<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1996
REGISTRATION NO. 333-03613
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
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)
DELAWARE 4731
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
DELAWARE 11-3309110
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
------------------------
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 AMOUNT OF
OF SECURITY BEING REGISTERED REGISTERED(1) SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Shares of Common Stock, $.01
par value ('Common
Stock')(3)................... 2,300,000 Shares $6.00 $13,800,000 $ 4,759
Warrants(3).................... 2,300,000 Warrants 0.10 230,000 79
Shares of Common Stock
underlying the Warrants(3)... 2,300,000 Shares 6.00 13,800,000 4,759
Underwriters' Purchase
Option....................... 200,000 .0005 100 1
Shares of Common Stock included
as part of Underwriter's
Purchase Option(4)........... 200,000 Shares 6.60 1,320,000 455
Warrants included as part of
Underwriter's Purchase
Option(4).................... 200,000 Warrants 0.11 22,000 8
Shares of Common Stock
underlying the Warrants
included in the Underwriter's
Purchase Option(4)(6)........ 200,000 Shares 6.00 1,200,000 414
Warrants issued in connection
with Bridge Financings(5).... 1,312,500 Warrants -- -- --
Warrants issued in connection
with Interim Financing(6).... 74,283 Warrants -- -- --
Shares of Common Stock
underlying Warrants issued in
connection with Bridge
Financings(6)................ 1,312,500 Shares 6.00 7,875,000 2,716
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)................. 71,310 Shares -- -- --
Shares of Common Stock
underlying Warrants issued in
connection with Interim
Financing(6)................. 74,283 -- -- --
Shares of Common Stock issued
to founders and in other
private financings(6)........ 400,276 Shares -- -- --
Total Registration Fee..... $38,247,100 $13,191
Previously Paid.......... $13,191
</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 300,000 Shares of Common Stock, 300,000 Warrants and 300,000 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 and Warrants 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;
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 25, 1996
AMERTRANZ WORLDWIDE HOLDING CORP.
2,000,000 SHARES OF COMMON STOCK AND
2,000,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
All of the 2,000,000 shares of common stock ('Common Stock') and 2,000,000
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. The Common
Stock and Warrants are being issued as separate securities and not as a unit
and, accordingly are immediately separately transferable. 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 71,310 shares of Common Stock ('Interim
Financing Shares') issued to certain lenders ('Interim Financing Holders') and
74,283 warrants issued to certain Interim Financing Holders ('Interim Financing
Warrants') pursuant to an interim financing between November 1995 and January
1996 ('Interim Financing'), and (iii) of 400,276 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 and the Company will not receive any proceeds from such sales. 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)............................... $12,200,000 $1,098,000 $11,102,000
</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 200,000 shares of Common Stock and an
option to purchase 200,000 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 $366,000 ($420,900 if the
Underwriter's over-allotment option is exercised in full), estimated at
$866,000.
(3) The Company has granted the Underwriter an option, exercisable within 45
days from the date of this Prospectus, to purchase up to 300,000 additional
shares of Common Stock and an option to purchase up to an additional 300,000
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 $14,030,000, $1,262,700 and $12,767,300, 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] AMERTRANZ
WORLDWIDE
[MAP OF THE UNITED STATES]
NORTH AMERICAN NETWORK OF TERMINALS
<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 237,089 shares of Common Stock and options to
purchase 396,910 shares of Common Stock effective as of February 7, 1996. 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 1970, 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.
BACKGROUND
The Company was incorporated in Delaware in January 1996 as the successor
to operations commenced in 1970 as the 'Wrangler Aviation' division of Blue
Bell, Inc., an apparel manufacturer. The Wrangler Aviation division transported
raw material to Blue Bell facilities in Puerto Rico and returned the finished
goods to its facilities in Greensboro, North Carolina. In 1988, new owners of
Blue Bell, Inc. separately incorporated the division in Delaware as Wrangler
Aviation, Inc. ('Wrangler'), and then sold Wrangler in October 1990. At that
time, Caribbean Freight System, Inc. ('CFS') was incorporated in Puerto Rico as
a wholly owned subsidiary of Wrangler to act as the marketing arm of Wrangler.
In December 1991, the owners of Wrangler engaged a new management team
following the discovery of certain improprieties performed 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. CFS and Wrangler both successfully emerged from the
Chapter 11 proceedings in November 1992 and June 1993, respectively. In January
1994, Wrangler changed its name to TIA, Inc. ('TIA'). Thereafter, TIA and CFS
continued to specialize in the movement of large freight shipments for
manufacturers, and maintained 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.
3
<PAGE>
Amertranz and its predecessor began operations in June 1985 as an
independently-owned exclusive agent of a domestic and international air freight
forwarder. During the next eight years, Amertranz opened nine offices under its
exclusive agency arrangement.
In January 1994, Amertranz acquired the domestic air freight forwarding
business (i.e., the transport of freight which has both its point of origin and
its point of destination within the United States) of the freight forwarder for
which Amertranz was acting as an exclusive agent, as a result of the settlement
of a lawsuit. Thereafter, Amertranz owned and operated 20 offices primarily
focusing on the movement of domestic freight and, in its original nine offices,
international air freight. As an independent freight operation, Amertranz
established an internal infrastructure, including accounting, data processing
and communications departments, to support its 20 office network.
In the Combination, the Company combined the freight forwarding businesses
of Amertranz and TIA and CFS. See 'Business--Historical Background' and 'Certain
Transactions'.
Unless otherwise expressly stated, all references to the 'Company' in this
Prospectus include the Company, Amertranz and its predecessors-in-operation,
Integrity Logistics, Inc. and Amerford Domestic, Inc., and CAS and its
predecessors-in-operation the freight forwarding business of TIA, and its
subsidiary, 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.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered....................... 2,000,000 shares of Common Stock and 2,000,000 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............................... 3,626,504 shares
Common Stock to be Outstanding After the
Offering............................... 5,626,504 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) $3,033,000 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, including, among others, the following specific risks (See 'Risk
Factors'):
o Substantial Losses; Accumulated Deficit
o Working Capital Deficit; Need for Additional Funding
o 'Going Concern' Qualification
o Proceeds to be Used to Satisfy Indebtedness and Overdue Payables
o Immediate and Substantial Dilution
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 TIA AND CFS(1)
--------------------------------------------------------- THE COMPANY
-------------------------------
YEAR ENDED 12/31 FOR THE PERIOD FOR THE PERIOD FOR THE PRO FORMA
------------------------- 1/1/95 TO 1/1/96 TO QUARTER ENDED 12 MONTHS ENDED
1993 1994 1995 3/31/95 2/7/96 MARCH 31, 1996 12/31/95(2)
------- ------- ------- -------------- -------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue............... $32,671 $38,576 $38,211 $9,018 $3,387 $ 13,493 $62,165
Cost of transportation.......... 24,232 30,254 30,300 7,394 2,729 10,080 47,597
Gross profit.................... 8,439 8,322 7,911 1,624 658 3,412 14,568
Selling, general &
administrative expenses....... 6,505 4,634 4,513 1,131 534 3,566 17,231
Amortization of goodwill........ -- -- -- -- -- -- 484
Operating income (loss)......... 1,934 3,688 3,398 493 124 (224) (3,147)
Net income (loss) before
taxes......................... 869 2,661 2,366 213 7 (736) (4,157)(3)
Pro forma net loss per
share(4)...................... $ (.13) $ (.69)
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
---------------------------------------------
MARCH 31, 1996
-------------------------
FEBRUARY 7, 1996 PRO FORMA
ACTUAL ACTUAL AS ADJUSTED(5)
---------------- ------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................................................ $ 21,114 $24,111 $ 26,906
Working capital (deficit)............................................... (5,340) (6,103) (242)
Current liabilities..................................................... 11,100 14,948 14,019
Long-term indebtedness.................................................. 12,367 12,272 6,024
Stockholders' equity (deficit).......................................... $ (2,354) $(3,109) $ 6,863
</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 pro forma 12-month period ended December 31, 1995 has been adjusted to
the amount of interest expense on the $10 million principal amount
promissory note issued to TIA and CFS in connection with the Combination as
if it were outstanding for the period presented.
(4) Based on the weighted average number of shares of Common Stock outstanding
immediately prior to the Offering. See Note 3 to Notes and Management's
Assumptions to Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1995 and the three months ended March 31, 1996.
(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'), (ii) receipt of the $1,200,000 proceeds of the May
Bridge Financing, (iii) the receipt of the net proceeds of approximately
$10,236,000 from the sale of the Securities offered hereby, (iv) the
repayment of principal and interest of approximately $4,503,000 in
connection with the Bridge Financings ($2,906,000 for the February Bridge
Financing and $1,224,000 for the May Bridge Financing) and the Interim
Financing ($373,000), (v) the partial principal repayment of $2,000,000 of
the Exchange Note and (vi) the write-off of $3,158,000 of debt issuance cost
incurred in connection with the Bridge Financings and the Interim Financing.
------------------
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 1996
Stock Option Plan ('Stock Option Plan'); (ii) 224,399 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 currently exceed its current assets and will exceed its
current assets after the consummation of the Offering. 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. Although 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, the
Company expects that it will experience periods of significant negative cash
flow through September 1996 as a result of the Company's planned growth in
business. After such 12-month period, 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'.
'GOING CONCERN' EXPLANATORY PARAGRAPH. 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,
contain an explanatory paragraph 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.
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'.
PROCEEDS TO BE USED TO SATISFY CERTAIN INDEBTEDNESS AND OVERDUE PAYABLES;
BROAD DISCRETION IN APPLICATION OF REMAINING PROCEEDS. Approximately
$6,503,000, or 63%, of the net proceeds received by the
6
<PAGE>
Company from the Offering will be used to repay outstanding indebtedness,
including interest thereon. Additionally, $700,000, or 7%, 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 $3,033,000 allocated to
working capital and general corporate purposes. See 'Use of Proceeds'.
IMMEDIATE AND SUBSTANTIAL DILUTION. The Offering involves an immediate
dilution of $6.92 per share of Common Stock (approximately 115% 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
39% 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 43%. 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 49.4% 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. Over the last several months
the Company's collection efforts for the Amertranz business have resulted in a
reduction in the Company's average outstanding accounts receivable turnover rate
has been reduced from 60 days on February 7, 1996 to approximately 45 days as of
May 31, 1996, the historical turnover rate for the CAS business. 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 working
capital. 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 working
capital. 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 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,
7
<PAGE>
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'.
POTENTIAL DIFFICULTY IN 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.
Currently there is no 'key person' life insurance in place for Messrs. Hettleman
and Faieta. However the Company intends to obtain such insurance policies in the
amount of $1 million on each of their lives shortly after the consummation of
the Offering. 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. Therefore, the profitability
of the Company's CAS business is largely dependent on such customers. On a pro
forma consolidated basis the approximate amount and percentage of the Company's
total operating revenue derived from such business was $33.5 million or 83% in
calendar 1993, $39.6 million or 69% in calendar 1994 and $39.2 million or 63% in
calendar 1995. 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 reducing the level of 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 June 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. 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,
computer and electronics industries. The Company 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)
8
<PAGE>
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'.
ABSENCE OF INDEPENDENT DIRECTORS. There are currently no independent
directors since all current directors of the Company are also officers of the
Company. The Company intends to invite at least one person to serve as an
independent director sometime after completion of the Offering. Additionally,
the Underwriter is entitled to designate one member for election to the Board of
Directors, although it has not yet done so. See 'Management'.
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 failure to meet these maintenance criteria in the
future may result in the Common Stock or the Warrants not being eligible for
quotations on the Nasdaq Small Cap Market and trading, if any, of the Common
Stock and Warrants would thereafter be conducted on the OTC Bulletin Board. As a
result of such ineligibility for Nasdaq quotations, an investor may find it more
difficult to dispose of, or obtain accurate quotations as to the market value of
the Common Stock or Warrants. 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 freight
forwarding industry and other factors. In addition,
9
<PAGE>
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'.
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
224,399 shares of Common Stock at per share exercise prices ranging from $.048
to $.408, 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 3,386,783
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 $15.3 million,
or approximately $4.21 per share of Common Stock (based on 3,626,504 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 $5.2 million, or approximately $.92 per share. This represents an
immediate increase in net tangible book value of $3.29 per share to the existing
stockholders, and an immediate dilution of $6.92 per share to investors in the
Offering (or approximately 115% of the per-share offering price).
The following table illustrates the per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Public offering price of the Common Stock....................................... $6.00
Consolidated negative net tangible book value before the Offering............. $(4.21)
Increase attributable to new investors in the Offering........................ 3.29
------
Consolidated negative net tangible book value after the Offering................ (.92)
-----
Dilution to investors in the Offering........................................... $6.92
-----
-----
</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.................... 3,626,504 64.5% $ 8,666,465 41.9% $2.39
New Investors............................ 2,000,000 35.5 12,000,000 58.1 6.00
--------- ------- ----------- -------
Total............................... 5,626,504 100.0% $20,666,465 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</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 $10,236,000 (approximately $11,846,400
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 28%
Repayment of the May Bridge Notes(2)................................. 1,224,000 12
Partial repayment of the Exchange Note(3)............................ 2,000,000 19
Repayment of the Interim Notes(4).................................... 373,000 4
Payment of Overdue Trade Payables(5)................................. 700,000 7
Working Capital and General Corporate Purposes(6).................... 3,033,000 30
----------- -------
Total........................................................... $10,236,000 100%
----------- -------
----------- -------
</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. As a result of the debt issuance costs associated with the
February Bridge Financing, primarily consisting of the securities issued in
the February Bridge Financing, the effective annual rate of interest on the
February Bridge Notes was approximately 200%. 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. As a result of the debt issuance costs associated with the
May Bridge Financing, primarily consisting of the securities issued in the
May Bridge Financing, the effective annual rate of interest on the May
Bridge Notes was approximately 525%. 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 71,310 shares of Common Stock and the 74,283 Interim Financing
Warrants. 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. As a result of the debt
issuance costs associated with the Interim Financing, primarily consisting
of the securities issued in the Interim Financing, the effective annual rate
of interest on the Interim Notes was approximately 98%. 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'.
12
<PAGE>
(Footnotes continued from previous page)
(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 $1,610,400 which also will be added to
the Company's working capital. See 'Business--Company Strategy'.
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) pro forma 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)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Current liabilities.................................................................... $ 14,948 $ 14,019
-------- --------------
-------- --------------
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;
3,386,504 shares issued and outstanding actual; 5,626,504 shares
issued and outstanding, pro forma, as adjusted.................................... 34 56
Additional paid-in capital........................................................... 7,613 18,846
Accumulated deficit.................................................................. (10,744) (14,028)
Treasury stock, 106,304 shares held at cost.......................................... (11) (11)
-------- --------------
Total stockholders' equity (deficit)............................................ (3,108) 6,863
-------- --------------
Total capitalization.............................................................. $ 9,164 $ 12,887
-------- --------------
-------- --------------
</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, (ii) receipt of the $1,200,000
proceeds of the May Bridge Financing, (iii) the receipt of the net proceeds
of approximately $10,236,000 from the sale of the Securities offered hereby,
(iv) the repayment of principal and interest of approximately $4,503,000 in
connection with the Bridge Financings ($2,906,000 for the February Bridge
Financing and $1,224,000 for the May Bridge Financing) and the Interim
Financing ($373,000), (v) the partial principal repayment of $2,000,000 of
the Exchange Note and (vi) the write-off of $3,158,000 of debt issuance cost
incurred in connection with the Bridge Financings and the Interim Financing.
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 periods
January 1, 1995 through March 31, 1995 and January 1, 1996 through February 7,
1996, and for the Company for the period February 8, 1996 through March 31, 1996
and the pro forma 12 months ended December 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, includes all
adjustments necessary for a fair presentation of such data. Results for the
five-week period ended February 7, 1996 and 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>
FREIGHT FORWARDING BUSINESS OF TIA AND CFS(1)
----------------------------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
YEARS ENDED DECEMBER 31 JANUARY 1, 1995 JANUARY 1, 1996
----------------------------------------------- TO TO
1991 1992 1993 1994 1995 MARCH 31, 1995 FEBRUARY 7, 1996
------- ------- ------- ------- ------- --------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue............. $32,076 $29,201 $32,671 $38,576 $38,211 $ 9,018 $3,387
Cost of transportation........ 26,353 24,103 24,232 30,254 30,300 7,394 2,729
------- ------- ------- ------- ------- ----- -----
Gross profit.................. 5,723 5,098 8,439 8,322 7,911 1,624 658
Selling, general &
administrative expenses..... 8,726 6,354 6,505 4,634 4,513 1,131 534
Amortization of goodwill...... -- -- -- -- -- -- --
------- ------- ------- ------- ------- ----- -----
Operating income (loss)....... (3,003) (1,256) 1,934 3,688 3,398 493 124
Net income (loss) before
taxes....................... (4,433) (2,149) 869 2,661 2,366 213 7
Pro forma net loss per share
(4)
OPERATING DATA:
Gross margin.................. 17.8% 17.5% 25.8% 21.6% 20.7% 18.0% 19.4%
Operating margin.............. (9.4)% (4.3)% 5.9% 9.6% 8.9% 5.5% 3.7%
<CAPTION>
THE COMPANY
---------------------------
PRO FORMA
12 MONTHS
ENDED
FOR THE DECEMBER
QUARTER ENDED 31,
MARCH 31, 1995 1995(2)
-------------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue............. $ 13,493 $62,165
Cost of transportation........ 10,080 47,597
------ -----------
Gross profit.................. 3,412 14,568
Selling, general &
administrative expenses..... 3,566 17,231
Amortization of goodwill...... -- 484
------ -----------
Operating income (loss)....... (224) (3,147)
Net income (loss) before
taxes....................... (736) (4,157)(3)
Pro forma net loss per share
(4) $ (.13) $ (.69)
OPERATING DATA:
Gross margin.................. 27.3% 23.4%
Operating margin.............. (3.4)% (5.1)%
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
--------------------------------------------------
MARCH 31, 1996
-----------------------------
FEBRUARY 7, 1996 PRO FORMA
ACTUAL ACTUAL AS ADJUSTED(5)
---------------- ------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................................................ $ 21,114 $24,111 $26,906
Working capital (deficit)............................................... (5,340) (6,103) (242)
Current liabilities..................................................... 11,100 14,948 14,019
Long-term indebtedness.................................................. 12,367 12,272 6,024
Stockholders' equity (deficit).......................................... $ (2,354) $(3,109) $ 6,863
</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 pro forma 12-month 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 period presented.
(4) Based on the weighted average number of shares of Common Stock outstanding
immediately prior to the Offering. See Note 3 to Notes and Management's
Assumptions to Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1995 and the three months ended March 31, 1996.
(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 Preferred Stock, (ii) receipt of the $1,200,000
proceeds of the May Bridge Financing, (iii) the receipt of the net proceeds
of approximately $10,236,000 from the sale of the Securities offered hereby,
(iv) the repayment of principal and interest of approximately $4,503,000 in
connection with the Bridge Financings ($2,906,000 for the February Bridge
Financing and $1,224,000 for the May Bridge Financing) and the Interim
Financing ($373,000), (v) the partial principal repayment of $2,000,000 of
the Exchange Note and (vi) the write-off of $3,158,000 of debt issuance cost
incurred in connection with the Bridge Financings and the Interim Financing.
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.
Historically, the CAS business has derived substantial operating revenues
from companies engaging in business in Puerto Rico and taking advantage of
significant United States income tax benefits available to such companies. On a
pro forma consolidated basis the appropriate amount of the Company's total
operating revenue derived from such business was $33.5 million or 83% in
calendar 1993, $39.6 million or 69% in calendar 1994 and $39.2 million or 63% in
1995. In 1993, Congress reduced the tax benefits available to companies doing
business in Puerto Rico, and in the most recent budget proposal, both Congress
and the Clinton Administration have proposed further reduction of these tax
benefits. In the event that there is any modification to these tax benefits
available to United States companies doing business in Puerto Rico, it could
result in these companies reducing the level of the business they have been
doing in Puerto Rico, which could have a material adverse effect on the
Company's operating results.
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. The action the Company took after the expansion resulted
in an existing domestic operations and administrative infrastructure that can
support a much higher revenue base. See 'Business--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.
15
<PAGE>
RESULTS OF OPERATIONS
THE COMPANY
Three Months Ended March 31, 1995 and 1996
The Company began its existence as the holding company for the combined
operations of Amertranz and the freight forwarding business of TIA and CFS on
February 8, 1996. From and after February 8, 1996, the freight forwarding
business of TIA and CFS was operated through the Company's CAS subsidiary. 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 combined results of the Company for the period February 8, 1996 through
March 31, 1996 and only the operations of the freight forwarding business of TIA
and CFS for the period January 1, 1996 through February 7, 1996, compared to the
results of operation of the Company's predecessor, the freight forwarding
business of TIA and CFS, for the quarter ended March 31, 1995.
Operating Revenue. Operating revenue increased 49.6% to $13.5 million for
the quarter ended March 31, 1996 from $9.0 million for the quarter ended March
31, 1995. Approximately $159,000 of such increase was attributable to the
operations of CAS and approximately $4.3 million of such increase was
attributable to the acquisition of Amertranz.
Cost of Transportation. Cost of transportation decreased to 74.7% of
operating revenue for the quarter ended March 31, 1996 from 82.0% of operating
revenue for the quarter ended March 31, 1995. The primary reason for the large
decrease in cost of transportation as a percentage of operating revenues is that
the Amertranz business had a cost of transportation of 66.5% for the quarter
ended March 31, 1996 which is significantly lower than the 78.6% cost of
transportation as a percentage of sales of the operations of CAS for the same
period.
Gross Profit. As a result of the higher margin associated with the
Amertranz business, gross profit for the quarter ended March 31, 1996 increased
to 25.3% of operating revenues from 18% for the comparable period in 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to 27.0% of operating revenue for the quarter
ended March 31, 1996 from 12.5% for the comparable period in 1995, primarily due
to the acquisition of Amertranz which had selling, general and administrative
expenses of 55.5% of its operating revenue for the period ended March 31, 1996.
The selling, general and administrative expenses of the operations of CAS for
the quarter ended March 31, 1996 increased to 13.5% of its operating revenue
from 12.5% from the same period in 1995.
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 Revenue. Operating revenue 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 revenue in 1995 compared to 1994 revenue. Sales to two
major customers decreased by an aggregate of approximately $2.0 million in 1995
compared to 1994, which offset the gain in revenue 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 revenue 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 revenue from 78.4% of 1994 operating revenue.
16
<PAGE>
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 revenue in the comparable period of 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased slightly to 11.8% of operating revenue in the
year ended December 31, 1995 from 12.0% of operating revenue in the comparable
period in 1994.
Years Ended December 31, 1993 and 1994
Operating Revenue. Operating revenue 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 revenue from 74.2% of 1993 operating revenue. 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 revenue for the comparable period in 1993.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to 12.0% of operating revenue in the year
ended December 31, 1994 from 19.9% of operating revenue 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 revenue 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 shipments
(i.e., gross revenues less the costs associated with the pick-up and delivery of
Amertranz's customers' shipments). Therefore, Amertranz's operating revenue and
cost of transportation reported for the periods before and after February 1994
are not comparable. See 'Business--Historical Background'.
The following selected financial data for each of the years ended June 30,
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.
17
<PAGE>
<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 revenue............................... $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 expenses...... 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 Revenue. Operating revenue 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 revenue for the year ended June 30, 1995 from 57.9% of operating
revenue 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 Expenses. Selling, general and
administrative expenses increased to $10.3 million or 41.3% of operating
revenue, in the year ended June 30, 1995 from $4.9 million or 43.7% of operating
revenue, 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.
Years Ended June 30, 1993 and 1994
Operating Revenue. Operating revenue 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 revenue 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.
18
<PAGE>
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 Expenses. Selling, general and
administrative expenses were $4.9 million, or 43.7% of operating revenue, in the
year ended June 30, 1994 and $2.7 million, or 81.2% of operating revenue, in the
year ended June 30, 1993. The increase in dollar amount and the decrease in the
amount as a percentage of operating revenue 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 Revenue. Operating revenue 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 revenue 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.
Since the Combination, the Company has re-focused its efforts to increase its
domestic operations and has concurrently significantly reduced its international
operations. Although the reduction of the international operations will result
in a reduction in operating revenue from international business, management
believes that this reduction will be more than offset by increased domestic
revenue and a decrease in expenses related to the international operations.
Cost of Transportation. Cost of transportation increased to 73.0% for
revenue 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 Expenses. Selling, general and
administrative expenses increased to $7.5 million, or 57.9% of operating
revenue, in the six months ended December 31,1995 from $5.1 million, or 36.5% of
operating revenue, for the same period in 1994. This increase in total amount
and percentage of operating revenue 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. Additionally, approximately
$300,000 was incurred as a result of the conversion costs of the new computer
system of Amertranz, approximately $350,000 was used to increase the allowance
for doubtful accounts, and $250,000 was incurred for additional commission
expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company used approximately $5.2 million of cash in operating activities
for the seven week period ended March 31, 1996. This cash was provided primarily
by cash on hand of approximately $2.4 million, the proceeds of a revolver note
of approximately $3.5 million and an increase in accounts payable and accrued
expenses of approximately $441,000. The cash used in operating activities was
primarily attributable to increases in the Company's accounts receivable of
approximately $4.5 million and a net loss incurred by the Company of
approximately $744,000 during such period. The increase in accounts receivable
is due principally to an increase in the trade receivables of the CAS operations
from a zero balance at the beginning of the period to approximately $4.3 million
at the end of the period.
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
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operating plans. As a result, Amertranz experienced severe working capital
shortfalls which restricted its ability to conduct its business as anticipated.
Although the Company anticipates that the proceeds of the Offering, together
with existing resources and cash generated from operations should be sufficient
to finance the Company's contemplated cash requirements for at least 12 months
after the consummation of this Offering, the Company expects it will experience
periods of significant negative cash flow through September 1996 as a result of
the Company's planned growth in business. After such 12-month period, 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 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 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
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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 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 the original terms of the respective obligations, payments on the TIA Loan
would have commenced 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 were due monthly thereafter, and the full
outstanding balance of the Revolver Note was 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 consecutive two-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 judgment 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 437,972 options to purchase
shares of Amertranz common stock, 47,559 of which options were exercised prior
to the Combination at $3.52 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 363,669
shares of Common Stock, and the holders of unexercised Amertranz options
exchanged such options for an aggregate of 181,809 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'), the Interim Financing Shares and the
Interim Financing Warrants. 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. As a result of the debt issuance costs
associated with the Interim Financing, primarily consisting of the securities
issued in connection with the Interim Financing, the
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effective annual rate of interest on the Interim Notes (after giving effect to
debt issuance cost of $150,000) is approximately 98%. Upon repayment of the
amounts due under the Interim Notes, the related unamortized debt issuance cost
will be expensed. 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'), 487,560 Bridge
Shares, and Bridge Warrants to purchase an aggregate of 906,783 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. All amounts due under the
Bridge Notes will be repaid out of the proceeds of the Offering. As a result of
the debt issuance costs associated with the Bridge Financings, primarily
consisting of the securities issued in connection with the Bridge Financings,
the effective annual rate of interest on the February Bridge Notes (after giving
effect to debt issuance cost of $2,143,000) is approximately 200% and on the May
Bridge Notes (after giving effect to debt issuance cost of $1,020,000) is
approximately 525%. Upon repayment of the amounts due under the February Bridge
Notes and the May Bridge Notes, the related unamortized debt issuance cost will
be expensed.
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, the Bridge Shares, the Interim
Shares and the Interim warrants are being registered by the Company on behalf of
the Bridge Holders in the Registration Statement of which this Prospectus forms
a part. 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.
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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 revenue
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 revenue (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 revenue 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.
o Expanding the use of the existing trucking network to minimize the use of
higher cost air transport.
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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 business.
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.
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.
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
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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.
According to a survey by Colography Inc., a consulting firm to the air
freight industry, domestic air freight transportation revenues totalled $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 freight forwarding business is generally not capital intensive.
Furthermore, the credit terms extended to customers by freight forwarders
generally mirror the payment terms afforded to freight forwarders by airlines
and truckers. Accordingly, and assuming that these industry practices continue,
at such time when the Company's operations become profitable, its working
capital requirements should be met from its normal operations.
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 the Cargo Aircraft Charter Agreement dated February 28,
1994, as amended ('L-1011 Charter'), the Company has exclusive rights, until
June 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.
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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 revenue 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.
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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. Management believes that its current
facilities are underutilized, at times by as much as 50%. Accordingly,
management believes that the Company's facilities are more than sufficient for
its planned growth.
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
HISTORICAL BACKGROUND
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 then 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 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'.
27
<PAGE>
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 'Company Operations', below.
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.
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.
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 870,254 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 principal amount 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.
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
28
<PAGE>
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.
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. ('AEI'), 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 alleges that
Amertranz improperly obtained control over the assets of AEI, committed fraud in
connection with the business discussions, breached on agreement not to solicit
the business or customers of AEI, induced AEI to convey property to Amertranz
for less than fair value and failed to pay AEI compensation for services
rendered by AEI to Amertranz. The complaint seeks damages in excess of $11
million. 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 May 31, 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.
29
<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....................... 46 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 intends to obtain 'key person' life insurance policies in the
amount of $1 million on the lives of each of Messrs. Hettleman and Faieta after
the consummation of the Offering.
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
30
<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 officers are employed for
a period of three years (subject to renewal for successive three-year periods)
at an annual base salary of $130,000 and $150,000 for Mr. Hettleman and Mr.
Faieta, respectively. The base salary will increase on each anniversary of the
respective employment agreements by an amount equal to .5% of the then current
base salary for each $100,000 of the Company's EBITDA for the fiscal year ended
prior to such anniversary date. Furthermore, each such officer is entitled to
incentive compensation in excess of base salary for each fiscal year of the
Company during the term of employment, in an amount equal to 1% of the base
salary in effect at the end of such fiscal year for each $100,000 of the
Company's EBITDA for such fiscal year. Each such officer has also been granted
an option to purchase 75,000 shares of Common Stock pursuant to the Company's
Stock Option Plan. See '--Stock Option Plan'. If either officer's employment
agreement is terminated by the Company other than for cause or if the officer
elects to terminate employment following either (i) a material breach of the
agreement by the Company, (ii) failure by the Company to offer renewal of the
employment agreement at its expiration upon terms at least as favorable as those
in effect at that time, or (iii) an event
31
<PAGE>
generally constituting a change in control of the Company, such officer shall be
entitled to receive one of the following, (at the officer's election): (a) all
compensation and benefits under the agreement for the balance of the term, (b)
299% of the sum of the base salary and incentive compensation paid to him in
respect of the fiscal year ended prior to termination, or (c) the present value
of his base salary and incentive compensation payable for the balance of the
term of the agreement (assuming certain increases in base salary and levels of
incentive compensation over the balance of the term of the agreement). In
addition, all unexercisable stock options will thereupon become immediately
exercisable. Each employment agreement generally prohibits the officer from
soliciting directly or indirectly, any existing customer or employee of the
Company for a period of two years following termination of employment.
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 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 exercise price and other 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 was automatically granted
an option ('Senior Executive Option') on June 3, 1996 (the 'Effective Grant
Date') to purchase 75,000 shares of Common Stock. The exercise price of the
Senior Executive Options is $6.00 per share. The Senior Executive Option will
vest over a period of 31 months, enabling each such officer to purchase: (i)
20,834 shares at any time after the 90th day following the date of this
Prospectus and an additional 16,666 shares at any time after January 1, 1997
(collectively, the 'First Tranche'), each such portion of the First Tranche
being exercisable through the tenth anniversary of the date of this Prospectus;
(ii) 18,750 shares (the 'Second Tranche') at any time after January 1, 1998
through the tenth anniverrsary of the date of this Prospectus, if the Company's
EBITDA for its fiscal year ending June 30, 1997 exceeds $500,000 provided, that
if the Company's EBITDA for its fiscal year ended June 30, 1997 does not exceed
$500,000 but its EBITDA for its fiscal year ended June 30, 1998 exceeds
$750,000, the Second Tranche shall be exercisable commencing on the date the
Company's EBITDA for its fiscal year ended June 30, 1998 has been determined;
and (iii) 18,750 shares at any time after January 1, 1999 through the tenth
anniversary of the date of this Prospectus, if the Company's EBITDA for its
fiscal year ended June 30, 1998 exceeds $750,000. In the event the employment of
either such
32
<PAGE>
officer is terminated in a manner which would entitle such officer to Severance
Compensation as defined in and under the terms of such officer's employment
agreement with the Company or due to the death or permanent disability of such
officer (as defined in such employment agreement), the Senior Executive Option
granted to such officer shall become immediately exercisable in full. In the
event the employment of either such officer is voluntarily terminated by such
officer, the Senior Executive Option granted to such officer shall remain
exercisable to the extent it has vested. In the event the employment of either
officer is terminated in any other manner, the Senior Executive Option granted
to such officer shall immediately terminate to the extent it has not then been
exercised. 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 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.
33
<PAGE>
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 and as of the Combination for options to purchase shares of Common
Stock:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED
OPTIONS EXERCISE ANNUAL RATES 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 68.9% $.408 2/7/99 $275,278 $292,193 $309,108
Bruce Brandi(3).............. 42,590 19.0% $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 $2.19 per share, as determined by the Company's Board of Directors.
(3) 14,196 of such options have vested and are currently exercisable, and an
additional 14,197 of such options vest and become exercisable on each of
October 10, 1996 and 1997.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning the number and value
of unexercised options held by each of the Named Officers as of December 31,
1995, as exchanged in and as of the Combination for options to purchase shares
of Common Stock:
AGGREGATED OPTION VALUES FOR FISCAL YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT DECEMBER 31, 1995 AT DECEMBER 31, 1995($)(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'.
34
<PAGE>
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 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity 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 870,254 shares of
Common Stock and options to purchase 224,399 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 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 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources'.
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
35
<PAGE>
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 237,089 shares
of Common Stock and options to purchase an aggregate of 190,910 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 49.4% 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'.
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
106,304 of such Amertranz shares from Mr. Rosso for an aggregate purchase price
of $11,250 and released Mr. Friedman from his obligations under a covenant not
to compete with the Company. The Company acquired such shares and agreed to the
release from the non-competition covenant in order to reduce the number of
shares outstanding and increase the number of shares available for employee
stock options.
INSIDER LOANS
Between June 1995 and November 1995 Amertranz borrowed $1,379,110 in
aggregate principal amount from persons affiliated with Amertranz, including
Michael Barsa and his brother, 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 an aggregate of 54,657 options to purchase
shares of Amertranz common stock at $3.52 per share, 47,559 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 363,669 shares
of Common Stock, and the holders of unexercised Amertranz options exchanged such
options for an aggregate of 181,809 options to purchase shares of the Company's
Common Stock. See 'Principal Stockholders'.
36
<PAGE>
BELGIUM AFFILIATE
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. This entity engaged in international freight forwarding. As
part of the Company's strategy to reduce its international operations and
re-focus its efforts on its domestic markets, the Company transferred all of its
interest in this entity to David R. Pulk, 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 $2.38 per share, options to purchase 52,453 shares of Common
Stock at $1.17 per share and options to purchase 42,642 shares of Common Stock
at $.048 per share. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview'.
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 received 100,000 shares of Common
Stock and 200,000 Bridge Warrants for an aggregate loan of $500,000, and (ii)
Michael Barsa received 25,000 shares of Common Stock and 50,000 Bridge Warrants
for an aggregate loan of $125,000.
All transactions between the Company and its officers, directors, principal
shareholders or other affiliates have been on terms no less favorable than those
that are generally available from unaffiliated third parties. Any such future
transactions will be on terms no less favorable to the Company than could be
obtained from an unaffiliated third party on an armslength basis and will be
approved by a majority of the Company's independent and disinterested directors.
37
<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>
Wrexham Aviation Corp.(1)(2).............................................. 2,780,370 76.7% 49.4%
TIA, Inc.(1)(2)(3)........................................................ 2,780,370 76.7% 49.4%
Caribbean Freight Services, Inc.(1)(2)(3)................................. 420,000 11.6 7.5
Michael Barsa(3)(5)....................................................... 281,010 7.4 4.9
Philip S. Rosso, Jr.(3)................................................... 198,669 5.5 3.5
Bruce Brandi(3)(6)........................................................ 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)................................... 3,082,574 81.2 53.2
</TABLE>
- ------------------
(1) Represents all of the shares of Common Stock owned or controlled by TIA and
CFS. See footnote 2. Swirnow Airways Corp. ('Swirnow Airways') owns the
majority interest in Wrexham Aviation Corp. ('Wrexham'). Stuart Hettleman, a
Director and President of the Company, is an executive officer and
non-controlling stockholder of Swirnow Airways and an executive officer of
Wrexham. Richard A. Swirnow is, indirectly, the controlling stockholder of
Swirnow Airways.
(2) Includes (i) 420,000 shares of Common Stock owned by CFS, and (ii) 580,370
shares of Common Stock with respect to which TIA and CFS have been granted
proxies. (See footnote 2, 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. Ninety per cent of the issued and outstanding stock of TIA
is owned and controlled by Wrexham. In addition, Stuart Hettleman and
Richard A. Faieta, executive officers of the Company, are executive officers
of TIA and CFS and Mr. Faieta is a non-controlling stockholder of TIA. See
'Management.' Messrs. Hettleman and Faieta disclaim beneficial ownership of
all shares of Common Stock owned by TIA and CFS and do not share voting
and/or investment power over the Common Stock owned by TIA and CFS.
(3) Messrs. Barsa, Rosso and Brandi and certain other stockholders have granted
to TIA and CFS irrevocable proxies to vote an aggregate of 580,370 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. As a result, TIA and CFS may retain the right to vote
these shares of Common Stock owned by those shareholders until at least
February 6, 2001.
(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'.
38
<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, 3,626,504
shares of Common Stock are outstanding. After the completion of the Offering
there will be 5,626,504 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.
39
<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, Interim Financing 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 and the holder of any warrant shall instead
receive the number of shares of Common Stock rounded off to the nearest whole
number.
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 has
undertaken 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.
40
<PAGE>
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York 10005 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
5,626,504 shares of Common Stock, (5,926,504 shares of Common Stock if the
Underwriter's over-allotment option is exercised in full). Of those shares, the
2,000,000 shares of Common Stock sold to the public in the Offering (2,300,000
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 3,626,504 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 the 3,626,504 restricted shares, 1,127,836 shares have been included in
the Registration Statement of which this Prospectus forms a part but may not be
sold by the holders thereof earlier than one year from the date of this
Prospectus without the consent of the Underwriter. The remaining 2,498,668
restricted shares, will not be available for sale until February 7, 1998. In
addition, with respect to such 2,498,668 shares, TIA, CFS, certain 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 an aggregate of 2,412,832 of such shares
without the prior written approval of the Underwriter. Furthermore, TIA and CFS
have agreed to lock up for a period of 12 months from the date of this
Prospectus the 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 having to comply with the public information, volume limitation or
notice provisions of Rule 144. In both cases,
41
<PAGE>
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 2,000,000 shares
of Common Stock and 2,000,000 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 $0.25 per share of Common Stock and $0.004 per Warrant. The
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $0.10 per share of Common Stock and $0.002 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 300,000 additional
shares of Common Stock and an option to purchase an aggregate of 300,000
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. 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.
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 200,000 shares of
42
<PAGE>
Common Stock and the right to purchase up to an aggregate of 200,000 Warrants.
The Underwriter's Purchase Option for the shares of Common Stock and Warrants is
exercisable initially at a price equal to 125% and 165%, respectively, of the
initial offering price of such 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. 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, the Interim Financing Warrants and the Insider Shares,
and to pay all expenses in connection therewith. An aggregate of 1,312,500
Bridge Warrants, 656,250 Bridge Shares, 71,310 Interim Financing Shares, 74,283
Interim Financing Warrants and 400,276 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 Bridge Shares, the Interim Financing Warrants, 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 798,944 shares of Common Stock and other consideration. Of such 798,944
shares, 400,276 shares are being registered under the Registration Statement of
which this Prospectus forms a part. See 'Use of
43
<PAGE>
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 Securities Corp.), 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.(1) ........................................................... 65,000 130,000
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
Jack Gold............................................................................... 3,750 7,500
Lloyd Goldman........................................................................... 3,750 7,500
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER
BRIDGE HOLDERS OF SHARES OF WARRANTS
- ---------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
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(2)................................... 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(2)....................................................................... 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
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
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER
BRIDGE HOLDERS OF SHARES OF WARRANTS
- ---------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Woodland Partner(2)(3).................................................................. 65,000 130,000
Leonard Zelin........................................................................... 7,500 15,000
INTERIM FINANCING HOLDERS
MH Capital Partners..................................................................... 12,500 --
155964 Canada, Inc. .................................................................... 10,555 13,335
Clinton Company......................................................................... 8,796 11,112
Swan Alley Nominees..................................................................... 39,459 49,836
INSIDER HOLDERS
Philip S. Rosso, Jr.(4)................................................................. 198,667 --
Martin Hoffenberg(5).................................................................... 165,541 --
David R. Pulk(6)........................................................................ 111,111 --
Michael Barsa(7)........................................................................ 281,010 50,000
Bruce Brandi(8)......................................................................... 21,564 --
Edward R. Reedy(9)...................................................................... 23,480 --
Anil K. Bhandari........................................................................ 14,363 --
Michael Kilzi........................................................................... 12,971 --
Allan Rubin Trust(10)................................................................... 57,771 --
Barrett Fischer......................................................................... 7,098 --
Jean Barsa.............................................................................. 40,965 30,000
Truck Net, Inc.......................................................................... 14,570 --
TIA, Inc.(11)........................................................................... 1,780,000 200,000
</TABLE>
- ------------------
(1) Represents 1.2% of the outstanding shares of Common Stock following
consummation of the Offering. Does not include (i) 7,500 shares and 15,000
Warrants owned by David Thalheim, a Selling Securityholder, who is a 50%
stockholder and executive officer of the corporate general partner of
Dalewood Associates, L.P., and (ii) 7,500 shares and 15,000 Warrants owned
by The Marilyn and Barry Rubinstein Family Foundation, a Selling
Securityholder, one of the trustees of which, Barry Rubenstein is a 50%
stockholder and executive officer of the corporate general partner of
Dalewood Associates, L.P.
(2) Does not include 65,000 shares and 130,000 Warrants owned by Dalewood
Associates, L.P.
(3) Represents 1.2% of the outstanding shares of Common Stock following
consummation of the Offering. Does not include 7,500 shares and 15,000
Warrants owned by The Marilyn and Barry Rubenstein Family Foundation, a
Selling Stockholder, a trustee of which is a general partner of Woodland
Partners.
(4) Represents 3.5% 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.
(5) Represents 2.9% 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.
(6) Includes options to purchase 6,957 shares of Common Stock, and represents
2.0% 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.
(7) Includes options to purchase 154,477 shares of Common Stock, and represents
5.0% 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.
(8) 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.
(9) Includes options to purchase 20,375 shares of Common Stock. 3,105 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.
(10) Represents 1.0% of the outstanding shares of Common Stock following
consummation of the Offering.
(11) Represents 31.6% 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. Does not include 420,000 shares owned by CFS and
580,370 shares with respect to which TIA and CFS have been granted proxies.
See footnotes (1) and (2) under 'Principal Stockholders'.
46
<PAGE>
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 of Amertranz Worldwide Holding Corp.
as of February 7, 1996 and Amertranz Worldwide, Inc. and Subsdiaries as of June
30, 1993, 1994 and 1995 in this prospectus and elsewhere in the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports 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) as of December 31, 1994
and 1995 and 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. In addition, all reports filed by the Company
via the Commission's Electronic Data Gathering and Retrieval System (EDGAR) can
be obtained from the Commission's Internet web site located at www.sec.gov.
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.
47
<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-14
Balance Sheets as of December 31, 1994 and 1995.......................................................... F-15
Statements of Operations and Changes in Net Liabilities of the Business for the Years Ended December 31,
1993, 1994 and 1995 and the Period January 1, 1996 through February 7, 1996........................... F-16
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 and the Period January 1,
1996 through February 7, 1996......................................................................... F-17
Notes to Financial Statements............................................................................ F-18
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
Report of Independent Public Accountants................................................................. F-25
Consolidated Balance Sheets as of December 31, 1995 (unaudited) and June 30, 1994 and 1995............... F-26
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-27
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-28
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-29
Notes to Consolidated Financial Statements............................................................... F-30
PRO FORMA FINANCIAL INFORMATION
Amertranz Worldwide Holding Corp. Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1995 (unaudited)...................................................... F-38
Amertranz Worldwide Holding Corp. Pro Forma Consolidated Statement of Operations for the three months
ended March 31, 1996 (unaudited)...................................................................... F-39
Notes to Management's Assumptions to Pro Forma Consolidated Statements of Operations (unaudited)......... F-40
</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 11 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, 3,386,504 shares
issued and outstanding..................................................... 33,865 33,865
Paid-in-capital............................................................... 7,612,600 7,612,600
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....................................................................... $13,492,715
DIRECT COSTS............................................................................ 10,079,987
-------------
Gross Profit..................................................................... 3,412,728
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................................ 3,636,311
-------------
Operating (loss)................................................................. (223,583)
OTHER INCOME (EXPENSE):
Other income (expense), net........................................................... (3,060)
Interest expense...................................................................... (509,846)
-------------
(Loss) before (provision for) income taxes....................................... (736,489)
(PROVISION FOR) INCOME TAXES............................................................ --
-------------
Net (loss)....................................................................... $ (736,489)
-------------
-------------
Pro forma net (loss) per share................................................... $ (.13)
-------------
-------------
Pro forma weighted average number of common shares............................... 5,327,703
-------------
-------------
</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>
Net liabilities of the Freight
Forwarding Business of
TIA/CFS as of Jan. 1, 1996... -- $ -- $ -- -- $ -- $ (4,911,989) $(4,911,989)
Net Income from the Freight
Forwarding Business of
TIA/CFS for the five weeks
ended February 7, 1996....... 7,342 7,342
Net liabilities retained by
TIA/CFS...................... 4,988,172 4,988,172
Common Stock issued to
TIA/CFS in connection with
asset exchange............ 2,100,000 21,000 62,525 (10,083,525) (10,000,000)
--------- ------- ---------- ------- -------- ------------ -----------
BALANCE, February 7, 1996.... 2,100,000 21,000 62,525 (10,000,000) (9,916,475)
Common Stock issued in
connection with assigned
notes........................ 280,888 2,809 1,376,301 -- -- -- 1,379,110
Common Stock issued in
connection with Bridge and
interim financing............ 487,560 4,876 1,764,187 -- -- -- 1,769,063
Common Stock issued to former
stockholders of Amertranz
Worldwide, Inc. and
Subsidiaries................. 518,056 5,180 4,409,587 -- -- -- 4,414,767
--------- ------- ---------- ------- -------- ------------ -----------
BALANCE, February 8, 1996...... 3,386,504 33,865 7,612,600 -- -- (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......................... 3,386,504 $33,865 $7,612,600 106,304 $(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 System, 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, and (iii) the air
freight forwarding business of TIA and CFS. 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 as they
represent the majority and controlling shareholders of the Company, and
accordingly their tangible assets are reflected in Holding at their historical
carrying values of $83,525. 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
2,000,000 shares of common stock and 2,000,000 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
direct 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. Management periodically
assesses whether there has been an impairment in the carrying value of the
excess of cost over the net assets acquired, by comparing current and projected
annual undiscounted cash flows with the related annual amortization. In the
event there is an impairment of goodwill, management would reduce the carrying
value to an amount equal to the projected discounted cash flow of the underlying
assets.
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.
Pro forma earnings per share:
Pro forma earnings per share is computed using the weighted average number
of common shares outstanding adjusted for: (i) the required amount of shares of
common stock at the initial public offering price to repay certain indebtedness
of the company; (ii) the required amount of shares of common stock at the
initial public offering price to repay $6,000,000 of the exchange note; and
(iii) the dilutive effect of options granted within 12 months of the expected
initial public offering using the treasury stock method.
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
F-8
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
3. GOING CONCERN--(CONTINUED)
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 $10,236,000 of which approximately $3,733,000 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.
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 870,254 shares of
Holding's common stock and options to purchase 224,399 shares of Holding's
common stock for $4,415,000 or approximately $4.25 per share and option. 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.
F-9
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
6. DEBT--(CONTINUED)
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 also received 487,560 shares of common stock of Holding, as well as
906,783 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 debt issuance costs of approximately $2,143,000 in
connection with such bridge financing and will amortize the amount over the life
of the debt. Upon repayment of the debt, the related unamortized debt issuance
cost would be expensed. The effective annual rate of interest on the notes after
giving effect to the debt issuance cost of $2,143,000 is 200%. The fair value of
the shares of common stock at the time of issuance was $4.25 per share.
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. 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 consecutive two-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 judgment
against the Company, Amertranz or CAS in an amount of $50,000 or more which
judgment is not stayed. 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.
F-10
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
6. DEBT--(CONTINUED)
(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 71,310 shares of Holding common
stock. The Company has recorded a debt issuance cost of $150,000 in connection
with the issuance of the stock and will amortize the amount over the life of the
debt. Upon repayment of the debt, the related unamortized debt issuance cost
would be expensed. The effective annual rate of interest on the notes after
giving effect to the debt issuance cost of $150,000 is 98%. The fair value of
the shares of common stock at the time of issuance was $2.22 per share.
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 by the holders thereof to Holding as part of the Combination and
are included in additional paid-in capital.
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 February 7, 1996, no
amounts were outstanding under this facility.
7. STOCKHOLDERS' EQUITY (DEFICIT)
Stock Options and Warrants
As of February 7, 1996, the Company had options outstanding to purchase a
total of 224,399 shares of common stock at exercise prices ranging from $.16 to
$.41, of which 196,005 options are exercisable. No options were exercised as of
February 7, 1996. These options replaced outstanding options of Amertranz and
were included in the computation of the consideration received by the former
Amertranz stockholders. The Company also had warrants outstanding to purchase
906,783 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.
Subsequent to the closing of the Asset Exchange Agreement and in order to
pursue the IPO, 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. The negotiations between the
underwriter and the Company with respect to the IPO were based upon an assumed
expected valuation of the Company after the closing of the Assets Exchange
Agreement. Due to the lower than expected financial results of Amertranz, the
valuation of the Company was decreased and, accordingly, adjustments were
required to be made to the number of outstanding shares of the Company's Common
Stock and the offering price of the securities to be issued in the Company's
proposed IPO. As part of such modifications, 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 237,089
shares of Common Stock and options to purchase an aggregate of 390,910 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 modification.
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
F-11
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
7. STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
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.
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>
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 remote.
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
F-12
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
9. INCOME TAXES--(CONTINUED)
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 debt issuance costs of approximately $1,020,000 in
connection with such bridge financing and will amortize the amount over the life
of the debt. Upon repayment of the debt, the related unamortized debt issuance
cost would be expensed. The effective annual rate of interest on the notes after
giving effect to the debt issuance cost of $1,020,000 is 525%. The fair value of
the shares of common stock at the time of issuance was $4.25 per share.
F-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TIA, Inc.:
We have audited the accompanying balance sheets of The Freight Forwarding
Business of TIA and CFS (the Air Freight Business of TIA, Inc. and Subsidiary)
(note 1) as of December 31, 1994 and 1995 and the related statements of
operations and changes in net liabilities of the Business and cash flows 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 financial position of The Freight Forwarding
Business of TIA and CFS (the Air Freight Business of TIA, Inc. and Subsidiary)
as of December 31, 1994 and 1995, and the results of its operations and its cash
flows 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
in Note 2 for which the date
is May 1, 1996
F-14
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $2,141,047 $2,463,336
Accounts receivable, net of allowance for doubtful accounts of $131,229 in 1995 and
$228,424 in 1994 (Note 7)........................................................ 5,196,113 5,379,903
Income taxes receivable............................................................. -- 65,000
Prepaid expenses and deposits....................................................... 111,878 84,917
---------- ----------
Total current assets........................................................ 7,449,038 7,993,156
---------- ----------
Property and equipment, at cost:
Ground support equipment............................................................ 1,211,507 1,259,942
Furniture, fixtures and leasehold improvements...................................... 374,751 429,145
---------- ----------
1,586,258 1,689,087
Less accumulated depreciation and amortization................................... 762,229 1,129,340
---------- ----------
Net property and equipment.................................................. 824,029 559,747
Notes receivable (Note 3)............................................................. -- 500,000
Other assets.......................................................................... 54,077 54,077
---------- ----------
$8,327,144 $9,106,980
---------- ----------
---------- ----------
LIABILITIES AND NET LIABILITIES OF THE BUSINESS
Current liabilities:
Note payable to affiliate (Note 4).................................................. $3,387,808 $2,187,808
Current installments of note payable (Note 4)....................................... 25,000 25,000
Accounts payable (Note 7)........................................................... 1,614,424 1,605,257
Accrued liabilities (Note 4)........................................................ 1,479,493 1,235,568
Income taxes payable................................................................ 108,201 --
---------- ----------
Total current liabilities................................................... 6,614,926 5,053,633
---------- ----------
Note payable (Note 4)................................................................. 50,000 25,000
Note payable to Parent (Note 4)....................................................... 8,940,336 8,940,336
---------- ----------
Total liabilities........................................................... 15,605,262 14,018,969
---------- ----------
Net liabilities of the Business....................................................... (7,278,118) (4,911,989)
Commitments and contingencies (Notes 6 and 9)
---------- ----------
$8,327,144 $9,106,980
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-15
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
STATEMENTS OF OPERATIONS AND
CHANGES IN NET LIABILITIES OF THE BUSINESS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE PERIOD JANUARY 1, 1996 THROUGH FEBRUARY 7, 1996
<TABLE>
<CAPTION>
FEBRUARY 7,
1996
DECEMBER 31, -----------
--------------------------------------------
1993 1994 1995 (UNAUDITED)
------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenue................................. $ 32,670,727 $ 38,576,285 $ 38,211,306 $ 3,387,338
Cost of transportation (Note 7)................... 24,231,379 30,254,733 30,300,476 2,729,272
------------ ------------ ------------ -----------
Gross profit................................. 8,439,348 8,321,552 7,910,830 658,066
Selling, general and administrative expenses...... 6,504,897 4,633,676 4,513,154 533,673
------------ ------------ ------------ -----------
Operating income............................. 1,934,451 3,687,876 3,397,676 124,393
Other income (expense):
Interest expense (Note 4)....................... (1,107,520) (1,143,787) (1,155,215) (113,015)
Other, net...................................... 41,928 117,214 123,668 (4,036)
------------ ------------ ------------ -----------
Total other expense.......................... (1,065,592) (1,026,573) (1,031,547) (117,051)
------------ ------------ ------------ -----------
Income before income taxes................... 868,859 2,661,303 2,366,129 7,342
Income taxes (Note 5)............................. -- 108,201 -- --
------------ ------------ ------------ -----------
Net income........................................ 868,859 2,553,102 2,366,129 7,342
Net liabilities of the Business:
Balance at beginning of period............... (10,700,079) (9,831,220) (7,278,118) (4,911,989)
------------ ------------ ------------ -----------
Balance at end of period.......................... $ (9,831,220) (7,278,118) (4,911,989) (4,904,647)
------------ ------------ ------------
------------ ------------ ------------
Net liabilities of the Business retained by TIA
and CFS......................................... 4,988,172
-----------
Assets of the Freight Forwarding Business of TIA
and CFS transferred to Holding (Note 2)......... $ 83,525
-----------
-----------
</TABLE>
See accompanying notes to the financial statements.
F-16
<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
AND THE PERIOD JANUARY 1, 1996 THROUGH FEBRUARY 7, 1996
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------- FEBRUARY 7, 1996
1993 1994 1995 (UAUDITED)
--------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 868,859 $2,553,102 $2,366,129 $ 7,342
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 416,830 377,569 367,111 39,687
Net disposals of property and equipment........... -- 46,978 -- --
Bad debt expense.................................. 153,574 70,000 41,000 53,601
Changes in assets and liabilities:
(Increase) decrease in accounts receivable........ (771,087) (949,027) (224,790) 1,134,292
Increase in income taxes receivable............... -- -- (65,000) --
Increase in inventory............................. (11,309) -- -- --
(Increase) decrease in prepaid expenses........... (140,608) 581,376 26,961 (18,172)
Increase (decrease) in accounts payable........... 487,518 (274,010) (9,167) 376,515
Decrease in accrued liabilities................... (706,398) (165,264) (243,925) (1,166,249)
Increase (decrease) in income taxes payable....... -- 68,201 (108,201) --
--------- ---------- ---------- ----------------
Total adjustments............................... (571,480) (244,177) (216,011) 419,674
--------- ---------- ---------- ----------------
Net cash provided by operating activities....... 297,379 2,308,925 2,150,118 427,016
Cash flows from investing activities:
Cash advances under notes receivable................. -- -- (500,000) (300,000)
Purchases of furniture, fixtures and equipment....... (95,567) (42,280) (102,829) (2,439)
Increase (decrease) in other assets.................. (7,393) (9,405) -- 2,118
--------- ---------- ---------- ----------------
Net cash used in investing activities........... (102,960) (51,685) (602,829) (300,321)
Cash flows from financing activities:
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........... (35,361) (470,065) (1,225,000) --
--------- ---------- ---------- ----------------
Net increase in cash and cash equivalents.............. 159,058 1,787,175 322,289 126,695
Cash and cash equivalents at beginning of period....... 194,814 353,872 2,141,047 2,463,336
--------- ---------- ---------- ----------------
Cash and cash equivalents at end of period............. 353,872 2,141,047 2,463,336 2,590,031
--------- ---------- ---------- ----------------
--------- ---------- ---------- ----------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............. 586,056 1,666,950 946,155 --
--------- ---------- ---------- ----------------
--------- ---------- ---------- ----------------
Cash paid during the period for income taxes......... $ -- $ -- $ 173,201 $ --
--------- ---------- ---------- ----------------
--------- ---------- ---------- ----------------
</TABLE>
See accompanying notes to the 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
DECEMBER 31, 1993, 1994 AND 1995 AND FEBRUARY 7, 1996
(INFORMATION RELATED TO THE PERIOD JANUARY 1, 1996 THROUGH FEBRUARY 7, 1996 IS
UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
The accompanying balance sheets and statements of operations and changes in
net liabilities of the Business 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'), which is not a separate legal or historical
reporting entity. The Business was combined in February 1996 with Amertranz
Worldwide Holding Corp. (Holding), see note 2, and, accordingly, the
accompanying financial statements include the accounts of TIA, Inc. and CFS
related to their air freight businesses and exclude accounts related to the
minority interest in CFS. Since the Business is not a separate legal entity, the
ownership is reflected as net liabilities of the Business rather than
stockholders' equity.
At December 31, 1995, CFS has a 51% ownership interest in Caribbean Air
Services Dominicana, Inc. (CASD); however, the accompanying financial statements
do not include the accounts of CASD since CASD was not combined with Holding.
All significant intrabusiness balances and transactions have been
eliminated in the financial statements.
The financial information in the accompanying financial statements for the
Business for the period January 1, 1996 through February 7, 1996 is unaudited
and, in the opinion of management, includes all adjustments necessary for a fair
presentation of such information.
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, and
related direct costs, are recognized when the shipments of cargo are completed.
Monthly provision is made for doubtful receivables, discounts, returns and
allowances.
Cash and Cash Equivalents
Cash at December 31, 1995 and February 7, 1996 includes $2,290,000 and
$2,240,000, respectively, of overnight repurchase agreements.
Property and Equipment
Property and equipment are depreciated using the straight-line method over
the estimated useful lives of the assets of five years for ground support
equipment and 5 to 10 years for furniture, fixtures and leasehold improvements.
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.
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 AND FEBRUARY 7, 1996
(INFORMATION RELATED TO THE PERIOD JANUARY 1, 1996 THROUGH FEBRUARY 7, 1996 IS
UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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.
Financial Instruments
The carrying amounts of accounts receivable, notes receivable, note payable
to affiliate, accounts payable and accrued liabilities approximate fair value
because of the short maturity of these financial instruments. The carrying
amount of the note payable to the Parent approximates fair value because it
bears interest at an adjustable rate.
Reclassifications
Certain amounts in the 1993 and 1994 financial statements have been
reclassified to conform with the 1995 and 1996 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 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.
(2) ASSET EXCHANGE AGREEMENT
In anticipation of a public offering of securities ('Offering'), 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 combined with Amertranz
Worldwide Holding Corp. ('Holding'), which contributed the 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 a freight
handling agreement with CASD; the 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 $83,525 as of
February 7, 1996; 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.
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 AND FEBRUARY 7, 1996
(INFORMATION RELATED TO THE PERIOD JANUARY 1, 1996 THROUGH FEBRUARY 7, 1996 IS
UNAUDITED)
(2) ASSET EXCHANGE AGREEMENT--(CONTINUED)
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,
revolving loan and notes receivable discussed in note 3 if, among other things,
Holding does not meet certain financial thresholds or obtain additional
financing. 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.
(3) NOTES RECEIVABLE
In anticipation of entering into the asset exchange agreement discussed in
note 2, TIA, Inc. and CFS made advances to a subsidiary of Holding totaling
$500,000 in 1995 and $300,000 subsequent to December 31, 1995. The notes are
secured by a subordinated lien on all of the assets of a subsidiary of Holding,
bear interest at a rate of 12%, and are repayable in 12 monthly payments of
principal and interest commencing 30 days after the closing of the Offering.
However, TIA, Inc. and CFS have agreed that, upon consummation of the Offering,
repayment of the notes will be deferred as discussed in note 2.
(4) NOTES PAYABLE
Substantially all of TIA, Inc.'s and CFS's activities in 1993, 1994, 1995
and 1996 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.
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 a 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, $252,000 and $23,000 in 1993, 1994, 1995 and 1996,
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 and February 7, 1996), 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,
$903,000 and $90,000 in 1993, 1994, 1995 and 1996, respectively. Interest in the
amount of approximately $11,000 and $202,000 is included in accrued liabilities
at December 31, 1994 and 1995, respectively.
In addition to the above notes, a noninterest bearing note payable of
$50,000 is outstanding at December 31, 1995 and is due in payments of $25,000 in
1996 and 1997.
F-20
<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 AND FEBRUARY 7, 1996
(INFORMATION RELATED TO THE PERIOD JANUARY 1, 1996 THROUGH FEBRUARY 7, 1996 IS
UNAUDITED)
(5) 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, 1995 and 1996 consists of:
<TABLE>
<CAPTION>
1993
-----------------------------------
CURRENT DEFERRED TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Federal............................ $ -- $ -- $ --
State.............................. -- -- --
--------- --------- ---------
$ -- $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<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>
<TABLE>
<CAPTION>
1996
-----------------------------------
CURRENT DEFERRED TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Federal............................ $ -- $ -- $ --
State.............................. -- -- --
--------- --------- ---------
$ -- $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Income tax expense for 1993, 1994, 1995 and 1996 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 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Computed 'expected' tax expense..................... $ 295,412 $ 904,843 $ 804,484 2,496
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) (4,309)
Other............................................... -- 46,083 13,444 1,813
--------- --------- --------- ---------
$ -- $ 108,201 $ -- $ --
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-21
<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 AND FEBRUARY 7, 1996
(INFORMATION RELATED TO THE PERIOD JANUARY 1, 1996 THROUGH FEBRUARY 7, 1996 IS
UNAUDITED)
(5) INCOME TAXES--(CONTINUED)
The temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December 31, 1994 and 1995
are presented below:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts receivable.................... $ 88,172 50,664
Alternative minimum tax credit carryforward................... 79,494 79,494
Reserves and accruals, not deductible until paid for tax
purposes................................................... 51,606 40,656
Net operating loss carryforwards.............................. 4,034,683 3,562,667
----------- -----------
Total gross deferred tax assets....................... 4,253,955 3,733,481
Less valuation allowance.............................. (2,709,088) (1,891,160)
----------- -----------
Net deferred tax assets............................... 1,544,867 1,842,321
Deferred tax liabilities:
Fixed assets, primarily excess tax over financial statement
depreciation............................................... (1,544,867) (1,842,321)
----------- -----------
Total gross deferred tax liabilities.................. (1,544,867) (1,842,321)
----------- -----------
$ -- --
----------- -----------
----------- -----------
</TABLE>
The changes in the valuation allowance for 1993, 1994, 1995 and 1996 result
from the utilization of net operating loss carryforwards allocated to the
Business. Subsequently recognized tax benefits relating to the valuation
allowance for deferred tax assets as of December 31, 1995 will be recorded as an
income tax benefit in the statement of operations.
At December 31, 1995, TIA, Inc. had federal and state net operating loss
carryforwards of approximately $9,227,000. 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 at December 31, 1995 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 $79,000 available for
carryforward.
(6) 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 noncancellable operating leases for the
years ended December 31, 1993, 1994, 1995 and the period January 1, 1996 through
February 7, 1996 was approximately $2,012,000, $675,000, $330,000 and $38,000,
respectively.
F-22
<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 AND FEBRUARY 7, 1996
(INFORMATION RELATED TO THE PERIOD JANUARY 1, 1996 THROUGH FEBRUARY 7, 1996 IS
UNAUDITED)
(7) 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. Included in accounts payable at December 31, 1994 and 1995
was approximately $31,000 and $8,000, respectively, due to these companies.
There were no such amounts for the period from January 1, 1996 through February
7, 1996.
During the year ended December 31, 1995 and the period January 1, 1996
through February 7, 1996, the Business had sales to a subsidiary of Holding that
amounted to approximately $350,500 and $30,000, respectively, and at December
31, 1995 and February 7, 1996 related accounts receivable of $150,500 and
$154,000 respectively, recorded in the accompanying balance sheets.
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 June 30, 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.
The investment in, and related activities of, Tradewinds Air are not
reflected in the accompanying financial statements as they were not included in
the Business combined with Holding, see Basis of Financial Statement
Presentation in note 1 and Asset Exchange Agreement in note 2.
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, $16,691,000 and
$1,444,000 in 1994, 1995 and 1996, respectively. At December 31, 1994 and 1995,
the Business owed $913,000 and $760,000, respectively, for such services which
are included in accounts payable.
TIA, Inc. provides accounting services to Tradewinds Air for $5,720 per
month.
(8) 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,
1995 and 1996. The Business estimates an allowance for doubtful accounts based
on the credit
F-23
<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 AND FEBRUARY 7, 1996
(INFORMATION RELATED TO THE PERIOD JANUARY 1, 1996 THROUGH FEBRUARY 7, 1996 IS
UNAUDITED)
(8) SUPPLIER AND CREDIT CONCENTRATION--(CONTINUED)
worthiness of its customers as well as general economic conditions.
Consequently, an adverse change in those factors could affect the Business's
estimate of its bad debts.
(9) 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-24
<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-25
<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 52,758 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-26
<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-27
<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, 1992.................... 1,200 $ 1,000 $ -- $ 181,973 $ 182,973
Distributions to stockholders........... -- -- -- (85,000) (85,000)
Net income.............................. -- -- -- 6,235 6,235
---------- -------- ----------- ----------- ----------------
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-28
<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-29
<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 common ownership by the same three
shareholders, 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 and
wholly owned by the same three shareholders. 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 and commenced
operations on that date. There was no purchase price as Integrity received
$700,000 from AIC as a component of the settlement, as described above.
Integrity hired some of the employees but did not acquire any assets or assume
any liabilities and accordingly, no values were assigned.
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 Amertranz 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
Amertranz, its growth and profitability.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of Amertranz, 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.
F-30
<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)
Basis of Presentation
The consolidated financial statements include the accounts of Amertranz
Worldwide, Inc., Integrity Logistics, Inc. and Amerford De Caribe Inc. from
inception and the accounts of AIC from Februry 1, 1994. 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
direct expenses associated with the cost of transportation are accrued
concurrently. 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. Amertranz utilizes a half-year
convention for assets in the year of acquisition and disposal.
Certain computer software costs related to a substantial revision of
Amertranz'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. Amertranz 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, Amertranz is not subject to Federal
corporate income taxes on its taxable income. The stockholders include their pro
rata share of Amertranz's income in their personal income tax returns. Amertranz
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, Amertranz 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-31
<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
Amertranz grants stock options to certain officers and related parties.
Compensation expense is recognized based on the aggregate difference between the
fair market value of Amertranz'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, Amertranz has
experienced a loss, negative cash flows from operations, and negative
stockholders' equity. Amertranz's continued existence is dependent upon its
ability to achieve and maintain profitable operations. Furthermore, Amertranz
entered into an Assets Exchange Agreement on February 7, 1996, and its parent
entered into a letter of intent with an underwriter to pursue an initial public
offering ('IPO') of its common stock. Amertranz believes that its cash
resources, augmented by these financings, at year-end will be sufficient to fund
Amertranz'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, Amertranz 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
Amertranz entered into the Purchase and Sale Agreement described above.
F-32
<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, Amertranz received cash and issued notes payable to an
officer of Amertranz 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
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 June 30, 1995,
excluding bonuses, was approximately $1,503,000.
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 damages 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 remote.
7. INCOME TAXES
State and city minimum and capital taxes were immaterial for the year ended
June 30, 1995.
Amertranz 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 Amertranz 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-33
<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
Amertranz'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, Amertranz 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-34
<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
Amertranz enters into transactions in the normal course of business with
another corporation whose officer is also an officer of Amertranz. 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, Amertranz 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 by the same three shareholders, and accordingly, are presented
as if they were a consolidated group for all periods presented.
Reverse Stock Split
On June 29, 1995, the Board of Directors of Amertranz declared a 2 for 1
reverse stock split for all issued and outstanding shares. The split became
effective upon Amertranz's receipt of proceeds of borrowings aggregating
$1,500,000 from officers and directors of Amertranz and other lenders (Note 12).
The consolidated financial statements have been prepared giving retroactive
effect to the stock split.
Stock Options
In June 1995, Amertranz granted options to purchase common stock to certain
key officers of Amertranz 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. As of June 30, 1995, Amertranz had outstanding options to purchase a total
of 3,050,000 shares of common stock of which 2,712,500 were exercisable.
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 closed on a combination of the
businesses on February 7, 1996 ('Combination'). Subsequent to year-end, TIA,
Inc. has lent Amertranz 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 the IPO expected to take place in the second quarter of 1996.
Furthermore, subsequent to June 30, 1995, Amertranz received approximately
$1,900,000 from officers and directors of Amertranz and other unaffiliated
lenders, to be repaid within one year at interest rates varying from 7% to 12%.
F-35
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1993, 1994 AND 1995
12. SUBSEQUENT EVENTS--(CONTINUED)
Between November 1995 and January 1996 Amertranz obtained interim financing
and issued $350,000 in aggregate principal amount of promissory notes ('Interim
Notes') as well as 71,310 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 offering, (ii) February 7, 1998, or (iii) a
sale or merger of Amertranz. As of December 31, 1995, Amertranz had received
$300,000 in proceeds from the Interim Notes and had issued 57,948 in common
stock. Amertranz has recorded a debt issuance cost of $150,000 in connection
with the issuance of the stock, and will amortize the amount over the life of
the related debt. Upon repayment of the debt, the related unamortized debt
issuance cost would be expensed. The effective annual rate of interest on the
Interim Notes after giving effect to debt issuance cost of $150,000 is 98%. The
fair value of the shares of common stock at the time of issuance was $2.22 per
share.
Stockholders' 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, for $213,000. At the time of the Combination Amertranz
transferred all of its interest in this Belgium affiliate 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 $2.38 per share, options to purchase 52,453 shares of
common stock at $1.17 per share and options to purchase 42,642 shares at $.048
per share.
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, Amertranz declared a 1.27906
reverse stock split for all issued and outstanding shares.
In December 1995, Amertranz granted 800,000 options to purchase common
stock to parties that served as finders on behalf of Amertranz 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. Amertranz 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, Amertranz has written off
advances which were made as start-up funds for a Brazilian affiliate as part of
the international operations. Amertranz 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-36
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1995 and the three months ended March 31, 1996 have 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 and 1996, respectively,
without giving effect to the Offering. The pro forma data for 1995 and the five
weeks ended February 7, 1996 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-37
<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............................ $ (.69)
--------------
--------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES...... 4,865,203
--------------
--------------
</TABLE>
The accompanying notes and management's assumptions to the
pro forma consolidated statement of operations are an integral part of this
statement.
F-38
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(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........................... $ 9,176,666 $ 6,396,621 $ -- $ 15,573,287
Cost of transportation...................... 7,211,631 4,488,834 -- 11,700,465
------------------- --------------- ----------- --------------
Gross profit............................. 1,965,035 1,907,787 -- 3,872,822
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................... 1,240,577 3,711,518 -- 4,952,095
AMORTIZATION OF GOODWILL...................... -- 70,538 50,356(a) 120,894
------------------- --------------- ----------- --------------
Operating income (loss).................. 724,458 (1,874,269) (50,356) (1,200,167)
INTEREST EXPENSE.............................. (113,015) (429,410) (86,985)(b) (629,410)
OTHER INCOME.................................. (6,106) 15,908 -- 9,802
------------------- --------------- ----------- --------------
NET INCOME (loss)............................. $ 605,337 $(2,287,771) $(137,341) $ (1,819,775)
------------------- --------------- ----------- --------------
------------------- --------------- ----------- --------------
NET LOSS PER SHARE............................ $ (.33)
--------------
--------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES...... 5,327,703
--------------
--------------
</TABLE>
The accompanying notes and management's assumptions to the
pro forma consolidated statement of operations are an integral part of this
statement.
F-39
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1996
(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 and January 1, 1996, respectively, 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 and the financial statements of the Company as of February 7,
1996. 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 and
January 1, 1996, respectively, 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 the interest expense recorded on the books of
TIA and CFS related to the interest on the $10,000,000 promissory note
made in connection with the Combination at the annual rate of 8% for
the period presented.
3. EARNINGS PER SHARE
Earnings per shares is computed using the weighted average number of common
shares outstanding adjusted for: (i) the required amount of shares of common
stock at the initial public offering price to repay certain indebtedness of the
company; (ii) the required amount of shares of common stock at the initial
public offering price to repay $6,000,000 of the exchange note; and (iii) the
dilutive effect of options granted within 12 months of the expected initial
public offering using the treasury stock method.
F-40
<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....................................... 23
Management..................................... 30
Certain Transactions........................... 35
Principal Stockholders......................... 38
Description of Securities...................... 39
Shares Eligible for Future Sale................ 41
Underwriting................................... 42
Selling Securityholders and Plan of
Distribution................................. 43
Legal Matters.................................. 47
Experts........................................ 47
Available Information.......................... 47
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] AMERTRANZ
WORLDWIDE
2,000,000 SHARES OF COMMON STOCK
AND
2,000,000 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.......................................... $ 13,191
NASD Filing Fee............................................... 3,939
Nasdaq SmallCap Listing Fee................................... 15,000
Printing Expense.............................................. 40,000
Legal Fees and Expenses....................................... 200,000
Accounting Fees and Expenses.................................. 150,000
Blue Sky Fees and Expenses.................................... 55,000
Stock Certificates and Transfer Agent Fees.................... 2,500
Miscellaneous................................................. 20,370
--------
Total.................................................... $500,000
--------
--------
</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 6 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 431,660 shares of Common Stock, which were
subsequently adjusted as of February 7, 1996 to 363,669 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 71,310 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
- ------ --------------------------------------------------------------------------------------------------------
<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.**
</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 June 24, 1996 between Amertranz Worldwide Holding Corp. and Stuart Hettleman
10.14 Employment Agreement dated June 24, 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 and as amended May 10, 1996
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
11. Statement re computation of Per Share Earnings
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**
</TABLE>
- ------------------
* To be filed by amendment
** Previously filed
II-4
<PAGE>
(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 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 25th 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
- ------------------------------------------ ------------------------------------------------- --------------
<S> <C> <C>
/s/ STUART HETTLEMAN Director, President, Chief Executive Officer, June 25, 1996
- ------------------------------------------ Chief Financial Officer and Principal Accounting
STUART HETTLEMAN Officer
* Director and Executive Vice President June 25, 1996
- ------------------------------------------
RICHARD FAIETA
/s/ MICHAEL BARSA Director and Vice President June 25, 1996
- ------------------------------------------
MICHAEL BARSA
*By: /s/ STUART HETTLEMAN June 25, 1996
--------------------------------------
STUART HETTLEMAN
Attorney-in-fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------------------------------- ----
<S> <C> <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 June 24, 1996 between Amertranz Worldwide Holding Corp. and Stuart
Hettleman
10.14 Employment Agreement dated June 24, 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 and as amended May 10, 1996
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------------------------------- ----
<S> <C> <C>
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
11. Statement re computation of Per Share Earnings
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**
</TABLE>
- ------------------
* To be filed by amendment
** Previously filed
AMERTRANZ WORLDWIDE HOLDING CORP.
COMMON STOCK COMMON STOCK
NUMBER SHARES
C___________ CUSIP 030726 10 3
INCORPORATED UNDER THE SEE REVERSE FOR
LAWS OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
THIS IS TO CERTIFY That is the owner of
fully paid and non-assessable shares of common stock of the par value of $.01
share of AMERTRANZ WORLDWIDE HOLDING CORP. transferable only on the books of the
corporation by the holder hereof in person or by attorney duly authorized, upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Delaware
and to the Certificate of Incorporation and By Laws of the corporation as now or
hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the corporation and the facsimile
signatures of its duly authorized officers.
Dated:
AMERTRANZ
WORLDWIDE
HOLDING CORP.
_______________________ INCORPORATED ________________________
Secretary 1996 President
DELAWARE Authorized Officer
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
NEW YORK, N.Y. TRANSFER AGENT
AND REGISTRAR
BY_________________________________________
<PAGE>
REVERSE SIDE
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT -- ________Custodian_________
(Cust) (Minor)
under Uniform Gifts to Minors
Act _________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- ----------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING
ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________ shares of the capital
stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint ______________________________________________________
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated ___________________________
NOTICE: ________________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
C65114.198 L:1
- 2 -
WARRANT CERTIFICATE
THIS WARRANT EXPIRES AT 5:00 P.M., NEW YORK TIME, ON JUNE 1, 2001
NUMBER WARRANTS
W____________ CUSIP 030726 11 1
REDEEMABLE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
AMERTRANZ WORLDWIDE HOLDING CORP.
This certifies that FOR VALUE RECEIVED
for registered assigns
The "Registered Holder") is the owner of the number of Redeemable Common Stock
Purchase Warrants ("Warrants") specified above. Each Warrant initially entitles
the Registered Holder to purchase subject to the terms and conditions set forth
in this Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Common Stock, $.01 par value, of Amertranz
Worldwide Holding Corp., a Delaware corporation (the "Company"), at any time
between ____ __, 1997 through June ___, 2001 (the "Last Exercise Date"), upon
the presentation and surrender of this Warrant certificate with the Subscription
form on the reverse hereof duly executed, at the corporate office of American
Stock Transfer & Trust Company as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $6.00 (the "Purchase Price") in lawful money
of the United States of America in cash or by official bank or certified check
made payable to the order of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated June __, 1996,
by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant hereby are subject to modification or
adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
line tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on the
Last Exercise Date, or such earlier date as the Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized
<PAGE>
to close, then the Expiration Date shall mean 5:00 p.m. (New York Time) the next
following day which in the State of New York is not a holiday or a day on which
banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Warrants represented by this Warrant Certificate unless a
registration statement under the Securities Act of 1933, as amended, with
respect to such securities is effective. The Company has covenanted and agreed
that it will file post effective amendments to the registration statement (which
events require such amendments) and cause the same to become effective and to
keep such registration statement current. The Warrants represented hereby shall
not be exercisable by a registered Holder in any state where such exercise would
be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment together with any service charge in
addition to any tax or other governmental charge imposed in connection
therewith, for registration or transfer of this Warrant Certificate at such
office, a new Warrant Certificate or Warrant Certificates representing an equal
aggregate number of Warrants will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a shareholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Warrants represented by this Warrant Certificate may be redeemed at the
option of the Company, at a redemption price of $.01 per warrant, provided the
closing bid price (as defined in the Warrant Agreement) for the Common Stock
issuable upon exercise of such Warrant has been at least $10.00 per share on the
twenty consecutive trading days ending on the third day prior to the date on
which the notice of redemption is given. Notice of redemption shall be given at
least thirty days prior to the date fixed for redemption as provided in the
Warrant Agreement. On and after the date fixed for redemption, the Registered
Holder shall have no rights with respect to the Warrants represented by
- 2 -
<PAGE>
this Warrant Certificate except to receive the $.01 per Warrant upon surrender
of this Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the Laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated:
AMERTRANZ AMERTRANZ WORLDWIDE
WORLDWIDE HOLDING CORP.
HOLDING
By _______________ CORP. By _____________________
Secretary INCORPORATED President
1996 Authorized Officer
DELAWARE
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By __________________________________________
- 3 -
<PAGE>
REVERSE SIDE
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_____________ Warrants represented by this Warrant Certificate, and to purchase
the securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of ______________
- -------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
______________________________________________________________________
______________________________________________________________________
(please print or type name and address)
and be delivered to
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _______________________________ the
undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- 4 -
<PAGE>
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(please print or type name and address)
- ----------------------------------------------------------------
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints
_______________________________________________________Attorney to transfer this
Warrant Certificate on the books of the Company, with full power of substitution
in the premises.
Dated:__________________________ x____________________________
Signature Guaranteed
-----------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK, TRUST
COMPANY OR SAVINGS ASSOCIATION, CREDIT UNION OR MEMBER FIRM OF THE AMERICAN
STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR MIDWEST STOCK
EXCHANGE.
- 5 -
Exhibit 5.1
June ___, 1996
Amertranz Worldwide Holding Corp.
2001 Marcus Avenue
Lake Success, New York 11042
Gentlemen:
It is our opinion that the securities being registered with
the Securities and Exchange Commission pursuant to the Registration Statement of
Amertranz Worldwide Holding Corp. on Form S-1 (File No. 333-03613), when sold
and paid for, will be legally issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
aforesaid Registration Statement and further consent to the reference made to us
under the caption "Legal Matters" in the Prospectus constituting a part of such
Registration Statement.
Very truly yours,
/s/ FERBER, GREILSHEIMER, CHAN & ESSNER
awhc.ltr
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 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.
<PAGE>
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; provided, however, that with respect to incentive stock
options, the option exercise price shall not be less than 100% of the fair
market value of the Shares on the date of grant, and, 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, 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 June 3, 1996 (the "Effective Grant Date") to purchase
75,000 Shares. The exercise price of the Senior Executive Options is $6.00 per
Share. The Senior Executive Option will vest over a period of two years,
enabling each such officer to purchase:
(i) 37,500 Shares (the "First Tranche") at any time after the 90th day
following the effectiveness of the Company's Registration Statement
filed with the United States Securities and Exchange Commission,
registration number 333-03613 (the "IPO Registration Statement")
through the tenth anniversary of the effectiveness of the IPO
Registration Statement;
(ii) 18,750 Shares plus any unexercised portion of the First Tranche
(collectively, the "Second Tranche") at any time following the first
anniversary of the effectiveness of the IPO Registration Statement
through the tenth anniversary of the effectiveness of the IPO
Registration Statement, if the Company's earnings before interest,
taxes, depreciation and amortization for its fiscal year ending June
30, 1997 exceeds $500,000; and
(iii) 18,750 Shares plus any unexercised portion of the Second Tranche at
any time following the second anniversary of the effectiveness of the
IPO Registration Statement through the tenth anniversary of the
effectiveness of the IPO Registration Statement, if the Company's
earnings before interest, taxes, depreciation and amortization for its
fiscal year ending June 30, 1998 exceeds $750,000.
In the event the employment of either such officer is terminated in a manner
which would entitle such officer to Severance Compensation as defined in and
under the terms of such officer's employment
- 2 -
<PAGE>
agreement with the Company or due to the death or permanent disability of such
officer (as defined in such employment agreement), the Senior Executive Option
granted to such officer shall become immediately exercisable in full. In the
event the employment of either such officer is terminated in any other manner,
the Senior Executive Option granted to such officer shall immediately terminate
to the extent it has not then been exercised.
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.
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
- 3 -
<PAGE>
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.
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.
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
- 4 -
<PAGE>
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 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 of the Company and,
upon approval of the Shareholders of the Company, shall be effective as of June
3, 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
- 5 -
<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
- 2 -
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of June 24, 1996 by and
between Amertranz Worldwide Holding Corp., a Delaware corporation
("Company"), and STUART HETTLEMAN ("Executive").
W I T N E S E T H:
WHEREAS, Executive is currently serving as President
and Chief Financial Officer of the Company and is also serving as
Executive Vice President of the Company's wholly-owned
subsidiaries, Amertranz Worldwide, Inc. ("Amertranz") and
Carribbean Air Services, Inc. ("CAS"); and
WHEREAS, the Company has recently filed a registration
statement with the Securities and Exchange Commission (File No.
333-03613) relating to a proposed public offering (the
"Offering") of the Company's Common Stock and warrants to
purchase Common Stock in a firm commitment underwriting to be
managed by GKN Securities Corp. (the "Underwriter"); and
WHEREAS, effective upon the commencement of the
Offering (the "Commencement Date") the parties hereto desire to
provide for the employment of the Executive by the Company as
President and Chief Executive Officer of the Company and as
Executive Vice President of Amertranz and CAS upon the terms set
forth herein; and
WHEREAS, the Executive is prepared to accept such
employment, upon the terms and conditions hereinafter described.
NOW THEREFORE, in consideration of the premises and
mutual promises and agreements hereinafter set forth, it is
agreed as follows:
1. Effectiveness of this Agreement. This Agreement
shall become effective on the Commencement Date, except that if
the Commencement Date does not occur on or before September 30,
1996, this Agreement shall be null and void and of no further
effect.
2. Employment and Duties.
(a) Executive shall serve as President and Chief
Executive Officer of the Company and as Executive Vice President
of each of Amertranz and CAS for a term commencing on the
Commencement Date and expiring on the third anniversary of the
Commencement Date. The Executive agrees to serve the Company
faithfully and to the best of his ability and to perform such
services and duties of an executive nature in connection with the
business, affairs and operations of the Company, Amertranz, CAS
and any other subsidiary of the Company as may be reasonably and
in good faith assigned or delegated to him from time to time by
or under the authority of the Board of Directors of the Company
and consistent with the positions of President and Chief
Executive Officer of the Company and Executive Vice President of
Amertranz and CAS, and to use his best efforts in the promotion
and advancement of the Company and its subsidiaries and their
welfare and business. Executive shall perform his duties
hereunder, to the extent as is or may be reasonably necessary in
connection therewith, at the Company's corporate headquarters in
Lake Success, New York; provided, however, that the Company
acknowledges that Executive's physical presence at the Company's
headquarters on a daily basis throughout the term is not
necessarily required, having due regard to the ability of
Executive to adequately interact with the Company's other
employees by telephone, facsimile and computer. The employment
with the Company shall be Executive's primary employment during
the term of this Agreement; provided, however, that the Company
acknowledges that the Executive shall be permitted to pursue
outside business interests during the term, but only to the
extent that such outside business interests do not interfere with
the Executive's duties under this Agreement and do not violate
the terms and conditions of Section 8 hereof.
(b) During the term of employment, Executive shall be
nominated by the management of the Company for election as a
director of the Company at each meeting of shareholders at which
his term of office as a director shall expire. In addition, at
his request, the Company shall have Executive elected to the
Board of Directors of each of its subsidiaries, including
Amertranz and CAS.
3. Compensation.
(a) Base Salary. In consideration of his employment
hereunder, the Company shall pay to the Executive, in such
installments as shall accord with the normal pay practices of the
Company, but no less frequently than monthly, an annual salary at
the initial rate of $130,000 per annum ("Base Salary"). As of
each anniversary of the Commencement Date, the Base Salary will
be increased by an amount equal to the product of (i), (ii) and
(iii), where
(i) is the Base Salary then in effect,
(ii) is .5%; and
(iii) is a fraction, the numerator of which is
EBITDA (as hereinafter defined) for the fiscal year of
the Company ending prior to such anniversary date and
the denominator of which is $100,000.
Additional increases in Base Salary may be awarded to Executive
at the discretion of the Board of Directors, subject to the prior
written consent of the Underwriter unless and until the Company's
EBITDA for any fiscal year equals or exceeds $________.
(b) Incentive Compensation. Executive shall be
entitled to receive incentive compensation ("Incentive
Compensation") in excess of any Base Salary, based on the
Company's EBITDA in any fiscal year during the term hereof, which
Incentive Compensation will be equal to the product of (i), (ii)
and (iii), where
(i) is the Base Salary in effect as of the end
of the applicable fiscal year;
(ii) is 1%; and
(iii) is a fraction, the numerator of which is
EBITDA for such fiscal year and the denominator of
which is $100,000.
Incentive Compensation shall be paid to the Executive no later
than 2 1/2 months after the end of the fiscal year for which it is
payable, or three days after the audited results for the Company
for such year becomes available, whichever is later. In the
event the Board of Directors of the Company determines at any
time during such year that all or any part of the Incentive
Compensation with respect to such year has been earned, the Board
of Directors in its sole discretion may pay all or part of such
Incentive Compensation prior to the time the Incentive
Compensation is due hereunder. Additional compensation, in
excess of the Incentive Compensation calculated for any year, may
be awarded to Executive at the discretion of the Board of
Directors, subject to the prior written consent of the
Underwriter unless and until the Company's EBITDA for any fiscal
year equals or exceeds $________.
(c) Definition of EBITDA. For purposes of this
Agreement, the term "EBITDA" shall be the income of the Company,
but before any (i) interest expense, (ii) income taxes or other
taxes based on income, (iii) amortization expense, (iv)
depreciation expense and (v) any extraordinary or other one-time
income or loss. The calculation of "EBITDA" shall be derived
from the audited financial statements of the Company, computed in
accordance with generally accepted accounting principles
consistently applied.
4. Issuance of Stock Option; Additional Stock
Options; Loans for Exercise of Options; Registration Rights.
(a) Effective upon the Commencement Date, the Company
shall issue to Executive an option (the "Option") to purchase
75,000 shares of Common Stock, which shall be exercisable at an
exercise price equal to the initial offering price to the public
of the Common Stock in the Offering. Such Option shall be issued
pursuant to the Company's 1996 Stock Option Plan (the "Plan"),
have a term of ten years and become exercisable, so long as
Executive is employed by the Company or any of its subsidiaries,
in accordance with the following schedule:
(i) as to 20,834 shares, the Option shall be
exercisable commencing on the 90th day following the
Commencement Date;
(ii) as to an additional 16,666 shares, the Option
shall be exercisable commencing on January 2, 1997;
(iii) as to an additional 18,750 shares, the Option
shall be exercisable commencing on January 2, 1998, so
long as EBITDA of the Company for the 12 months ended
June 30, 1997 exceeds $500,000, provided, however, that
if EBITDA for the 12 months ended June 30, 1997 does
not exceed $500,000 but EBITDA for the 12 months ended
June 30, 1998 exceeds $750,000, the Option shall
nevertheless become exercisable as to these 18,750
shares commencing on the date of determination of
EBITDA for the 12 months ended June 30, 1998; and
(iv) as to an additional 18,750 shares, the Option
shall be exercisable commencing on January 2, 1999, so
long as EBITDA for the 12 months ended June 30, 1998
exceeds $750,000.
; provided, however, that if (i) Executive is terminated for
Cause (as defined in Section 7 of this Agreement), the Option
shall thereupon terminate to the extent not then exercised, (ii)
Executive is terminated without Cause, or dies or is Permanently
Disabled (as defined in Section 5 below) at any time during the
term of employment, any portion of the Option not yet then
exercisable shall thereupon become fully exercisable for the
balance of the ten year term of the Option and (iii) the
Executive voluntarily terminates employment, the vested portion
of the Option at the time of termination shall remain exercisable
for the balance of the ten year term of the Option. The Option
will, to the maximum extent permitted under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), be
classified as an "incentive stock option" under the Code.
(b) In addition to the Option to be issued pursuant to
paragraph (a) of this Section 4, further options to purchase
Common Stock may be granted to Executive, under the Plan or
otherwise, at the discretion of the Board of Directors, subject
to the prior written consent of the Underwriter unless and until
the Company's EBITDA for any fiscal year equals or exceeds
$________.
(c) With respect to shares of Common Stock of the
Company which may be acquired by Executive pursuant to the Option
provided for in this Agreement or options hereafter granted to
him, the Company agrees that, to the extent permitted by
applicable Delaware law, the Company will lend or cause to be
lent to Executive, at Executive's request, funds sufficient to
enable him to pay the exercise price of such options from time to
time up to the total number of shares covered by said options, so
long as Executive is an employee of the Company or any of its
subsidiaries at the time a request for any such loan is made.
Such loan shall bear interest at the minimum applicable federal
rate such that imputed interest will not result, and will be due
36 months after the loan is made, unless Executive is terminated
for Cause or voluntarily terminates his employment prior to the
end of the term of employment, in which case the loan will be due
12 months following the date of termination. In addition, any
such loan shall be secured by shares of Common Stock owned by
Executive the fair market value of which shall at any time be not
less than 100% of the outstanding principal amount of, and
accrued but unpaid interest on, such loan.
(d) Subject to any contract or agreement to which the
Company may be a party with the Underwriter pursuant to which the
Company is required to withhold or delay the filing of any
registration statement relating to shares issuable pursuant to
any option plan of the Company, the Company shall file, as
promptly as practicable following the Commencement Date, a
registration statement with the Securities and Exchange
Commission on Form S-8 (or other then applicable form),
registering the shares of the Company's Common Stock issuable to
Executive upon exercise of the Option and any other options
granted to the Executive, together with (if required to enable
the Executive to resell any such shares publicly) a selling
shareholder prospectus in conformity with Form S-3 (or any then
applicable form). The Company covenants and agrees to file all
necessary amendments to such registration statement and to keep
same current during the full option exercise term, at its sole
cost and expense.
5. Permanent Disability; Insurance.
(a) In the event of termination of Executive's
employment due to Permanent Disability (as hereinafter defined),
the Company shall thereafter pay the Executive 50% of his then
effective Base Salary for the balance of the stated term of this
Agreement. In addition, Executive shall be entitled to (i) a pro
rata portion of the Incentive Compensation payable pursuant to
paragraph 3(b) of this Agreement for the fiscal year in which
such termination occurs on the basis of the elapsed time (in full
months) during such year that Executive was employed prior to the
date of termination, (ii) reimbursement of expenses properly
incurred prior to the date of termination (as contemplated by
Section 6(b) of this Agreement) and (iii) accrued vacation pay
and pension, if any. "Permanent Disability" for purposes hereof
shall be deemed to exist if, in the judgment of a physician
licensed to practice in the state of Executive's residence who is
satisfactory to Executive, Executive will be unable, due to
mental or physical incapacity, disease or injury, to perform the
duties of his office for a period of not less than six months.
In the event of a termination due to Permanent Disability, the
Company shall also continue to include Executive and his family
in its group hospitalization, major medical and life insurance
plans (if any) until the end of the stated term, with the expense
thereof to be borne by the Company.
(b) (i) The Company shall provide term life insurance
on the life of the Executive in the principal amount of
$1,000,000 during the term of this Agreement, and pay
all premiums with respect to such insurance. The
beneficiary or beneficiaries of said insurance shall be
as designated in writing to Company by Executive.
Executive agrees to submit to any physical examination
required by any prospective insurer, and will otherwise
cooperate with the Company in connection with obtaining
such insurance. The Company shall pay additional
compensation to the Executive to hold him harmless from
any income taxes he may owe as a result of the premiums
paid by the Company with respect to such insurance and
as a result of such additional compensation.
(ii) Upon termination of his employment hereunder,
other than for Cause, the Company shall be required to
transfer and assign to Executive any policy of life
and/or disability insurance then owned by the Company
in respect of Executive.
(iii) In the event the Board of Directors determines
to acquire "key man" insurance on the life of
Executive, Executive shall cooperate with the Company
in obtaining such insurance.
6. Executive Benefits; Reimbursement of Expenses.
(a) In addition to the benefits set forth under
Section 5 hereof, Executive shall be entitled to participate in
all employee benefit plans which may be available at the date
hereof or in the future by the Company to employees serving the
Company or its subsidiaries in an executive capacity during the
term of employment. Benefits for Executive under such plans
shall be at least as great as those offered to any other employee
of Company and its subsidiaries. Executive shall be entitled to
vacations of one month in each calendar year during the term of
employment. Vacation periods need not be consecutive and shall
carry over to the following calendar years to the extent unused.
(b) The Company authorizes Executive to incur such
expenses as are appropriate for the reasonable and proper conduct
of the Company's business, and the Company shall reimburse him no
less frequently than monthly for such expenses upon submission of
a reasonably detailed accounting thereof, with appropriate
substantiation.
(c) In addition to expenses reimbursable pursuant to
paragraph (b) above, the Company shall provide Executive with an
automobile allowance of $500 per month during the term of this
agreement, and the Company shall reimburse Executive for the
insurance, repair, gas, maintenance and mobile telephone expense
associated with Executive's automobile.
7. Termination.
(a) The Company may not terminate this Agreement for
any reason except for (i) Cause (defined to be either (A) the
conviction of Executive for, or Executive pleads nolo contendere
to, any crime or offense involving monies or other property of
the Company or any other felony or (B) a violation of the
provisions of Section 8 hereof (subject to the provisions of
paragraph (d) thereof)), or (ii) upon a Permanent Disability as
provided in Section 5 hereof. If the employment of Executive is
terminated by the Company for Cause, the Company shall have no
obligation to Executive except any Base Salary earned to the date
of termination, a pro rata portion of the Incentive Compensation
payable pursuant to paragraph 3(b) of this Agreement for the
fiscal year in which such termination occurs on the basis of the
elapsed time (in full months) during such year that Executive was
employed prior to the date of termination, reimbursement of
expenses properly incurred prior to such date and accrued
vacation pay and pension, if any. If the employment of Executive
is terminated as a result of a Permanent Disability, the
provisions of Section 5 shall apply.
(b) The occurrence of any of the following will
entitle Executive to the benefits set forth in paragraph (c) of
this Section 7:
(i) Any material breach of this Agreement by
the Company, including but not limited to any attempt
by the Company to terminate the employment of Executive
for any reason other than as set forth in paragraph (a)
of this Section 7, any attempt by the Company to remove
the Executive from the position of President and Chief
Executive Officer of the Company or Executive Vice
President of Amertranz or CAS or the assignment of
duties to the Executive which are materially
inconsistent with those positions; provided, however,
that if the breach is cured within the ten day period
referred to in Section 10(c) of this Agreement, no
breach will be deemed to have occurred hereunder.
(ii) If, at the expiration of the term of this
Agreement, the Company fails to offer Executive the
right to continue employment for not less than an
additional three year term on terms and conditions
which are at least as favorable as those in effect at
the end of the stated term.
(iii) If, without the prior written consent of
Executive, at any time after the date hereof, any of
the following occurs:
(A) The acquisition, other than from the
Company, by any individual, entity or group
(within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), other than TIA,
Inc. or Carribbean Freight Service, Inc. or any of
their respective affiliates, of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more
of either the then outstanding shares of Common
Stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the
then outstanding voting securities of the Company
having general voting power in electing the Board
of Directors of the Company (the "Outstanding
Company Voting Securities"); or
(B) Individuals who, as of the date hereof,
constitute the Board of Directors of the Company
(the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of
Directors, provided, however, that any individual
becoming a director subsequent to the date hereof
whose election, or nomination for election, by the
Company's stockholders was approved by a vote of
at least a majority of the directors then
comprising the Incumbent Board shall be considered
as though such individual was a member of the
Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of
office is in connection with an actual or
threatened election contest relating to the
election of the Directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(C) Approval by the stockholders of the
Company of a complete liquidation or dissolution
of the Company or of the sale or other disposition
of all or substantially all of the assets of the
Company, or of a reorganization, merger or
consolidation with respect to which all or
substantially all of the individuals and entities
who were the respective beneficial owners of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to
such reorganization, merger or consolidation do
not, immediately following such reorganization,
merger or consolidation, beneficially own,
directly or indirectly, more than 50% of,
respectively, the then outstanding shares of
common stock and the combined voting power of the
then outstanding voting securities entitled to
vote generally in the election of directors of the
corporation resulting from such reorganization,
merger or consolidation, as the case may be; or
(D) Executive is not nominated for a
directorship of the Company or, if requested, of
any subsidiary; or, if nominated, he is not
elected by the stockholders; or if there appears
to either Executive or the Company to be a clear
and reasonable probability (judging, among other
things, by proxy returns, competitive proxy
solicitations, or adverse vote campaigns), that
Executive may not be so elected.
(c) If any of the events specified in paragraph (b) of
this Section 7 occur, Executive may, by written notice to the
Company, elect to treat such breach as a termination without
Cause within the meaning of this Agreement and terminate his
employment as an officer and director of the Company and all
subsidiaries. In the event of a termination without Cause, all
obligations of Executive hereunder shall terminate, and Executive
shall be entitled to the following:
(i) Executive may elect to receive either (A),
(B) or (C) below (the "Severance Compensation"):
(A) Continue to receive all compensation and
benefits provided by this Agreement as if he had
continued to be employed hereunder for the full
term of employment (without any duty to mitigate
damages).
(B) Receive, in lieu of all such compensation
and benefits, within ten business days after the
date of termination, an amount equal to the sum of
(x) and (y) below:
(x) all accrued but unpaid Base Salary,
Incentive Compensation and other compensation
or other amounts due to Executive under this
Agreement as of the date of termination; and
(y) the discounted present value of all
remaining Base Salary and Incentive
Compensation to which Executive would be
entitled under this Agreement for all years
remaining under the Agreement. "Base Salary"
for purposes of this subparagraph shall be
deemed the annual Base Salary rate in effect
at the time of the discharge, increased by
10% on each successive anniversary of the
Commencement Date. "Incentive Compensation"
for purposes of this subparagraph shall mean,
for any year, an amount equal to 50% of the
Base Salary payable to Executive for such
year. The discounted present value for the
remaining term of the Agreement shall be
determined using an interest rate equal to
the most recent federal rate published by the
Internal Revenue Service for imputing
interest applicable to a period of time equal
to the period between the date of termination
and the expiration date of the stated term of
employment.
(C) Receive, in lieu of amounts payable
under either (A) or (B), within ten business days
after the date of termination, an amount equal to
299% of the Executive's Base Salary and Incentive
Compensation in respect of the last full fiscal
year Executive was employed under this Agreement.
(ii) All indebtedness of Executive to the
Company then outstanding, if any, shall thereupon be
forgiven.
(iii) The group major medical, hospitalization
and life insurance coverage (if any) provided to
Executive and his family at the time of termination
shall be provided for the remainder of the stated term
of the Agreement with the cost thereof to be borne by
the Company.
(iv) All stock options, including but not
limited to the Option granted pursuant to Section 4 of
this Agreement, which were not exercisable at the time
of termination of employment shall thereupon become
exercisable in full.
(d) In the event of termination of employment due to
death, such termination shall not result in the loss of any
rights which the Executive may have as an employee of the Company
or any subsidiary at the time of his death pursuant to any
insurance or other death benefit plans or arrangements of the
Company or any subsidiary or pursuant to any employee benefit
plans of the Company or subsidiary or pursuant to any options or
rights to acquire shares of Common Stock of the Company (except
to the extent that such loss of rights arises under the terms of
the instruments governing such plans or arrangements).
8. Restrictive Covenants. Executive covenants and
agrees that:
(a) Executive will not, at any time during the term of
employment hereunder and for two years thereafter, divulge to any
person other than a person associated with the Company any secret
and confidential information concerning the Company, or any of
its subsidiaries, and their respective products, customers and
plans which Executive acquired during the course of Executive's
employment.
(b) Executive will not, directly or indirectly, except
for the benefit of the Company, at any time during the term of
employment hereunder, become an officer, director, stockholder,
partner, associate, employee, owner, agent, creditor, independent
contractor, co-venturer or otherwise, or be interested in or
associated with any other corporation, firm or business engaged
in the same or any similar business competitive with that of the
Company or any of its subsidiaries.
(c) Executive will not, directly or indirectly, except
for the benefit of the Company, during the term of employment and
for a period of two years thereafter:
(i) (A) solicit, cause or authorize, directly or
indirectly, to be solicited for or on behalf of
Executive or third parties, from persons who were
customers of the Company at any time within one year
prior to the cessation of Executive's employment
hereunder, any business similar to the business
transacted by the Company with such customer; or
(B) accept or cause or authorize, directly
or indirectly, to be accepted for or on behalf of the
Executive or third parties, any such business from any
such customers of the Company as defined in the
preceding subsection.
(ii) (A) solicit, entice, persuade or induce,
directly or indirectly, any employee of the Company or
any of its subsidiaries or any other person who was, at
any time within one year prior to the cessation of
Executive's employment hereunder, then under contract
with or rendering services to the Company or any of its
subsidiaries, to terminate his or her employment by, or
contractual relationship with, the Company or its
subsidiaries or to refrain from extending or renewing
the same (upon the same or new terms) or to refrain
from rendering services to the Company or its
subsidiaries or to become employed by or to enter into
contractual relations with persons other than the
Company or its subsidiaries; or
(B) approach any such employee or other
person for any of the foregoing purposes; or
(C) authorize or knowingly approve or assist
in the taking of any such actions by any person other
than the Company or any of its subsidiaries.
; provided, however, that if the employment of Executive has been
terminated without Cause under this Agreement and the Company has
failed to deliver to Executive the Severance Compensation and
other benefits due him pursuant to Section 7(c) hereof, Executive
shall not be subject to this paragraph (c) immediately upon such
non-delivery.
(d) Notwithstanding any alleged breach of the
provisions of this Section 8 by Executive, this Agreement shall
continue in full force and effect, and the Company shall be
required to make all payments and furnish all benefits due to
Executive hereunder, until such time as there is a final judgment
by a court of competent jurisdiction finding that there has been
a material breach of this Section 8 by Executive, which is no
longer subject to appeal by Executive.
9. Legal fees. The Company shall pay for all fees
and expenses of counsel to the Executive for serviced rendered by
such counsel in connection with this Agreement.
10. Binding Effect; Governing Law;
Notice of Breach and Right to Cure.
(a) The rights and obligations under this Agreement
shall inure to the benefit of and shall be binding upon the
Company and its successors and assign, including any corporation
with which the Company shall merge or consolidate or to which it
shall sell all or substantially all of its assets. This
Agreement is otherwise nonassignable.
(b) The interpretation and construction of this
Agreement shall be governed by the laws of the State of New York.
(c) In the event of any material breach by either
party of this Agreement, the non-breaching party shall give the
breaching party written notice thereof, and the breaching party
shall have ten days from receipt of such notice to cure such
breach. If the breach is cured within such ten day period, no
breach will be deemed to have occurred hereunder.
11. Arbitration. Disputes between the parties arising
under or with respect to this Agreement shall be submitted to
arbitration in the City of New York by a single arbitrator under
the rules of the American Arbitration Association or a similar
organization and the arbitration award shall be binding upon the
parties and enforceable in any court of competent jurisdiction.
The cost of arbitration, including counsel fees, shall be borne
by the Company unless the arbitrator specifically determines that
the Executive's position was frivolous and without reasonable
foundation in which case the Company and the Executive shall each
bear their own expenses.
12. Miscellaneous.
(a) This Agreement may not be modified, amended or
rescinded except by a writing duly signed by the parties hereto.
(b) All notices or other communications described
herein or contemplated hereby shall be in writing and shall be
deemed to have been duly given if transmitted by facsimile (with
proof of delivery) or mailed by registered or certified mail,
return receipt requested, (i) if to the Company, directed to
Amertranz Worldwide Holding Corp., 2001 Marcus Avenue, Lake
Success, New York 10042, and (ii) if to Executive, directed to
Mr. Stuart Hettleman at _____________________________, or to such
other address as the parties may in writing establish by notice
in accordance herewith.
13. Severability. If any provision herein shall, as a
result of arbitration or court proceedings, be determined to be
invalid or contrary to law, then that provision alone shall be
deemed deleted herefrom and the remainder hereof shall survive.
14. Indemnification. The Company undertakes to
indemnify Executive for all acts or omissions as an officer or
director or employee of the Company or any subsidiary thereof, to
the full extent provided or permitted under Delaware law, against
all damages, expenses and costs (including reasonable counsel
fees) in any action or proceeding commenced during the term of
employment or after termination of his employment hereunder. The
Company agrees to purchase, as promptly as practicable after the
Commencement Date, and keep in full force and effect during the
term of this Agreement directors and officers liability insurance
in an amount not less than $_______________.
IN WITNESS WHEREOF, the Company has caused this
Employment Agreement to be signed and sealed by its undersigned
officer, hereunto duly authorized, and Executive has set his hand
hereto, all as of the day and year first above written.
ATTEST: AMERTRANZ WORLDWIDE HOLDING
CORP.
/s/ By: /s/
Name:
Title:
/s/ /s/
Witness Stuart Hettleman
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of June 24, 1996 by and
between Amertranz Worldwide Holding Corp., a Delaware corporation
("Company"), and RICHARD A. FAIETA ("Executive").
W I T N E S E T H:
WHEREAS, Executive is currently serving as Executive
Vice President of the Company and is also serving as an officer
of the Company's wholly-owned subsidiaries, Amertranz Worldwide,
Inc. ("Amertranz") and Carribbean Air Services, Inc. ("CAS"); and
WHEREAS, the Company has recently filed a registration
statement with the Securities and Exchange Commission (File No.
333-03613) relating to a proposed public offering (the
"Offering") of the Company's Common Stock and warrants to
purchase Common Stock in a firm commitment underwriting to be
managed by GKN Securities Corp. (the "Underwriter"); and
WHEREAS, effective upon the commencement of the
Offering (the "Commencement Date") the parties hereto desire to
provide for the employment of the Executive by the Company as
Executive Vice President of the Company, Chief Executive Officer
of Amertranz and President of CAS upon the terms set forth
herein; and
WHEREAS, the Executive is prepared to accept such
employment, upon the terms and conditions hereinafter described.
NOW THEREFORE, in consideration of the premises and
mutual promises and agreements hereinafter set forth, it is
agreed as follows:
1. Effectiveness of this Agreement. This Agreement
shall become effective on the Commencement Date, except that if
the Commencement Date does not occur on or before September 30,
1996, this Agreement shall be null and void and of no further
effect.
2. Employment and Duties.
(a) Executive shall serve as Executive Vice President
of the Company, Chief Executive Officer of Amertranz and
President of CAS for a term commencing on the Commencement Date
and expiring on the third anniversary of the Commencement Date.
The Executive agrees to serve the Company faithfully and to the
best of his ability and to perform such services and duties of an
executive nature in connection with the business, affairs and
operations of the Company, Amertranz, CAS and any other
subsidiary of the Company as may be reasonably and in good faith
assigned or delegated to him from time to time by or under the
authority of the Board of Directors of the Company and consistent
with the positions of Executive Vice President of the Company
Chief Executive Officer of Amertranz and President of CAS, and to
use his best efforts in the promotion and advancement of the
Company and its subsidiaries and their welfare and business.
Executive shall perform his duties hereunder, to the extent as is
or may be reasonably necessary in connection therewith, at the
Company's location in Greensboro, North Carolina; provided,
however, that the Company acknowledges that Executive's physical
presence at the Company's headquarters on a daily basis
throughout the term is not necessarily required, having due
regard to the ability of Executive to adequately interact with
the Company's other employees by telephone, facsimile and
computer. The employment with the Company shall be Executive's
primary employment during the term of this Agreement; provided,
however, that the Company acknowledges that the Executive shall
be permitted to pursue outside business interests during the
term, but only to the extent that such outside business interests
do not interfere with the Executive's duties under this Agreement
and do not violate the terms and conditions of Section 8 hereof.
(b) During the term of employment, Executive shall be
nominated by the management of the Company for election as a
director of the Company at each meeting of shareholders at which
his term of office as a director shall expire. In addition, at
his request, the Company shall have Executive elected to the
Board of Directors of each of its subsidiaries, including
Amertranz and CAS.
3. Compensation.
(a) Base Salary. In consideration of his employment
hereunder, the Company shall pay to the Executive, in such
installments as shall accord with the normal pay practices of the
Company, but no less frequently than monthly, an annual salary at
the initial rate of $150,000 per annum ("Base Salary"). As of
each anniversary of the Commencement Date, the Base Salary will
be increased by an amount equal to the product of (i), (ii) and
(iii), where
(i) is the Base Salary then in effect,
(ii) is .5%; and
(iii) is a fraction, the numerator of which is
EBITDA (as hereinafter defined) for the fiscal year of
the Company ending prior to such anniversary date and
the denominator of which is $100,000.
Additional increases in Base Salary may be awarded to Executive
at the discretion of the Board of Directors, subject to the prior
written consent of the Underwriter unless and until the Company's
EBITDA for any fiscal year equals or exceeds $________.
(b) Incentive Compensation. Executive shall be
entitled to receive incentive compensation ("Incentive
Compensation") in excess of any Base Salary, based on the
Company's EBITDA in any fiscal year during the term hereof, which
Incentive Compensation will be equal to the product of (i), (ii)
and (iii), where
(i) is the Base Salary in effect as of the end
of the applicable fiscal year;
(ii) is 1%; and
(iii) is a fraction, the numerator of which is
EBITDA for such fiscal year and the denominator of
which is $100,000.
Incentive Compensation shall be paid to the Executive no later
than 2 1/2 months after the end of the fiscal year for which it is
payable, or three days after the audited results for the Company
for such year becomes available, whichever is later. In the
event the Board of Directors of the Company determines at any
time during such year that all or any part of the Incentive
Compensation with respect to such year has been earned, the Board
of Directors in its sole discretion may pay all or part of such
Incentive Compensation prior to the time the Incentive
Compensation is due hereunder. Additional compensation, in
excess of the Incentive Compensation calculated for any year, may
be awarded to Executive at the discretion of the Board of
Directors, subject to the prior written consent of the
Underwriter unless and until the Company's EBITDA for any fiscal
year equals or exceeds $________.
(c) Definition of EBITDA. For purposes of this
Agreement, the term "EBITDA" shall be the income of the Company,
but before any (i) interest expense, (ii) income taxes or other
taxes based on income, (iii) amortization expense, (iv)
depreciation expense and (v) any extraordinary or other one-time
income or loss. The calculation of "EBITDA" shall be derived
from the audited financial statements of the Company, computed in
accordance with generally accepted accounting principles
consistently applied.
4. Issuance of Stock Option; Additional Stock
Options; Loans for Exercise of Options; Registration Rights.
(a) Effective upon the Commencement Date, the Company
shall issue to Executive an option (the "Option") to purchase
75,000 shares of Common Stock, which shall be exercisable at an
exercise price equal to the initial offering price to the public
of the Common Stock in the Offering. Such Option shall be issued
pursuant to the Company's 1996 Stock Option Plan (the "Plan"),
have a term of ten years and become exercisable, so long as
Executive is employed by the Company or any of its subsidiaries,
in accordance with the following schedule:
(i) as to 20,834 shares, the Option shall be
exercisable commencing on the 90th day following the
Commencement Date;
(ii) as to an additional 16,666 shares, the Option
shall be exercisable commencing on January 2, 1997;
(iii) as to an additional 18,750 shares, the Option
shall be exercisable commencing on January 2, 1998, so
long as EBITDA of the Company for the 12 months ended
June 30, 1997 exceeds $500,000, provided, however, that
if EBITDA for the 12 months ended June 30, 1997 does
not exceed $500,000 but EBITDA for the 12 months ended
June 30, 1998 exceeds $750,000, the Option shall
nevertheless become exercisable as to these 18,750
shares commencing on the date of determination of
EBITDA for the 12 months ended June 30, 1998; and
(iv) as to an additional 18,750 shares, the Option
shall be exercisable commencing on January 2, 1999, so
long as EBITDA for the 12 months ended June 30, 1998
exceeds $750,000.
; provided, however, that if (i) Executive is terminated for
Cause (as defined in Section 7 of this Agreement), the Option
shall thereupon terminate to the extent not then exercised, (ii)
Executive is terminated without Cause, or dies or is Permanently
Disabled (as defined in Section 5 below) at any time during the
term of employment, any portion of the Option not yet then
exercisable shall thereupon become fully exercisable for the
balance of the ten year term of the Option and (iii) the
Executive voluntarily terminates employment, the vested portion
of the Option at the time of termination shall remain exercisable
for the balance of the ten year term of the Option. The Option
will, to the maximum extent permitted under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), be
classified as an "incentive stock option" under the Code.
(b) In addition to the Option to be issued pursuant to
paragraph (a) of this Section 4, further options to purchase
Common Stock may be granted to Executive, under the Plan or
otherwise, at the discretion of the Board of Directors, subject
to the prior written consent of the Underwriter unless and until
the Company's EBITDA for any fiscal year equals or exceeds
$________.
(c) With respect to shares of Common Stock of the
Company which may be acquired by Executive pursuant to the Option
provided for in this Agreement or options hereafter granted to
him, the Company agrees that, to the extent permitted by
applicable Delaware law, the Company will lend or cause to be
lent to Executive, at Executive's request, funds sufficient to
enable him to pay the exercise price of such options from time to
time up to the total number of shares covered by said options, so
long as Executive is an employee of the Company or any of its
subsidiaries at the time a request for any such loan is made.
Such loan shall bear interest at the minimum applicable federal
rate such that imputed interest will not result, and will be due
36 months after the loan is made, unless Executive is terminated
for Cause or voluntarily terminates his employment prior to the
end of the term of employment, in which case the loan will be due
12 months following the date of termination. In addition, any
such loan shall be secured by shares of Common Stock owned by
Executive the fair market value of which shall at any time be not
less than 100% of the outstanding principal amount of, and
accrued but unpaid interest on, such loan.
(d) Subject to any contract or agreement to which the
Company may be a party with the Underwriter pursuant to which the
Company is required to withhold or delay the filing of any
registration statement relating to shares issuable pursuant to
any option plan of the Company, the Company shall file, as
promptly as practicable following the Commencement Date, a
registration statement with the Securities and Exchange
Commission on Form S-8 (or other then applicable form),
registering the shares of the Company's Common Stock issuable to
Executive upon exercise of the Option and any other options
granted to the Executive, together with (if required to enable
the Executive to resell any such shares publicly) a selling
shareholder prospectus in conformity with Form S-3 (or any then
applicable form). The Company covenants and agrees to file all
necessary amendments to such registration statement and to keep
same current during the full option exercise term, at its sole
cost and expense.
5. Permanent Disability; Insurance.
(a) In the event of termination of Executive's
employment due to Permanent Disability (as hereinafter defined),
the Company shall thereafter pay the Executive 50% of his then
effective Base Salary for the balance of the stated term of this
Agreement. In addition, Executive shall be entitled to (i) a pro
rata portion of the Incentive Compensation payable pursuant to
paragraph 3(b) of this Agreement for the fiscal year in which
such termination occurs on the basis of the elapsed time (in full
months) during such year that Executive was employed prior to the
date of termination, (ii) reimbursement of expenses properly
incurred prior to the date of termination (as contemplated by
Section 6(b) of this Agreement) and (iii) accrued vacation pay
and pension, if any. "Permanent Disability" for purposes hereof
shall be deemed to exist if, in the judgment of a physician
licensed to practice in the state of Executive's residence who is
satisfactory to Executive, Executive will be unable, due to
mental or physical incapacity, disease or injury, to perform the
duties of his office for a period of not less than six months.
In the event of a termination due to Permanent Disability, the
Company shall also continue to include Executive and his family
in its group hospitalization, major medical and life insurance
plans (if any) until the end of the stated term, with the expense
thereof to be borne by the Company.
(b) (i) The Company shall provide term life insurance
on the life of the Executive in the principal amount of
$1,000,000 during the term of this Agreement, and pay
all premiums with respect to such insurance. The
beneficiary or beneficiaries of said insurance shall be
as designated in writing to Company by Executive.
Executive agrees to submit to any physical examination
required by any prospective insurer, and will otherwise
cooperate with the Company in connection with obtaining
such insurance. The Company shall pay additional
compensation to the Executive to hold him harmless from
any income taxes he may owe as a result of the premiums
paid by the Company with respect to such insurance and
as a result of such additional compensation.
(ii) Upon termination of his employment hereunder,
other than for Cause, the Company shall be required to
transfer and assign to Executive any policy of life
and/or disability insurance then owned by the Company
in respect of Executive.
(iii) In the event the Board of Directors determines
to acquire "key man" insurance on the life of
Executive, Executive shall cooperate with the Company
in obtaining such insurance.
6. Executive Benefits; Reimbursement of Expenses.
(a) In addition to the benefits set forth under
Section 5 hereof, Executive shall be entitled to participate in
all employee benefit plans which may be available at the date
hereof or in the future by the Company to employees serving the
Company or its subsidiaries in an executive capacity during the
term of employment. Benefits for Executive under such plans
shall be at least as great as those offered to any other employee
of Company and its subsidiaries. Executive shall be entitled to
vacations of one month in each calendar year during the term of
employment. Vacation periods need not be consecutive and shall
carry over to the following calendar years to the extent unused.
(b) The Company authorizes Executive to incur such
expenses as are appropriate for the reasonable and proper conduct
of the Company's business, and the Company shall reimburse him no
less frequently than monthly for such expenses upon submission of
a reasonably detailed accounting thereof, with appropriate
substantiation.
(c) In addition to expenses reimbursable pursuant to
paragraph (b) above, the Company shall provide Executive with an
automobile allowance of $500 per month during the term of this
agreement, and the Company shall reimburse Executive for the
insurance, repair, gas, maintenance and mobile telephone expense
associated with Executive's automobile.
7. Termination.
(a) The Company may not terminate this Agreement for
any reason except for (i) Cause (defined to be either (A) the
conviction of Executive for, or Executive pleads nolo contendere
to, any crime or offense involving monies or other property of
the Company or any other felony or (B) a violation of the
provisions of Section 8 hereof (subject to the provisions of
paragraph (d) thereof)), or (ii) upon a Permanent Disability as
provided in Section 5 hereof. If the employment of Executive is
terminated by the Company for Cause, the Company shall have no
obligation to Executive except any Base Salary earned to the date
of termination, a pro rata portion of the Incentive Compensation
payable pursuant to paragraph 3(b) of this Agreement for the
fiscal year in which such termination occurs on the basis of the
elapsed time (in full months) during such year that Executive was
employed prior to the date of termination, reimbursement of
expenses properly incurred prior to such date and accrued
vacation pay and pension, if any. If the employment of Executive
is terminated as a result of a Permanent Disability, the
provisions of Section 5 shall apply.
(b) The occurrence of any of the following will
entitle Executive to the benefits set forth in paragraph (c) of
this Section 7:
(i) Any material breach of this Agreement by
the Company, including but not limited to any attempt
by the Company to terminate the employment of Executive
for any reason other than as set forth in paragraph (a)
of this Section 7, any attempt by the Company to remove
the Executive from the position of Executive Vice
President of the Company or Chief Executive Officer of
Amertranz or President of CAS or the assignment of
duties to the Executive which are materially
inconsistent with those positions; provided, however,
that if the breach is cured within the ten day period
referred to in Section 10(c) of this Agreement, no
breach will be deemed to have occurred hereunder.
(ii) If, at the expiration of the term of this
Agreement, the Company fails to offer Executive the
right to continue employment for not less than an
additional three year term on terms and conditions
which are at least as favorable as those in effect at
the end of the stated term.
(iii) If, without the prior written consent of
Executive, at any time after the date hereof, any of
the following occurs:
(A) The acquisition, other than from the
Company, by any individual, entity or group
(within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), other than TIA,
Inc. or Carribbean Freight Service, Inc. or any of
their respective affiliates, of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more
of either the then outstanding shares of Common
Stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the
then outstanding voting securities of the Company
having general voting power in electing the Board
of Directors of the Company (the "Outstanding
Company Voting Securities"); or
(B) Individuals who, as of the date hereof,
constitute the Board of Directors of the Company
(the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of
Directors, provided, however, that any individual
becoming a director subsequent to the date hereof
whose election, or nomination for election, by the
Company's stockholders was approved by a vote of
at least a majority of the directors then
comprising the Incumbent Board shall be considered
as though such individual was a member of the
Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of
office is in connection with an actual or
threatened election contest relating to the
election of the Directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(C) Approval by the stockholders of the
Company of a complete liquidation or dissolution
of the Company or of the sale or other disposition
of all or substantially all of the assets of the
Company, or of a reorganization, merger or
consolidation with respect to which all or
substantially all of the individuals and entities
who were the respective beneficial owners of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to
such reorganization, merger or consolidation do
not, immediately following such reorganization,
merger or consolidation, beneficially own,
directly or indirectly, more than 50% of,
respectively, the then outstanding shares of
common stock and the combined voting power of the
then outstanding voting securities entitled to
vote generally in the election of directors of the
corporation resulting from such reorganization,
merger or consolidation, as the case may be; or
(D) Executive is not nominated for a
directorship of the Company or, if requested, of
any subsidiary; or, if nominated, he is not
elected by the stockholders; or if there appears
to either Executive or the Company to be a clear
and reasonable probability (judging, among other
things, by proxy returns, competitive proxy
solicitations, or adverse vote campaigns), that
Executive may not be so elected.
(c) If any of the events specified in paragraph (b) of
this Section 7 occur, Executive may, by written notice to the
Company, elect to treat such breach as a termination without
Cause within the meaning of this Agreement and terminate his
employment as an officer and director of the Company and all
subsidiaries. In the event of a termination without Cause, all
obligations of Executive hereunder shall terminate, and Executive
shall be entitled to the following:
(i) Executive may elect to receive either (A),
(B) or (C) below (the "Severance Compensation"):
(A) Continue to receive all compensation and
benefits provided by this Agreement as if he had
continued to be employed hereunder for the full
term of employment (without any duty to mitigate
damages).
(B) Receive, in lieu of all such compensation
and benefits, within ten business days after the
date of termination, an amount equal to the sum of
(x) and (y) below:
(x) all accrued but unpaid Base Salary,
Incentive Compensation and other compensation
or other amounts due to Executive under this
Agreement as of the date of termination; and
(y) the discounted present value of all
remaining Base Salary and Incentive
Compensation to which Executive would be
entitled under this Agreement for all years
remaining under the Agreement. "Base Salary"
for purposes of this subparagraph shall be
deemed the annual Base Salary rate in effect
at the time of the discharge, increased by
10% on each successive anniversary of the
Commencement Date. "Incentive Compensation"
for purposes of this subparagraph shall mean,
for any year, an amount equal to 50% of the
Base Salary payable to Executive for such
year. The discounted present value for the
remaining term of the Agreement shall be
determined using an interest rate equal to
the most recent federal rate published by the
Internal Revenue Service for imputing
interest applicable to a period of time equal
to the period between the date of termination
and the expiration date of the stated term of
employment.
(C) Receive, in lieu of amounts payable
under either (A) or (B), within ten business days
after the date of termination, an amount equal to
299% of the Executive's Base Salary and Incentive
Compensation in respect of the last full fiscal
year Executive was employed under this Agreement.
(ii) All indebtedness of Executive to the
Company then outstanding, if any, shall thereupon be
forgiven.
(iii) The group major medical, hospitalization
and life insurance coverage (if any) provided to
Executive and his family at the time of termination
shall be provided for the remainder of the stated term
of the Agreement with the cost thereof to be borne by
the Company.
(iv) All stock options, including but not
limited to the Option granted pursuant to Section 4 of
this Agreement, which were not exercisable at the time
of termination of employment shall thereupon become
exercisable in full.
(d) In the event of termination of employment due to
death, such termination shall not result in the loss of any
rights which the Executive may have as an employee of the Company
or any subsidiary at the time of his death pursuant to any
insurance or other death benefit plans or arrangements of the
Company or any subsidiary or pursuant to any employee benefit
plans of the Company or subsidiary or pursuant to any options or
rights to acquire shares of Common Stock of the Company (except
to the extent that such loss of rights arises under the terms of
the instruments governing such plans or arrangements).
8. Restrictive Covenants. Executive covenants and
agrees that:
(a) Executive will not, at any time during the term of
employment hereunder and for two years thereafter, divulge to any
person other than a person associated with the Company any secret
and confidential information concerning the Company, or any of
its subsidiaries, and their respective products, customers and
plans which Executive acquired during the course of Executive's
employment.
(b) Executive will not, directly or indirectly, except
for the benefit of the Company, at any time during the term of
employment hereunder, become an officer, director, stockholder,
partner, associate, employee, owner, agent, creditor, independent
contractor, co-venturer or otherwise, or be interested in or
associated with any other corporation, firm or business engaged
in the same or any similar business competitive with that of the
Company or any of its subsidiaries.
(c) Executive will not, directly or indirectly, except
for the benefit of the Company, during the term of employment and
for a period of two years thereafter:
(i) (A) solicit, cause or authorize, directly or
indirectly, to be solicited for or on behalf of
Executive or third parties, from persons who were
customers of the Company at any time within one year
prior to the cessation of Executive's employment
hereunder, any business similar to the business
transacted by the Company with such customer; or
(B) accept or cause or authorize, directly
or indirectly, to be accepted for or on behalf of the
Executive or third parties, any such business from any
such customers of the Company as defined in the
preceding subsection.
(ii) (A) solicit, entice, persuade or induce,
directly or indirectly, any employee of the Company or
any of its subsidiaries or any other person who was, at
any time within one year prior to the cessation of
Executive's employment hereunder, then under contract
with or rendering services to the Company or any of its
subsidiaries, to terminate his or her employment by, or
contractual relationship with, the Company or its
subsidiaries or to refrain from extending or renewing
the same (upon the same or new terms) or to refrain
from rendering services to the Company or its
subsidiaries or to become employed by or to enter into
contractual relations with persons other than the
Company or its subsidiaries; or
(B) approach any such employee or other
person for any of the foregoing purposes; or
(C) authorize or knowingly approve or assist
in the taking of any such actions by any person other
than the Company or any of its subsidiaries.
; provided, however, that if the employment of Executive has been
terminated without Cause under this Agreement and the Company has
failed to deliver to Executive the Severance Compensation and
other benefits due him pursuant to Section 7(c) hereof, Executive
shall not be subject to this paragraph (c) immediately upon such
non-delivery.
(d) Notwithstanding any alleged breach of the
provisions of this Section 8 by Executive, this Agreement shall
continue in full force and effect, and the Company shall be
required to make all payments and furnish all benefits due to
Executive hereunder, until such time as there is a final judgment
by a court of competent jurisdiction finding that there has been
a material breach of this Section 8 by Executive, which is no
longer subject to appeal by Executive.
9. Legal fees. The Company shall pay for all fees
and expenses of counsel to the Executive for serviced rendered by
such counsel in connection with this Agreement.
10. Binding Effect; Governing Law;
Notice of Breach and Right to Cure.
(a) The rights and obligations under this Agreement
shall inure to the benefit of and shall be binding upon the
Company and its successors and assign, including any corporation
with which the Company shall merge or consolidate or to which it
shall sell all or substantially all of its assets. This
Agreement is otherwise nonassignable.
(b) The interpretation and construction of this
Agreement shall be governed by the laws of the State of New York.
(c) In the event of any material breach by either
party of this Agreement, the non-breaching party shall give the
breaching party written notice thereof, and the breaching party
shall have ten days from receipt of such notice to cure such
breach. If the breach is cured within such ten day period, no
breach will be deemed to have occurred hereunder.
11. Arbitration. Disputes between the parties arising
under or with respect to this Agreement shall be submitted to
arbitration in the City of New York by a single arbitrator under
the rules of the American Arbitration Association or a similar
organization and the arbitration award shall be binding upon the
parties and enforceable in any court of competent jurisdiction.
The cost of arbitration, including counsel fees, shall be borne
by the Company unless the arbitrator specifically determines that
the Executive's position was frivolous and without reasonable
foundation in which case the Company and the Executive shall each
bear their own expenses.
12. Miscellaneous.
(a) This Agreement may not be modified, amended or
rescinded except by a writing duly signed by the parties hereto.
(b) All notices or other communications described
herein or contemplated hereby shall be in writing and shall be
deemed to have been duly given if transmitted by facsimile (with
proof of delivery) or mailed by registered or certified mail,
return receipt requested, (i) if to the Company, directed to
Amertranz Worldwide Holding Corp., 2001 Marcus Avenue, Lake
Success, New York 10042, and (ii) if to Executive, directed to
Mr. Richard A. Faieta at _____________________________, or to
such other address as the parties may in writing establish by
notice in accordance herewith.
13. Severability. If any provision herein shall, as a
result of arbitration or court proceedings, be determined to be
invalid or contrary to law, then that provision alone shall be
deemed deleted herefrom and the remainder hereof shall survive.
14. Indemnification. The Company undertakes to
indemnify Executive for all acts or omissions as an officer or
director or employee of the Company or any subsidiary thereof, to
the full extent provided or permitted under Delaware law, against
all damages, expenses and costs (including reasonable counsel
fees) in any action or proceeding commenced during the term of
employment or after termination of his employment hereunder. The
Company agrees to purchase, as promptly as practicable after the
Commencement Date, and keep in full force and effect during the
term of this Agreement directors and officers liability insurance
in an amount not less than $_______________.
IN WITNESS WHEREOF, the Company has caused this
Employment Agreement to be signed and sealed by its undersigned
officer, hereunto duly authorized, and Executive has set his hand
hereto, all as of the day and year first above written.
ATTEST: AMERTRANZ WORLDWIDE HOLDING
CORP.
/s/ By: /s/
Name:
Title:
/s/ /s/
Witness Richard A. Faieta
CARGO AIRCRAFT CHARTER AGREEMENT
THIS AGREEMENT, (hereinafter referred to as the "Agreement",
made and entered into as of this 28th day of February, 1994, between Florida
West Airlines, Inc. (hereinafter referred to as "FWA"), a Delaware corporation
having its principal place of business at 4343 West Flagler Street, Suite 500,
Miami, Florida 33134 and TIA, Inc., (formerly Wrangler Aviation, Inc.)
(hereinafter referred to as "TIA"), a Delaware corporation, having a mailing
address at 112 E. 25th Street, Baltimore, Maryland 21218
W I T N E S S E T H:
WHEREAS, TIA desires FWA, as an independent contractor, to
perform services required by TIA in furtherance of TIA's business of
transporting cargo by air, and FWA is willing to perform such services, on the
terms hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, FWA and TIA agree as follows:
ARTICLE I
CHARTER OF AIRCRAFT
Section 1.1 FWA hereby charters to TIA in accordance with the
terms of this Agreement one properly crewed, maintained, insured, equipped and
fueled Lockheed L-1011 aircraft having an available capacity of not less than
one hundred thousand (0100,000) pounds actual weight (the "Aircraft") for the
carriage of TIA's freight on the routes designated by TIA, at the times and at
the charter prices set forth herein.
Section 1.2 FWA shall operate the Aircraft in accordance with
the terms of this Agreement and shall, at its own cost and expense, perform all
services required of it under this Agreement. Specifically, FWA, at its own cost
and expense, shall:
(i) Do all things necessary and appropriate to operate the
Aircraft in accordance with and provide the charter
services required by this Agreement.
(ii) Prepare all flight related documents required to
operate the Aircraft in accordance with this Agreement;
(iii)Pay any and all taxes arising from the performance of
this Agreement, including, but not limited to, taxes
based upon ownership or use of the Aircraft or the net
income, gross receipts or gross income of FWA and taxes
related to the compensation of FWA's employees;
<PAGE>
(iv) Provide a fully qualified, licensed and experienced
cockpit crew as necessary to fly and otherwise operate
the Aircraft;
(v) Provide all maintenance, overhaul and repair services
necessary to keep the Aircraft in an airworthy
condition;
(vi) Pay all required compensation, including but not
limited to salaries and employment benefits, to its
employees utilized in providing the services required
of FWA under this Agreement;
(vii)Maintain all insurance coverage required by Article IX
below; and
(viii) Supply all fuel and petroleum products required to
operate the Aircraft in accordance with this Agreement.
Section 1.3 FWA shall be solely responsible for the
operational control of the Aircraft. FWA shall have full authority and control
to determine what persons shall be carried on board the Aircraft, in accordance
with Federal Aviation Regulations (FAR's) and any restrictions established by
insurance underwriters. To the extent permitted by FAR's and applicable
insurance restrictions, FWA shall, upon TIA's request, make available up to six
(6) passenger seats on board the Aircraft for the transportation of persons
specified by TIA.
Section 1.4 FWA agrees that its pilots will be neatly
uniformed and meet the appearance standards of TIA.
ARTICLE II
EXCLUSIVE USE OF AIRCRAFT
Section 2.1
(a) Except as expressly provided otherwise in Section 2.1(c)
below, throughout the Term of this Agreement, FWA shall operate the Aircraft in
the performance of its obligations to TIA under this Agreement and shall make
one hundred percent (100%) of the cargo space of the Aircraft available for
utilization by TIA.
(b) FWA shall have the right to charter the Aircraft on an ad
hoc basis during any period of time when the Aircraft is not otherwise scheduled
to be operated under this Agreement.
(c) Should FWA desire to utilize the Aircraft to provide
air cargo transportation services to any third party, FWA shall
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<PAGE>
first obtain the express written permission of TIA. TIA shall not
withhold such permission provided that:
(i) the intended utilization of the Aircraft will not cause
FWA to fail to make any scheduled flight required by
this Agreement on time;
(ii) TIA does not desire to charter the Aircraft on an ad
hoc basis during the period of time necessary to
provide such services to such third party;
(iii)the intended utilization of the Aircraft will not
cause FWA to violate the non-compete provisions of this
Agreement as set forth in Section 16.2 hereof: and
(iv) TIA has no other reasonable basis for withholding such
permission.
ARTICLE III
RELIABILITY REQUIREMENT
Section 3.1 Except for scheduled flights which are delayed or
canceled at the request of TIA or by reason of Force Majeure, FWA shall maintain
at least a ninety percent (90%) on-time schedule reliability factor for each
calendar month and at least a ninety-five percent (95%) on-time schedule
reliability factor for each calendar year with respect to flights required to be
performed by this Agreement. A flight required to be performed by FWA pursuant
to this Agreement shall be deemed to be on time if it arrives within one hour of
its scheduled arrival time.
Section 3.2 FWA will notify TIA as soon as possible of any
delay, breakdown or any other occurrence (including, but not limited to, an
event of Force Majeure) which is reasonably expected to adversely affect the
ability of FWA to perform any flight required to be performed by this Agreement
in a timely manner.
Section 3.3 If the departure or arrival of a flight required
to be performed by this Agreement is delayed for three (3) hours or more for any
reason other than an event of Force Majeure or a request by TIA to delay such
flight, the price that TIA would otherwise be obligated to pay for such flight
shall be reduced by ten percent (10%).
Section 3.4
(a) If, at any time, FWA becomes aware of circumstances, other
than an event of Force Majeure, that cause it to reasonably expect or should
cause it to reasonably expect that the arrival of
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<PAGE>
a flight scheduled to be performed for TIA pursuant to this Agreement (including
any ad hoc charter) will be delayed for five (5) hours or more, FWA shall notify
TIA of such circumstances and shall immediately use best efforts to contact all
professionally reputable substitute air cargo carriers ("Substitute Carriers")
which (i) have access to an aircraft capable of providing the required lift for
at least sixty-five percent (65%) of the concerned cargo (a "Substitute
Aircraft"), and (ii) are potentially capable of providing the required lift for
such cargo in a manner more timely than FWA.
(b) If FWA locates a Substitute Carrier which has access to a
Substitute Aircraft and is able to utilize such aircraft to provide the required
lift for at least sixty-five percent (65%) of the concerned cargo within five
(5) hours or less after the originally scheduled arrival time, FWA shall
immediately contract with such Substitute Carrier to utilize the Substitute
Aircraft to provide such lift for the maximum possible amount of the concerned
cargo.
(c) If, after the exercise of best efforts, FWA is unable to
locate and contract with a Substitute Carrier as provided for in paragraph (b)
above, FWA shall (i) immediately notify TIA of this fact, (ii) provide TIA with
an estimate as to when FWA reasonably expects to be able perform the concerned
flight and (iii) identify to TIA the Substitute Carrier(s) capable of providing
a Substitute Aircraft and the required lift for at least sixty-five percent
(65%) of the concerned cargo in a more timely manner. TIA may thereafter:
1. cancel the required flight without penalty or
obligation to FWA;
2. require FWA to contract with a Substitute Carrier
capable of providing a Substitute Aircraft and the
required lift for at least sixty-five percent (65%) of
the concerned cargo in a manner more timely than FWA;
or
3. require FWA to perform the required flight when the
Aircraft becomes available.
(d) FWA shall be solely responsible for compensating any Substitute Carrier
contracted with pursuant to paragraph (b) or (c) above.
(e) In the event a Substitute Carrier is engaged to provide
lift for all or part of the concerned cargo pursuant to this Section 3.4, TIA
shall reimburse to FWA the amount paid by FWA
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<PAGE>
to such Substitute Carrier; provided, however, that in no event shall TIA be
required to reimburse to FWA an amount which exceeds (i) the amount FWA would
have been entitled to receive from TIA, after making the adjustment required by
Section 3.3, if FWA had performed the required flight with the L-1011, times
(ii) the percentage of the concerned cargo actually transported by the
Substitute Carrier.
(f) FWA agrees to ensure that any Substitute Carrier that it
contracts with pursuant to the terms of this Section 3.4 shall have all
requisite government authority to perform the concerned flight and shall be
capable of performing such flight in a professionally competent manner.
(g) In the event a flight required to be performed by FWA
under this Agreement is delayed for five (5) hours or more due to a cause not
attributable to a request of TIA or an event of Force Majeure, and TIA elects to
cancel such flight, the block hours that would have been utilized by FWA to
perform such flight shall be credited toward TIA's Aggregate Block Hour
Commitment.
(h) In the event a Substitute Carrier is engaged to provide
lift for all or part of the concerned cargo pursuant to this Section 3.4, the
block hours that would have been utilized by FWA to provide the lift for all of
the concerned cargo shall be credited toward TIA's Aggregate Block Hour
Commitment.
Section 3.5 TIA shall not be obligated to make any payments
for flights not actually performed due to FWA's inability to complete the
flight.
ARTICLE IV
PRICE AND PAYMENT
Section 4.1 In consideration of the performance of tile duties
and obligations of FWA as set forth herein, TIA agrees to pay FWA the charter
price set forth in Section 4.2 below. All invoices for services rendered
hereunder shall be provided to TIA weekly within seven (7) days after the end of
the calendar week in which the services were performed. TIA shall forward
payments to FWA no later than fifteen (15) days after the receipt of a proper
invoice and adequate documentation from FWA.
Section 4.2 Such charter prices shall be determined by
multiplying the actual block hours used for a chartered trip under this
Agreement by the Hourly Rate. The Hourly Rate shall be Five Thousand Five
Hundred Dollars ($5,500.00) per block hour and shall be further adjusted as
provided for in this Agreement. The parties have agreed that the Hourly Rate
covers all services to be provided by FWA under this Agreement and includes all
costs that may be incurred by FWA in providing such services.
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<PAGE>
Section 4.3 The Hourly Rate stated in Section 4.2 is based on
average fuel costs of Seventy Cents ($0.70) per gallon. The parties agree that
the Hourly Rate and, therefore, the charter price shall be adjusted up or down
once each week (a week being Monday through Sunday) to take into account changes
in the price of fuel. Adjustments in the Hourly Rate and the charter price for
fuel cost changes for each week shall be based on the average price of each
gallon of fuel purchased by FWA for use in the L-1011 for trips for TIA the
previous week. For the purpose of determining the actual usage of fuel, the
parties may assume that the L-1011 will use two thousand six hundred (2600)
gallons of fuel per block hour.
Section 4.4 The parties agree that the Hourly Rate shall be
adjusted on each anniversary of the Effective Date by an amount equal to the
percentage change experienced by the Consumer Price Index for all Urban
Consumers published by the Department of Labor during the preceding calendar
year (January through December) multiplied by One Thousand Fifty Dollars
($1,050.00), (i.e. if the CPI increase is 5% then the Hourly Rate would increase
by .05 multiplied by $1,050.00 or $52.50/Block Hour).
Section 4.5 Within sixty (60) days after the end of each
anniversary of the Effective Date, FWA shall supply to TIA a statement of its
average operational costs per block hour ("AOCPBH") incurred in connection with
the performance of its obligations under this contract during the previous
Contract Year. To the extent that the AOCPBH is less than Three Thousand Two
Hundred Fifty Dollars ($3,250.00), ("Base Cost") then TIA shall be entitled to a
rebate from FWA. The amount of the rebate shall be determined by the sum of (i)
twenty percent (20%) of the difference between the Base Cost and AOCPBH, not to
exceed Forty Dollars ($40.00), multiplied by the number of block hours flown
during the Contract Year, and (ii) forty percent (40%) of the difference between
the Base Cost and AOCPBH, multiplied by the number of block hours flown during
the contract year. FWA shall pay such amounts to TIA within ten (10) days after
delivery of the statement required to be delivered to TIA by FWA by this
Section. The Base Cost shall be increased each contract year by the amount of
the increase in the Hourly Rate provide for in Section 4.4 above.
TIA shall have the right to audit the statement of FWA's
AOCPBH. If FWA and TIA shall dispute the AOCPBH. as contained in the statement
issued by FWA, such dispute shall be submitted to binding arbitration in
accordance with the Rules of the American Arbitration Association.
AOCPBH shall mean the average per block hour costs incurred by
FWA (i) in operating the L-1011 for flight crews, flight following, maintenance,
parts (including parts lease), aircraft lease and reserve charges, insurance,
flight plans; and (ii) all costs related to the existing physical plant at the
GSO
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<PAGE>
facility, except that any increase in the costs attributed to work performed by
FWA, on other aircraft besides the L-1011, shall not be included.
ARTICLE V
TERM OF AGREEMENT
Section 5.1 This Agreement shall come into effect on March 1,
1994, (the "Effective Date") and shall expire on the fourth anniversary of that
date, unless earlier terminated as provided for herein. A twelve ( 12) month
period which commences on the Effective Date or one of the first three (3)
anniversaries of the Effective Date shall be referred to as a "Contract Year."
Section 5.2 If TIA requires additional time to meet its
commitments as stated in Section 14a of the Stock Purchase Agreement between the
parties dated this same day ("Aggregate Block Hour Commitment"), TIA shall have
the right to extend the term of this Agreement for an additional twelve (12)
months by providing FWA with written notice of TIA's exercise of such right at
least one hundred twenty ( 120) days prior to the expiration of the fourth
Contract Year.
ARTICLE VI
FURTHER OBLIGATIONS OF TIA
Section 6.1 TIA shall arrange and pay for cargo loading and
unloading in connection with any charter flight operation undertaken pursuant to
this Agreement. TIA may request FWA to perform or arrange for the performance of
any of the aforementioned items, and TIA agrees to reimburse FWA's documented
costs incurred in connection therewith.
ARTICLE VII
FLIGHT SCHEDULING AND CANCELLATION RIGHTS
Section 7.1 For each calendar month covered by the Term of
this Agreement, TIA shall provide FWA with a tentative schedule of its
reasonably foreseeable flight requirements for such month (the "Monthly Flight
Schedule"). Each such schedule shall be provided by TIA to FWA at least fourteen
(14) calendar days prior to the calendar month covered by such schedule. Actual
required flights and times for flights shall be determined by TIA seven (7) days
in advance of each flight.
Section 7.2 TIA may add a flight at any time if the Aircraft
is (i) not then scheduled for routine maintenance or (ii) not then scheduled to
perform an ad hoc charter for TIA or (iii) not then scheduled to perform an ad
hoc charter for a third party previously consented to by TIA.
- 7 -
<PAGE>
Section 7.3 TIA may cancel or delay any flight upon at least
forty-eight (48) hours' prior written notice without penalty.
Section 7.4 TIA may cancel or delay any flight on less than
forty-eight (48) hours' prior written notice if TIA reimburses FWA's reasonable
and documented net costs incurred in connection with canceling or delaying such
flight on short notice; however, such reimbursement shall not be required if
such cancellation or delay is made necessary by an event of Force Majeure
affecting TIA's requirement for such flight.
Section 7.5 Notwithstanding the other provisions of this
Article VII, FWA agrees that TIA may cancel flights without penalty or charge
for the following holidays: New Years Day; Three Kings Day; Presidents Day; Good
Friday; Memorial Day; Independence Day, Labor Day; Columbus Day; Thanksgiving
Day; Christmas Day and two other discretionary days at the sole discretion of
TIA.
Section 7.6 Either TIA or FWA may cancel or delay the
operation of any flight if such cancellation or delay is made necessary by
reason of Force Majeure. Such cancellations or delays shall not be taken into
account in calculating FWA's reliability under Article III.
ARTICLE VIII
FLIGHT SCHEDULING AND CANCELLATION RIGHTS
Section 8.1 FWA warrants to TIA that it will perform the
services required under this Agreement in a safe manner, with a level of skill
consistent with the highest professional standards, and within the agreed upon
performance time. FWA warrants that it has the requisite federal, state and
local governmental authority and all necessary corporate authority to enter into
this Agreement.
Section 8.2 FWA further warrants that all the services will be
performed in accordance with all applicable airport regulations, applicable
federal state and local government, foreign government and international
organization operating laws, rules, regulations, directives and requirements,
including but not limited to those of the Federal Aviation Administration, the
Department of Transportation and each airport where FWA renders services
pursuant to this Agreement.
Section 8.3 FWA warrants that the Aircraft shall be airworthy
and in good working order at all times during the performance of services
hereunder.
Section 8.4 FWA warrants that the L-1011 has and throughout
the Term of this Agreement shall have an available capacity of not less than one
hundred thousand (100,000) pounds actual weight.
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<PAGE>
ARTICLE IX
INSURANCE
Section 9.1 FWA agrees to maintain Aircraft "all risk" hull,
broad form third party property damage and public liability insurance in a
minimum amount of Two Hundred Million Dollars ($200,000,000) combined single
limit; and cargo liability insurance coverage in the amount of Two Million
Dollars ($2,000,000) per occurrence. FWA's liability will be limited to Nine
Dollars and Seven Cents ( $9.07) per pound for any damage to or loss of TIA's
cargo while under the control of FWA, provided however that FWA shall not be
liable for any damages or loss of TIA's cargo due to negligent acts of
commission or omission by TIA.
Section 9.2 Should the L-1011 be taken out of service by
reason of mechanical failure or extended maintenance, FWA shall use its best
efforts to put the L-1011 back in service as soon as possible. Furthermore, at
TIA's request FWA shall carry a policy of "loss of use" insurance insuring TIA
and FWA against financial losses caused by the L-1O11's failure to be available
for (i) any continuous period in excess of fourteen (14) days, or (ii) more than
forty-five (45) days during any twelve (12) month period covered by the term of
this Agreement. The cost of such "loss of use" insurance if requested by TIA
shall be paid for by TIA in addition to the charter price.
Section 9.3 The coverage provided under Sections 9.1 and 9.2
above shall remain in full force and effect during the term hereof with TIA
named as an "Additional Insured" and shall be endorsed (a) to provide at least
thirty (30) days notice of cancellation or non-renewal to the Additional Insured
and (b) to provide that such coverages are primary and not in excess of any
insurance coverages which may be maintained by TIA such that any such coverages
maintained by TIA shall be in excess of the coverages herein provided by FWA.
Prior to the commencement of the Term of this Agreement, FWA shall provide to
TIA certificates of insurance and copies of policies evidencing such coverage.
Certificates and policies provided by FWA shall be in the English language in a
form and substance acceptable to TIA.
ARTICLE X
INDEMNITY
Section 10.1 FWA, for itself, its successors, assigns and
affiliates, agrees to defend, indemnify and hold harmless TIA, its officers,
directors, shareholders, employees, representatives, agents and affiliates from
and against any and all claims, loss, cost, expense (including court costs and
reasonable attorneys fees) or damage to the persons or property of TIA or third
parties resulting form or arising out of the services to be performed or
- 9 -
<PAGE>
equipment or facilities to be provided by FWA pursuant to this
Agreement.
Section 10.2 TIA, for itself, its successors, assigns and
affiliates, agrees to defend, indemnify and hold harmless FWA, its officers,
directors, shareholders, employees, representatives, agents and affiliates from
and against any and all claims, loss, cost, expense (including court costs and
reasonable attorneys fees) or damage to the persons or property of FWA or third
parties resulting form or arising out of the services or acts to be performed or
equipment or facilities to be provided by TIA pursuant to this Agreement.
Section 10.3 Neither party shall be liable to the other party
for the death or injury to employees of the other party. Each party will cover
its own employees through workman's compensation or similar coverages as may be
required under applicable law.
ARTICLE XI
INTERNATIONAL FLIGHTS
Section 11.1 To the extent any carriage required to be
provided under this Agreement involves an ultimate destination or stop in a
country other than the country of departure, the Warsaw Convention may be
applicable and FWA's liability limited thereby.
ARTICLE XII
DEFAULTS AND REMEDIES
Section 12.1 Should FWA default in any of its obligations
hereunder, and should FWA fail to cure any such default within ten (10) days
after it received written notice describing the default, TIA may, at its option,
terminate this Agreement. No such termination shall relieve FWA or TIA of their
respective obligations under this Agreement accrued prior to the date of
cancellation. TIA shall have no further obligation to utilize any flights with
FWA until and unless FWA has timely cured such default.
Section 12.2 Should TIA default in any of its obligations
hereunder, and should TIA fail to cure any such default within ten (10) days
after it received written notice describing the default, FWA may, at its option,
terminate this Agreement. No such termination shall relieve FWA or TIA of their
respective obligations under this Agreement accrued prior to the date of
termination. If the default described in the notice involves the failure by TIA
to make a payment to FWA required by this Agreement, and if TIA does not cure
such default within five (5) days from the receipt of said notice, FWA shall be
under no further obligation to operate any flights until all payments then owing
from TIA to FWA have been made.
- 10 -
<PAGE>
Section 12.3 Should FWA fail to meet the monthly reliability
standard for two (2) consecutive calendar months or should FWA fail to meet the
quarterly reliability standard for any two calendar quarters within any four
quarter period, TIA shall thereafter have the right, without liability to FWA,
to declare FWA in breach of the Agreement and to either (i) terminate the
Agreement, or (ii) engage one or more Substitute Carriers to perform some or all
of the services required of TIA under this Agreement; and TIA may continue to so
engage the services of such Substitute Carrier(s) until FWA provides TIA with
evidence satisfactory in the sole and absolute discretion of TIA that FWA is
capable of and intends to thereafter comply with the reliability standard set
forth in Article III.
Section 12.4 Should the Aircraft be unavailable for (i) any
continuous period in excess of fourteen (14) days, or (ii) more than forty-five
(45) days during any twelve (12) month period covered by the term of this
Agreement, TIA shall be entitled to make a claim or to cause FWA to make a claim
under the policy of "loss of use" insurance required to be carried by FWA by
Section 9.2, to compensate TIA for any loss incurred as a result of the Aircraft
being unavailable.
Section 12.5 A waiver of any default hereunder shall not be
deemed a waiver of any other or subsequent default.
Section 12.6 Should TIA engage the services of one or more
Substitute Carrier(s) pursuant to the rights established in Section 12.3, the
block hours flown by such Substitute Carrier(s) shall be credited toward TIA's
Aggregate Block Hour Commitment.
ARTICLE XIII
NOTICES
Section 13.1 Except where specifically provided otherwise, all
notices and other communications authorized hereunder shall be given in writing
to the person listed below either by personal delivery to said person, or by
facsimile transmission, or by registered or certified mail, return receipt
requested, and the date upon which any such notice is so personally delivered
(or if the notice is given other than by personal delivery, the date upon which
it is received by the addressee) shall be deemed to be the date of such notice,
without regard to the date stated in such notice.
If to FWA:
Florida West Airlines, Inc.
Attention: President
P.O Box 026062
Miami, Florida 33102
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<PAGE>
Fax: (305) 441 -0679
If to TIA:
TIA, Inc.
Attention: President
112 E. 25th Street
Baltimore, Maryland 21218
Fax: (410) 330-1105
FWA and TIA may each change, from time to time, their named representatives and
respective addresses for the purpose of this Section by written notice as herein
provided.
ARTICLE XIV
ASSIGNMENT
Section 14.1 This Agreement may not be assigned by FWA, in
whole or in part, without the express prior written consent of TIA.
Section 14.2 It is specifically agreed that TIA a may assign
this Agreement at any time in connection with any corporate reorganization or in
connection with any merger, consolidation, sale or exchange of its freight
forwarding operations.
ARTICLE XV
FORCE MAJEURE
Section 15.1 "Force Majeure" as used in this Agreement shall
mean acts of God, adverse weather conditions, strikes of persons not in the
employ of the party asserting a claim of Force Majeure, acts of the public
enemy, wars, blockades, riots, epidemics, lightning, earthquake, fire, flood,
explosions, failure of public utilities, unavailability of fuel, or inability to
secure landing slots.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 This Agreement, including the Attachment(s)
hereto, represents the entire agreement between the parties regarding the
subject matter of this Agreement, and no other prior written and/or oral
agreements shall have any force or effect. Any modification of this Agreement or
of the attachment(s) hereto shall be invalid unless in writing and signed by an
authorized officer of FWA and an authorized officer of TIA.
Section 16.2 In consideration of TIA's entering into this
Agreement, FWA agrees that during the Term of this Agreement it will not provide
common carriage, contract or charter service
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<PAGE>
between the United States and Puerto Rico, except that FWA retains the right to
provide (i) ad hoc or non-routine charters of one week or less between the
United States and Puerto Rico or (ii) common carriage, contract, or charter
service between Miami and Puerto Rico. If FWA breaches this covenant, TIA shall
thereafter have the right to immediately terminate this Agreement. The exercise
of the right to terminate provided for in this paragraph 17.2 shall not impair
any other rights to relief TIA may have at law or equity against FWA for a
breach of this covenant. FWA specifically acknowledges that a breach of this
covenant not to compete shall cause irreparable harm to TIA, and that as a
consequence of such breach TIA shall be entitled to injunctive relief, to
enforcement of this covenant by specific performance, and to damages.
Section 16.3 This Agreement shall be governed by and construed
under the laws of the State of North Carolina and any action commenced or claim
made pursuant hereto shall be brought only in the courts of competent
jurisdiction located in North Carolina.
Section 16.4 BOTH PARTIES WAIVE TRIAL BY JURY IN
CONNECTION WITH ANY LAWSUIT BROUGHT UNDER THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement
the day and year first written above.
Florida West Airlines, Inc. TIA, Inc.
By:_________/s/_______________ By:_______/s/________________
Its: Excutive Vice President Its: Executive Vice President
C65104A.198
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<PAGE>
ASSIGNMENT AGREEMENT
This Agreement is made and entered into this 29th day of
November, 1995 by and among Kenneth Welt, Trustee of Florida West Airline, Inc.
hereinafter "Trustee"; TIA, Inc., a Delaware corporation, hereinafter "TIA"; and
Tradewinds Airlines, Inc., a Delaware corporation, hereinafter "Tradewinds";
WHEREAS, Florida West Airlines, Inc. and TIA entered into an
L-1011 Interim Operating Agreement and a Cargo Aircraft Charter Agreement both
dated as of February 28, 1994, hereinafter the "Contracts".
WHEREAS, Florida West Airlines, Inc. filed a Petition for
Relief under Chapter 11 of the Bankruptcy Code on October 11, 1994
in the United States Bankruptcy Court for the Southern District of
Florida Case No.: 94-14243-BKC-AJC;
WHEREAS, Trustee, pursuant to the Trustee's Second Amended and
Modified Plan of Reorganization confirmed by the Bankruptcy Court "The Plan",
desires to assign the Contracts to Tradewinds, Tradewinds desires to accept an
assignment of the Contracts; and TIA is willing to approve such an assignment of
the Contracts.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth Trustee, TIA and Tradewinds agree as follows:
1. Trustee assigns to Tradewinds and Tradewinds accepts such
assignment from Trustee of the Cargo Aircraft Charter Agreement. Tradewinds
agrees to be fully bound to all Florida West Airlines, Inc.'s obligations under
said Agreement. TIA agrees to such assignment.
2. Section 5.2 of the Cargo Aircraft Charter Agreement
is revised as follows:
Delete from the second line "14A of the Stock
Purchase Agreement between the parties dated this same date" and insert in its
place "paragraph 4 of the Assignment Agreement dated November 29, 1995 between
Kenneth Welt, Trustee of Florida West Airlines, Inc., Tradewinds Airlines, Inc.
3. Trustee assigns to Tradewinds and Tradewinds accepts
such assignment. Tradewinds agrees to be fully bound to all of
Florida West Airlines, Inc.'s obligations under said Agreement.
4. Share Return Provision:
TIA will be issued shares of Tradewinds pursuant to
the Plan. TIA agrees that such shares will be subject to return to
Tradewinds' subject to the following terms:
(a) The number of shares of Tradewinds Stock to be issued to TIA shall be
reduced if the number of required hours over
<PAGE>
the life of the Cargo Aircraft Charter Agreement is not obtained. The reduction
in the number of shares of Tradewinds Stock shall be accomplished by TIA
returning to Tradewinds the required number of shares of Tradewinds Stock, or if
all or part of the Tradewinds Stock issued to TIA has been sold, the TIA shall,
at its option either transfer to Tradewinds (i) the number of shares of
Tradewinds Stock, required to be returned or (ii) a combination of cash and
Tradewinds Stock equaling the value of the number of shares of Tradewinds Stock
required to be returned. The number of shares of Tradewinds Stock (or shares of
Tradewinds Stock plus cash, as the case may be) to be returned shall be
determined in the following manner:
(i) the total number of block hours flown (including hours
deemed flown pursuant to Section 4(c) hereof) shall be
determined for each 12-month period starting March 1,
1994, annualized for periods less than 12 months;
(ii) the number of required block hours to be flown shall be
determined as set forth on Schedule A by selecting the
Block Hours Per Year equal to or, if not equal, next
greater than the total number of block hours flown
(determined pursuant to Section 4(a)(i) hereof), and
the corresponding Required Block Hours shall be divided
into the total number of block hours flown (determined
pursuant to Section 4(a) (i) hereof);
(iii)if the sum of all the quotients obtained from (ii)
above shall be equal to or greater than 1, then TIA
shall have satisfied its requirement as to the minimum
number of hours and shall be required to return any
shares of Tradewinds Stock;
(iv) if, at the end of the term of the Cargo Aircraft
Agreement or any extension thereof, the sum of all of
the quotients obtained from (ii) above is less than 1,
then TIA shall be required to return shares of
Tradewinds Stock (or shares of Tradewinds Stock plus
cash, as the case may be), the number of which shall be
calculated as set forth in (1) and (2) below;
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<PAGE>
(1) the sum of all of the quotients obtained from (ii)
above shall be subtracted from 1;
(2) the number obtained from Section 4(a)(iv)(1) above
shall be multiplied by 800,000, and this shall be the
number of shares of Tradewinds Stock (or shares of
Tradewinds Stock plus cash as the case may be) to be
returned by TIA to Tradewinds.
(b) As security for TIA's obligation to return the
shares of Tradewinds Stock, for every block hour less than 2,700 per year
average flown by the L-1011 under the Freight Handling Contract, TIA shall place
into escrow with Tradewind's stock transfer agent, within 30 days after the
receipt by TIA of the results of the annual audit referred to below, 60 shares
of Tradewinds Stock, or if all or part of the Tradewinds Stock has been sold,
then, at TIA's option, a combination of Tradewinds Stock has and cash with a
total value of $300 for each hour the average annual number of block hours the
L-1011 Airplane flew under the Cargo Aircraft Agreement is less than 2,700 block
hours per year. Tradewinds shall annually perform an audit of the number of
block hours the L-1011 Airplane has flown (including hours deemed to have been
flown pursuant to Section 4(c) hereof) under the Cargo Aircraft Charter
Agreement, commencing one year from March 1, 1994, and shall complete the annual
audit within 30 days from such annual date. If the audit shows the additional
shares of Tradewinds Stock are required to be placed into escrow, then TIA shall
place the required number of shares of Tradewinds Stocks or shares of Tradewinds
Stock plus cash in escrow within 30 days after written notice is given by
Tradewinds to TIA of the number of shares of Tradewinds Stock to be placed in
escrow. If the audit shows that there are more than sufficient shares of
Tradewinds Stock, and/or cash in escrow, then Tradewinds shall direct the escrow
agent to return the over amount of shares of Tradewinds Stock, and/or cash to
TIA. The escrow agent shall return all of the cash in the escrow account, before
returning shares of Tradewinds Stock. For the purposes of calculating the cost
equivalents for Tradewinds Stock, each share of Tradewinds Stock shall have a
cash value of $2.00.
(c) If TIA shall have scheduled flight hours for
the L-1011 Airplane under the Cargo Aircraft Charter Agreement, and Tradewinds
is unable to fly such hours for any reason whatsoever, then for the purposes of
calculating the number of hours flown in any year, it shall be deemed that the
L-1011 Airplane flew for the hours it would have flown had the L-1011 Airplane
been available. If Tradewinds causes a termination of the Cargo Aircraft Charter
- 3 -
<PAGE>
Agreement, then for the purposes of Section 4(a) (iii) hereof, the sum of the
questions shall be deemed to be 1.
5. Tradewinds and TIA agree as follows:
(a) for the lesser of (i) five years from March 1,
1994 or (ii) so long as TIA owns a CL-44 airplane, Tradewinds will provide
parking and storage for TIA's CL-44 airplane feet at the Piedmont Triad Airport
Facilities leased by Tradewinds, at no cost to TIA;
(b) for five years from March 1, 1994, Tradewinds
will provide maintenance and repair services for the CL-44 fleet at a fully
burdened direct labor cost, without markup or profit. Tradewind's fully burdened
direct labor cost is $22.00 per man hour. This cost may be adjusted annually for
inflation, using the Consumer Price Index for all urban consumers (1967 = 100);
as the basis for any adjustment in direct fully burden labor costs;
(c) following transfer of TIA's DOT and FAA
Certificates to Tradewinds, Tradewinds will operate the CL-44 presently owned by
TIA for Tradewinds' direct cost plus 5%;
(d) Tradewinds will provide the exclusive use of
the warehouse and office portion of the Piedmont Triad Airport Facility leased
by Tradewinds or Tradewinds Airlines, Inc. to TIA, its affiliates or assigns at
no cost, other than the direct cost for utilities.
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date and year first above written.
WITNESSED BY: TRUSTEE:
__________/s/__________ _____________/s/__________
Kenneth Welt, Trustee of
Florida West Airlines, Inc.
TIA, INC.
__________/s/__________ By:___________/s/__________
Stuart Hettleman,
Executive Vice-President
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<PAGE>
TRADEWINDS AIRLINES, INC.
________/s/_________ By:__________/s/__________
Larry Scheevel, Executive
Vice President
C65104.198
- 5 -
<PAGE>
<TABLE>
SCHEDULE A
<CAPTION>
BLOCK HOURS PER YEAR REQUIRED BLOCK HOURS
(TO BE USED IN 4(a) (ii))
<S> <C> <C>
2,700 13,500
3,000 9,000
3,300 OR MORE 7,500
</TABLE>
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<PAGE>
May 10, 1996
Mr. Stuart Hettleman
Executive Vice President
Caribbean Air Services, Inc.
7304 West Market Street
Greensboro, North Carolina 27409
Dear Stuart:
The Cargo Aircraft Charter Agreement dated February 28, 1994 and the Assignment
Agreement dated November 29, 1995 and that further assignment of TIA, Inc. to
Caribbean Air Services, Inc. expire on February 28, 1998 (copies attached). The
issue for the L-1011 aircraft used to perform this contract expires on June 30,
1998, a four month difference.
In order for TradeWinds to better secure facilities that enable us to perform
this Charter Agreement, we are requesting an extension of four months that will
coincide with the termination of the aircraft lease.
TradeWinds agrees that there will be no increase in the hourly rate for this
extension period over the rate in effect on February 28, 1998.
If you agree with this request for a four month extension, please sign on the
signature line below and return to me.
Thank you for your consideration.
Sincerely,
__________/s/_________________
Larry C. Scheevel
Chief Operating Officer
_________/s/__________________
Caribbean Air Services, Inc.
May 10, 1996
Date
cc: Paul J. Finazzo
<PAGE>
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
Agreement of Lease, made as of this _______ day of ___________ 19__, between The
Equitable Life Assurance Society of the United States, having an address at c/o
Equitable Real Estate Investment management, Inc., 101 Park Avenue, 40th Floor,
New York, New York 10178 party of the first part, hereinafter referred to as
OWNER, and ____________________________________________ party of the second
part, hereinafter referred to as TENANT, Witnesseth: Owner hereby leases to
Tenant and Tenant hereby hires from Owner the area shown on Schedule "A" annexed
hereto and made a part hereof and also known as Suite_________ or "Building"
__________ in the building known as 2001 Marcus Avenue, Lake Success, New York
11042, for the term of (see Article 38) (or until such term shall sooner cease
and expire as hereinafter provided) to commence on the ____ day of __________
nineteen hundred and ______________, and to end on the _____ day of __________
nineteen hundred and ____________, both dates inclusive, at an annual rental
rate of (see Article 40)
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first _______ monthly installment(s) on the execution hereof (unless the
lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Rent: 1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy: 2. Tenant shall use and occupy demised premises for the uses set
forth in Article 39 and for no other purpose.
Tenant Alterations: 3. Tenant shall make no changes in or to the demised
premises of any nature without Owner's prior written consent. Subject to the
prior written consent of Owner, and to the provisions of this article, Tenant,
at Tenant's expense, may make alterations, installations, additions or
improvements which are nonstructural and which do not affect utility services or
plumbing and electrical lines, in or to the interior of the demised premises by
using contractors or mechanics first approved in each instance by Owner. Tenant
shall, before making any alterations, additions, installations or improvements,
at its expense, obtain all permits, approvals and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner and Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may require. If any mechanic's lien is filed against the demised premises, or
the building of which the same forms a part, for work claimed to have been done
for, or materials furnished to, Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within thirty days thereafter,
at Tenant's expense, by filing the bond required by law. All fixtures and all
paneling, partitions, railings and like installations, installed in the premises
at any time, either by Tenant or by Owner on Tenant's behalf, shall, upon
installation, become the property of Owner and shall remain upon and be
surrendered with the demised premises unless Owner, by notice to Tenant no later
than twenty days prior to the date fixed at the termination of this lease,
elects to relinquish Owner's right thereto and to have them removed by Tenant,
in which event the same shall be removed from the premises by Tenant
prior to the expiration of the lease, at Tenant's expense. Nothing in this
Article shall be construed to give Owner title to or to prevent Tenant's removal
of trade fixtures, moveable office furniture and equipment, but upon removal of
any such from the premises or upon removal of other installations as may be
required by Owner, Tenant shall immediately and at its expense, repair and
restore the premises to the condition existing prior to installation and repair
any damage to the demised premises or the building due to such removal. All
property permitted or required to be removed by Tenant at the end of the term
remaining in the premises after Tenant's removal shall be deemed abandoned and
may, at the election of Owner, either be retained as Owner's property or may be
removed from the premises by Owner, at Tenant's expense.
Maintenance and Repairs: 4. Tenant shall, throughout the term of this lease,
take good care of the demised premises and the fixtures and appurtenances
therein. Tenant shall be responsible for all damage or injury to the demised
premises or any other part of the building and the systems and equipment
thereof, whether requiring structural or nonstructural repairs caused by or
resulting from carelessness, omission, neglect or improper conduct of Tenant,
Tenant's subtenants, agents, employees, invitees or licensees, or which arise
out of any work, labor, service or equipment done for or supplied to Tenant or
any subtenant or arising out of the installation, use or operation of the
property or equipment of Tenant or any subtenant. Tenant shall also repair all
damage to the building and the demised premises caused by the moving of Tenant's
fixtures, furniture and equipment. Tenant shall promptly make, at Tenant's
expense, all repairs in and to the demised premises for which Tenant is
responsible, using only the contractor for the trade or trades in question,
selected from a list of at least two contractors per trade submitted by Owner.
Any other repairs in or to the building or the facilities and systems thereof
for which Tenant is responsible shall be performed by Owner at the Tenant's
expense. Owner shall maintain in good working order and repair the exterior and
the structural portions of the building, including the structural portions of
its demised premises, and the public portions of the building interior and the
building plumbing, electrical, heating and ventilating systems (to the extent
such systems presently exist) serving the demised premises. Tenant agrees to
give prompt notice of any defective condition in the premises for which Owner
may be responsible hereunder. There shall be no allowance to the Tenant for a
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner or others
making repairs, alterations, additions or improvements in or to any portion of
the building or the demised premises or in and to the fixtures, appurtenances or
equipment thereof. It is specifically agreed that Tenant shall not be entitled
to any setoff or reduction of rent by reason of any failure of Owner to comply
with the covenants of this or any other article of this Lease. Tenant agrees
that Tenant's sole remedy at law in such instance will be by way of any action
for damages for breach of contract. The provisions of this Article 4 shall not
apply in the case of fire or other casualty which are dealt with in Article 9
hereof.
Window Cleaning: 5. Tenant will not clean nor require, permit, suffer or allow
any window in the demised premises to be cleaned from the outside in violation
of Section 202 of the Labor Law or any other applicable law or of the Rules of
the Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
Requirements of Law, Fire Insurance, Floor Loads: 6. Prior to the commencement
of the lease term, if Tenant is then in possession, and at all times thereafter,
Tenant, at Tenant's sole cost and expense, shall promptly comply with all
present and future laws, orders and regulations of all state, federal, municipal
and local governments, departments, commissions and boards and any direction of
any public officer pursuant to law, and all orders, rules and regulations of the
New York Board of Fire Underwriters, Insurance Services Office, or any similar
body which shall impose any violation, order or duty upon Owner or Tenant with
respect to the demised premises, whether or not arising out of Tenant's use or
manner of use thereof, (including Tenant's permitted use) or, with respect to
the building, if arising out of Tenant's
<PAGE>
use or manner of use of the premises or the building (including the use
permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use of the
demised premises or method of operation therein, violated any such laws,
ordinances, orders, rules, regulations or requirements with respect thereto.
Tenant may, after securing Owner to Owner's satisfaction against all damages,
interest, penalties, and expenses, including, but not limited to, reasonable
attorney's fees, by cash deposit or by surety bond in an amount and in a company
satisfactory to Owner, contest and appeal any such laws, ordinances, orders,
rules, regulations or requirements provided same is done with all reasonable
promptness and provided such appeal shall not subject Owner to prosecution for a
criminal offense or constitute a default under any lease or mortgage under which
Owner may be obligated, or cause the demised premises or any part thereof to be
condemned or vacated. Tenant shall not do or permit any act or thing to be done
in or to the demised premises which is contrary to law, or which will invalidate
or be in conflict with public liability, fire or other policies of insurance at
any time carried by or for the benefit of Owner with respect to the demised
premises or the building of which the demised premises form a part, or which
shall or might subject Owner to any liability or responsibility to any person or
for property damage. Tenant shall not keep anything in the demised premises
except as now or hereafter permitted by the Fire Department, Board of Fire
Underwriters, Fire Insurance Rating Organization or other authority having
jurisdiction, and then only in such manner and such quantity as so not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or
damages, which may be imposed upon Owner by reason of Tenant's failure to comply
with the provisions of this article and if by reason of such failure the fire
insurance rate shall, at the beginning of this lease or at any time thereafter,
be higher than it otherwise would be, then Tenant shall reimburse Owner, as
additional rent hereunder, for that portion of all life insurance premiums
thereafter paid by Owner which shall have been charged because of such failure
by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a
schedule or "make-up" or rate for the building or demised premises issued by the
New York Fire Insurance Exchange, or other body making fire insurance rates
applicable to said premises shall be conclusive evidence of the facts therein
stated and of the several items and charges in the fire insurance rates then
applicable to said premises. Tenant shall not place a load upon any floor of the
demised premises exceeding the floor load per square foot area which it was
designed to carry and which is allowed by law. Owner reserves the right to
prescribe the weight and position of all safes, business machines and mechanical
equipment. Such installations shall be placed and maintained by Tenant, at
Tenant's expense, in settings sufficient, in Owner's judgement, to adsorb and
prevent vibration, noise and annoyance.
Subordination: 7. This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter affect such
leases or the real property of which demised premises are a part and to all
renewals, modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument or subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request.
Property -- Loss, Damage, Reimbursement, Indemnity: 8. Owner or its agents shall
not be liable for any damage to property of Tenant or of others entrusted to
employees of the building, nor for loss of or damage to any property of Tenant
by theft or otherwise, nor for any injury or damage to persons or property
resulting from any cause of whatsoever nature, unless caused by or due to the
negligence of Owner, its agents, servants or employees. Owner or its agents will
not be liable for any such damage caused by other tenants or persons in, upon or
about said building or cause by operations in connection of any private, public
or quasi public work. If at any time any windows of the demised premises are
temporarily closed, darkened or bricked up (or permanently closed, darkened or
bricked up, if required by law) for any reason whatsoever including, but not
limited to Owner's own acts, Owner shall not be liable for any damage Tenant may
sustain thereby and Tenant shall be not entitled to any compensation therefor
nor abatement or diminution of rent nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction. Tenant shall indemnify and
save harmless Owner against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Owner shall not be reimbursed by
insurance, including reasonable attorney's fees, paid, suffered or incurred as a
result of any breache by Tenant, Tenant's agents, contractors, employees,
invitees, or licensees, of any covenant or condition of this lease, or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action or proceeding by counsel approved by Owner in writing, such approval not
to be unreasonably withheld.
Destruction, Fire and Other Casualty: 9. (a) If the demised premises or any part
thereof shall be damaged by fire or other casualty, Tenant shall give immediate
notice thereof to Owner and this lease shall continue in full force and effect
except as hereinafter set forth. (b) If the demised premises are partially
damaged or rendered partially unusable by fire or other casualty, the damages
thereto shall be repaired by and at the expense of Owner and the rent, until
such repair shall be substantially completed, shall be apportioned from the day
following the casualty according to the part of the premises which is usable.
(c) If the demised premises are totally damaged or rendered wholly unusable by
fire or other casualty, then the rent shall be proportionately paid up to the
time of the casualty and thence forth shall cease until the date when the
premises shall have been repaired and restored by Owner, subject to Owner's
right to elect not to restore the same as hereinafter provided. (d) If the
demised premises are rendered wholly unusable or (whether or not the demised
premises are damaged in whole or in part) if the building shall be so damaged
that Owner shall decide to demolish it or to rebuild it, then, in any such
events, Owner may elect to terminate this lease by written notice to Tenant,
given within 90 days after such fire or casualty, specifying a date for the
expiration of the lease, which date shall not be more than 60 days after the
giving of such notice, and upon the date specified in such notice the term of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however, to Landlord's
rights and remedies against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to such date and any
payments of rent made by Tenant which were on account of any period subsequent
to such date shall be returned to Tenant. Unless Owner shall serve a termination
notice as provided for herein, Owner shall make the repairs and restorations
under the conditions of (b) and (c) hereof, with all reasonable expedition,
subject to delays due to adjustment of insurance claims, labor troubles and
causes beyond Owner's control. After any such casualty, Tenant shall cooperate
with Owner's restoration by removing from the premises as promptly as reasonably
possible, all of Tenant's salvageable inventory and movable equipment,
furniture, and other property. Tenant's liability for rent shall resume five (5)
days after written notice from Owner that the premises are substantially ready
for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve Tenant
from liability that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance in
its favor before making any claim against the other party for recovery for loss
or damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery against the
other or any one claiming through or under each of them by way of subrogation or
otherwise. The foregoing release and waiver shall be in force only if both of
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefitting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver or subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and/or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
Assignment, Mortgage, Etc.: 11. Tenant, for itself, its heirs, distributees,
executors, administrators, legal representatives, successors and assigns,
expressly covenants that it shall not assign, mortgage or encumber this
agreement, nor underlet, or suffer or permit the demised premises or any part
thereof to be used by others, without the prior written consent of Owner in each
instance. Transfer of the majority of the stock of a corporate Tenant shall be
deemed an assignment. If this lease be assigned, or if the demised premises or
any part thereof be underlet or occupied by anybody other than Tenant, Owner
may, after default by Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent herein reserved, but
not such assignment, underletting, occupancy or collection shall be deemed a
waiver of this covenant, or the acceptance of the assignee, under-tenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of covenants on the part of Tenant herein contained. The consent by Owner
to an assignment or underletting shall not in any wise be construed to relieve
Tenant from obtaining the express consent in writing of Owner to any further
assignment or underletting.
Electric Current: 12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER* attached hereto. Tenant
covenants and agrees that at all times is use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
Access to Premises: 13. Owner or Owner's agents shall have the right (but shall
not be obligated) to enter the demised premises in any emergency at any time,
and, at all other reasonable times, to examine the same and to make such
repairs, replacements and improvements as Owner may deem necessary and
reasonably desirable to the demised premises or to any portion of the building,
or which Owner may elect to perform. Tenant shall permit Owner to use and
maintain and replace pipes and conduits in and through the demised premises and
to erect new pipes and conduits therein provided they are concealed within the
walls, floor, or ceiling. Owner may, during the progress of any work in the
demised premises, take all necessary materials and equipment into said premises
without the same constituting an eviction nor shall the Tenant be entitled to
any abatement of rent while such work is in progress nor to any damages by
reason of loss or interruption of business or otherwise. Throughout the term
hereof Owner shall have the right to enter the demised premises at reasonable
hours for the purpose of showing the
- ----------
* Rider to be added if necessary.
<PAGE>
same to prospective purchasers or mortgagees of the building, and during the
last six months of the term for the purpose of showing the same to prospective
tenants. If Tenant is not present to open and permit an entry into the
premises, Owner or Owner's agents may enter the same whenever such entry may be
necessary or permissible by master key or forcibly and provided reasonable care
is exercised to safeguard Tenant's property, such entry shall not render Owner
or its agents liable therefor, nor in any event shall the obligations of
Tenant hereunder be affected. If during the last month of the term Tenant shall
have removed all or substantially all of Tenant's property therefrom, Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitation or abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder.
Vault, Vault Space, Area: 14. No vaults, vault space or area, whether or not
enclosed or covered, not within the property line of the building is leased
hereunder, anything contained in or indicated on any sketch, blue print or plan,
or anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant.
Occupancy: 15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises and accepts them
as is, subject to the riders annexed hereto with respect to Owner's work, if
any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by the Owner by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (1) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtor; or (2) the making by
Tenant of an assignment or any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming through or under
Tenant, or by reason of any statute or order of court, shall thereafter be
entitled to possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 16 shall be applicable only to the party
then owning Tenant's interest in this lease.
(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such re-letting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default: 17. (1) If Tenant defaults in fulfilling any of the covenants of this
lease other than the covenants for the payment of rent or additional rent; or if
the demised premises becomes vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if this lease be rejected under Section 235 of Title 11 of the U.S. Code
(bankruptcy code); or if Tenant shall fail to move into or take possession of
the premises within fifteen (15) days after the commencement of the term of this
lease, then, in any one or more of such events, upon Owner serving a written
five (5) days notice upon Tenant specifying the nature of said default and upon
the expiration of said five (5) days, if Tenant shall have failed to comply with
or remedy such default, or if the said default or omission complained of shall
be of a nature that the same cannot be completely cured or remedied within said
five (5) day period, and if Tenant shall not have diligently commenced during
such default within such five (5) day period, and shall not thereafter with
reasonable diligence and in good faith, proceed to remedy or cure such default,
then Owner may serve a written three (3) days' notice of cancellation of this
lease upon Tenant, and upon the expiration of said three (3) days this lease and
the term thereunder shall end and expires as fully and completely as if the
expiration of such three (3) day period were the day herein definitely fixed for
the end and expiration of this lease and the term thereof and Tenant shall then
quit and surrender the demised premises to Owner but Tenant shall remain liable
as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and the term
shall expire as aforesaid; or if Tenant shall make default in the payment of the
rent reserved herein or any item of additional rent herein mentioned or any part
of either or in making any other payment herein required; then and in any of
such events Owner may without notice, re-enter the demised premises order either
by force or otherwise, and dispossess Tenant by summary proceedings or
otherwise, and the legal representative of Tenant or other occupant of demised
premises and remove their effects and hold the premises as if this lease had not
been made, and Tenant hereby waives the service of notice of intention to
re-enter or to institute legal proceedings to that end. If Tenant shall make
default hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Owner may cancel and terminate such renewal or
extension agreement by written notice.
Remedies of Owner and Waiver of Redemption: 18. In case of any such default,
re-entry, expiration and/or dispossess by summary proceedings or otherwise, (a)
the rent shall become due thereupon and be paid up to the time of such
re-entry, dispossess and/or expiration, (b) Owner may re-let the premises or any
part or parts thereof, either in the name of Owner or otherwise, for a term or
terms, which may at Owner's option be less than or exceed the period which would
otherwise have constituted the balance of the term of this lease and may grant
concessions or free rent or charge a higher rental than that in this lease,
and/or (c) Tenant or the legal representatives of Tenant shall also pay Owner as
liquidated damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between the rent hereby
reserved and/or covenanted to be paid and the net amount, if any, of the rents
collected on account of the lease or leases of the demised premises for each
month of the period which would otherwise have constituted the balance of the
term of this lease. The failure of Owner to re-let the premises or any part or
parts thereof shall not release or affect Tenant's liability for damages. In
computing such liquidated damages there shall be added to the said deficiency
such expenses as Owner may incur in connection with re-letting, such as legal
expenses, attorneys' fees, brokerage, advertising and for keeping the demised
premises in good order or for preparing the same for re-letting. Any such
liquidated damages shall be paid in monthly installments by Tenant on the rent
day specified in this lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights of Owner to
collect the deficiency for any month shall not prejudice in any way the rights
of Owner to collect the deficiency of any subsequent month by a similar
proceeding. Owner, in putting the demised premises in good order or preparing
the same for re-rental may, at Owner's option, make such alterations, repairs,
replacements, and/or decorations in the demised premises as Owner, in Owner's
sole judgment, considers advisable and necessary for the purpose of re-letting
the demised premises, and the making of such alterations, repairs, replacements,
and/or decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Owner shall in no event be liable in any way
whatsoever for failure to re-let the demised premises, or in the event that he
demised premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Owner obtaining
possession of demised premises, be reason of the violation by Tenant of any of
the covenants and conditions of this lease, or otherwise.
Fees and Expenses: 19. If Tenant shall default in the observance or performance
of any term or covenant on Tenant's part to be observed or performed under or by
virtue of any of the terms or provisions in any article of this lease, then,
unless otherwise provided elsewhere in this lease, Owner may immediately or at
any time thereafter and without notice perform the obligation of Tenant
thereunder. If Owner, in connection with the foregoing or in connection with any
default by Tenant in the covenant to pay rent hereunder, makes any expenditures
or incurs any obligations for the payment of money, including but not limited to
attorney's fees, in instituting, prosecuting or defending any action or
proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within five (5) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such obligations, such
sums shall be recoverable by Owner as damages.
Building Alterations and Management: 20. Owner shall have the right at any time
without the same constituting an eviction and without incurring liability to
Tenant therefor to change the arrangement and/or location of public entrances,
passageways, doors, doorways, corridors, elevators, stairs, toilets or other
public parts of the building and to change the name, number or designation by
which the building may be known. There shall be no allowance to Tenant for
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner or other
Tenants making any repairs in the building or any such alterations, additions
and improvements. Furthermore, Tenant shall not have any claim against Owner by
reason of Owner's imposition of such controls of the manner of access to the
building by Tenant's social or business visitors as the Owner may deem necessary
for the security of the building and its occupants.
No Representations by Owner: 21. Neither Owner nor Owner's agents have made any
representations or promises with respect to the physical condition of the
building, the land upon which
<PAGE>
it is erected or the demised premises, the rents, leases, expenses of operation
or any other matter or thing affecting or related to the premises except as
herein expressly set forth and no rights, easements or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between the Owner and Tenant and any executory agreement hereafter
made shall be ineffective to change, modify, discharge or effect an abandonment
of it in whole or in part, unless such executory agreement is in writing and
signed by the party against whom enforcement of the change, modification,
discharge or abandonment is sought.
End of Term: 22. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender to Owner the demised premises, broom
clean, in good order and condition, ordinary wear and damages which Tenant is
not required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this lease. If the
last day of the term of this Lease or any renewal thereof, falls on Sunday, this
lease shall expire at noon on the preceding Saturday unless it be a legal
holiday in which case it shall expire at noon on the preceding business day.
Quiet Enjoyment: 23. Owner covenants and agrees with Tenant that upon Tenant
paying the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 31 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
Failure to Give Possession: 24. If Owner is unable to give possession of the
demised premises on the date of the commencement of the term hereof, because of
the holding-over or retention of possession of any tenant, undertenant or
occupants or if the demised premises are located in a building being
constructed, because such building has not been sufficiently completed to make
the premises ready for occupancy or because of the fact that a certificate of
occupancy has not been procured or for any other reason, Owner shall not be
subject to any liability for failure to give possession on said date and the
validity of the lease shall not be impaired under such circumstances, nor shall
the same be construed in any wise to extend the term of this lease, but the rent
payable hereunder shall be abated (provided Tenant is not responsible for
Owner's inability to obtain possession) until after Owner shall have given
Tenant written notice that the premises are substantially ready for Tenant's
occupancy. If permission is given to Tenant to enter into the possession of the
demised premises or to occupy premises other than the demised premises prior to
the date specified at the commencement of the term of this lease, Tenant
covenants and agrees that such occupancy shall be deemed to be under all the
terms, covenants, conditions and provisions of this lease, except as to the
covenant to pay rent. The provisions of this article are intended to constitute
"an express provision to the contrary" within the meaning of Section 233-a of
the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this lease or
of any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach and no provision of this lease
shall be deemed to have been waived by Owner unless such waiver be in writing
signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
of any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. No act or thing done by Owner or Owner's
agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises; and no agreement to accept such surrender shall be
valid unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
Waiver of Trial by Jury: 26. It is mutually agreed by and between Owner and
Tenant that the respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or ____ counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any summary proceeding
for possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding including a counterclaim
under Article 4.
Inability to Perform: 27. This Lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in no wise be affected, impaired or excused
because Owner is unable to fulfill any of its obligations under this lease or to
supply or is delayed in supplying any service expressly or impliedly to be
supplied or is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed in supplying any
equipment or fixtures if Owner is prevented or delayed from so doing by reason
of strike or labor troubles or any cause whatsoever including, but not limited
to, government preemption in connection with a National Emergency or by reason
of any rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions of supply and demand which have
been or are affected by war or other emergency.
Bills and Notices: 28. Except as otherwise in this lease provided, a bill,
statement, notice or communication which Owner may desire or be required to give
to Tenant, shall be deemed sufficiently given or rendered if, in writing,
delivered to Tenant personally or sent by registered or certified mail addressed
to Tenant at the building in which the demised premises form a part or at the
last known residence address or business address of Tenant or left at any of the
aforesaid premises addressed to Tenant, and the time of the rendition of such
bill or statement and of the giving of such notice or communication shall be
deemed to be the time when the same is delivered to Tenant, mailed, or left at
the premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
Services Provided by Owners: 29. As long as Tenant is not in default under any
of the covenants of this lease, Owner shall provide: (a) necessary elevator
facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m.
to 1 p.m. and have one elevator subject to call at all other times; (b) heat to
the demised premises when and as required by law, on business days from 8 a.m.
to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (c) water for ordinary
lavatory purposes, but if Tenant uses or consumes water for any other purposes
or in unusual quantities (of which fact Owner shall be the sole judge), Owner
may install a water meter at Tenant's expense which Tenant shall thereafter
maintain at Tenant's expense in good working order and repair to register such
water consumption and Tenant shall pay for water consumed as shown on said meter
as additional rent as and when bills are rendered; (d) cleaning service for the
demised premises on business days at Owner's expense provided that the same are
kept in order by Tenant. If, however, said premises are to be kept clean by
Tenant, it shall be done at Tenant's sole expense, in a manner satisfactory to
Owner and no one other than persons approved by Owner shall be permitted to
enter said premises or the building of which they are a part of such purpose.
Tenant shall pay Owner the cost of removal of any of Tenant's refuse and rubbish
from the building; (e) if the demised premises is serviced by Owner's air
conditioning/cooling and ventilating system, air conditioning/cooling will be
furnished to tenant from May 15th through September 30th on business days
(Mondays through Fridays, holidays excepted) from 8:00 a.m. to 6:00 p.m., and
ventilation will be furnished on business days during the aforesaid hours except
when air conditioning/cooling is being furnished as aforesaid; *(f) Owner
reserves the right to stop services of the heating, elevators, plumbing,
air-conditioning, power systems or cleaning or other services, if any, when
necessary by reason of accident or for repairs, alterations, replacements or
improvements necessary or desirable in the judgment of Owner for as long as may
be reasonably required by reason thereof. If the building of which the demised
premises are a part supplies manually-operated elevator service, Owner at any
time may substitute automatic-control elevator service and upon ten days'
written notice to Tenant, proceed with alterations necessary therefor without in
any wise affecting this lease or the obligation of Tenant hereunder. The same
shall be done with a minimum of inconvenience to Tenant and Owner shall pursue
the alteration with due diligence. See Exhibit B for Holidays.
Captions: 30. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provisions thereof.
Definitions: 31. The term "office", or "offices", wherever used in this lease,
shall not be construed to mean premises used as a store or stores, for the sale
or display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised premises form
a part, so that in the event of any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser or
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner, hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "business days" as used in this lease shall exclude Saturdays
(except such portion thereof as is covered by specific hours in Article 29
hereof), Sundays and all days set forth on Exhibit B.
- ----------
* Rider to be added if necessary.
<PAGE>
Adjacent Excavation -- Shoring: 32. If an excavation shall be made upon land
adjacent to the demised premises, or shall be authorized to be made, Tenant
shall afford to the person causing or authorized to cause such excavation,
license to enter upon the demised premises for the purpose of doing such work as
said person shall deem necessary to preserve the wall of the building of which
demised premises form a part from injury or damage and to support the same by
proper foundations without any claim for damages or indemnity against Owner, or
diminution or abatement of rent.
Rules and Regulations: 33. Tenant and Tenant's servants, employees, agents,
visitors, and licensees shall observe faithfully, and comply strictly with, the
Rules and Regulations and such other and further reasonable Rules and
Regulations as Owner or Owner's agents may from time to time adopt. Notice of
any additional rules or regulations shall be given in such manner as Owner may
elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulation hereafter made or adopted by Owner or Owner's agents, the parties
hereto agree to submit the question of the reasonableness of such Rule or
Regulation for decision to the New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto. The right to dispute the reasonableness of any additional Rule or
Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice, in writing upon Owner within ten (10) days
after giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease, as against any
other tenant and Owner shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors or licensees.
Security: 34. Tenant has deposited with Owner the sum of $________* as security
for the faithful performance and observance by Tenant of the terms, provisions
and conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which Tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including but not limited to, any
damages or deficiency in the re-letting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of which
the demised premises form a part, Owner shall have the right to transfer the
security to the vendee on lessee and Owner shall thereupon be released by Tenant
from all liability for the return of such security; and Tenant agrees to look to
the new Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Estoppel Certificate: 35. Tenant, at any time, and from time to time, upon at
least 10 days' prior notice by Owner, shall execute, acknowledge and deliver to
Owner, and/or to any other person, firm or corporation specified by Owner, a
statement certifying that this Lease is unmodified and in full force and effect
(or, if there have been modifications, that the same is in full force and effect
as modified and stating the modifications), stating the dates to which the rent
and additional rent have been paid, and stating whether or not there exists any
default by Owner under this Lease, and, if so, specifying each such default.
Successors and Assigns: 36. The covenants, conditions and agreements contained
in this lease shall bind and inure to the benefit of Owner and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this lease, their assigns.
- ----------
* Space to be filled in or deleted.
In Witness Whereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
Witness for Owner: The Equitable Life Assurance Society
of The United States
By: (CORP. SEAL)
-------------------------------------------
[L.S.]
- ------------------------ -------------------------------------------
Witness for Tenant: (CORP. SEAL)
-------------------------------------------
[L.S.]
- ------------------------ -------------------------------------------
ACKNOWLEDGMENTS
CORPORATE OWNER
STATE OF NEW YORK, ss.:
County of
On this ____ day of _____________________, 19__, before me personally came
_______________________________________ to me known, who bring by me duly sworn,
did depose and say that he resides
in______________________________________________________________________________
that he is the ___________________ of __________________________________________
the corporation described in and which executed the foregoing instrument, as
OWNER; that he knows the seal of said corporation; that the seal of affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.
_______________________________________
INDIVIDUAL OWNER
STATE OF NEW YORK ss.:
County of
On this ____ day of _____________________, 19__, before me personally came
_______________________________________ to me known and known to me to be the
individual ______________________ described in and who, as OWNER, executed the
foregoing instrument and acknowledged to me that ______________________________
he executed the same.
_______________________________________
CORPORATE TENANT
STATE OF NEW YORK, ss.:
County of
On this ____ day of _____________________, 19__, before me personally came
_______________________________________ to me known, who bring by me duly sworn,
did depose and say that he resides
in______________________________________________________________________________
that he is the ___________________ of __________________________________________
the corporation described in and which executed the foregoing instrument, as
TENANT; that he knows the seal of said corporation; that the seal so affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.
_______________________________________
INDIVIDUAL TENANT
STATE OF NEW YORK ss.:
County of
On this ____ day of _____________________, 19__, before me personally came
_______________________________________ to me known and known to me to be the
individual ______________________ described in and who, as TENANT, executed the
foregoing instrument and acknowledged to me that ______________________________
he executed the same.
_______________________________________
<PAGE>
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to Owner
making the within lease with Tenant, the undersigned guarantees to Owner,
Owner's successors and assigns, the full performance and observance of all the
covenants, conditions and agreements, therein provided to be performed and
observed by Tenant, including the "Rules and Regulations" as therein provided,
without requiring any notice of non-payment, non-performance, or non-observance,
or proof of, or notice, or demand, whereby to charge the undersigned therefor,
all of which the undersigned hereby expressly waives and expressly agrees that
the validity of this agreement and the obligations of the guarantor hereunder
shall in no wise be terminated, affected or impaired by reason of the assertion
by Owner against Tenant of any of the rights or remedies reserved to Owner
pursuant to the provisions of the within lease. The undersigned further
covenants and agrees that this guaranty shall remain and continue in full force
and effect as to any renewal, modification or extension of this lease and during
any period when Tenant is occupying the premises as a "statutory tenant." As a
further inducement to Owner to make this lease and in consideration thereof,
Owner and the undersigned covenant and agree that in any action or proceeding
brought by either Owner or the undersigned against the other on any matters
whatsoever arising out of, under, or by virtue of the terms of this lease or of
this guaranty that Owner and the undersigned shall and do hereby waive trial by
jury.
Dated New York City __________________________________________________ 19__
WITNESS:
- --------------------------------------------------------------------------------
STATE OF NEW YORK, ) ss.:
County of )
On this __________ day of __________________, 19__ before me personally
came _________________________________, to me known and known to me to be the
individual described in, and who executed the foregoing Guaranty and
acknowledged to me that he executed the same.
_________________________________
Notary
__________________________________________________________________________[L.S.]
Residence ______________________________________________________________________
Business Address________________________________________________________________
Firm Name_______________________________________________________________________
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE IN
ACCORDANCE WITH ARTICLE 33.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odor, and/or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability, and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact with
the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination if his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and
each Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building between the hours of
6 P.M. and 8 A.M. and at all hours on Sundays, and legal holidays all persons
who do not present a pass to the building signed by Owner. Owner will furnish
passes to persons for whom any Tenant requests same in writing. Each Tenant
shall be responsible for all persons for whom he requests such pass and shall be
liable to Owner for all acts of such persons.
11. Owner shall have the right to prohibit any advertising by any Tenant
which in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the demised
premises, any inflammable, combustible or explosive fluid, material, chemical or
substance, or cause or permit any odors of cooking or other processes, or any
unusual or other objectionable odors to permeate in or emanate from the demised
premises.
13. If the building contains central air conditioning and ventilation,
Tenant agrees to keep all windows closed at all times and to abide by all rules
and regulations issued by the Owner with respect to such services. If Tenant
requires air conditioning or ventilation after the usual hours, Tenant shall
give notice in writing to the building superintendent prior to 3:00 P.M. in the
case of services required on week days, and prior to 3:00 P.M. on the day prior
in the case of after hours service required on weekends or on holidays.
14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky
matter, or fixtures into or out of the building without Landlord's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures requires
special handling, all work in connection therewith shall comply with the
Administrative Code of the City of New York and all other laws and regulations
applicable thereto and shall be done during such hours as Owner may designate.
Address
Premises
================================================================================
The Equitable Life Assurance Society of the United States
TO
================================================================================
STANDARD FORM OF
(SEAL) OFFICE (SEAL)
LEASE
The Real Estate Board of New York, Inc.
(C) Copyright 1993. All rights Reserved.
Reproduction in whole or in part prohibited.
================================================================================
Dated 19
Rent Per Year
Rent Per Month
Term
From
To
Drawn by_____________________________________________________________________
Checked by___________________________________________________________________
Entered by___________________________________________________________________
Approved by__________________________________________________________________
================================================================================
<PAGE>
ADDITIONAL CLAUSES attached to and forming a part of lease dated as of
________________, 1994 between THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES, as Landlord, and INTEGRITY LOGISTICS, INC., as Tenant.
Wherever the provisions of this rider conflict with the printed portions
of the lease, the provisions of this rider shall govern.
37. LANDLORD'S WORK:
The Demised Premises shall be completed and prepared for Tenant's
occupancy in the manner, and subject to the terms, conditions and covenants, set
forth in the work letter annexed hereto and made a part hereof as Exhibit A. The
installations, facilities, materials and work so to be furnished, installed and
performed in the Demised Premises by Landlord at its expense are hereinafter and
in Exhibit A referred to as "Landlord's Work."
38. COMMENCEMENT AND EXPIRATION DATES:
(A) The Commencement Date of the term hereof shall occur on the later to
occur of (i) the date on which the Demised Premises are substantially ready for
occupancy (with the exception of "special" items of work requested by Tenant
which are not standard building installations), or (ii) April 1, 1994. Landlord
shall use reasonable efforts to give to Tenant at least one (1) week prior
notice of the Commencement Date.
(B) The Expiration Date of the term hereof shall occur on the last day of
the sixty-sixth (66 - th) full calendar month occurring after the Commencement
Date.
(C) If the Commencement Date shall occur on other than the first day of a
calendar month, the Minimum Rent payable by Tenant from and including the
Commencement Date to and including the last day of the calendar month in which
the Commencement Date occurs shall be a prorated portion of a regular monthly
installment of Minimum Rent which shall be paid by Tenant on the first day of
the first full calendar month occurring subsequent to the Commencement Date and
Landlord shall apply the monthly installment of rent paid by Tenant on execution
hereof towards payment of Minimum Rent for such first full calendar month
subsequent to the Commencement Date.
(D) The Demised Premises shall be deemed substantially ready for occupancy
on the date that Landlord's Work to be performed by Landlord in accordance with
Article 37 hereof, in the Demised Premises shall have been substantially
completed, notwithstanding the fact that minor or unsubstantial details of
construction, mechanical adjustment, or decoration remain to be performed, the
non-completion of which do not materially interfere with Tenant's use of the
Demised Premises. If the substantial completion of Landlord's Work to be
performed by Landlord is delayed due to any act or omission of Tenant or any of
its employees, agents or contractors or any failure by Tenant to plan Landlord's
Work or to plan or execute Tenant's Work (as hereinafter defined) diligently
<PAGE>
and expeditiously, including, without limitation, the failure to timely submit
or approve plans, drawings, specifications or changes thereto (collectively
"Tenant's Delay"), the Demised Premises shall be deemed ready for occupancy on
the date when they would have been ready but for Tenant's Delay. Upon Tenant
taking actual possession of the Demised Premises, it shall be conclusively
presumed that the same were in satisfactory condition as of the date of such
taking of possession, unless within fifteen (15) days after such date Tenant
shall give Landlord notice specifying the respects in which the Demised Premises
were not in satisfactory condition.
39. USE:
Subject to and in accordance with the rules, regulations, laws,
ordinances, statutory limitations and requirements of all governmental
authorities and the fire insurance rating organization and board of fire
underwriters and any similar bodies having jurisdiction thereof, Tenant
covenants and agrees that it shall use the Demised Premises solely as general
offices and for no other purpose. Tenant agrees that Landlord shall have the
right to prohibit the use of the Demised Premises by Tenant for any method of
operation or advertising which Landlord deems detrimental to the operation or
reputation of the Building, and upon notice from Landlord, Tenant shall
forthwith refrain from or discontinue such activities.
40. RENTAL:
(A) The payments reserved under this lease for the term hereof shall be
and consist of the aggregate of:
(i) "Minimum Rent", which shall be One Hundred Twenty Three Thousand
One Hundred Seventy Four and 30/100 ($123,174.30) Dollars per annum ($10,264.53
per month) during the period commencing upon the Commencement Date and
continuing thereafter for twelve (12) calendar months.
The "Minimum Rent" for the second through the sixth year of the
Lease shall be as follows:
Lease Year Annual Rent Monthly Rent
2nd $127,767.24 $10,647.27
3rd $152,819.64 $12,734.97
4th $162,005.52 $13,500.46
5th $167,711.90 $13,976.00
6th $ 86,778.73 $14,463.13
The rental shown in the 6th year is for a six month period.
The term "rent" as used in the Standard Form of Office Lease attached
hereto shall have the same meaning as Minimum Rent used herein.
2
<PAGE>
(ii) "Additional Rent", consisting of all such other sums of money
as shall become due from and payable by Tenant to Landlord hereunder (for
default in payment of which Landlord shall have the same remedies as a default
in payment of Minimum Rent). The term "additional rent" as used in the Standard
Form of Office Lease attached hereto shall have the same meaning as Additional
Rent used herein.
(B) Landlord shall not be required to accept rent paid by parties other
than Tenant or its successors or permitted subtenants or assigns. Acceptance of
rent from other than named Tenant shall in no event be deemed a waiver of
Tenant's obligations under this lease or the acceptance and acquiescence to any
assignment or subletting of the Demised Premises in whole or in part. No payment
by Tenant or receipt by Landlord of an amount less than the monthly payments of
Minimum Rent or Additional Rent then due shall be deemed to be other than on
account of the stipulated rent, nor shall any endorsement or extraneous matter
on any check or in any letter accompanying such payment of rent affect the terms
of this lease or be deemed an accord and satisfaction, and Landlord may accept
such payment without prejudice to any of its rights under this lease or at law
or in equity.
41. TENANT'S INSTALLATIONS:
Except for Landlord's Work, if any, to be performed by Landlord pursuant
to Article 37 hereof, and that work which Landlord elects to perform as
hereinafter provided, all work necessary or desirable to make the Demised
Premises suitable for Tenant's use and occupancy shall be performed by Tenant at
Tenant's own cost and expense (hereinafter called "Tenant's Work"). Tenant's
Work to be performed by Tenant in the Demised Premises shall be subject to the
following conditions:
(A) Tenant shall comply with all of the laws, orders, rules and
regulations of all governmental authorities, and of the fire insurance rating
organization having jurisdiction thereof, and the local board of fire
underwriters, or any similar body, and Tenant shall have procured and paid for,
so far as the same may be required, all governmental permits and authorizations.
(B) Prior to commencing Tenant's Work, all plans and specifications
therefor shall be submitted to Landlord for Landlord's prior written approval.
The approval by Landlord of any of Tenant's plans and specifications shall not
constitute an assumption of any liability on the part of Landlord for their
accuracy or their conformity with applicable law, and Tenant shall be solely
responsible therefor. Approval by Landlord of any of Tenant's plans and
specifications shall not constitute a waiver by Landlord of the right to
thereafter require Tenant to amend same to provide for omissions or errors
therein later discovered by Landlord.
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(C) Tenant's Work shall be completed (i) with reasonable dispatch, (ii) in
accordance with the plans and specifications submitted to, and approved in
writing by, Landlord pursuant to Paragraph (B) hereof and (iii) only with the
use of new first-class materials and supplies. Landlord reserves the right, from
time to time, to inspect work in progress for the purpose of approving or
disapproving the quality of workmanship and its conformity with approved plans,
specifications and drawings. In the event Landlord has a construction
superintendent on the premises, Tenant's contractors will be subject to such
construction superintendent's rules and regulations as promulgated by him
especially as to the orderly flow of work, utilization of on-site utilities,
loading, unloading, and non-interference with the other tenants, occupants,
customers, agents or invitees or any others lawfully in or upon the Building.
(D) Except as otherwise expressly provided for herein, the cost of such
Tenant's Work shall be paid by Tenant in cash, or its equivalent, so that the
Demised Premises and Building shall at all times be free of liens for labor and
materials supplied in connection with Tenant's Work.
(E) Prior to commencing Tenant's Work, Tenant shall at its own cost and
expense deliver to Landlord an endorsement of its policy of comprehensive
general liability insurance referred to in Article 47 of this lease, covering
the risk during the course of performance of Tenant's Work, together with proof
of payment of such endorsement, which policy as endorsed shall protect Landlord
in the same amounts against any claims or liability arising out of Tenant's
Work, and Tenant or Tenant's contractors shall obtain workers' compensation
insurance to cover all persons engaged in Tenant's Work.
(F) Prior to commencing Tenant's Work, Tenant, at its own cost and
expense, shall deliver to Landlord security satisfactory to Landlord, in an
amount at least equal to Landlord's estimated cost of Tenant's Work.
(G) All of Tenant's Work shall be done in such a manner so as not to
materially interfere with, delay, or impose any additional expense upon Landlord
in the maintenance of the Building. In no event shall Landlord be required to
consent to any Tenant's Work which would physically affect any part of the
Building outside of the Demised Premises or would, in Landlord's sole judgment,
affect the proper functioning of any of the mechanical, electrical, sanitary or
other systems of the Building.
(H) Notwithstanding anything herein contained to the contrary, Tenant
shall make all repairs to the Demised Premises necessitated by Tenant's Work
permitted hereunder, and shall keep and maintain in good order and condition all
of the installations in connection with Tenant's Work, and shall make all
necessary replacements thereto.
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(I) Tenant shall advise Landlord of any Tenant's Work which requires
governmental permits or authorizations, and Landlord, within thirty (30) days of
receipt of Tenant's plans and specifications therefor accompanied by the bid on
Tenant's Work which is acceptable to Tenant, may submit a written bid to Tenant
for Tenant's Work. If Landlord's bid is within ten (10%) percent of the
aforementioned bid acceptable to Tenant, Tenant shall accept Landlord's bid and
Landlord shall perform Tenant's Work.
42. ELECTRICITY:
(A) Landlord shall provide and Tenant shall purchase from Landlord "normal
energy service" for Tenant's electricity requirements during the periods from 8
a.m. to 6 p.m., Mondays through Fridays and from 9 a.m. to 1 p.m.-Saturdays
(hereinafter referred to as "Working Hours"), which power demands shall not
exceed three (3) watts per rentable square foot of the Demised Premises, or part
thereof, per Working Hour (hereinafter referred to as "Allowable Use").
Tenant shall pay to Landlord for the cost of normal energy service (the
"Normal Service Charge"), at the rate of $2.25 per annum multiplied by the
number of rentable square feet which amount shall be subject to escalation as
hereinafter provided in Paragraphs (B) and (C) of this Article 42. The Normal
Service Charge is included in the Minimum Rent set forth in Article 40(A)(i).
Any escalation to the Normal Service Charge shall be payable as Additional Rent.
Notwithstanding anything in this Article 42 to the contrary, in the event Tenant
requires (i) energy service during days or hours other than the Working Hours
("Overtime Service") or (ii) energy service in excess of Allowable Use for
normal energy service ("Excess Service"), then Landlord shall charge Tenant and
Tenant shall pay to Landlord as Additional Rent an amount reflecting the value
of such Excess Service or Overtime Service. Tenant shall be provided with 24
hour energy services, without charge, for low wattage accessory equipment,
including refrigerators, water coolers, answering machines, and electric key
telephone systems (up to 2 amps or 240 watts), provided that Tenant limits its
use of such equipment to three (3) electric outlets within the Demised Premises
and further provided that the information as to the description and location of
such equipment is provided by Tenant to Landlord prior to the commencement of
Landlord's Work, if any, in the Demised Premises. In the event that Tenant
requires Excess Service for other customary or usual office equipment,
including, but not limited to, computerized communication systems, telephone
switching systems and CRT's that require 24 hour energy service, Tenant shall
pay to Landlord an amount reflecting the value of such Excess Service as
aforesaid. Landlord shall deliver to Tenant a bill for the Overtime Service and
Excess Service as set forth in this Paragraph (A) at least once every three
months, which amount shall be due and payable by Tenant to Landlord as
Additional Rent during the month in which same is billed.
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(B) The rates referred to herein are based upon rates promulgated by the
utility company furnishing electricity to the Building as of the date hereof.
All of the rates, classifications, fuel and adjustment costs, state and local
government taxes, and all other component parts of the Utility Company charges
as reflected in its bills referred to herein are subject to increase by the
Utility Company. Tenant agrees to pay monthly Tenant's Share (as defined in
Article 43 herein) of such increase in Utility Company charges. In advance,
Landlord shall give reasonable notice to Tenant of any such increase or change
in Utility Company charges. No diminution or abatement of Minimum Rent or other
compensation shall be claimed by Tenant, nor shall this lease or any of the
obligations of Tenant be affected or reduced in the event Tenant uses less
energy than is contemplated herein.
(C) Landlord hereby reserves to itself the right, from time to time, to
cause a reputable electric engineering company (the "Engineer") to make a survey
of Tenant's energy usage requirements to determine whether the three (3) watts
per square foot limitation or any other limitations as set forth in this Article
42 have been exceeded and, if so, to what extent. If these surveys indicate at
the time that the cost to Landlord by reason thereof, computed on an annual
basis at rates which would be charged by the Utility Company for such purposes,
is in excess of the initial cost similarly computed, then the Additional Rent
provided for in this Article 42 shall be increased as provided for herein,
commencing with the first day of the month immediately following the computation
of such survey and the submission of a copy thereof to Tenant.
(D) Landlord shall have full and unrestricted access to all
air-conditioning and heating equipment, and to all other utility installations
servicing the Building and the Demised Premises. Landlord reserves the right
temporarily to interrupt, curtail, stop or suspend air-conditioning and heating
service, and all other utility, or other services, because of Landlord's
inability to obtain, or difficulty or delay in obtaining, labor or materials
necessary therefor, or in order to comply with governmental restrictions in
connection therewith, or for any other cause beyond Landlord's reasonable
control. No diminution or abatement of Minimum Rent, Additional Rent, or other
compensation shall be or will be claimed by Tenant, nor shall this lease or any
of the obligations of Tenant hereunder be affected or reduced by reason of such
interruptions, stoppages or curtailments, the causes of which are hereinabove
enumerated, nor shall the same give rise to a claim in Tenant's favor that such
failure constitutes actual or constructive, total or partial eviction from the
Demised Premises, unless such interruptions, stoppages or curtailments have been
due to the arbitrary, willful or negligent act, or failure to act, of Landlord.
(E) Telephone installation and service shall be the sole responsibility of
Tenant at Tenant's sole cost and expense. Tenant
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shall make all arrangements for telephone service with the company supplying
said service, including the deposit requirement for the furnishing of service.
Landlord shall not be responsible for any delays occasioned by failure of the
telephone company to furnish service.
43. TAX ESCALATION:
(A) As used in this lease:
(i) "Taxes" shall mean the real estate taxes and assessments and
special assessments imposed upon the Building and/or the land on which the
Building is situated (the "Land") by the County of Nassau, the local School
District, and any other governmental bodies or authorities. If at any time
during the term of this lease the methods of taxation prevailing at the
commencement of the term hereof shall be altered so that in lieu of, or as an
addition to or as a substitute for the whole or any part of the taxes,
assessments, levies, impositions or charges now levied, assessed or imposed on
real estate and the improvements thereof, there shall be levied, assessed and
imposed (a) a tax, assessment, levy or otherwise on the rents received
therefrom, or (b) a license fee measured by the rent payable by Tenant to
Landlord, or (c) any other such additional or substitute tax, assessment, levy,
imposition or charge, then all such taxes, assessments, levies, impositions or
charges or the part thereof so measured or based shall be deemed to be included
within the term "Taxes" for the purpose hereof.
(ii) "Base Tax" shall mean the Real Estate Taxes, as finally
determined, for: the General Tax Year fiscal period of January 1, 1994 through
December 31, 1994; and the School Tax Year fiscal period commencing July 1, 1994
and ending on June 30, 1995.
(iii) (a) "General Tax Year" shall mean the fiscal year commencing
on January 1 and ending on December 31 (or such other period as hereafter may be
duly adopted by the County of Nassau as its fiscal year for real estate tax
purposes);
(b) "School Tax Year" shall mean each period of twelve (12)
months, commencing on July 1 of each such period, in which occurs any part of
the term of this lease or such other period of 12 months occurring during the
term of this lease as hereafter may be duly adopted as the fiscal year for real
estate tax purposes of the school taxing authority; and
(iv) "Tenant's Share" shall be 3.27604 percent.
(B) (i) If the Taxes for any General Tax Year and/or School Tax Year shall
be more than the Base Tax, Tenant shall pay as Additional Rent for such General
Tax Year and/or School Tax Year an amount equal to Tenant's Share of the amount
by which the Taxes for such General Tax Year and/or School Tax Year are greater
than the
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Base Tax (the amount payable by Tenant is hereinafter called the "Tax Payment").
The Tax Payment shall be prorated, if necessary, to correspond with that portion
of a General Tax Year and/or School Tax Year occurring within the term of this
lease. The Tax Payment shall be payable by Tenant within ten (10) days after
receipt of a demand from Landlord therefor. In addition to and supplementing the
foregoing, Landlord may estimate the amount of the Tax Payment which will be due
from Tenant to Landlord and notify Tenant of the amount so estimated. Thereupon,
Tenant shall pay the amount so estimated to Landlord, in equal monthly
installments, in advance; on the first day of each calendar month during the
applicable General Tax Year and/or School Tax Year. Within sixty (60) days after
the end of each General Tax Year and/or School Tax Year, Landlord shall deliver
a copy to Tenant of all tax bills for such General Tax Year and/or School Tax
Year, together with a statement showing the amount of Tenant's Tax Payment. If
the amount of such monthly payments paid by Tenant exceeds the actual amount
due, the overpayment shall be credited on Tenant's next succeeding payment or,
during the last year of the term, Landlord will refund such excess to Tenant
within thirty (30) days following the expiration of the term, if Tenant is not
in default hereunder. If the amount of such monthly payments paid by Tenant
shall be less than the actual amount due, then Tenant shall pay to Landlord the
difference between the amount paid by Tenant and the actual amount due within
ten (10) days after demand from Landlord.
(ii) In the event the Base Tax is reduced as a result of an
appropriate proceeding, Landlord shall have the right to adjust the amount of
Tax Payment due from Tenant for any General Tax Year and/or School Tax Year in
which Tenant is or was obligated to pay a Tax Payment hereunder, and Tenant
agrees to pay the amount of said adjustment on the next rental installment day
immediately following receipt of a rent statement from Landlord setting forth
the amount of said adjustment.
(C) Only Landlord shall be eligible to institute tax reduction or other
proceedings to reduce the assessed valuation of the Land and the Building.
Should Landlord be successful in any such reduction proceedings and obtain a
rebate for periods during which Tenant has paid its share of increases, Landlord
shall after deducting its expenses, including attorneys' fees and disbursements
in connection therewith, return Tenant's Share of such rebate to Tenant.
Landlord represents that as of the date hereof the Building is not subject to an
exemption from or abatement to Taxes.
(D) With respect to any period at the expiration of the term of this lease
which shall constitute a partial General Tax Year and/or School Tax Year,
Landlord's statement shall apportion the amount of the Additional Rent due
hereunder. The obligation of Tenant in respect to such Additional Rent
applicable for the last year of the term of this lease or part thereof shall
survive the expiration of the term of this lease.
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(E) Notwithstanding the fact that the increase in rent is measured by an
increase in Taxes, such increase is Additional Rent and shall be paid by Tenant
as provided herein regardless of the fact that Tenant may be exempt, in whole or
in part, from the payment of any taxes by reason of Tenant's diplomatic or other
tax-exempt status or for any other reason whatsoever.
44. INTENTIONALLY OMITTED:
45. NON-WAIVER AND SURVIVAL OF ADDITIONAL RENT OBLIGATIONS:
Landlord's failure during the lease term to prepare and deliver any of the
tax bills, statements, notice or bills set forth in Articles 42, 43 and 44 or
Landlord's failure to make a demand shall not in any way cause Landlord to
forfeit or surrender its rights to collect any of the foregoing items of
Additional Rent which may have become due during the term of this lease.
Tenant's liability for the amounts due under Articles 42, 43 and 44 shall
survive the expiration of the lease term.
46. Intentionally omitted.
47. INDEMNITY-LIABILITY INSURANCE:
(A) Tenant hereby indemnifies and saves Landlord and its principals,
disclosed or undisclosed, harmless from and against any and all claims, losses,
damages or expenses (including reasonable attorneys' fees) or other liability
arising during the term of this lease out of or in connection with (i) the
construction, possession, use, occupancy, management, repair, maintenance or
control of the Demised Premises or any part thereof or any other part of the
Building used by Tenant, or (ii) any act or omission of Tenant or Tenant's
agents, employees, contractors, concessionaires, licensees, invitees, subtenants
or assignees, or (iii) any default, breach, violation or nonperformance of this
lease or any provision hereof by Tenant, or (iv) any injury to person or
property or loss of life sustained in or about the Demised Premises or any part
thereof, except such claims found to be the result of the negligence of
Landlord, its agents, employees or contractors. Tenant shall, at its own cost
and expense, defend any and all actions, suits and proceedings which may be
brought against, and Tenant shall pay, satisfy and discharge any and all
judgments, orders and decrees which may be made or entered against, Landlord,
its principals, disclosed or undisclosed, with respect to, or in connection
with, any of the foregoing. The comprehensive general liability coverage
maintained by Tenant pursuant to this lease shall specifically insure the
contractual obligations of Tenant as set forth in this Article and/or as
provided in this lease.
(B) Tenant covenants to provide on or before the Commencement Date of the
term hereof and to keep in force during the term hereof for the benefit of
Landlord and Tenant a comprehensive policy of liability insurance protecting
Landlord, Tenant, Landlord's
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managing agent, if any (and any other parties as Landlord shall designate to be
added as insured parties) against any liability whatsoever occasioned by
accident on or about the Demised Premises or any appurtenances thereto. Such
policy is to be written by good and solvent insurance companies licensed to do
business in the State of New York and satisfactory to Landlord. The policy shall
be a comprehensive General Liability type and extended to include personal
injury liability and fire legal liability with the amounts of liability
thereunder not less than $1,000,000.00 in respect of any one person, not less
than $3,000,000.00 in respect of any one accident, and not less than $500,000.00
in respect of property damages. In addition, Tenant will, at Tenant's expense,
maintain (i) workers' compensation insurance within statutory limits covering
all persons employed, directly or indirectly, in connection with any of Tenant's
Work or any repair or alteration authorized by this lease or consented to by
Landlord, and all employees and agents of Tenant with respect to whom death or
bodily injury claims could be asserted against Landlord or Tenant; (ii) fire and
extended coverage, vandalism, malicious mischief and special extended coverage
insurance in an amount adequate to cover the cost of replacement of all fixtures
and decorations and improvements in the Demised Premises; and (iii) rent
insurance covering those risks referred to in (ii) above in an amount equal to
all Minimum Rent and Additional Rent payable under this lease for a period of
twelve (12) months commencing with the date of loss. Prior to the time such
insurance is first required to be carried by Tenant, and thereafter at least
thirty (30) days prior to the expiration of any such policy, Tenant agrees to
deliver to Landlord either a duplicate or original of the aforesaid policy or a
certificate evidencing such insurance, provided said certificate contains an
endorsement that such insurance may not be canceled or modified except upon ten
(10) days' written notice to Landlord, together with evidence of payment for the
policy. Tenant's failure to provide and keep in force the aforementioned
insurance shall be regarded as a material default hereunder, entitling Landlord
to exercise any or all of the remedies as provided in this lease in the event of
Tenant's default. The minimum limits of insurance described above shall be
subject to increase at any time, and from time to time, after the third
anniversary of the Rent Commencement Date, if Landlord shall deem same necessary
for adequate protection. Within thirty (30) days after demand therefor by
Landlord, Tenant shall furnish Landlord with evidence of compliance with such
demand.
48. EXCULPATORY CLAUSE:
If Landlord shall be an individual, joint venture, tenancy-in-common,
co-partnership, unincorporated association, or other unincorporated aggregate of
individuals and/or entities, or a corporation, Tenant shall look only to such
Landlord's estate and property in the Building and, where expressly so provided
in this lease, to offset against the rents payable under this lease, for the
satisfaction of Tenant's remedies for the collection of a
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judgment (or other judicial process) requiring the payment of money by Landlord
in the event of any default by Landlord hereunder, and no other property or
assets of such Landlord or any of the principals of Landlord, disclosed or
undisclosed, shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to this lease,
the relationship of Landlord and Tenant hereunder or Tenant's use or occupancy
of the Demised Premises.
49. BROKER:
Tenant covenants, warrants and represents that there was no broker
instrumental in consummating this lease other than Cushman and Wakefield of Long
Island, Inc. (the "Broker"), and no conversations or negotiations were had with
any other broker concerning the renting of the Demised Premises. Tenant agrees
to indemnify, defend and hold and save Landlord harmless against any and all
liability from any claims of any other broker arising out of Tenant's acts
(including, without limitation, the cost of counsel fees and disbursements in
connection with the defense of any such claims in connection with the renting of
the Demised Premises). Based upon such representation, Landlord has agreed to
enter into this lease agreement with Tenant.
50. CONFLICT OF TERMS:
In the event any term, covenant, condition or agreement contained in this
rider to the lease shall conflict or be inconsistent with any term, covenant,
condition or agreement contained in the Standard Form of Office Lease attached
hereto, then the parties agree that the rider provision shall prevail.
51. TENANT'S REMEDIES:
With respect to any provision of this lease which provides, in effect,
that Landlord shall not unreasonably withhold or unreasonably delay any consent
or any approval, Tenant in no event shall be entitled to make, nor shall Tenant
make, any claim, and Tenant hereby waives any claim, for money damages; nor
shall Tenant claim any money damages by way of setoff, counterclaim or defense,
based upon any claim or assertion by Tenant that Landlord has unreasonably
withheld or unreasonably delayed any consent or approval; but Tenant's sole
remedy shall be an action or proceeding to enforce any such provision, or for
specific performance, injunction or declaratory judgment.
52. TENANT'S OPERATING OBLIGATIONS:
Tenant covenants and agrees that during the term of this lease:
(A) If any governmental license or permit shall be required for the proper
and lawful conduct of Tenant's business in the
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Demised Premises, or any part thereof, and if failure to secure such license or
permit would in any way affect Landlord, then Tenant, at its sole cost and
expense, shall duly procure and thereafter maintain such license or permit and
submit the same to inspection by Landlord. Tenant shall at all times comply with
the terms and conditions of each such license or permit.
(B) Tenant shall maintain any sanitary lines in the Demised Premises and
shall not misuse plumbing facilities or dispose of any foreign substances
therein. Tenant shall not permit any food, waste, or other foreign substances to
be thrown or drawn into the pipes. Tenant shall maintain the plumbing that it
installs in good order, repair and condition, and repair any damage resulting
from any violation of this Paragraph. Tenant shall make any repairs to the other
plumbing in the Building, if damage results from Tenant's improper use of such
plumbing.
(C) Tenant will not encumber or obstruct or permit to be encumbered or
obstructed any hallway, service elevator, stairway or passageway in the
Building.
(D) Tenant covenants and agrees that throughout the term, it shall not
suffer, allow or permit any offensive or obnoxious vibration, noise, odor or
other undesirable effect to emanate from the Demised Premises, or any machine or
other installation therein, or otherwise suffer, allow or permit any such
obnoxious vibration, noise, odor or other undesirable effect to constitute a
nuisance or otherwise interfere with the safety, comfort or convenience of
Landlord, or other tenants, occupants, customers, agents, or invitees or any
others lawfully in or upon the Building and upon Landlord's notice to Tenant,
Tenant shall within five (5) days thereof remove or control the same, and if any
such condition is not so remedied, then Landlord may, at its discretion, either:
(i) cure such condition and add any cost and expense incurred by Landlord
therefor to the next installment of rent due under this lease, and Tenant shall
then pay said amount, as Additional Rent hereunder; or (ii) treat such failure
on the part of Tenant to remedy such condition as a material default of this
lease on the part of Tenant hereunder, entitling Landlord to any of its remedies
pursuant to the terms of this lease.
(E) Tenant shall have no right to maintain any facilities in the Demised
Premises for cooking or the preparation of food in any form without the prior
written consent of Landlord. Without limiting the generality of the foregoing,
Tenant shall not install or maintain in the Demised Premises a gas or electric
range, electric or microwave ovens, hot plates or so called Dwyer kitchen units.
Tenant shall have the right to maintain a machine for the making of hot
beverages provided the electric consumption thereof does not exceed the capacity
of the electric service to the Demised Premises.
53. LABOR REGULATIONS:
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Tenant covenants and agrees that prior to and throughout the demised term,
it shall not take any action which would violate Landlord's union contract, if
any, affecting the Building, nor create any work stoppage, picketing, labor
disruption or dispute, or any interference with the business of Landlord or any
other tenant or occupant in the Building or with the rights and privileges of
any person(s) lawfully in the Building, nor cause any impairment or reduction of
the good name of the Building.
54. CONTROL OF TENANT:
If Tenant is a corporation (other than one whose shares are regularly and
publicly traded on a recognized stock exchange), partnership or other entity
other than an individual, Tenant represents that the ownership and power to vote
the majority of its entire outstanding capital stock or other controlling
interests belongs to and is vested in the person(s) executing this lease or
members of his or their immediate family. Any transfer of said controlling
interests in Tenant shall constitute an assignment and shall accordingly be
subject to the restrictions set forth in Article 56 of this lease.
Notwithstanding anything to the contrary herein, the controlling shareholder of
Tenant intends to transfer all of its interest in Tenant to Transglobal
Resources and Landlord hereby consents to said transfer based upon Tenant's
representations that upon the signing of this Lease and upon said transfer, the
financial condition of Tenant shall be substantially similar to the financial
condition of Tenant as provided on that certain Balance Sheet as of January 31,
1994.
55. ADDENDUM TO ARTICLE 22 (END OF TERM):
If Tenant shall default in surrendering the Demised Premises upon the
expiration or termination of the term, Tenant's occupancy subsequent to such
expiration or termination, whether or not with the consent or acquiescence of
Landlord, shall be deemed to be that of a tenancy at will and in no event from
month to month or from year to year, and it shall be subject to all the terms,
covenants and conditions of this lease applicable thereto, except the Minimum
Rent shall be twice the amount payable in the last year of the term, and no
extension or renewal of this lease shall be deemed to have occurred by such
holding over. In the event Landlord shall commence proceedings to dispossess
Tenant by reason of Tenant's default, Tenant shall pay, in addition to costs and
disbursements, minimum legal fees of $500.00 for each proceeding as Additional
Rent hereunder.
56. ADDENDUM TO ARTICLE 11 (ASSIGNMENT, SUBLETTING, MORTGAGING):
(A) Tenant will not, by operation of law or otherwise, assign, mortgage or
encumber this lease, nor sublet or permit the Demised Premises or any part
thereof to be used by others, without Landlord's prior express written consent
in each instance. The consent by Landlord to any assignment or subletting shall
not in
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any manner be construed to relieve Tenant (pound)rom obtaining Landlord's
express written consent to any other or further assignment or subletting nor
shall any such consent by Landlord serve to relieve or release Tenant from its
obligations to fully and faithfully observe and perform all of the terms,
covenants and conditions of this lease on Tenant's part to be observed and
performed. The sale or transfer of a majority ownership interest in tenant by
single or successive transfers of stock (if a corporate thereof) or percentage
interests in a partnership (other than a transfer to a member of the transferors
immediate family or a transfer by inheritance) shall be deemed an assignment
under this Article 56.
(B) If Tenant shall desire to assign or to sublet all or any portion of
the Demised Premises, Tenant shall give notice thereof to Landlord and in the
case of subletting, Tenant shall specify in said notice the area and location of
the space Tenant wishes to sublet as well as the proposed term of such
subletting. Upon receipt of such notice, Landlord shall have the following
options to be exercised within thirty (30) days from receipt of Tenant's notice:
(i) In the event Tenant's notice is of Tenant's desire to make an
assignment or a subletting of all or substantially all of the Demised Premises,
Landlord shall have the option to cancel and terminate this lease as of the date
proposed by Tenant for such assignment or subletting, which option shall be
exercised within the aforesaid thirty (30) day period and on which date the term
of this lease shall cease and expire with the same force and effect as if such
date were originally provided herein as the expiration of the term hereof.
(ii) In the event Tenant's notice is of Tenant's desire to make a
subletting or assignment for less than all or substantially all of the Demised
Premises, Landlord shall have the option, to be exercised within said thirty
(30) day period, of cancelling and terminating this lease only as to such
portion of the Demised Premises to take effect as of the proposed effective date
thereof as stated in Tenant's notice. In the event Landlord exercises its option
under this subparagraph (ii) the rent and all other charges payable hereunder
shall be equitably adjusted and apportioned.
(C) If Landlord does not exercise its right to cancellation under either
of the foregoing two options granted under Paragraph (B) hereof within the time
set forth therein, Tenant shall have the right to attempt to assign Tenant's
interest in this lease or sublease all or portions of the Demised Premises to
third parties procured by Tenant or by outside brokers whom Tenant may wish to
utilize; provided, however, that such assignment or subletting shall be subject
to the provisions of the above Paragraph (B) as well as the following provisions
of this Article. Upon obtaining a proposed assignee or sublessee, upon terms
satisfactory to Tenant, Tenant shall submit to Landlord in writing (x) the name
of the
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proposed assignee or subtenant; (y) the terms and conditions of the proposed
assignment or subletting; (z) the nature and character of the business and
credit of the proposed assignee or subtenant, and any other information
reasonably requested by Landlord. Landlord shall have the further option, to be
exercised within fifteen (15) business days from submission of Tenant's request,
to require Tenant to execute an assignment or sublease to Landlord or
Land-lord's designee on the same terms and conditions in Landlord's own name, or
the name of Landlord's designee, with a right to sublease to others without
Tenant's consent being required for such or any further sublettings. If Landlord
shall not exercise its foregoing further option within the time set forth, its
consent to any such proposed assignment or subletting shall not be unreasonably
withheld or unduly delayed; provided, however, that Landlord may withhold
consent thereto if in the exercise of its sole judgment it determines that:
(i) The financial condition and general reputation of the proposed
assignee or subtenant are not consistent with the extent of the obligation
undertaken by the proposed assignment or sublease.
(ii) The proposed use of the Demised Premises is not appropriate for
the Building or in keeping with the character of the existing tenancies or
permitted by Tenant's lease (but the foregoing shall not be deemed to enlarge
the purposes for which the Demised Premises are permitted to be used as set
forth in this lease).
(iii) The nature of the occupancy of the proposed assignee or
subtenant will cause an excessive density of employees or traffic or make
excessive demands on the Building's services or facilities or in any other way
will lessen the character of the Building.
(iv) Tenant proposes to assign or sublet to one who at the time is a
tenant or occupant of the Building or a corporation or other entity which
controls or is controlled by such tenant or occupant or is under common control
with such tenant or occupant, or to one with whom Landlord or its agents are
actively negotiating for space in the Building, or to one who at the time is a
tenant or occupant of premises in any other building then owned or managed by
Landlord or its affiliates.
(v) Tenant proposes to assign or sublet all or a portion of the
Demised Premises at a rental rate less than the rental rate Landlord is then
asking for other space in the Building.
(vi) The proposed assignee or subtenant is: a government or any
subdivision or agency thereof; a school, college, university or educational
institution of any type, whether for profit or non-profit; an employment or
recruitment agency; a travel agency; or a messenger service.
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(D) Further, and as a condition of Landlord's consent to any assignment or
subletting:
(i) Tenant at the time of requesting Landlord's consent shall not be
in default in the payment of any Minimum Rent or Additional Rent provided to be
paid by Tenant hereunder and further that Tenant is not then in material default
otherwise under this lease;
(ii) Each assignee of this lease shall assume, and each subtenant of
this lease shall take subject to, in writing, all of the terms, covenants and
conditions of this lease on the part of Tenant hereunder to be performed and
observed;
(iii) An original or duplicate original of the instrument of
assignment and assumption or of the sublease agreement shall be delivered to
Landlord within five (5) days following the making thereof;
(iv) Any instrument of sublease shall specifically state that each
sublease is subject to all of the terms, covenants and conditions of this lease;
(v) Each assignee or sublessee of this lease shall deposit with
Landlord a sum equal to two (2) months then current Minimum Rent as additional
security under this lease;
(vi) The space to be sublet shall be regular in shape with
appropriate means of ingress and egress for normal renting purposes; and
(vii) Tenant shall employ, as exclusive renting agent for the
subletting of the Demised Premises or the assignment of this lease, Landlord's
managing agent for the Building.
If Tenant shall duly comply with all of the foregoing then, as aforesaid,
Landlord shall not unreasonably withhold or unduly delay its consent to such
assignment or subletting; provided, however, that at the time of requesting
Landlord's consent Tenant shall pay to Landlord, Landlord's reasonable estimated
costs and expenses as a processing fee for each assignment and/or subletting.
(E) It is agreed that if Landlord shall not exercise any of its foregoing
options and shall consent to such assignment or subletting, and Tenant shall
thereupon assign this lease or sublet all or any portion of the Demised
Premises, then and in that event Tenant shall pay to Landlord, as Additional
Rent, (i) in the event of an assignment, the amount of all monies, if any, which
the assignee has agreed to and does pay to Tenant in consideration of the making
of such assignment less, however, all out-of-pocket costs actually incurred by
Tenant in connection with the making of such assignment, including but not
limited to any brokerage fees, advertising and alteration costs; and (ii) in the
event of a
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subletting the amount, if any, by which the Minimum Rent and Additional Rent
payable by the sublessee to Tenant shall exceed the Minimum Rent plus Additional
Rent allocable to that part of the Demised Premises affected by such sublease,
pursuant to the provisions of this lease plus the amounts, if any, payable by
such sublessee to Tenant pursuant to any side agreement as consideration
(partial or otherwise) for Tenant making such subletting, less, however, all
out-of-pocket costs actually incurred by Tenant in connection with the making of
the sublease, including but not limited to any brokerage fees, advertising and
alteration costs. Such Additional Rent payments shall be made monthly within
five (5) days after receipt of the same by Tenant or within five (5) days after
Tenant is credited with the same by the assignee or sublessee. At the time of
submitting the proposed assignment or sublease to Landlord, Tenant shall certify
to Landlord in writing whether or not the assignee or sublessee has agreed to
pay any monies to Tenant in consideration of the making of the assignment or
sublease other than as specified and set forth in such instruments, and if so
Tenant shall certify the amounts and time of payment thereof in reasonable
detail.
(F) If this lease shall be assigned, or if the Demised Premises or any
part thereof be sublet or occupied by any person or persons other than Tenant,
Landlord may, after default by Tenant, collect rent from the assignee, subtenant
or occupant and apply the net amount collected (which may be treated by Landlord
as rent or as use and occupancy) to the rent herein reserved but no such
assignment, subletting, occupancy or collection of rent shall be deemed a waiver
of the covenants in this Article, nor shall it be deemed acceptance of the
assignee, subtenant or occupant as a tenant, or a release of Tenant from the
full performance by Tenant of all the terms, conditions and covenants of this
lease.
(G) Each permitted assignee shall assume and be deemed to have assumed
this lease and shall be and remain liable jointly and severally with Tenant for
the payment of the Minimum Rent and Additional Rent and for the due performance
of all the terms, covenants, conditions and agreements herein contained on
Tenant's part to be performed for the term of this lease and any renewals and
modifications hereof. No assignment shall be binding on Landlord unless, as
hereinbefore provided, such assignee or Tenant shall deliver to Landlord a
duplicate original of the instrument of assignment which contains a covenant of
assumption by the assignee of all of the obligations aforesaid and shall obtain
from Landlord the aforesaid written consent prior thereto. Any assignment,
sublease or agreement permitting the use and occupancy of the Demised Premises
to which Landlord shall not have expressly consented in writing shall be deemed
null and void and of no force or effect.
(H) Tenant agrees that notwithstanding any subletting or assignment
permitted by Landlord, no other and further subletting of the Demised Premises
by Tenant or any person or entity claiming
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through or under Tenant (except as provided in Paragraph (C) herein) shall or
will be made except upon compliance with and subject to the provisions of this
Article.
57. ADDENDUM TO ARTICLE 18 (LANDLORD'S REMEDIES):
Should Tenant fail to pay within ten (10) days after same becomes due any
installments of Minimum Rent, Additional Rent or any other sum payable to
Landlord under the terms of this lease (within thirty (30) days for installments
of Minimum Rent), then interest shall accrue from and after the date on which
any such sum shall be due and payable, and such interest, together with a late
charge of two cents for each dollar overdue to cover the extra expense involved
in handling such delinquency, shall be paid by Tenant to Landlord at the time of
payment of the delinquent sum. If Tenant shall issue a check to Landlord which
is returnable unpaid for any reason, Tenant shall pay Landlord an additional
charge of $100.00 for Landlord's expenses in connection therewith. If Tenant
shall be late in making any payment due under this lease more than three (3)
times in any Lease Year, Landlord shall be entitled to demand from Tenant and
Tenant agrees to tender to Landlord Additional Security (as hereinafter defined)
in the amount of one month's then current Minimum Rent.
58. INTEREST:
Whenever this lease refers to "interest", same shall be computed at a rate
per annum of two (2%) percent in excess of the rate of interest announced from
time to time by Citibank, N.A. as its base rate, except where otherwise in this
lease a different rate is specifically set forth. If, however, payment of
interest at any such rate by Tenant (or by the tenant then in possession having
succeeded to Tenant's interest in accordance with the terms of this lease)
should be unlawful, i.e., violative of the usury statutes or otherwise, then
"interest" shall, as against such party, be computed at the maximum lawful rate
payable by such party.
59. ARBITRATION:
Either party may request arbitration of any matter in dispute wherein
arbitration is expressly provided in this lease as the appropriate remedy. All
such controversies shall be settled by decision of the American Arbitration
Association, Garden City office, whose decision shall be final and conclusive
upon the parties hereto and a judgment may be obtained thereon in any court
having jurisdiction in accordance with the procedural rules then obtaining of
the American Arbitration Association, Garden City office, or any successor
thereto. The arbitrator or arbitrators shall be disinterested person(s) having
at least ten (10) years of experience in the County of Nassau in a calling
connected with the dispute and may grant injunctions or other relief in such
controversies or claims. The parties agree that the unsuccessful party shall pay
the entire cost and expense of such arbitration,
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and each shall separately pay for its own attorneys' fees and expenses.
60. ENTIRE AGREEMENT:
This agreement contains the entire understanding and agreement of the
parties with respect to the subject matter hereof and no earlier statement or
prior written matter shall have any force or effect. Tenant agrees that it is
not relying on any representations or agreements, written or oral, other than
those contained in this lease. This agreement shall not be modified or canceled
except by writing signed by all of the parties hereto.
61. SAVINGS PROVISION:
If any provision of this lease, or its application to any situation shall
be invalid or unenforceable to any extent, the remainder of this lease, or the
application thereof to situations other than that as to which it is invalid or
unenforceable, shall not be affected thereby, and every provision of this lease
shall be valid and enforceable to the fullest extent permitted by law.
62. LEASE NOT BINDING UNLESS EXECUTED:
Submission by Landlord of the within lease for execution by Tenant shall
confer no rights nor impose any obligations on either party unless and until
both Landlord and Tenant shall have executed this lease and duplicate originals
thereof shall have been delivered to the respective parties.
63. MECHANIC'S LIENS:
(A) Notwithstanding anything to the contrary contained in this lease,
Tenant, its successors and assigns, warrant and guarantee to Landlord, its
successors and assigns, that if any mechanic's lien shall be filed against the
Building of which the Demised Premises forms a part, for work claimed to have
been done for, or materials claimed to have been furnished to, Tenant (a) the
same shall be discharged by Tenant, by either payment, by bond or otherwise, at
the sole cost and expense of Tenant, within fifteen (15) days of the giving of
notice thereof by Landlord, (b) either a release or a satisfaction of lien, as
the case may be, shall be filed with the County Clerk of the county in which the
Building is situate within such fifteen (15) day period, and (c) a copy of such
release or satisfaction, as the case may be, certified to by such County Clerk
shall be delivered to Landlord within three (3) days after such filing.
(B) In the event such mechanic's lien is not discharged timely, as
aforesaid, Landlord may discharge same for the account of and at the expense of
Tenant by payment, bonding or otherwise, without investigation as to the
validity thereof or of any offsets or defenses thereto, and Tenant shall
promptly reimburse Landlord,
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as Additional Rent, for all costs, disbursements, fees and expenses, including,
without limitation, legal fees, incurred in connection with so discharging said
mechanic's lien, together with interest thereon from the time or times of
payment until reimbursement by Tenant. Tenant shall, within five (5) days of
demand therefor by Landlord, pay to Landlord as Additional Rent, the sum of One
Thousand ($1,000) Dollars on account of Landlord's legal fees and disbursements,
but the foregoing shall not limit the extent of Tenant's liability as set forth
above.
(C) In the event such mechanic's lien is not discharged timely, as
aforesaid, Landlord, in addition to all other rights granted to Landlord in this
lease and without limitation, may institute a dispossess summary proceeding
based upon such failure to discharge any such lien. In the event Tenant fails to
deliver to Landlord the certified copy of the release or satisfaction required
hereunder within the time period provided for the delivery thereof to Landlord,
Landlord shall have the right to assume that such mechanic's lien has not been
discharged and Landlord shall have all of the rights and remedies provided for
herein based upon Tenant's failure to discharge any such lien.
64. LANDLORD'S CONSENT:
If Tenant requests Landlord's consent or approval to alterations,
assignment, subletting or any other matter or thing requiring Landlord's consent
or approval under this lease, and if in connection with such request Landlord
seeks the advice of its attorneys, architect and/or engineer, then Landlord, as
a condition precedent to granting its consent or approval, may require (in
addition to any other requirements of Landlord in connection with such request)
that Tenant pay the reasonable fee of Landlord's attorneys, architect and/or
engineer in connection with the consideration of such request and/or the
preparation of any documents pertaining thereto.
65. HEAT, VENTILATION AND AIR-CONDITIONING:
(A) Landlord, at its expense, shall maintain and operate the heating,
ventilating and air-conditioning systems (hereinafter called the "Systems"), and
shall furnish heat, ventilating and air-conditioning (hereinafter collectively
called "air-conditioning service"), in the Demised Premises through the Systems,
during "Regular Hours" (that is, generally customary daytime business hours, but
not before 8 a.m. or after 6 p.m. weekdays or before 9 a.m. or after 1 p.m.
Saturdays), of "Business Days" (which term is used herein to mean all days
except Saturdays (after 1 p.m.), Sundays and Holidays set forth in Exhibit B.
(B) Use of the Demised Premises, or any part thereof, in a manner
exceeding the design conditions thereof (including occupancy and connected
electrical load) for air-conditioning service in the Demised Premises, or
rearrangement of partitioning which interferes
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with normal operation of the air-conditioning service in the Demised Premises,
or the use of computer or data processing machines, may require changes in the
Systems servicing the Demised Premises. Such changes so occasioned shall be made
by Tenant, at its expense, as Tenant's Work pursuant to Article 41 hereof.
Tenant agrees to lower and keep closed the venetian blinds or other window
coverings in the Demised Premises whenever required for the proper operation of
the air-conditioning service.
66. SUBORDINATION, NOTICE TO LESSORS AND MORTGAGEES:
In the event of any act or omission of Landlord which would give Tenant
the right, immediately or after lapse of a period of time, to cancel or
terminate this lease, or to claim a partial or total eviction, Tenant shall not
exercise such right (1) until it has given written notice of such act or
omission to the holder of each mortgage and the lessor of each ground or
underlying lease whose name and address shall previously have been furnished to
Tenant in writing, and (2) unless such act or omission shall be one which is not
capable of being remedied by Landlord or such holder or lessor within a
reasonable period or time, until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice and following
the time when such holder or lessor shall have become entitled under such
superior mortgage or superior lease, as the case may be, to remedy the same
(which reasonable period shall in no event be less than the period to which
Landlord would be entitled under this lease or otherwise, after similar notice,
to effect such remedy), provided such holder or lessor shall with due diligence
give Tenant written notice of its intention to, and commence and continue to,
remedy such act or omission.
67. ADDENDUM TO ARTICLE 34 (SECURITY DEPOSIT):
In the event Landlord elects to place the security deposit, as set forth
in Paragraph 34 of this lease, into an interest bearing account, Tenant agrees
that, in compliance with New York General Obligations Law Sec. 7-103, Landlord
shall be entitled to administration expenses in the sum of one (1%) per cent per
annum upon the security deposit. It is further agreed that, in compliance with
that statute, the other interest earned upon said security shall be added to the
security deposit as additional security. Except as otherwise provided herein, it
is the intention of the parties that there shall always be security in the
amount of at least two (2) months of the Minimum Rent as adjusted during the
term of this lease. If at any time the security deposit shall not equal two (2)
months of the then current Minimum Rent, Landlord may send written notice to the
Tenant of said deficiency and Tenant shall have fifteen (15) days in which to
pay to Landlord said deficiency. In the event said security is not paid, it
shall be deemed Additional Rent and shall be collectible as such.
Notwithstanding anything to the contrary herein, if Tenant is not in default
beyond any applicable cure period, the security deposit
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shall be reduced to one (1) months rent upon the commencement of the fifteenth
(15th) month of the term of this Lease and Landlord shall return to Tenant said
excess, if any.
68. Intentionally omitted.
69. Intentionally omitted.
70. TENANT SHALL BE LIABLE FOR INCREASE
IN COST OF LANDLORD'S INSURANCE:
Tenant shall be liable and shall pay for any increase in the cost of
Landlord's insurance to the extent same results from (i) any leasehold
improvements of Tenant in excess of building standard, whether installed by
Tenant, or by Landlord at Tenant's expense, which results in an increase in the
insurable value of Demised Premises, or (ii) Tenant's use and occupancy or
manner of use of the Demised Premises or Tenant's abandonment or failure to
operate for business in the Demised Premises. A schedule or rule book issued by
the Fire Insurance Rating Organization having jurisdiction or any similar body,
or the rating procedures or rules of Landlord's insurance carrier, shall be
conclusive evidence of the several items and charges which make up the insurance
rates and premiums on the Building and the rental income to be derived
therefrom.
71. LANDLORD'S RIGHT OF SELF-HELP:
Tenant covenants and agrees that if Tenant shall, at any time, fail to
make any payment or perform any other act on its part to be made or performed
under this lease, Landlord may, but shall not be obligated to, and without
notice or demand and without waiving, or releasing Tenant from any obligation of
Tenant under this lease, make such payment or perform such other act to the
extent Landlord may deem desirable, and in connection therewith, to pay expenses
and employ counsel. All sums so paid by Landlord, and all expenses in connection
therewith, including attorneys' fees), together with interest thereon from the
date of such payment, shall be deemed Additional Rent hereunder and be payable
to Landlord on demand at the time of any installment of Minimum Rent thereafter
becoming due and, for purpose of securing collection of such sums, Landlord
shall have the same rights and remedies for the nonpayment thereof as in the
case of default in the payment of Minimum Rent.
72. ADDENDUM TO ARTICLE 4 (MAINTENANCE AND REPAIRS):
(A) Landlord covenants, at Landlord's sole cost and expense to make all
necessary structural repairs to the Demised Premises and structural repairs to
the exterior of the Building and the water and sewer lines servicing the Demised
Premises that are located outside of the Demised Premises. As used herein,
"Structural Repairs" shall mean repairs to the following elements only: the
roof, load bearing structural elements, exterior walls,
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mains and conduits carrying utilities into the Demised Premises to the point
where Tenant connects to same, also the parking lot and common areas, as defined
above. Landlord shall also be responsible for repair to the common areas of the
Building. If the necessity for any such repairs has been occasioned by the
negligence, act or omission of Tenant, or any subtenant of Tenant or either of
their respective employees, agents or contractors, Landlord shall make such
repairs but Tenant shall pay for same in reimbursement; the amount of
reimbursement to be deemed Additional Rent hereunder. Landlord shall not be
required to commence any such repair, until after notice from Tenant that such
repair is necessary; Landlord shall have a reasonable time to commence and
complete the repair work. In doing repairs Landlord shall attempt to reasonably
minimize inconvenience to Tenant, but Landlord shall not be required to incur
additional expenses for over-time work.
(B) Except as otherwise provided herein, Tenant covenants, at Tenant's
sole cost and expense, to take good care of the Demised Premises and building
equipment therein and all appurtenances therein, to keep the same and each and
every part thereof in good repair, order and condition and to make promptly all
reasonable and necessary repairs, alterations and replacements. Any replacements
required to be made by Tenant under this lease shall be of type and material of
equal or better quality than the original item replaced.
(C) If Tenant shall fail, refuse or neglect to make repairs in accordance
with the terms of this lease, then Landlord has the right (but not the
obligation) to make any such repairs (upon ten (10) days' notice, except in the
case of an emergency) and Landlord shall be reimbursed for its expenses in so
doing (plus a 25% administrative and overhead fee), and the amount of
reimbursement shall be deemed Additional Rent hereunder.
(D) Nothing shall be construed herein to obligate Tenant to pay for any
repairs for which Landlord has been reimbursed by insurance proceeds.
73. Intentionally omitted.
74. SPRINKLERS:
Anything in this lease to the contrary notwithstanding, if the applicable
Board of Fire Underwriters, or Fire Insurance Exchange, if any, or any
governmental authority recommend or require any changes, modifications or
additional heads or other equipment be made or added to any sprinkler systems
now or hereafter installed at the Demised Premises, for Tenant's manner of use
of the Demised Premises, or if the modification of a system shall become
necessary to avoid the imposition of a penalty or charge by the local fire
rating organization or exchange and is required by Tenant's manner of use of the
Demised Premises, then Landlord shall make such sprinkler systems change or
addition, but at Tenant's expense, as
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Landlord's charge for this work shall be paid within ten (10) days after
rendition of a statement for same, and the charge shall be deemed Additional
Rent hereunder. Tenant shall make no alteration to the sprinkler systems system
without Landlord's prior written consent.
75. ADDENDUM TO ARTICLE 10 (EMINENT DOMAIN):
(A) If, as a result of the exercise of the power of eminent domain
(hereinafter referred to as a "Proceeding"), the entire Demised Premises shall
be taken, this lease and all right, title and interest of Tenant hereunder shall
cease and come to an end on the date of vesting of title pursuant of such
Proceeding. The Minimum Rent shall be apportioned as of the date of such vesting
and Landlord shall be entitled to and shall receive the total award made in such
Proceeding, and Tenant hereby assigns such award to Landlord, except that Tenant
shall be entitled to receive any award specifically allocated to compensation
for Tenant's trade fixtures, provided Tenant so proves in the Proceeding.
(B) If less than the entire Demised Premises shall be taken in any
Proceeding, this lease shall terminate as to the portion of the Demised Premises
so taken upon vesting of title in the Proceeding, and in the event, and only in
the event, that the remainder of the Demised Premises not so taken is not
reasonably fit or suited to be used and employed by Tenant to enable Tenant to
discharge and satisfy the purposes for which the Demised Premises are leased
hereunder to Tenant and to carry on its business as conducted thereon at the
time of such taking, Tenant, provided that Tenant is not in default under this
lease, may in such event terminate this lease as to the remainder of the Demised
Premises by giving notice in writing not later than thirty (30) days after the
date of such vesting, specifying as the date for termination a date not later
than thirty (30) days after the giving of such notice. Upon the date specified
in such notice, the term of this lease and all right, title and interest of
Tenant hereunder shall cease and come to an end, provided Tenant is not in
default under this lease on such date, and the Minimum Rent shall be apportioned
as of the date of such termination.
(C) If less than the entire Demised Premises shall be taken in a
Proceeding and this lease is not terminated pursuant to the provisions above,
this lease shall terminate as to the portion of the Demised Premises so taken
upon vesting of title in the Proceeding. In any such case, Landlord covenants
and agrees at Landlord's cost and expense, to restore that portion of the
Demised Premises not so taken to a complete architectural unit for the use and
occupancy of Tenant as described in Article 39 hereof. If less than the entire
Demised Premises shall be taken in any proceeding, and whether or not Tenant
shall exercise its right to terminate this lease, Landlord shall be entitled to
and shall receive the total award made in any Proceeding, and Tenant hereby
assigns such award to Landlord. After and as of the date of vesting of title in
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the Proceeding, the Minimum Rent shall be reduced by an amount based upon the
proportion which the square footage area of usable floor space of Demised
Premises, including space occupied by interior walls and columns remaining after
the taking, bears to the total floor space of the Demised Premises prior to the
taking.
(D) Anything hereinabove to the contrary notwithstanding, if a portion of
the Demised Premises shall be taken in any Proceeding, Landlord shall have the
option of terminating this lease as of the date of vesting of title in the
Proceeding by written notice to Tenant given within thirty (30) days after such
vesting of title, in which event Landlord shall make a proportionate refund to
Tenant of such rent as may have been paid in advance.
76. NO CHANGE OF LOCKS:
Tenant shall not change any locks on the Demised Premises without
Landlord's written permission.
77. REIMBURSEMENT OF LANDLORD FOR EXPENSES
INCURRED IN THE ENFORCEMENT OF THIS LEASE:
Tenant covenants and agrees to pay, and to indemnify Landlord against all
legal costs and charges, including reasonable counsel fees, lawfully incurred in
obtaining possession of the Demised Premises after default by Tenant or upon
expiration or earlier termination of the term of this lease or in enforcing any
covenant or agreement of Tenant herein contained (regardless of the commencement
of litigation), or in the defense of any suit arising out of the occupancy or
operation of the Demised Premises by Tenant. If either party shall commence any
litigation or proceeding against the other party, and the party commencing said
action shall not prevail, then said other party shall reimburse the other party
for all costs, expenses and reasonable attorneys' fees that said party actually
incurred in defending such action or proceeding against the other party.
78. TENANT'S ESTOPPEL CERTIFICATE:
At any time and form time to time, and within ten (10) days after request
by Landlord, Tenant agrees to execute, acknowledge and deliver to Landlord, a
written statement certifying (a) that this lease is unmodified and in full force
and effect (or if there have been modifications that the same is in full force
and effect as modified and identifying the modifications), (b) the dates to
which the Minimum Rent, Additional Rent, and other charges have been paid, (c)
that there are no offsets to the payment of rent and (d) that Landlord is not in
default under any provisions of the lease. It is intended that any such
statement may be relied upon by any person proposing to acquire Landlord's
interest in this lease or any prospective mortgagee of, or assignee of any
mortgage upon such interest.
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79. NO RECORDATION:
Tenant shall not record this lease or a memorandum hereof.
80. TENANT ACCEPTS DEMISED PREMISES "AS IS"; NO REPRESENTATIONS:
Tenant has had an opportunity to inspect the Demised Premises and is fully
familiar with the physical condition of the Demised Premises and every part
thereof. Landlord has made no representations of whatever nature in connection
with the condition of the Demised Premises or any part thereof, and Landlord
shall not be liable for any latent or patent defects therein. However, Landlord
shall perform the work described in Exhibit A, if any, to prepare the Demised
Premises for Tenant's occupancy.
81. MEDICAL AND TOXIC WASTE:
The Tenant acknowledges that the Tenant shall be solely responsible for
the proper and legal disposal of all medical, toxic and so called "red bag"
waste, as same may be defined from time to time, by all regulatory authorities
having jurisdiction. The Landlord shall have no liability to any person or
entity in this regard. The Tenant shall comply with all regulations issued by
the federal government, New York State, the County of Nassau, or any other
agency, municipality or regulatory authority having jurisdiction with respect to
the generation, storage and disposal of such waste. In addition, the Tenant
shall be required, at its own cost and expense to contract with a licensed
medical and toxic waste disposal company for the disposal of all syringes,
needles and other medical, toxic and red bag waste. The Tenant shall furnish the
Landlord with a copy of the contract and renewals thereof. Failure (a) to
maintain the aforesaid contract continuously and to furnish the Landlord with
evidence that the contract is in full force and effect, or (b) to properly
dispose of all medical, toxic and red bag waste, shall be a material default
under this lease. Any failure by the Landlord to take any action with respect to
obtaining from the Tenant all contracts and renewals, shall in no way relieve
the Tenant of its responsibility to provide same and to dispose of all such
medical, toxic and red bag waste pursuant to all applicable law. The Tenant
shall, and does hereby, indemnify the Landlord and holds Landlord harmless from
any damage, loss, liability, claims, actions or proceedings, including but not
limited to attorneys fees and any fines or penalties, arising out of or relating
to the Tenant's failure to perform any obligation under this Article. This
Article shall survive the termination or expiration of this lease.
82. PARKING:
Tenant shall be entitled to the use of six (6) reserved parking spaces
servicing the Premises, as more particularly shown on Exhibit "C". Tenant's use
of said parking spaces shall be in compliance with all rules and regulations
which may now or from
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<PAGE>
time to time hereafter be in effect. Said parking spaces shall be subject to
reassignment at the discretion of the Landlord. Landlord shall have no
responsibility for policing, maintaining or removing vehicles from any such
parking spaces.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals (or in the case of a corporation, have had their proper corporate officers
execute this lease and affix their corporate seals hereto) as of the date first
above written.
LANDLORD:
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By:___________________________________
TENANT: INTEGRITY LOGISTICS, INC.
By:___________________________________
27
<PAGE>
SCHEDULE "A"
[Area of Demised Premises to be attached]
<PAGE>
EXHIBIT A
[TO BE SUPPLIED]
<PAGE>
EXHIBIT B
Tenant will not observe normal business hours on the following
holidays:
1. New Year's Day
2. Washington's Birthday
3. Memorial Day
4. Independence Day
5. Labor Day
6. Thanksgiving Day
7. Christmas Day
The date in any given Lease Year upon which any of the above
holidays will be observed shall be that date as shall be published annually by
the New York State Banking Department.
<PAGE>
NORTH CAROLINA
GUILFORD COUNTY
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into this 21st day of June, 1993,
by and between S PARTNERS, High Point, North Carolina, a North Carolina
Partnership ("OWNER"); and WRANGLER AVIATION, INC., dba TRADEWINDS INTERNATIONAL
AIRLINES, a Delaware Corporation, ("TENANT").
WITNESSETH:
OWNER, for and in consideration of the rents, covenants and agreements
hereinafter set forth which are to be paid, kept and performed does lease and
rent to TENANT and TENANT hereby agrees to lease and take and does hereby lease
and take upon the terms and conditions hereinafter set forth the following
described land, building and improvements (hereinafter referred to as "Demised
Premises") to wit:
BEING a portion of that certain industrial building (approximately 10,000
sq. ft.) on the lot known and described as 7001 Cessna Drive, Cross Creek
Corporate Center, Greensboro, North Carolina, together with the privilege
of sharing parking space on a pro rata basis according to the square
footage of building space leased by each of them with other tenants at
7001 Cessna Drive.
THE TERMS and conditions of the Lease Agreement are as follows:
1. TERM. The term of this Lease shall be one (1) year, commencing
September 1, 1993 and ending August 31, 1994.
2. RENTAL.
(a) TENANT agrees to pay OWNER the sum of Forty-three thousand five
hundred dollars ($43,500.00) as lease payments during the term of this Lease
payable on the first day of each calendar month in installments of $3625.00 per
month.
(b) If any installment of rental is not paid on or before the tenth
day of the calendar month during which such payment becomes due, TENANT shall be
obligated to pay to OWNER two percent (2%) of the first late payment, three
percent (3%) of the second late payment and five percent (5%) of the amount of
each subsequent late payment as a late payment charge which shall be due and
payable upon receipt by TENANT of a statement setting forth the amount due.
<PAGE>
(c) All payments of rental shall be paid by TENANT to OWNER without
notice or demand at the address set forth in the notice provisions of this Lease
or at such other address as OWNER may from time to time designate in writing to
TENANT. All rental shall be paid by check payable to S Partners or to such
person, firm or corporation as OWNER may designate in the future by notice given
pursuant to the notice provisions of this Lease.
3. USE AND COMPLIANCE WITH LAWS.
(a) TENANT shall not conduct on the Demised Premises nor permit to be
conducted on the Demised Premises any business which is in violation of the laws
of the State of North Carolina or any law or ordinance of any political
subdivision having jurisdiction over the premises.
(b) TENANT shall not, without compliance with applicable rules,
regulations and ordinances, store, treat or dispose of any hazardous waste and
shall not, without compliance with applicable rules, regulations and ordinances,
store or dispose of any "oil" as defined in the North Carolina Oil Pollution and
Hazardous Substances Control Act (G.S. 143-215.77) or "hazardous waste" as
defined in the Resource Conservation and Recovery Act of 1976 (as amended) (42
USC S6901 et seq), or "hazardous substances" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (as amended) (42
USC S9601 et seq). TENANT, to the best of its knowledge and ability with
regard to the Demised Premises will remain in material compliance with all
applicable federal, state and local environmental laws, regulations or
ordinances (collectively, "Environmental Laws") and will promptly notify OWNER
of any written allegation of non-compliance.
4. PAYMENT OF TAXES AND ASSESSMENTS. TENANT covenants and agrees to pay
all ad valorem taxes on the Demised Premises over the term of this Lease and
shall be obligated to reimburse OWNER for payment of such taxes with the payment
of rental that becomes due in the calendar month next succeeding the month in
which OWNER gives TENANT written notice of the amount of such taxes. TENANT
shall pay directly all ad valorem taxes and assessments of any nature imposed or
assessed upon or against fixtures, equipment, merchandise or other personal
property installed or kept upon the Demised Premises. OWNER shall pay any and
all assessments for local improvements, such as water and sewer facilities,
street improvements and the like imposed or assessed against any portion of the
land hereby leased to TENANT. Taxes for any partial year shall be prorated
between the parties based on a calendar year.
5. UTILITIES. OWNER will make utilities available to the Demised
Premises. TENANT shall at its own expense pay for the consumption of all fuel,
water, sewer, electric power, telephone and other utilities which it shall
consume in connection with its occupancy of the Demised Premises.
2
<PAGE>
6. REPAIRS, INSURANCE AND DAMAGE OR DESTRUCTION.
(a) If the roof, exterior walls or other structural portions of the
building (except floors) and the driveway or parking area shall need or require
repairs not caused by fire or other casualty for which the OWNER is insured
under the provisions of Subparagraph (d) of this ARTICLE and not caused by the
negligence or fault of the TENANT, the OWNER, after receiving notice from the
TENANT that such repairs are required, shall with reasonable promptness make
such repairs at the OWNER'S expense.
(b) TENANT shall, at its own expense, maintain the interior of the
building on the Demised Premises, including all windows and doors, in good
condition, save and except ordinary wear and tear and damage from fire,
windstorm or other casualty to the extent that such damage is covered by
insurance carried by OWNER pursuant to the provisions of Paragraph 6(d). All
damage to or destruction of glass shall be at the risk of TENANT.
(c) TENANT shall at its own expense perform all routine maintenance
(e.g. repair stopped toilet caused by misuse and replace burned out lights,
etc.), maintain the landscaping, parking and driveway areas, make all necessary
repairs to the heating system, electrical system, plumbing system, fire
protection system (including annual inspection), and all other equipment
installed in the Building and replace any and all such equipment if damage is
caused by the fault or negligence of TENANT. TENANT shall maintain an active
service agreement on HVAC systems during the term of the Lease and provide OWNER
with evidence of same. OWNER shall nevertheless make available to TENANT the
benefits of any and all warranties on any of such equipment originally installed
in the Building.
(d) OWNER shall at all times carry a standard coverage insurance
policy covering the Demised Premises, including fixtures, in an amount not less
than the replacement cost. The premiums for such insurance shall be reimbursed
by TENANT and shall be due and payable with the next installment of rent which
becomes due after the OWNER notifies TENANT of the amount of such insurance
premium and provides TENANT with a copy of the premium. In lieu of the
obligation to reimburse OWNER pursuant to this Paragraph 6(d), TENANT may at its
option procure and carry such insurance and if TENANT elects to do so, it shall
cause such policy or policies of insurance to include OWNER as named insured and
provide to OWNER and OWNER'S lender, if any, certificates evidencing or other
reasonable evidence of the existence and amounts of such insurance with the
insured's as required by this Lease. TENANT shall carry such insurance covering
its property located on the Demised Premises or shall as to such property be a
self-insurer. TENANT shall obtain and keep in force during the term of this
Lease a Commercial General Liability policy of insurance protecting TENANT and
OWNER (as an additional insured) against claims for bodily
3
<PAGE>
injury, personal injury and property damage based upon, involving or arising out
of the use, occupancy or maintenance of the Demised Premises. Such insurance
shall be on an occurrence basis providing single limit coverage in an amount not
less than $1,000,000 per occurrence. OWNER may also maintain liability insurance
in addition to, and not in lieu of, the insurance required to be maintained by
TENANT.
(e) Without affecting any other rights or remedies provided pursuant
to the terms of this Lease, TENANT and OWNER ("Waiving Party") each hereby
release and relieve the other, and waive their right to recover damages (whether
in contract or in tort) against the other for loss of or damage to the Waiving
Party's property arising out of or incidental to the perils required to be
insured against under Paragraph 6 to the extent of any recovery collected under
such insurance.
(f) In the event the Building is damaged by fire or other casualty,
TENANT shall give immediate notice in writing to OWNER. If the Building is
partially damaged, but not to such extent as to render the Demised Premises
wholly untenantable for the purposes for which TENANT uses them under this
Lease, the rental and all obligations of TENANT shall abate proportionately from
the date of such notice based on the number of square feet which TENANT is
unable to use for the purposes for which it was leased and OWNER shall be
obligated to make and to complete with due and reasonable diligence such repairs
as may be necessary to restore the building to its condition as before such
damage occurred. If the damage to the Building is so extensive as to render the
Demised Premises wholly untenantable for the purposes for which TENANT uses them
under this Lease, the rent shall cease from the time OWNER is notified in
writing by TENANT. If the premises are wholly untenantable either party may
terminate this Lease by giving written notice to the other pursuant to the
notice provisions of this Lease. If both parties elect to continue under the
terms of this Lease OWNER shall promptly restore the Building to its condition
as existed before such damage occurred and the obligation of TENANT to pay
rental shall thereupon resume.
(g) In the event of disagreement between the parties as to the extent
of damage or amount of rental reduction, the differences shall be decided by
arbitration, as outlined in ARTICLE 18 of this Agreement.
7. MUTUAL INDEMNIFICATION.
(a) Except for OWNER'S willful actions or negligence and/or any
failure by OWNER to fulfill its obligations hereunder, TENANT shall indemnify,
protect, defend and hold harmless OWNER from and against any and all claims,
damages, costs, liens, judgments, attorneys' fees, expenses and liabilities
arising out of, involving, or in dealing with, the occupancy of the Demised
4
<PAGE>
Premises by TENANT during the Term, any act, omission or neglect of TENANT, its
employees or invitees, and arising out of any breach by TENANT in the
performance of any obligations on TENANT'S part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein. In case any
action or proceeding be brought against OWNER by reason of any of the foregoing
matters, TENANT upon notice from OWNER shall defend the same at TENANT'S expense
by counsel reasonably satisfactory to OWNER and OWNER shall cooperate with
TENANT in such defense. OWNER need not have first paid any such claim in order
to be so indemnified. The terms of this indemnity shall not terminate upon the
termination of the Lease or the sale or transfer of the Demised Premises.
8. IMPROVEMENTS AND ALTERATIONS. TENANT shall make no alterations or
additions to the building or Demised Premises without the written approval of
OWNER, but such approval shall not be unreasonably withheld. TENANT shall submit
plans in reasonable detail and shall indemnify OWNER from any damage incident
thereto. Such work shall be in compliance with all applicable codes and
ordinances. All improvements shall become the property of OWNER at the end of
the term of this lease or, at OWNER'S option, removed by TENANT at TENANT'S
expense.
9. RIGHT TO SUBLET. TENANT shall not sublease or assign the Demised
Premises without the written approval of OWNER, but such approval shall not be
unreasonably withheld. No permitted subleasing or assignment shall relieve
TENANT from any obligations on its part imposed by this Lease Agreement.
10. RIGHT TO REMOVE PERSONALTY. TENANT shall not remove from the Premises
any parts or portions of the heating, electrical, air conditioning or plumbing
systems, even though provided at its expense. Otherwise, TENANT shall have the
right to remove and shall remove upon request of OWNER at termination of the
Lease all equipment, fixtures, merchandise and other personal property installed
or provided by TENANT. In the event such removal shall injure or damage the
building or Demised Premises, TENANT shall promptly repair all such damage at
its own expense or pay to OWNER the agreed, reasonable cost of such repairs.
Upon termination of the Lease, TENANT shall remove all of its personal property
and leave the premises "broom clean".
11. RIGHT OF INSPECTION. OWNER or his delegees shall have the right to
enter upon and inspect the Demised Premises at and upon reasonable times and
occasions during the Lease term.
12. TAKING BY EMINENT DOMAIN.
(a) If the total Demised Premises or all of the Building is taken for
any public purpose pursuant to the power of eminent domain (including purchase
under threat of condemnation) this
5
<PAGE>
Lease shall terminate as of the date that the condemning authority takes title
or possession, whichever occurs first.
(b) If the Demised Property is partially taken for public use pursuant
to the power of eminent domain (including purchase in lieu of condemnation)
TENANT may at its option terminate the Lease effective as of the date the
condemning authority takes title or possession, whichever is first, if the
taking is so substantial as to render the remainder of the property unusable for
the purposes for which it was leased. OWNER shall, at its expense, restore the
untaken portion of the Demised Premises to the extent necessary to render it
reasonably suitable for the purposes for which it was leased, including
replacing any parking area taken and returning the Demised Premises to
compliance with zoning ordinances and other applicable laws, and shall make all
repairs reasonably necessary to constitute the building a complete architectural
unit.
(c) All compensation for the taking of the property shall belong to
and be the property of OWNER without any participation by TENANT, except that
TENANT may prosecute its claim directly against the condemning authority for any
compensable losses sustained by TENANT.
(d) In the event of partial taking without termination of the Lease,
reasonable adjustments shall be made in the rental to reflect the loss of
utility sustained by TENANT as a result of the taking.
(e) In the event that any dispute arises between OWNER and TENANT with
respect to the taking or partial taking of the property pursuant to the power of
eminent domain, such dispute shall be settled by arbitration as outlined in
ARTICLE 18 of this Agreement.
13. DEFAULT.
(a) Each of the following shall be deemed a default by TENANT and a
breach of this Lease Agreement:
(i) The filing of a petition by TENANT for adjudication as bankrupt,
the involuntary adjudication of TENANT as a bankrupt or the voluntary
reorganization of TENANT pursuant to the United States Bankruptcy Code.
(ii) The appointment of a receiver for TENANT.
(iii) The dissolution or the commencement of any action or
proceeding for the dissolution or liquidation of TENANT.
(iv) Taking possession of the property of the TENANT by any
government officer or agency pursuant to the statutory
6
<PAGE>
authority for dissolution or liquidation of TENANT or pursuant to any
judgement or lien.
(v) The making by TENANT of any assignment for the benefit of
creditors.
(vi) A default in the payment of rent, late payment or ad valorem
taxes or insurance premiums to be paid by TENANT pursuant to Paragraph 4 &
6 (d) as may be modified by the terms of this Lease.
(vii) A default in the performance of any other covenant or
condition of this Lease Agreement on the part of TENANT.
(b) Each of the following shall be deemed a default by OWNER and a
breach of this Lease Agreement:
(i) A default in the performance of any covenant or condition of
this Lease on the part of OWNER.
(ii) Any adverse change in the financial position of OWNER which
shall cause him to be unable to fulfill his obligations under the terms of
this Lease.
14. REMEDIES IN CASE OF DEFAULT.
(a) If TENANT fails to perform any obligation imposed by this Lease
and the default continues for thirty (30) days after written notice of such
default has been given to TENANT, or if TENANT defaults in the payment of rental
or late charge and such default continues for ten (10) days, OWNER, at its
option and upon an appropriate finding pursuant to the arbitration in accordance
with the terms hereof in the case of a dispute may re-enter and take possession
of the Demised Premises and may terminate this Agreement, or may, without
terminating this Agreement, re-enter and take possession of the Demised
Premises, remove the property of TENANT and all other parties from the Demised
Premises and relet the premises for the account of TENANT in which case TENANT
shall be liable to OWNER not only for all unpaid rent which accrued prior to
default, but shall also be liable for all rent accruing under this Lease
Agreement during the unexpired term, and for all expenses incurred by OWNER,
including reasonable attorneys' fees, less amounts as shall actually be received
by OWNER as a result of such reletting. The remedies herein provided for are
cumulative and are in addition to but not exclusive, of those provided by law.
15. INTERPRETATION AND CONSTRUCTION.
(a) Failure by either party to exercise any right, power or privilege
arising under this Agreement shall not be construed as a waiver of the right to
exercise that right, power or privilege at
7
<PAGE>
a subsequent time. Failure of either party to insist upon strict compliance with
any of the terms of this Agreement shall not be construed as a waiver of the
right to insist upon strict compliance in the future.
(b) This Agreement is intended to and shall create the relationship of
Landlord and Tenant only. No estate shall pass out of OWNER and TENANT has no
interest subject to levy and sale. This Lease is made in North Carolina, to be
executed and performed in North Carolina, and shall be construed in accordance
with the laws of North Carolina. If TENANT remains in possession of the Demised
Premises or any part thereof after the expiration of the Term with OWNER'S
acquiescence and without any agreement of the parties, TENANT shall be a tenant
from month to month and there shall be no renewal of this Lease or exercise of
an option by operation of law.
(c) The invalidity of any provision of this Lease, as determined by
arbitration or a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
(d) Whenever a singular word is used herein, it shall also include the
plural wherever required by the context, and vice versa; and whenever any gender
is used herein, it shall also include the other genders wherever required by the
context. The terms and conditions hereof shall be interpreted and construed in
accordance with their usual and customary meanings, and the parties hereby
expressly waive and disclaim, in connection with the interpretation and
construction hereof, any rule of law or procedure requiring otherwise,
specifically including, but not limited to, any rule of law to the effect that
ambiguous or conflicting terms or conditions contained herein shall be
interpreted or construed against the party whose counsel prepared this Lease or
any earlier draft hereof.
(e) The captions herein are for convenience and identification
purposes only, are not an integral part hereof, and are not to be considered in
the interpretation of any part hereof.
16. NOTICES. All notices provided for in this Agreement shall be in
writing and may be delivered (by hand or by messenger or courier service) or may
be sent by regular, certified or registered mail or U.S. Postal Service Express
Mail, with postage prepaid, by recognized overnight courier or by facsimile
transmission, and shall be deemed sufficiently given if served in a manner
specified in this Paragraph 16. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given five (5) business days after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery within the United States
8
<PAGE>
shall be deemed given two (2) business days after delivery of the same to the
United States Postage Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Saturday, Sunday or legal holiday, it shall be deemed received on the next
business day.
Notice to OWNER shall be addressed to:
S PARTNERS
POST OFFICE BOX 11088
HIGH POINT, NORTH CAROLINA 27419
Notice to the TENANT shall be addressed to:
WRANGLER AVIATION, INC.
dba TRADEWINDS INTERNATIONAL AIRLINES
7001 B CESSNA DRIVE
GREENSBORO, NORTH CAROLINA 27409
Either party may from time to time by notice as herein provided designate a
different person, address or both to which notices given pursuant to this Lease
shall be sent.
17. BINDING LEASE. The terms of this Lease shall be binding on both OWNER
and TENANT and upon their respective heirs, executors, administrators,
successors and assigns.
18. ARBITRATION. TENANT and OWNER agree that any dispute arising out of,
pursuant to, or relating to this Lease shall be resolved by binding arbitration
in Guilford County, North Carolina, before one (1) arbitrator pursuant to the
rules of the American Arbitration Association for commercial arbitration. The
sole function of the arbitrator is to interpret and enforce this Lease under
North Carolina law and the arbitrator shall have no authority to alter, amend,
modify or change this Lease. The costs of the arbitration (other than each
party's attorneys' fees) shall be paid as determined by the arbitrator. This is
a mandatory arbitration clause in accordance with the North Carolina Arbitration
Act.
19. FIRST RENEWAL OPTION.
(a) If TENANT is not then in default, TENANT shall have the option to
extend the Lease for an additional term of one (1) year by giving 120 days'
written notice to OWNER as required by Paragraph 23(b). Rental during the
extension shall be Forty-three thousand five hundred dollars, payable in 12
monthly installments of $3,625.00 each.
9
<PAGE>
(b) In order to exercise this option, TENANT must give OWNER written
notice one hundred twenty (120) days prior to the expiration date of the first
extension of the lease term.
(c) All other terms and conditions of this Lease Agreement shall be
and remain in full force and effect during any extension of this Lease
Agreement.
20. SIGNS. TENANT may not, without OWNER'S prior written consent, cause or
permit the erection, installation, or display of any sign or advertising
material anywhere upon the Demised Premises. Any sign, device, fixture or other
attachment permitted to be installed by TENANT hereunder shall be installed by
TENANT at its own expense and in accordance with all governmental requirements.
TENANT shall be responsible for any damage resulting from the installation or
removal of any such sign, device, fixture or other attachment.
21. COVENANT OF QUIET ENJOYMENT. OWNER warrants and covenants with TENANT
that he is seized of the Demised Premises in fee simple and has the right and
authority to enter into this Lease for the full term thereof; and that at all
times when TENANT is not in default under the terms of and during the original
term and any extension of this Lease, TENANT'S quiet and peaceable enjoyment of
the Demised Premises shall not be disturbed and interfered with. This covenant
shall extend to OWNER'S lender.
22. SUBORDINATION. Subject to TENANT receiving assurance from OWNER'S
lender that TENANT'S possession will not be disturbed, TENANT agrees to execute
such reasonable documents and instruments as may be necessary to subordinate
this Lease to any bona fide mortgage, deed of trust or ground lease, at any time
during the term of this Lease.
23. ENTIRE AGREEMENT. This lease contains the entire agreement between the
parties and may not be modified except in writing and signed by both parties.
24. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of such party to institute suit for recovery of such sum. If it
shall be determined pursuant to arbitration or otherwise that there was no legal
obligation on the part of such party to pay such sum or any part thereof, such
party shall be entitled to recover each sum or so much thereof as it was not
legally required to pay under the provision of this Lease.
10
<PAGE>
25. RECORDING. Either OWNER or TENANT shall upon request by the other,
execute, acknowledge and delivery to the other a short form memorandum of this
Lease for recording purposes. The party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
OWNER AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF OWNER AND TENANT WITH RESPECT TO THE
DEMISED PREMISES.
IN WITNESS WHEREOF, OWNER has hereunto set his hand and seal and TENANT
has caused this Lease Agreement to be executed by its duly authorized officers
and its seal to be hereunto affixed, the day and year first above written.
OWNER: S PARTNERS
/s/ [ILLEGIBLE] (SEAL)
-------------------------------------
Managing Partner
TENANT: WRANGLER AVIATION, INC.
dba TRADEWINDS INTERNATIONAL AIRLINES
By: /s/ [ILLEGIBLE]
-------------------------------------
President
ATTEST:
- -----------------------
SECRETARY
(CORPORATE SEAL)
11
<PAGE>
NORTH CAROLINA
GUILFORD COUNTY
SECOND AGREEMENT EXTENDING PRIOR LEASE
THIS AGREEMENT, made and entered into this the 9th day of April, 1994, by
and between S PARTNERS, a North Carolina Partnership, High Point, North
Carolina, hereinafter referred to as OWNER; and TIA, INC. (formerly Wrangler
Aviation, Inc.), a Delaware Corporation, hereinafter referred to as TENANT;
WITNESSETH
THAT, WHEREAS, on the 21st day of June, 1993, the parties hereto entered
into a certain Lease, whereby the OWNER leased to the TENANT for a period of
twelve (12) months, beginning on the 1st day of September, 1993 and ending on
the 31st day of August, 1994, and
WHEREAS, on the 15th day of July, 1994, the parties hereto entered into a
certain Agreement Extending Prior Lease, whereby the OWNER leased to the TENANT
for a period of twelve (12) months, beginning September 1, 1994 and ending on
August 31, 1995 the "Demised Premises", to wit:
BEING a portion of that certain industrial building (approximately 10,000
sq. ft.) on the lot known and described as 7001 Cessna Drive, Cross Creek
Corporate Center, Greensboro, North Carolina, together with the privilege of
sharing parking space on a pro rata basis according to the square footage of
building space leased by each of them with other tenants at 7001 Cessna Drive.
NOW, THEREFORE, it is mutually agreed that the said Lease shall be amended
to exclude Paragraphs 1 and 2 of the Agreement Extending Prior Lease and include
the following conditions:
1) OWNER shall extend Lease for an additional twenty-four (24) months
beginning September 1, 1995 and ending on August 31, 1997.
2) The rental rate for the extension shall be Three thousand seven hundred
dollars ($3700.00) per month.
3) TENANT shall have an option to cancel this Lease Agreement at the end
of the first twelve months with a ninety (90) day written notice to OWNER.
TENANT shall pay a cancellation fee of $11,100.00 at the time of such notice.
4) If TENANT is not then in default at the end of the second year, TENANT
shall have the option to extend the Lease for an additional term of two years by
giving 90 day's written notice to
<PAGE>
OWNER as required by Paragraph 23(b) of the Lease Agreement. Rental during the
extension shall be Three thousand eight hundred ($3,800.00) dollars.
5) All other terms and conditions of the existing Lease shall remain as
is.
IN TESTIMONY WHEREOF, said OWNER and TENANT have caused this SECOND
AGREEMENT EXTENDING PRIOR LEASE to be executed in their behalf by their duly
authorized corporate officers and the corporate seals to be hereto affixed on
the day and date first above written.
TENANT: TIA, INC.
BY: /s/ [ILLEGIBLE] 6/6/95
-----------------------------------
PRESIDENT
ATTEST:
[ILLEGIBLE]
- ---------------------------------
SECRETARY
(COPORATE SEAL)
OWNER: S PARTNERS
BY: /s/ [ILLEGIBLE] (SEAL)
-----------------------------------
PARTNER
<PAGE>
EXHIBIT 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
PRO FORMA FOR THE FOR THE FOR THE
YEAR ENDED SEVEN WEEKS ENDED QUARTER ENDED
DECEMBER 31, 1995 MARCH 31, 1996 MARCH 31, 1996
----------------- ----------------- --------------
<S> <C> <C> <C>
Historical earnings per share:
Net loss.................... $(4,156,748) $ (743,831) $ (1,819,775)
Interest expense(1)......... 807,000 52,000 52,000
----------------- ----------------- --------------
Net loss available to common
stockholders............. $(3,349,748) $ (691,831) $ (1,767,775)
Weighted average shares
outstanding:
Common stock(2)(3).......... 4,778,171 5,237,671 5,240,671
Stock options(4)............ 87,032 87,032 87,032
----------------- ----------------- --------------
4,865,203 5,327,703 5,327,703
Historical net loss per
share....................... $ (0.69) $ (0.13) $ (0.33)
</TABLE>
<TABLE>
<CAPTION>
OPTIONS
----------
<S> <C>
Options issued within one year of initial registration statement
filing......................................................... 382,747
----------
Proceeds from exercise........................................... $1,774,290
----------
Expected initial public offering price........................... $ /6.00
----------
Treasury stock................................................... 295,715
Incremental shares............................................... 87,032
----------
----------
</TABLE>
- ------------------
(1) Eliminates interest expense on the debt assumed to be repaid, in (2).
(2) Common stock has been adjusted to give for effect 854,167 shares of common
stock, the amount which would be required to be issued at the initial public
offering price of $6.00 per share, to repay a portion of the Company's
outstanding debt.
(3) Common stock has been adjusted to give effect for 1,000,000 shares of common
stock, the amount which would be required to repay the balance at the
exchange note.
(4) 382,747 options to purchase shares of common stock were issued within the 12
months preceding the initial filing of the registration statement at prices
lower than the expected initial public offering price of $6.00 per share.
Pursuant to Staff Accounting Bulletin No. 83 ('SAB No. 83') such shares have
been included in the weighted average number of shares for the quarter ended
March 31, 1996.
<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 2,000,000 shares of common
stock and 2,000,000 redeemable common stock purchase warrants.
ARTHUR ANDERSEN LLP
New York, New York
June 24, 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.
KPMG PEAT MARWICK LLP
Greensboro, North Carolina
June 24, 1996
