<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1996
REGISTRATION NO. 333-03613
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERTRANZ WORLDWIDE HOLDING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
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)
</TABLE>
------------------------
2001 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
(516) 326-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STUART HETTLEMAN
2001 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
(516) 326-9000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
DAVID I. FERBER, ESQ. DAVID ALAN MILLER, ESQ.
BRUCE E. FOGARTY, ESQ. GRAUBARD MOLLEN & MILLER
FERBER GREILSHEIMER CHAN & ESSNER 600 THIRD AVENUE
530 FIFTH AVENUE NEW YORK, NEW YORK 10016
NEW YORK, NEW YORK 10036 (212) 818-8800
(212) 944-2200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /x/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM OFFERING PROPOSED
TITLE OF EACH CLASS AMOUNT BEING PRICE PER MAXIMUM AGGREGATE 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)................... 2,300,000Shares $6.00 $13,800,000 $ 4,759
Warrants(3).................... 2,300,000Warrants 0.10 230,000 79
Shares of Common Stock
underlying the Warrants(3)... 2,300,000Shares 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)........... 200,000Shares 6.60 1,320,000 455
Warrants included as part of
Underwriter's Purchase
Option(4).................... 200,000Warrants 0.11 22,000 8
Shares of Common Stock
underlying the Warrants
included in the Underwriter's
Purchase Option(4)(6)........ 200,000Shares 6.00 1,200,000 414
Warrants issued in connection
with Bridge Financings(5).... 1,312,500Warrants -- -- --
Warrants issued in connection
with Interim Financing(6).... 74,283Warrants -- -- --
Shares of Common Stock
underlying Warrants issued in
connection with Bridge
Financings................... 1,312,500Shares 6.00 7,875,000 2,716
Shares of Common Stock issued
in connection with Bridge
Financings(5)................ 656,250Shares -- -- --
Shares of Common Stock issued
in connection with Interim
Financing(6)................. 71,310Shares -- -- --
Shares of Common Stock issued
to founders and in other
private financings(6)........ 403,893Shares -- -- --
Total Registration Fee..... $38,247,100 $13,191
Previously Paid.......... $11,881
Amount Due............... $ 1,310
</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 18, 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. 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 403,893 shares of Common Stock
('Insider Shares') issued to certain other parties ('Insider Holders') in
connection with private financings between June 1995 and February 1996 and in
connection with the founding of the Company. The securities offered by the
Bridge Holders, the Interim Financing Holders and the Insider Holders
(collectively, 'Selling Securityholders') are not part of the underwritten
Offering 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]
NORTH AMERICAN NETWORK OF TERMINALS
[PICTURE OF UNITED STATES OF AMERICA]
<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 270,391 shares of Common Stock and options to
purchase 159,131 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 combines freight forwarding businesses of
Amertranz and TIA and CFS, and contributed the TIA and CFS freight forwarding
business to CAS. 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............................... 3,624,981 shares
Common Stock to be Outstanding After the
Offering............................... 5,624,981 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 PERIOD PRO FORMA
------------------------- 1/1/95 TO 1/1/96 TO 2/8/96 TO 12 MONTHS ENDED
1993 1994 1995 3/31/95 2/7/96 3/31/96 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 $ 10,105 $62,165
Cost of transportation........... 24,232 30,254 30,300 7,394 2,729 7,351 47,594
Gross profit..................... 8,439 8,322 7,911 1,624 658 2,754 14,568
Selling, general & administrative
expenses....................... 6,505 4,634 4,513 1,131 534 3,032 17,231
Amortization of goodwill......... -- -- -- -- -- 70 484
Operating income (loss).......... 1,934 3,688 3,398 493 124 (348) (3,147)
Net income (loss) before taxes... 869 2,661 2,366 213 7 (744) (4,157)(3)
Pro forma net loss per
share(4)....................... $ (0.13) $ (.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) the receipt of the net proceeds from the sale of
the Securities offered hereby, (iii) the repayment of principal and interest
of approximately $4,503,000 in connection with the Bridge Financings and the
Interim Financing, (iv) the partial repayment of $2,000,000 of the Exchange
Note and (v) 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 exceed its current assets. Although the CAS business has
generated positive cash flow from operations for the past three fiscal years,
the cash flow from the operations of the Amertranz business has not been
sufficient to finance trade payables, capital equipment requirements and new
office expansion and development. As a result, Amertranz has engaged in interim
borrowing from various sources. 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 Company from the
Offering will be used to repay outstanding indebtedness, including interest
thereon.
6
<PAGE>
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
there has been a trend toward an improvement in the Company's collection efforts
for the Amertranz business. The 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, medium-haul, truckload and less than
truckload carriers, and railroads. While the Company does not consider
7
<PAGE>
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 cutting back on the business which they
had been doing in Puerto Rico, which would have a material adverse effect upon
the Company's operating results.
DEPENDENCE ON CARRIERS; INABILITY TO CONTROL TRANSPORTATION
FACILITIES. The Company does not own or operate any trucks, nor does it
own or operate any aircraft (although it will have certain exclusive
rights to the use of an L-1011 aircraft in connection with its CAS
business until 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) to continue to be sensitive to domestic and, increasingly, global
economic conditions and other factors beyond its
8
<PAGE>
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 OUTSIDE DIRECTORS. All current directors of the Company are
also officers of the Company. There are no outside directors. The Company
intends to invite an additional person to serve as an outside director sometime
after completion of the Offering. The Underwriter is entitled to designate one
member for election to the Board of Directors and may designate different
individuals to serve in this capacity from time to time.
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 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, the stock market is subject
to price and volume fluctuations that affect the market prices for companies and
that are often unrelated to operating performance. See 'Distribution'.
9
<PAGE>
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. The Company will be able to issue shares of its Common Stock upon
exercise of the Warrants only if there is then a current prospectus relating to
such shares of Common Stock and only if such shares of Common Stock are
qualified for sale or exempt from qualification under applicable state
securities laws of the jurisdictions in which the various holders of the
Warrants reside. The Company has undertaken and intends to file and keep current
a prospectus which will permit the purchase and sale of the shares of Common
Stock underlying the Warrants, but there can be no assurance that the Company
will be able to do so. Although the Company intends to seek to qualify for sale
the shares of Common Stock underlying the Warrants in those states in which the
securities are to be offered, no assurance can be given that such qualification
will occur. The Warrants may be deprived of any value and the market for the
Warrants may be limited if a current prospectus covering the shares of Common
Stock issuable upon exercise of the Warrants is not kept effective or if such
shares of Common Stock are not qualified or exempt from qualification in the
jurisdictions in which the holders of the Warrants then reside. See 'Description
of Securities--Warrants'.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants may be
redeemed by the Company at any time after the Warrants become exercisable at a
redemption price of $.01 per Warrant upon not less than 30 days' prior written
notice if the last sale price of the Common Stock has been at least $10.00 per
share for each of the 20 consecutive trading days during a period ending on the
third trading day prior to the date of the notice of redemption. Notice of
redemption of the Warrants could force the holders to exercise the Warrants and
pay the exercise price at a time when it may be disadvantageous for them to do
so, to sell the Warrants at the current market price when they might otherwise
wish to hold the Warrants, or to accept the redemption price which would be
substantially less than the market value of the Warrants at the time of
redemption. See 'Description of Securities--Warrants'.
EFFECT OF OUTSTANDING OPTIONS AND WARRANTS. As of the date of this
Prospectus, there are outstanding stock options to purchase an aggregate of
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 $13.1 million,
or approximately $3.62 per share of Common Stock (based on 3,624,981 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 $2.71 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............. $(3.62)
Increase attributable to new investors in the Offering........................ 2.71
------
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.................... 3,624,981 65.3% $ 8,666,465 41.9% $2.39
New Investors............................ 2,000,000 34.7 12,000,000 58.1 6.00
--------- ------- ----------- -------
Total............................... 5,624,981 100.0% $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 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 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 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;
3,624,981 shares issued and outstanding actual; 5,624,981 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 10% Cumulative Convertible Preferred Stock ('Class
A Preferred Stock'), (ii) the receipt of the net proceeds from the sale of
the Securities offered hereby, (iii) the repayment of principal and interest
of approximately $4,503,000 in connection with the Bridge Financings and the
Interim Financing, (iv) the partial repayment of $2,000,000 of the Exchange
Note and (v) 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....................... (3,799) (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
FOR THE PERIOD ENDED
FEBRUARY 8 DECEMBER
TO 31,
MARCH 31, 1996 1995(2)
-------------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue............. $ 10,105 $62,165
Cost of transportation........ 7,351 47,594
------ -----------
Gross profit.................. 2,754 14,568
Selling, general &
administrative expenses..... 3,032 17,231
Amortization of goodwill...... 70 484
------ -----------
Operating income (loss)....... (348) (3,147)
Net income (loss) before
taxes....................... (744) (4,157)(3)
Pro forma net loss per share
(4) $ (0.13) $ (.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 as adjusted 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) the receipt of the net proceeds from
the sale of the Securities offered hereby, (iii) the repayment of principal
and interest of approximately $4,503,000 in connection with the Bridge
Financings and the Interim Financing, (iv) the partial repayment of
$2,000,000 of a $10,000,000 principal amount promissory note made in
connection with the Combination ('Exchange Note') and (v) 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.
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.
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.
15
<PAGE>
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.
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.
16
<PAGE>
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.
<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.
17
<PAGE>
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.
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
18
<PAGE>
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
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 through June 1997, 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
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$4,000,000 from TIA and CFS under a revolving credit facility (see below). At
April 30, 1996, the aggregate principal balance outstanding under all such
borrowings was approximately $10,323,000.
Fidelity Facility. In March 1995, Amertranz entered into an accounts
receivable Purchase and Sale Agreement ('Fidelity Facility') with Fidelity
Funding of California, Inc. ('Fidelity'), as amended July 5, 1995, October 25,
1995, and February 7, 1996. The Fidelity Facility expires in March 1997. Under
the agreement, as amended, the Company can borrow the lesser of $3.125 million
or 75% of eligible accounts receivable. Amertranz's borrowings under the
Fidelity Facility are secured by a first lien on all of Amertranz's assets and
are guaranteed by the Company. At February 7, 1996, the Company had outstanding
borrowings of approximately $1,698,000 under the Fidelity Facility which
represented the full amount available thereunder.
TIA Loan. In October 1995, Amertranz obtained a $500,000 subordinated
secured loan from TIA, which was increased to $800,000 in January 1996 ('TIA
Loan'). The TIA Loan bears interest at the rate of 12% per annum and is
repayable in 12 equal, consecutive monthly payments of principal and interest
commencing 30 days after the closing of the Offering. However, TIA has agreed
that, upon consummation of the Offering, repayment of the TIA Loan will be
deferred as described below. The TIA Loan is secured by a lien on all of the
assets of Amertranz subordinated only to the lien granted to Fidelity in
connection with the Fidelity Facility.
Revolver Note. As part of the Combination, TIA and CFS agreed to advance
to CAS, on a revolving loan basis, the net collections of the accounts
receivable of TIA and CFS as of February 7, 1996 and additional amounts in the
discretion of TIA and CFS, up to an aggregate maximum of $4,000,000 outstanding
at any time, pursuant to the terms of a Revolving Credit Promissory Note
('Revolver Note'). Funds advanced under the Revolver Note with respect to the
TIA and CFS accounts receivable do not bear interest prior to maturity.
Discretionary advances under the Revolver Note bear interest at the greater of
(i) 1% per month, or (ii) a fluctuating rate equal to the prime rate of interest
as published in The Wall Street Journal, plus 4%. Advances under the Revolver
Note may be used only for ordinary, current operating expenses of CAS unless TIA
and CFS consent to another use of such funds. The Revolver Note matures on July
6, 1996; however, TIA and CFS have agreed that, upon consummation of the
Offering, payment of the Revolver Note will be deferred as described below. All
obligations under the Revolver Note are guaranteed by the Company and Amertranz.
All obligations under the Revolver Note and the guarantees thereof are secured
by a first priority lien on all of the issued and outstanding shares of CAS, a
first priority lien on all of the assets of the Company and CAS, and a lien on
the accounts receivable of Amertranz, subordinate only to the first priority
lien granted to Fidelity in connection with the Fidelity Facility and the second
position lien granted to TIA in connection with the TIA Loan. As of March 31,
1996, the Company had outstanding borrowings of approximately $3,491,000 under
the Revolver Note.
Exchange Note. In the Combination, TIA and CFS transferred their freight
forwarding business to the Company. In consideration of such transfer, the
Company issued to TIA and CFS the Exchange Note in the original principal amount
of $10,000,000, which bears interest at the rate of 8% per annum, and an
aggregate of 2,100,000 shares of Common Stock. The Exchange Note is payable in
five consecutive monthly payments of principal and interest in the amount of
$80,000 each, commencing March 1, 1996, and, thereafter, monthly payments of
principal and interest in the amount of $166,667 each until the Exchange Note
has been paid in full. Of the proceeds of the Offering, $2,000,000 will be used
to repay a portion of the Exchange Note. Immediately prior to the consummation
of the Offering, TIA and CFS exchanged $2,000,000 principal amount of the
Exchange Note for 200,000 shares of the 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
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<PAGE>
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 296,669
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 effective annual rate of
interest on the Interim Notes (after giving effect to debt issuance cost of
$150,000) is 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'), 416,250 Bridge
Shares, and Bridge Warrants to purchase an aggregate of 832,500 shares of the
Company's Common Stock at an exercise price of $5.00 per share. The February
Bridge Notes bear interest at a rate of 10% per annum through April 30, 1996,
and thereafter at a rate of 15% per annum. In May 1996, in connection with the
May Bridge Financing, the Company issued an aggregate of $1.2 million in
principal amount of its secured promissory notes ('May Bridge Notes'), 240,000
Bridge Shares, and Bridge Warrants to purchase an aggregate of 480,000 shares of
the Company's Common Stock at an exercise price of $5.00 per share. The May
Bridge Notes bear interest at a rate of 15% per annum. 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 200% and on the May Bridge Notes
(after giving effect to debt issuance cost of $1,020,000) is 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,
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<PAGE>
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 will 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>
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*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 841,118 shares of Common
Stock. In consideration of the transfer to the Company of the freight forwarding
business of TIA and CFS, TIA and CFS received 2,100,000 shares of Common Stock,
and was issued the $10 million 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 officer is employed for a
period of three years, at an annual salary of $130,000 for Mr. Hettleman and
$150,000 for Mr. Faieta. The respective employment agreements provide that if
the employee resigns voluntarily or is discharged for cause he may not solicit,
directly or indirectly, any existing customer or employee of the Company for a
period of two years. If the Company terminates either such officer's employment
for any other reason, it may enforce these restrictions if it continues to pay
his salary.
Pursuant to the terms of an Employment Agreement dated September 26, 1994,
as amended February 7, 1996, Bruce Brandi is employed by Amertranz for a term of
three years commencing October 10, 1994. The employment agreement provides for
an annual salary of $150,000, with an increase of $7,500 on the second
anniversary date. During 1995, Mr. Brandi deferred $30,250 of his salary which
amount will be paid by February 1999. The employment agreement provides that if
Mr. Brandi is discharged for cause he may not solicit, directly or indirectly,
any existing customer or employee of the Company for a period of two years. If
the Company
31
<PAGE>
terminates Mr. Brandi's employment for any other reason, it may enforce these
restrictions if it continues to pay his salary.
Messrs. Barsa and Rosso have signed agreements which provide that upon
termination of their employment they will not solicit any employees of the
Company for a period of one year and also will not solicit any existing customer
for a period of 90 days.
Pursuant to his consulting agreement with the Company, Mr. Hoffenberg has
agreed not to engage in any business which is in competition with the Company
nor to solicit any employee or customer of the Company, for a period of one year
after the termination of the agreement.
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan ('Stock Option Plan') was adopted by
the Company's Board of Directors and approved by the stockholders in June 1996.
A total of 402,348 shares of Common Stock have been reserved for issuance under
the Stock Option Plan. Options may be granted under the Stock Option Plan to
employees, officers and directors of the Company and its subsidiaries. Prior to
the consummation of the Offering, options to purchase shares have been
granted under the Stock Option Plan.
The Stock Option Plan will be administered by the Stock Option Committee of
the Company's Board of Directors ('Options Committee'). The Options Committee
has the authority, within limitations as set forth in the Stock Option Plan, to
interpret the terms of the Stock Option Plan and establish rules and regulations
concerning the Stock Option Plan, to determine the persons to whom options may
be granted, the number of shares of Common Stock to be covered by each option,
and the 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 has been automatically
granted an option ('Senior Executive Option') on June 3, 1996 (the 'Effective
Grant Date') to purchase shares of Common Stock. The Senior Executive
Option will vest over a period of three years, enabling each such officer to
purchase shares of Common Stock at any time within six months following
the end of each of the Company's fiscal years ending June 30, 1997, 1998 and
1999, if the Company's earnings before interest, taxes, depreciation and
amortization for such fiscal year exceeds $ , and if such officer is
then employed by the Company or one of its subsidiaries. The exercise price of
the Senior Executive Options is $6.00 per share. The Stock Option Plan provides
that the provisions relating to Senior Executive Options may not be amended more
than once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act (ERISA) or the rules
and regulations promulgated thereunder.
Options granted under the Stock Option Plan may be either incentive stock
options ('ISOs') within the meaning of Section 422 of the Internal Revenue Code,
or non-qualified stock options ('NQSOs'), as the Options Committee may
determine. The exercise price of an option will be fixed by the Options
Committee on the date of grant, except that (i) the exercise price of an ISO
granted to any individual who owns (directly or by attribution) shares of Common
Stock possessing more than 10% of the total combined voting power of all classes
of outstanding stock of the Company (a '10% Owner') must be at least equal to
110% of the fair market value of the Common Stock on the date of grant but in no
event less than $6.00 per share, and (ii) the exercise price of an ISO granted
to any individual other than a 10% Owner must be at least equal to the fair
market value of the Common Stock on the date of the grant but in no event less
than $6.00 per share. Any options granted must expire within ten years from the
date of grant (five years in the case of an ISO granted to a 10% Owner). Shares
subject to options granted under the Stock Option Plan which expire, terminate,
or are canceled without having been exercised in full become available again for
option grants. No options shall be granted under the Stock Option Plan more than
ten years after the adoption of the Stock Option Plan.
Options are exercisable by the holder subject to terms fixed by the Options
Committee. No option can be exercised until at least six months after the date
of grant. However, an option will be exercisable immediately upon the happening
of any of the following (but in no event during the six-month period following
the date of grant or subsequent to the expiration of the term of an option): (i)
the holder's retirement on or after attainment of age 65; (ii) the holder's
disability or death; or (iii) the occurrence of such special circumstances or
events as the
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<PAGE>
Options Committee determines merits special consideration. Under the Stock
Option Plan, a holder generally may pay the exercise price in cash, by check, by
delivery to the Company of shares of Common Stock already owned by the holder
or, in certain circumstances, in shares issuable in connection with the options,
or by such other method as the Options Committee may permit from time to time.
Options granted under the Stock Option Plan will be non-transferable and
non-assignable; provided, however, that the estate of a deceased holder may
exercise any options held by the decedent. If an option holder terminates his
employment or consulting relationship with the Company or service as a director
of the Company while holding an unexercised option, the option will terminate
immediately.
OTHER STOCK OPTIONS
During the year ended December 31, 1995, the Company granted to Michael
Barsa options to purchase 154,477 shares of Common Stock in connection with a
loan made by Mr. Barsa to Amertranz pursuant to a convertible subordinated
promissory note (see 'Certain Transactions--Insider Loans'). In addition, during
the year ended December 31, 1995, the Company granted to Bruce Brandi options to
purchase 42,590 shares of Common Stock as compensation. See 'Option Grants in
Last Fiscal Year' and 'Option Exercises and Holdings', below.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
year ended December 31, 1995 to each of the Named Officers by Amertranz, as
exchanged in 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 $2.19 per share, as determined by the Company's Board of Directors.
(3) 14,196 of such options have vested and are currently exercisable, and an
additional 14,197 of such options vest and become exercisable on each of
October 10, 1996 and 1997.
33
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning the number and value
of unexercised options held by each of the Named Officers as of December 31,
1995, as exchanged in and as of the Combination for options to purchase shares
of Common Stock:
AGGREGATED OPTION VALUES FOR FISCAL YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARs IN-THE-MONEY OPTIONS/SARs
AT DECEMBER 31, 1995 AT DECEMBER 31, 1995($)(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'.
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<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 841,118 shares of
Common Stock and options to purchase 224,339 shares of Common Stock. Included in
this group are Martin Hoffenberg and Philip S. Rosso, Jr., who may be deemed to
be promoters of the Company, and Michael Barsa and Bruce Brandi (see 'Principal
Stockholders'). The terms of such conversions by these individuals were no more
favorable to these individuals than the terms of the conversions by all other
stockholders and convertible promissory noteholders of Amertranz (a total of 22
persons). See '--Insider Loans', below.
In the Combination, TIA and CFS contributed their freight forwarding
business to the Company. In consideration of such transfer, the Company issued
to TIA and CFS 2,100,000 shares of Common Stock 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 238,612 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
71,235 of such Amertranz shares from Mr. Rosso for an aggregate purchase price
of $11,250.
INSIDER LOANS
Between June 1995 and November 1995 Amertranz borrowed $1,379,110 in
aggregate principal amount from persons affiliated with Amertranz, including
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 296,669 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'.
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<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 and options to purchase 95,095 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.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of May 31, 1996, and as adjusted to
reflect the sale of the Securities offered hereby, by (i) each person known by
the Company to be the beneficial owner of five percent or more of the
outstanding Common Stock of the Company, (ii) each of the Company's directors,
(iii) each of the Named Officers, and (iv) all directors and executive officers
as a group. In each case, the address of the beneficial owner is the address of
the principal executive offices of the Company.
<TABLE>
<CAPTION>
PERCENTAGE
--------------------
DIRECTORS, EXECUTIVE OFFICERS AND NUMBER OF SHARES BEFORE AFTER
FIVE PERCENT STOCKHOLDERS BENEFICIALLY OWNED OFFERING OFFERING
- -------------------------------------------------------------------------- ------------------ -------- --------
<S> <C> <C> <C>
TIA, Inc.(1)(2)(3)........................................................ 2,780,370 76.7% 49.4%
Caribbean Freight Services, Inc.(1)(2)(3)................................. 420,000 11.6 7.5
Michael Barsa(2)(4)....................................................... 281,010 7.4 4.9
Philip S. Rosso, Jr.(2)................................................... 198,669 5.5 3.5
Bruce Brandi(2)(5)........................................................ 21,564 0.6 0.4
Stuart Hettleman(1)(3).................................................... 0 -- --
Richard A. Faieta(1)(3)................................................... 0 -- --
All directors and executive officers
as a group (4 persons)(1)(2)(3)(4)(5)................................... 2,477,574 66.0 43.2
</TABLE>
- ------------------
(1) 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. All of the issued and outstanding stock of TIA is owned and
controlled by Wrexham Aviation, Inc., a Delaware corporation, a majority of
which is owned by Swirnow Airways Corp., a Delaware corporation, of which
Stuart Hettleman, a Director and President of the Company, is a
non-controlling stockholder. Richard A. Swirnow is, indirectly, the
controlling stockholder of Swirnow Airways Corp. In addition, Richard A.
Faieta, a Director and Executive Vice President of the Company, is a
Director, President and non-controlling stockholder of TIA.
(2) Messrs. Barsa, Rosso and Brandi and certain other stockholders have granted
to TIA and CFS irrevocable proxies to vote 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.
(3) Messrs. Hettleman and Faieta disclaim beneficial ownership of all shares of
Common Stock owned by TIA and CFS.
(4) Includes options to purchase 154,477 shares of Common Stock which are or
become exercisable within 60 days of May 31, 1996. See 'Management--Other
Stock Options'.
(5) Includes options to purchase 14,196 shares of Common Stock which are or
become exercisable within 60 days of May 31, 1996. See 'Management--Other
Stock Options'.
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<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, 3,624,981
shares of Common Stock are outstanding. After the completion of the Offering
there will be 5,624,981 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.
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<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 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
5,624,981 shares of Common Stock, (5,924,981 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 3,624,981 shares of Common Stock
will be classified as 'restricted' securities under the Securities Act.
Restricted securities may not be sold unless they are registered under the
Securities Act or sold pursuant to an exemption from registration under the
Securities Act, including Rule 144.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned any
restricted shares for at least two years (including a stockholder who may be
deemed to be an affiliate of the Company), will be entitled to sell, within any
three-month period, that number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock or (ii) the average weekly
trading volume of the Common Stock during the four calendar weeks preceding the
date on which notice of such sale is given to the Commission, provided certain
public information, manner of sale and notice requirements are satisfied. A
stockholder who is deemed to be an affiliate of the Company, including members
of the Board of Directors and executive officers of the Company, will still need
to comply with the restrictions and requirements of Rule 144, other than the
two-year holding period requirement, in order to sell shares of Common Stock
that are not restricted securities, unless such sale is registered under the
Securities Act. A stockholder (or stockholders whose shares are aggregated) who
is deemed not to have been an affiliate of the Company at any time during the 90
days preceding a sale by such stockholder, and who has beneficially owned
restricted securities for at least three years, will be entitled to sell such
shares under Rule 144 without regard to the volume limitations described above.
Of such restricted shares, 1,131,453 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 2,493,528 restricted
shares, will not be available for sale until February 7, 1998. In addition, with
respect to such 2,493,528 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,
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<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 $ per share of Common Stock and $ per Warrant. The
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ per share of Common Stock and $ per Warrant to certain other
dealers. After the Offering, the offering price and other selling terms may be
changed by the Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriter an expense allowance on a nonaccountable
basis equal to 3% of the gross proceeds derived from the sale of the Securities
underwritten (including the sale of any Securities subject to the Underwriter's
over-allotment option), $50,000 of which has been paid to date. The Company also
has agreed to pay all expenses in connection with qualifying the Securities
offered hereby for sale under the laws of such states as the Underwriter may
designate and registering the Offering with the National Association of
Securities Dealers, Inc., including fees and expenses of counsel retained for
such purposes by the Underwriter.
The Company has granted to the Underwriter an option to purchase from the
Company at the initial offering price up to an aggregate of 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. Additionally, other
NASD members may be engaged by the Underwriter in its solicitation efforts. To
the extent not inconsistent with the guidelines of the NASD and the rules and
regulations of the Commission, the Company has agreed to pay the Underwriter for
bona fide services rendered a commission equal to 5% of the exercise price for
each Warrant exercised if the exercise was solicited by the Underwriter. In
addition to soliciting, either orally or in writing, the exercise of the
Warrants, such services may also include disseminating information, either
orally or in writing, to warrantholders about the Company or the market for the
Company's securities, and assisting in the processing of the exercise of
Warrants. No compensation will be paid to the Underwriter in connection with the
exercise of the Warrants if the market price of the underlying shares of Common
Stock is lower than the exercise price, the Warrants are held in a discretionary
account, the Warrants are exercised in an unsolicited transaction, the
warrantholder has not confirmed in writing that the Underwriter solicited such
exercise or the arrangement to pay the commission is not disclosed in the
prospectus provided to warrantholders at the time of exercise. In addition,
unless granted an exemption by the Commission from Rule 10b-6 under the Exchange
Act, while it is soliciting exercise of the Warrants, the Underwriter will be
prohibited from engaging in any market activities or solicited brokerage
activities with regard to the Company's securities unless the Underwriter has
waived its right to receive a fee for the exercise of the Warrants.
42
<PAGE>
In connection with the Offering, the Company has agreed to sell to the
Underwriter for an aggregate of $100 the Underwriter's Purchase Option,
consisting of the right to purchase up to an aggregate of 200,000 shares of
Common Stock and the right to purchase up to an aggregate of 200,000 Warrants.
The Underwriter's Purchase Option is exercisable initially at a price equal to
110% of the initial offering price of the Securities for a period of four years
commencing one year from the date hereof. The Underwriter's Purchase Option may
not be transferred, sold, assigned or hypothecated during the one-year period
following the date of this Prospectus except to officers of the Underwriter and
the selected dealers and their officers or partners. The Underwriter's Purchase
Option grants to the holders thereof certain 'piggyback' and demand rights for
periods of seven and five years, respectively, from the date of this Prospectus
with respect to the registration under the Securities Act of the securities
directly and indirectly issuable upon exercise of the Underwriter's Purchase
Option.
Prior to the Offering there has been no public market for any of the
Company's securities. Accordingly, the offering price of the Securities and the
terms of the Warrants have been arbitrarily determined by negotiation between
the Company and the Underwriter and do not necessarily bear any relation to
established valuation criteria. Factors considered in determining such prices
and terms, in addition to prevailing market conditions, include an assessment of
the prospects for the industry in which the Company competes, the Company's
management and the Company's capital structure.
Pursuant to the Underwriting Agreement, all of the officers and directors
of the Company, and TIA and CFS, the principal shareholders of the Company, have
agreed not to sell any of their shares of Common Stock for a period of 24 months
from the date of this Prospectus, subject to certain exceptions, without the
prior written consent of the Underwriter. For a period of three years following
the Offering, the Underwriter has the right, in certain circumstances, to
purchase for its account or to sell for the account of insiders of the Company
any securities sold by such insiders under Rule 144. In addition, the
Underwriting Agreement provides that, for a period of five years from the date
of this Prospectus, the Company will recommend and use its best efforts to elect
a designee of the Underwriter as a member of its Board of Directors. If the
Underwriter does not choose to designate a board member, the Company will permit
the Underwriter to send an individual to observe meetings of the Board of
Directors. Such observer will not be a member of the Board of Directors and will
not be entitled to vote on any matters before the Board. The Underwriter has not
yet selected a designee.
In February 1996, the Underwriter acted as placement agent for the February
Bridge Financing and was paid a commission of $277,500 and a nonaccountable
expense allowance of $83,250. In May 1996, the Underwriter acted as placement
agent for $500,000 of the May Bridge Financing and was paid a commission of
$50,000.
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
The Company has agreed to register for resale under the Securities Act
concurrently with the Offering, the Bridge Warrants, the Bridge Shares, the
Interim Financing Shares and the Insider Shares, and to pay all expenses in
connection therewith. An aggregate of 1,312,500 Bridge Warrants, 656,250 Bridge
Shares, 71,310 Interim Financing Shares, 74,283 Interim Financing Warrants and
403,893 Insider Shares may be offered and sold pursuant to this Prospectus by
the holders thereof. The securities offered by the Bridge Holders, the Interim
Financing Holders and the Insider Holders (collectively, the 'Selling
Securityholders') are not part of the underwritten Offering. The Company will
not receive any of the proceeds from the sale of the Bridge Warrants, the shares
of Common Stock issuable upon exercise of the Bridge Warrants, the Bridge
Shares, the Interim Financing 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
43
<PAGE>
aggregate of 741,733 shares of Common Stock and other consideration. Of such
741,733 shares, 403,893 shares are being registered under the Registration
Statement of which this Prospectus forms a part. See 'Use of Proceeds' and
'Management's Discussion and Analysis of Financial Condition on Results of
Operations-- Liquidity and Capital Resources' and 'Certain Transactions'.
The shares of Common Stock and the Warrants registered for sale on behalf
of the Selling Securityholders under the Registration Statement of which this
Prospectus forms a part may be offered and sold from time to time in
transactions (which may include block transactions) on the Nasdaq SmallCap
Market in negotiated transactions, or a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at the time of
sale, or at negotiated prices. The Selling Securityholders have advised the
Company that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
Shares. The Selling Securityholders may effect such transactions by selling
their shares directly to purchasers or to or through broker-dealers (including
GKN), which may act as agents or principals. Such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from the
Selling Securityholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). The Selling Securityholders and any broker-dealers that
act in connection with the sale of the shares might be deemed to be
'underwriters' within the meaning of Section 2(11) of the Securities Act. The
Selling Securityholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the
securities against certain liabilities, including liabilities arising under the
Securities Act. Notwithstanding that such shares are being registered, the
Selling Securityholders have agreed that none of such securities may be sold
prior to one year following the consummation of the Offering without the prior
written consent of the Underwriter.
The following table sets forth the name of each Selling Securityholder and
the number of Warrants and shares of Common Stock beneficially owned prior to
sale, including options exercisable for shares of Common Stock within 60 days of
the date of this Prospectus. Except as indicated, all of such shares and
warrants are being registered for sale under the Registration Statement of which
this Prospectus forms a part, and the Company believes that all such shares and
warrants will be owned by the respective Selling Securityholders thereof
following the consummation of the Offering and prior to resale. Except as
indicated, none of the Selling Securityholders has ever held any position or
office with the Company or had any other material relationship with the Company.
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
NUMBER NUMBER
BRIDGE HOLDERS OF SHARES OF WARRANTS
- ---------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Leon Abramson........................................................................... 3,750 7,500
John Aletti............................................................................. 3,750 7,500
ALSA, Inc............................................................................... 7,500 15,000
David Stephen Becker.................................................................... 3,750 7,500
Neil Bellett............................................................................ 3,750 7,500
Robert Bender........................................................................... 3,750 7,500
Stanley H. Blum......................................................................... 7,500 15,000
Eliot H. Brown.......................................................................... 3,750 7,500
Glenn Cadrez............................................................................ 3,750 7,500
William C. Clement...................................................................... 3,750 7,500
Kenneth D. Cole......................................................................... 7,500 15,000
Henri Cristini.......................................................................... 3,750 7,500
William J. Curtis....................................................................... 7,500 15,000
Dalewood Associates, L.P.(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
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER
BRIDGE HOLDERS OF SHARES OF WARRANTS
- ---------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Jack Gold............................................................................... 3,750 7,500
Lloyd Goldman........................................................................... 3,750 7,500
Ernest Gottdiener....................................................................... 3,750 7,500
Leigh Gove.............................................................................. 3,750 7,500
Paula Graff............................................................................. 3,750 7,500
Anthony S. Graffeo and Angelina Graffeo................................................. 3,750 7,500
Bruce Greenberg......................................................................... 15,000 30,000
Glenda Guttentag........................................................................ 3,750 7,500
Gary C. & Kathleen R. Hall JTWROS....................................................... 3,750 7,500
Robert L. Jacobs........................................................................ 3,750 7,500
Frank and Charlotte Joy JTWROS.......................................................... 3,750 7,500
Stuart Kahn & Company................................................................... 3,750 7,500
Daniel A. Kaplan........................................................................ 3,750 7,500
Delaware Charter Custodian for C. Daniel Karnes--IRA Account............................ 3,750 7,500
Rebecca Jane Karpoff and Stefan Shoup JTWROS............................................ 3,750 7,500
Richard C. Kaufman and Elaine J. Lenart JTWROS.......................................... 3,750 7,500
Donald M. Kleban........................................................................ 7,500 15,000
Michael Kremins......................................................................... 3,750 7,500
Norman Kurtz............................................................................ 3,750 7,500
David Kushner........................................................................... 3,750 7,500
Steven and Rona Landman JTWROS.......................................................... 1,875 3,750
Boris and Marina Laskin JTWROS.......................................................... 3,750 7,500
Alex Lauchlin........................................................................... 3,750 7,500
Donald R. Levin......................................................................... 3,750 7,500
William Levin........................................................................... 3,750 7,500
Paul D. Levitt & Leslie Levitt Revocable Trust.......................................... 3,750 7,500
Stephen Lewen........................................................................... 3,750 7,500
Irwin Lieber............................................................................ 3,750 7,500
Mariwood Investments.................................................................... 3,750 7,500
Joseph and Georgia Melnick JTWROS....................................................... 15,000 30,000
Eli Oxenhorn............................................................................ 3,750 7,500
Robert J. Parkes & Carol J. Parkes JTWROS............................................... 3,750 7,500
RJB Partners............................................................................ 3,750 7,500
Patricia Reyes.......................................................................... 3,750 7,500
Jonathan Robinson....................................................................... 7,500 15,000
Andrew Rosen............................................................................ 3,750 7,500
Martin Rosenman......................................................................... 3,750 7,500
William J. Rouhana, Jr. ................................................................ 3,750 7,500
The Marilyn and Barry Rubenstein Family Foundation(1)................................... 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
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER
BRIDGE HOLDERS OF SHARES OF WARRANTS
- ---------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Lance Wolfson........................................................................... 3,750 7,500
William Wolfson......................................................................... 15,000 30,000
Woodland Partners(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)........................................................................ 117,111 --
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 --
Brent Burns............................................................................. 3,617 --
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 115,000 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 65,00 shares and 130,000 Warrants owned by Dalewood
Associates, L.P., the corporate general partner of which Mr. Thalheim is a
50% stockholder and executive officer.
(3) Represents 1.2% of the outstanding shares of Common Stock following
consummation of the Offering. Does not include 7,500 shares 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.
(Footnotes continued on next page)
46
<PAGE>
(Footnotes continued from previous page)
(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'.
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, 3,357,368 shares
issued and outstanding..................................................... 33,574 33,574
Paid-in-capital............................................................... 7,612,891 7,612,891
Accumulated deficit........................................................... (10,000,000) (10,743,831)
Less: Treasury stock, 106,304 shares held at cost............................. -- (11,250)
---------------- --------------
Total stockholders' equity (deficit)....................................... (2,353,535) (3,108,616)
---------------- --------------
Total liabilities and stockholders' equity (deficit)....................... $ 21,114,197 $ 24,111,195
---------------- --------------
---------------- --------------
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-3
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
7 WEEKS ENDED
MARCH 31,
1996
-------------
<S> <C>
OPERATING REVENUE....................................................................... $10,105,377
DIRECT COSTS............................................................................ 7,350,715
-------------
Gross Profit..................................................................... 2,754,662
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................................ 3,102,638
-------------
Operating (loss)................................................................. (347,976)
OTHER INCOME (EXPENSE):
Other income (expense), net........................................................... 976
Interest expense...................................................................... (396,831)
-------------
(Loss) before (provision for) income taxes....................................... (743,831)
(PROVISION FOR) INCOME TAXES............................................................ --
-------------
Net (loss)....................................................................... $ (743,831)
-------------
-------------
Pro forma net (loss) per share................................................... $ (.13)
-------------
-------------
Pro forma weighted average number of common shares............................... 5,298,567
-------------
-------------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-4
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE SEVEN WEEKS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------- PAID-IN ------------------ ACCUMULATED
SHARES AMOUNT CAPITAL SHARES AMOUNT (DEFICIT) TOTAL
--------- ------- ---------- ------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 8, 1996...... 3,357,368 $33,574 $7,612,891 -- $ -- $(10,000,000) $(2,353,535)
Purchase of treasury
stock..................... -- -- -- 106,304 (11,250) -- (11,250)
Net loss..................... -- -- -- -- -- (743,831) (743,831)
--------- ------- ---------- ------- -------- ------------ -----------
BALANCE, March 31,
1996......................... 3,357,368 $33,574 $7,612,891 106,304 $(11,250) $(10,743,831) $(3,108,616)
--------- ------- ---------- ------- -------- ------------ -----------
--------- ------- ---------- ------- -------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-5
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SEVEN WEEKS ENDED MARCH 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................................... $ (743,831)
Bad debt expense....................................................................... (181,122)
Depreciation and amortization.......................................................... 262,292
Changes in operating assets and liabilities
Increase in accounts receivable..................................................... (4,549,557)
Increase in prepaid expenses and other current assets............................... (270,712)
Increase in taxes receivable........................................................ (21,472)
Increase in due from affiliates..................................................... (2,701)
Increase in other assets............................................................ (85,831)
Increase in accounts payable and accrued expenses................................... 441,259
-----------
Net cash used in operating activities............................................. (5,151,675)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment..................................................... (89,006)
-----------
Net cash used by investing activities............................................. (89,006)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable to affiliate................................................ 3,491,428
Proceeds from short-term debt.......................................................... 3,339,000
Payment of short-term debt............................................................. (3,516,394)
Payment of lease obligations........................................................... (3,565)
Purchase of treasury stock............................................................. (11,250)
-----------
Net cash provided by financing activities......................................... 3,299,219
-----------
Net increase in cash and cash equivalents......................................... (1,941,462)
CASH AND CASH EQUIVALENTS, beginning of the year......................................... 2,420,926
-----------
CASH AND CASH EQUIVALENTS, end of the year............................................... $ 479,464
-----------
-----------
CASH PAYMENTS FOR:
Interest............................................................................... $ 242,543
Income taxes........................................................................... --
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-6
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET
FEBRUARY 7, 1996
1. COMPANY BACKGROUND
In January 1996, Amertranz Worldwide Holding Corp. ('Holding' or the
'Company') was incorporated in the state of Delaware. Effective February 7,
1996, Holding concluded an Asset Exchange Agreement with TIA, Inc. ('TIA'),
Caribbean Freight 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, primarily by comparing current and
projected annual cash flows with the related annual amortization.
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 Company has
signed a letter of intent with an underwriter with respect to the IPO to be
consummated in calendar
F-8
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
3. GOING CONCERN--(CONTINUED)
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 841,118 shares of
Holding's common stock and options to purchase 230,339 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>
Holding
-- Promissory note to TIA and $10,000,000
CFS(a)...........................
-- Bridge notes(b).................... 2,775,000
Amertranz
-- Asset-based financing(c)........... 1,697,862
-- Notes payable to TIA(d)............ 800,000
-- Interim financing(e)............... 350,000
-----------
Total debt.................................................. 15,622,862
Less: Current portion....................................... (3,282,798)
-----------
Long-term debt.............................................. $12,340,064
-----------
-----------
</TABLE>
Holding
Notes Payable
(a) On February 7, 1996, as part of the Agreement, Holding issued to TIA
and CFS a $10,000,000 promissory note which bears interest at the rate of 8.0%
per annum. The note is payable in five consecutive monthly payments of principal
and interest in the amount of $80,000 each, commencing March 1, 1996, and
thereafter monthly payments of principal and interest in the amount of $166,667
each until the note is paid in full. Upon the conclusion of the IPO by Holding,
$2,000,000 will be due and payable on the note. The Company
F-9
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
6. DEBT--(CONTINUED)
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 416,250 shares of common stock of Holding, as well as
832,500 warrants to purchase shares of common stock of Holding for five years at
$5.00 per share. These warrants convert into warrants upon the completion of the
IPO by Holding and will be exercisable at the IPO price. The notes accrue
interest at 10% per annum until April 30, 1996 and thereafter at 15% per annum.
The notes are secured by a junior lien on all of the assets of the Company. The
Company has recorded 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.
(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
F-10
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
6. DEBT--(CONTINUED)
(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
$1.17, 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
832,500 shares of common stock at an exercise price equal to the exercise price
of the Warrants issued in connection with the Company's February bridge
financing.
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 266,225
shares of Common Stock and options to purchase an aggregate of 382,747 shares of
Common Stock, and an additional 150,000 shares of Common Stock in the aggregate
were issued to TIA and CFS. All share amounts have been adjusted to give effect
to this 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
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.
F-11
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
7. STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
The Preferred Stock will pay cumulative cash dividends at an annual rate of
$1.00 per share. The Company is prohibited from paying any dividends on common
stock unless all required preferred dividends have been paid. Each share of
Preferred Stock may be converted at the option of the holder into common stock
at a conversion price of the lower of (i) the IPO price per share of common
stock or (ii) 80% of the average of the closing price per share of common stock
on the day prior to the conversion date. Preferred Stock holders are entitled to
a liquidation preference of $10.00 per share plus all accrued and unpaid
dividends.
Additional Paid-in-Capital
As of February 7, 1996, the Company had additional paid-in capital ('APIC')
which was made up of the following:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
----------------
<S> <C> <C>
Investment in Amertranz Worldwide........ $4,414,767 492,624
Assigned notes........................... 1,379,110 280,888
Deferred financing costs................. 1,769,063 483,856
Investment in CAS........................ 83,525 2,100,000
---------- ----------------
7,646,465 3,357,368
Less: O/S Common Stock at par............ (33,574)
----------
Total APIC............................... $7,612,891
</TABLE>
Accumulated Deficit
As of February 7, 1996, the accumulated deficit of $10,000,000 is comprised
of the $10,000,000 promissory note discussed in Note 6(a).
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.
F-12
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
9. INCOME TAXES
At February 7, 1996, the Company had a tax net operating loss carryforward
of approximately $7,757,000, available within statutory limits, to offset future
regular federal taxable income. In accordance with certain provisions of the Tax
Reform Act of 1986, a change in ownership of a corporation of greater than 50
percentage points within a three-year period places an annual limitation on the
corporation's ability to utilize its existing net operating loss carryforwards.
Such a change in ownership was deemed to have occurred in connection with the
Asset Exchange Agreement in which Amertranz became part of Holding, at which
time the Company's net operating loss carryforwards amounted to approximately
$7,757,000. The annual limitation of the utilization of such tax attributes is
approximately $206,000. To the extent the annual limitation is not utilized, it
may be carried forward for utilization in future years. This limitation could
affect the Company's future provisions for or payment of federal income tax
should the Company's operations produce increased amounts of taxable income in
the future.
Deferred tax benefits at February 7, 1996, which are fully offset by a
valuation allowance, primarily represent the estimated future tax effects of
federal net operating losses aggregating approximately $917,583.
10. RELATED PARTY TRANSACTIONS
Under the terms of a cargo aircraft charter agreement with Tradewinds
Airlines, Inc. ('Tradewinds Air'), a subsidiary of Tradewinds Acquisition
Corporation, of which TIA owns approximately 30% of the outstanding common
stock, CAS has exclusive rights until March 1, 1998 to the use of a leased
L-1011 freighter aircraft. While CAS is guaranteed the use of the L-1011
aircraft as needed, it pays only for actual use of the aircraft at market rates.
At February 7, 1996, Amertranz owes approximately $124,000 to TIA for air
freight forwarding services.
11. SUBSEQUENT EVENT
On May 10, 1996, Holding consummated a private placement with a group of
investors whereby Holding borrowed $1,200,000 and issued promissory notes. The
notes are due at the earlier of (i) the closing of the IPO by Holding or (ii)
February 7, 1998 or (iii) the sale or merger of Holding. The investors also
received 240,000 shares of common stock of Holding, as well as 480,000 warrants
to purchase shares of common stock of Holding for five years at $5.00 per share.
These warrants convert into warrants upon the completion of the IPO by Holding
and will be exercisable at the IPO price. The notes accrue interest at 15% per
annum. The notes are secured by a lien on all of the assets of the Company. The
Company has recorded 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)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</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 year......... 194,814 353,872 2,141,047 2,463,336
--------- ---------- ---------- ----------------
Cash and cash equivalents at end of year............... 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.............................. -- -- --
--------- --------- ---------
$ -- $ -- $ --
--------- --------- ---------
--------- --------- ---------
<CAPTION>
1994
-----------------------------------
CURRENT DEFERRED TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Federal............................ $ 79,494 $ -- $ 79,494
State.............................. 28,707 -- 28,707
--------- --------- ---------
$ 108,201 $ -- $ 108,201
--------- --------- ---------
--------- --------- ---------
<CAPTION>
1995
-----------------------------------
CURRENT DEFERRED TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Federal............................ $ -- $ -- $ --
State.............................. -- -- --
--------- --------- ---------
$ -- $ -- $ --
--------- --------- ---------
--------- --------- ---------
<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.
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 as of July 1, 1994.
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 48,642 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...... 4,836,067
--------------
--------------
</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, 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........................... $ 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) 29,728(b) (512,697)
OTHER INCOME.................................. (6,106) 15,908 -- 9,802
------------------- --------------- ----------- --------------
NET INCOME (loss)............................. $ 605,337 $(2,287,771) $ (20,628) $ (1,703,062)
------------------- --------------- ----------- --------------
------------------- --------------- ----------- --------------
NET LOSS PER SHARE............................ $ (.31)
--------------
--------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES...... 5,298,567
--------------
--------------
</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.
[AmerTranz Worldwide logo]
1,750,000 SHARES OF COMMON STOCK
AND
1,750,000 REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
---------------------
PROSPECTUS
---------------------
[GKN Securities logo]
, 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 421,572 shares of Common Stock, which were
subsequently adjusted as of February 7, 1996 to 354,913 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 , 1996 between Amertranz Worldwide Holding Corp. and Stuart
Hettleman*
10.14 Employment Agreement dated , 1996 between Amertranz Worldwide Holding Corp. and Richard A.
Faieta*
10.15 Cargo Aircraft Charter Agreement dated February 28, 1994 between TIA, Inc. and Florida West Airlines,
Inc., as amended and assigned November 29, 1995*
10.16 Lease Agreement dated March 31, 1994 between The Equitable Life Assurance Society of the U.S. and
Integrity Logistics, Inc. for the premises at 2001 Marcus Avenue, Lake Success, New York*
10.17 Lease Agreement dated August 7, 1990 between S Partners and Caribbean Freight Systems, Inc. for the
premises at 7001 Cessna Drive, Greensboro, North Carolina, as amended and extended April 9, 1994*
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 18th 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 18, 1996
- ------------------------------------------ Chief Financial Officer and Principal Accounting
STUART HETTLEMAN Officer
* Director and Executive Vice President June 18, 1996
- ------------------------------------------
RICHARD FAIETA
* Director and Vice President June 18, 1996
- ------------------------------------------
MICHAEL BARSA
*By: /s/ STUART HETTLEMAN June 18, 1996
- ------------------------------------------
STUART HETTLEMAN
Attorney-in-fact
</TABLE>
II-6
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned, being of legal age, in order to form a
corporation under and pursuant to the laws of the State of Delaware, does hereby
set forth as follows:
FIRST: The name of the corporation is
AMERTRANZ WORLDWIDE HOLDING CORP.
SECOND: The address of the initial registered and principal
office of this corporation in this state is c/o United Corporate Services, Inc.,
15 East North Street, in the city of Dover, County of Kent, State of Delaware
19901 and the name of the registered agent at said address is United Corporate
Services, Inc.
THIRD: The purpose of the corporation is to engage in
any lawful act or activity for which corporations may be organized
under the corporation laws of the State of Delaware.
FOURTH: The corporation shall be authorized to issue the
following shares:
Class Number of Shares Par Value
COMMON 15,000,000 $ .01
FIFTH: The name and address of the incorporator are as
follows:
NAME ADDRESS
Ray A. Barr 10 Bank Street
White Plains, New York 10606
SIXTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of the
corporation, and for further definition, limitation and regulation of the powers
of the corporation and of its directors and stockholders:
(1) The number of directors of the corporation shall be such
as from time to time shall be fixed by, or in the manner provided in the
by-laws. Election of directors need not be by ballot unless the By-Laws so
provide.
(2) The Board of Directors shall have power without the
assent or vote of the stockholders:
(a) To make, alter, amend, change, add to or repeal
the By-Laws of the corporation; to fix and vary the amount to be
<PAGE>
reserved for any proper purpose; to authorize and cause to be executed mortgages
and liens upon all or any part of the property of the corporation; to determine
the use and disposition of any surplus or net profits; and to fix the times for
the declaration and payment of dividends.
(b) To determine from time to time whether, and to
what times and places, and under what conditions the accounts and books of the
corporation (other than the stock ledger) or any of them, shall be open to the
inspection of the stockholders.
(3) The directors in their discretion may submit any contract
or act for approval or ratification at any annual meeting of the stockholders,
at any meeting of the stockholders called for the purpose of considering any
such act or contract, or through a written consent in lieu of a meeting in
accordance with the requirements of the General Corporation Law of Delaware as
amended from time to time, and any contract or act that shall be so approved or
be 50 ratified by the vote of the holders of a majority of the stock of the
corporation which is represented in person or by proxy at such meeting, (or by
written consent whether received directly or through a proxy) and entitled to
vote thereon (provided that a lawful quorum of stockholders be there represented
in person or by proxy) shall be as valid and as binding upon the corporation and
upon all the stockholders as though it had been approved, ratified, or consented
to by every stockholder of the corporation, whether or not the contract or act
would otherwise be open to legal attack because of directors' interest, or for
any other reason.
(4) In addition to the powers and authorities hereinbefore or
by statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the corporation; subject, nevertheless, to the provisions of the
statutes of Delaware, of this certificate, and to any by-laws from time to time
made by the stockholders; provided, however, that no by-laws so made shall
invalidate any prior act of the directors which would have been valid if such
by-law had not been made.
SEVENTH: No director shall be liable to the corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except with respect to (1) a breach of the director's duty of loyalty
to the corporation or its stockholders, (2) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as
- 2 -
<PAGE>
amended from time to time. The corporation shall indemnify to the fullest extent
permitted by Sections 102(b)(7) and 145 of the Delaware General Corporation Law,
as amended from time to time, each person that such Sections grant the
corporation the power to indemnify.
EIGHTH: Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them and/or between
this corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware, may, on the application in
a summary way of this corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for this corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case way be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
NINTH: The corporation reserves the right to amend, alter,
change or repeal any provision contained ln this certificate of incorporation in
the manner now or hereafter prescribed by law, and all rights and powers
conferred herein on stockholders, directors and officers are subject to this
reserved power.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this twelfth day of January, 1996.
__________________________
S/RAY A. BARR
Ray A. Barr, Incorporator
C64892.198
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<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned, being the President of Amertranz Worldwide
Holding Corp., hereby certifies that:
FIRST: The name of the Corporation is Amertranz Worldwide Holding Corp.
SECOND: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on January 16, 1996.
THIRD: ARTICLE FOURTH of said Certificate of Incorporation is hereby
amended in its entirety to read as follows:
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 17,500,000 shares
consisting of (1) 2,500,000 shares of preferred stock, $10.00
par value (the "Preferred Stock"); and (2) 15,000,000 shares
of common stock, $.01 par value (the "Common Stock").
The Board of Directors shall have authority to establish the
classes, designations, powers, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations and restrictions
thereof in respect of the Preferred Stock and the Common Stock.
FOURTH: The foregoing amendment has been duly advised and
adopted by the Board of Directors of the Corporation and approved by the
stockholders of the Corporation in accordance with the applicable provisions of
Section 242 of the General Corporation Law of the State of Delaware by written
consent of the stockholders of the Corporation given in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware. Prompt written notice of adoption of the foregoing amendment has been
given to all stockholders who have not consented to such adoption in writing in
accordance with the provisions of Section 228(d) of the General Corporation Law
of Delaware.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on this 13th
day of June, 1996.
ATTEST:
_________________________ ___________/S/______________
Stuart Hettleman
President
_________________________ __________/S/_______________
Michael Barsa
Secretary
<PAGE>
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
1996 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the 1996 Stock Option Plan of Amertranz Worldwide Holding
Corp. (the "Plan") is to promote the financial interests of Amertranz Worldwide
Holding Corp. (the "Company"), including its growth and performance, by
encouraging directors, officers and employees of the Company and its
subsidiaries to acquire an ownership position in the Company, enhancing the
ability of the Company and its subsidiaries to attract and retain employees of
outstanding ability, and providing employees with a way to acquire or increase
their proprietary interest in the Company's success.
2. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 13 hereof, up to 402,348 of
shares of common stock, par value $.01 per share, of the Company (the "Shares")
shall be available for the grant of options under the Plan. The Shares issued
under the Plan may be authorized and unissued Shares or treasury Shares, as the
Company may from time to time determine. The Company shall reserve and keep
available such number of Shares as will satisfy the requirements of all
outstanding options granted under the Plan.
Shares subject to an option that expires unexercised, that is forfeited,
terminated or canceled, in whole or in part, or is paid in cash in lieu of
Shares, shall thereafter again be available for grant under the Plan, provided
that if such option was granted to an officer or director subject to the
provisions of Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") who received benefits of ownership of such Shares for purposes
of Section 16(b) of the Exchange Act, such Shares shall not thereafter be
available for grant under the Plan to officers or directors except in accordance
with the provisions of Section 16(b) of the Exchange Act.
3. ADMINISTRATION.
The Plan shall be administered by the Stock Option Committee (the
"Committee") of the Board of Directors of the Company. A majority of the
Committee shall constitute a quorum, and the acts of a majority shall be the
acts of the Committee.
Subject to the provisions of the Plan, the Committee shall (i) from time to
time select directors, officers and employees of the Company and its
subsidiaries who will participate in the Plan (the "Participants"), determine
the type of options to be granted to Participants, determine the Shares subject
to option, and (ii) have the authority to interpret the Plan, to establish,
amend and rescind any rules and regulations relating to the Plan, determine the
terms and provisions of any agreements entered into hereunder, and make all
other determinations necessary or advisable for the administration of the Plan.
The Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any option in the manner
<PAGE>
and to the extent it shall deem desirable to carry it into effect. The
determinations of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive.
4. ELIGIBILITY.
All directors, officers and employees of the Company and its subsidiaries,
as determined by the Committee, are eligible to be Participants in the Plan,
provided, however, that the President and Executive Vice President of the
Company are eligible to participate in the Plan only to the extent set forth in
Section 6 hereof.
5. OPTIONS; EXERCISE PRICE.
Options under the Plan may consist of either incentive stock options within
the meaning of Section 422 of the Internal Revenue Code or non-qualified stock
options.
The Committee shall establish the option price at the time each stock
option is granted; 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
_______ Shares. The Senior Executive Option will vest over a period of three
years, enabling each such officer to purchase _______ Shares at any time within
six months following the end of each of the Company's fiscal years ending June
30, 1997, 1998 and 1999, if the Company's earnings before interest, taxes,
depreciation and amortization for such fiscal year exceeds $_______, and if such
officer is then employed by the Company or one of its subsidiaries. The exercise
price of the Senior Executive Options is $6.00 per share.
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.
- 2 -
<PAGE>
The provisions of this Section 6 may not be amended or modified more than
once every six months except as may be required to comply with the provisions of
the Internal Revenue Code of 1986, as amended, or the Employee Retirement Income
Security Act of 1974, as amended.
7. EXERCISE OF OPTIONS.
Except as herein provided, options shall be exercisable for such period as
specified by the Committee. In no event may options be exercisable until at
least six months following the date of grant. In no event may options be
exercisable more than 10 years after their date of grant or, in the case of an
incentive stock option granted to an optionee who, at the time the option is
granted, owns stock possessing more than 10% of the total voting power of stock
of the Company, more than five years after the date of grant.
The option price of each Share as to which a stock option is exercised
shall be paid in full at the time of such exercise. Such payment shall be made
in cash, by tender of Shares owned by the Participant valued at fair market
value as of the date of exercise and in such other consideration as the
Committee deems appropriate, or by a combination of cash, Shares and such other
consideration.
To exercise the option, the optionee or his successor shall give written
notice to the Company's Chief Financial Officer at the Company's principal
office, setting forth the number of Shares being purchased and the date of
exercise of the option, which date shall be at least five days after the giving
of such notice unless otherwise agreed to by the Committee and the optionee.
Such notice shall be accompanied by full payment of the option exercise price
for Shares being purchased and a written statement that the Shares are purchased
for investment and not with a view toward distribution. However, this statement
shall not be required in the event the Shares subject to the option are
registered with the Securities and Exchange Commission. If the option is
exercised by the successor of the optionee, following his death, proof shall be
submitted, satisfactory to the Committee, of the right of the successor to
exercise the option.
Shares issued pursuant to this Plan which have not been registered with the
Securities and Exchange Commission shall be appropriately legended.
No Shares shall be issued pursuant to the Plan until full payment for such
Shares has been made. The optionee shall have no rights as a shareholder with
respect to optioned Shares until the date of exercise of the option with respect
to such Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to such date of exercise,
except as otherwise provided herein.
- 3 -
<PAGE>
The Company shall not be required to transfer or deliver any certificates
for Shares purchased upon any exercise of any option until after compliance with
all then applicable requirements of law. Any fraction of a Share required to
satisfy such obligation shall be disregarded and the amount due shall instead be
paid in cash to the Participant.
8. OPTION AGREEMENTS.
The granting of an option (except Senior Executive Options as described in
Section 6 hereof) shall take place only when a written Option Agreement
substantially in the form of Exhibit A hereto is executed by the Company and the
optionee and delivered to the optionee. All options under this Plan (except
Senior Executive Options) shall be evidenced by such written Option Agreement
between the Company and the optionee. Such Option Agreement shall contain such
further terms and conditions, not inconsistent with the foregoing, related to
the grant or the time or times of exercise of options as the Committee shall
prescribe.
9. WITHHOLDING.
The Company shall have the right to deduct from any payment to be made
pursuant to the Plan, or to require prior to the issuance or delivery of any
Shares or the payment of cash under the Plan, any taxes required by law to be
withheld therefrom. The Committee, in its sole discretion, may permit a
Participant to elect to satisfy such withholding obligation by having the
Company retain the number of Shares the fair market value of which equals the
amount required to be withheld.
10. NONTRANSFERABILITY.
No option shall be assignable or transferable, and no right or interest of
any Participant shall be subject to any lien, obligation or liability of the
Participant, except by will or the laws of descent and distribution.
11. NO RIGHT TO EMPLOYMENT.
No person shall have any claim or right to be granted an option, and the
grant of an option shall not be construed as giving a Participant the right to
be retained in the employ or as a director of the Company or its subsidiaries.
Further, the Company and its subsidiaries expressly reserve the right at any
time to dismiss a Participant free from any liability, or any claim under the
Plan, except as provided herein or in any agreement entered into hereunder.
- 4 -
<PAGE>
12. TERMINATION OF RIGHTS; DEATH.
All unexercised or unexpired options granted or awarded under this Plan
will terminate, be forfeited and will lapse immediately if such Participant's
employment or relationship with the Company and its subsidiaries is terminated
for any reason, unless the Committee permits the exercise of such options for a
period not to exceed 90 days after the date of such termination. If a
Participant's employment or relationship with the Company is terminated by
reason of his death, such Participant's personal representatives, estate or
heirs (as the case may be) may exercise, subject to any restrictions imposed by
the Committee at the time of the grant, any option which was exercisable by the
Participant as of the date of his death for a period of 180 days after the date
of the Participant's death.
13. REGISTRATION.
If the Company shall be advised by its counsel that any Shares deliverable
upon any exercise of an option are required to be registered under the
Securities Act of 1933, or that the consent of any other authority is required
for the issuance of such Shares, the Company may effect registration or obtain
such consent, and delivery of Shares by the Company may be deferred until
registration is effected or such consent is obtained.
14. ADJUSTMENT OF AND CHANGES IN SHARES.
In the event of any change in the outstanding Shares by reason of any Share
dividend or split, recapitalization, merger, consolidation, spinoff, combination
or exchange of Shares or other corporate change, or any distributions to
shareholders other than regular cash dividends, the Committee may make such
substitution or adjustment, if any, as it deems to be equitable, as to the
exercise price, number or kind of Shares or other securities issued or reserved
for issuance pursuant to the Plan and to outstanding options.
15. AMENDMENT.
The Board of Directors may amend or terminate the Plan or any portion
thereof at any time, provided that no amendment shall be made without
shareholder approval if such approval is necessary in order for the Plan to
continue to comply with Rule 16b-3 under the Exchange Act.
16. COMPLIANCE WITH EXCHANGE ACT.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by
- 5 -
<PAGE>
the Committee fails to comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
17. EFFECTIVE DATE.
The Plan has been adopted by the Board of Directors 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
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<PAGE>
EXHIBIT A
AMERTRANZ WORLDWIDE HOLDING CORP.
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made this ________________, 199__, by and
between AMERTRANZ WORLDWIDE HOLDING CORP., a Delaware corporation (the
"Company"), and _____________________________ (the "Optionee").
WHEREAS, the Board of Directors of the Company considers it desirable and
in the Company's interest that the Optionee be given an opportunity to purchase
its shares of common stock, par value $.01 per share (the "Shares"), pursuant to
the terms and conditions of the Company's 1996 Stock Option Plan (the "Plan") to
provide an incentive for the Optionee and to promote the interests of the
Company.
NOW, THEREFORE, it is agreed as follows:
1. Incorporation of the Terms of the Plan. This Stock Option Agreement
is subject to all of the terms and conditions of the Plan, and the terms of the
Plan are hereby incorporated herein by reference and made a part hereof.
2. Grant of Option. The Company hereby grants to Optionee an option to
purchase from the Company ________ Shares ("Option Shares") at the exercise
price per Share set forth below. Subject to earlier expiration or termination of
the option granted hereunder, this option shall expire on the 10th anniversary
of the date hereof.
3. Period of Exercise of Option. The Optionee shall be entitled to exercise
the option granted hereunder to purchase Option Shares as follows:
Exercise Date No. of Shares Exercise Price Per Share
in each case, together with the number of Option Shares which Optionee was
theretofore entitled to purchase.
4. Additional Exercise Periods. In the event of the death of the Optionee,
or if the Optionee's employment or relationship with the Company or its
subsidiaries is terminated for any reason, the option granted hereunder may be
exercised as set forth in the Plan.
5. Method of Exercise. In order to exercise the options granted hereunder,
Optionee must give written notice to the Chief Financial Officer of the Company
at the Company's principal place of business, substantially in the form of
Exhibit A hereto, accompanied by full
<PAGE>
payment of the exercise price for the Option Shares being purchased, in
accordance with the terms and provisions of the Plan.
6. Manner of Payment. An Optionee may pay the option price for Shares
purchased upon exercise of the option as set forth in the Plan.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed under seal, intending this to be a sealed instrument, as of the date
first above written.
ATTEST: AMERTRANZ WORLDWIDE HOLDING CORP.
______________________________ By:_____________________________(SEAL)
WITNESS: OPTIONEE:
______________________________ ________________________________(SEAL)
C63580.198
- 2 -
<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 -
<PAGE>
PURCHASE AND SALE AGREEMENT
Amertranz Worldwide, Inc., a Delaware corporation (the "Company"),
desires to obtain financing by selling its accounts receivable to Fidelity
Funding of California, Inc., a California corporation ("Fidelity"), and Fidelity
desires to purchase such accounts receivable on the terms and conditions set
forth in this Purchase and Sale Agreement (this "Agreement"). In consideration
of the mutual covenants and agreements contained herein, the Company and
Fidelity hereby agree as follows:
Section 1. Definitions and Construction.
1.1. Definitions. Among the terms used in this Agreement are
the following. Terms defined in the UCC which are used and not
otherwise defined herein shall have the meanings given them in the
UCC.
"Account" means the right to payment for goods sold or leased or for
services rendered which is not evidenced by a promissory note or chattel paper,
together with anything else defined as an "account" in the UCC.
"Account Debtor" means the person or entity which is obligated
on an Account.
"Adjustments" has the meaning given it in Section 4.4.
"Advance Rate" has the meaning given it in Section 2.2.
"Advances" has the meaning given it in Section 3.2.
"Affiliated Companies" means collectively, the Company and
Amerford Domestic, Inc.
"Affiliated Company Agreements" means collectively the Purchase and
Sale Agreements of even date herewith between each of the Affiliated Companies
and Fidelity.
"Commitment" means the amount of $3,125,000 for the Affiliated
Companies in the aggregate.
"Dispute" has the meaning given it in Section 6.4.
"Eligible Accounts" means Accounts (i) which have been outstanding for
not more than ninety (90) days from invoice date or as otherwise approved by
Fidelity, (ii) as to which Fidelity has a valid and perfected, first priority
security interest, (iii) to the extent that the aggregate outstanding amount of
Accounts owed by any single Account Debtor does not exceed twenty percent (20%)
of the outstanding aggregate amount of Accounts of all Account Debtors, (iv)
which are owed by Account Debtors that are not affiliates of the Company or
officers or employees of the Company or any affiliate of the Company, (v) which
do not arise out of a
87985 04465 CORP 77059 1
<PAGE>
sale made or services performed outside of the United States and which are not
owed by an Account Debtor located outside the United States, (vi) which are owed
by Account Debtors which are not creditors or suppliers of the Company and which
have not asserted any defense or contested any liability with respect to such
Accounts, and (vii) which have been approved by Fidelity, in its sole and
absolute discretion, for inclusion in the Eligibility Base.
"Eligibility Base" has the meaning given it in Section 2.2.
"Event of Default" has the meaning given it in Section 11.
"Interest Rate" has the meaning given it in Section 3.3.
"Late Payment Rate" means the per annum rate of interest equal to four
percent (4%) above the Interest Rate but in no event to exceed the maximum rate
permitted by applicable law.
"Merchandise" means goods which are sold or leased or services which
are rendered that give rise to an Account.
"Prime Rate" means the rate as published from time to time by The Wall
Street Journal as the base rate for corporate loans at large commercial banks
(if more than one such rate is published, the Prime Rate will be the higher or
highest of the rates so published). If such rate is no longer published by The
Wall Street Journal, then Fidelity shall, in its sole discretion select the base
or prime rate for corporate loans at a large commercial bank as the "Prime
Rate."
"Related Rights" means, with respect to any Account, all guarantees and
security therefor and all of the Company's right, title and interest in the
Merchandise represented by such Account, including all of the Company's rights
to returned goods and rights of stoppage in transit, replevin, and reclamation
as an unpaid vendor.
"Reserve Account" has the meaning set forth in Section 5.
"Term" has the meaning given it in Section 12.4.
"Transaction Documents" means this Agreement and the documents and
instruments executed and delivered in connection therewith.
"UCC" means the Uniform Commercial Code as in effect in the
state, the law of which is applicable.
1.2. Construction. The terms defined in this Agreement which
refer to a particular agreement, instrument or document also refer
to and include all renewals, extensions and modifications of such
agreement, instrument or document. All addendums, exhibits and
schedules attached to this Agreement are a part hereof for all
87985 04465 CORP 77059 2
<PAGE>
purposes. Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
1.3. Calculations and Determinations. All interest accruing hereunder
shall be calculated on the basis of actual days elapsed (including the first day
but excluding the last) plus three business days and a year of 360 days. Unless
otherwise expressly provided herein or unless Fidelity otherwise consents, all
financial statements and reports furnished to Fidelity hereunder shall be
prepared and all financial computations and determinations pursuant hereto shall
be made in accordance with generally accepted accounting principles,
consistently applied.
Section 2. Eligible Accounts.
2.1. The Company hereby offers to sell, assign, transfer, convey and
deliver with recourse to Fidelity, as absolute owner, all of the right, title
and interest of the Company in and to all of the Company's Eligible Accounts
2.2. Subject to the terms of this Agreement, Fidelity agrees to
purchase all Eligible Accounts together with the Related Rights but in no event
shall Fidelity be obligated to purchase Eligible Accounts if after such purchase
is made, the aggregate face amount of all outstanding Eligible Accounts which
have been purchased by Fidelity from the Affiliated Companies exceeds the lesser
of (i) the Commitment or (ii) seventy percent (70%) (the "Advance Rate") of the
net amount of Eligible Accounts less any reserves created from time to time by
Fidelity in its sole discretion, reasonably exercised (hereinafter, the
"Eligibility Base"). At any time after the first ninety days of the Term, in the
event the Affiliated Companies have implemented new internal accounting systems
and such implementation has been verified by an audit conducted by Fidelity,
Fidelity may in its sole discretion elect to increase the Advance Rate to eighty
percent (80%). The amount of the Company's Eligible Accounts which constitute
the first purchase during the Term or any extended term of this Agreement or
which are purchased after the first month of the Term or any such extended term
(in each case less the amounts retained by Fidelity for the payment of fees and
to create the Reserve Account), must equal or exceed $5,000.
2.3. Fidelity shall not be obligated to purchase any Account hereunder
until it shall have received the following documents, duly executed in form and
substance satisfactory to Fidelity and its counsel: (i) a guaranty from each of
Martin Hoffenberg, Philip S. Rosso, and S. Gary Friedman, (ii) a guaranty of
each of Amerford DeCaribe, Inc. Integrity Logistics, Inc. and Amerford
Domestics, Inc., (iii) a release agreement along with related UCC termination
statements from Ambassador Factors, and (iv) intercreditor agreements with any
other person who holds a security interest in any of the Collateral. The Company
shall allow Fidelity, during normal business hours, access to all of its
locations and all of its books and records. In addition, the Company shall allow
Fidelity to consult with its officers and
87985 04465 CORP 77059 3
<PAGE>
employees concerning the Company's business and operations. Furthermore,
Fidelity shall not be obligated to purchase any Account if (i) Fidelity deems
the Account unacceptable for any reason, (ii) an Event of Default, or an event
with which the passage of time or the giving of notice shall become an Event of
Default, has occurred hereunder, or (iii) such purchase shall be prohibited by
any law or any regulation or any order of any court or governmental agency or
authority.
2.4. The Company may, from time to time, submit names of Account
Debtors to Fidelity for approval prior to submissions of an Account to Fidelity.
A credit investigation by Fidelity shall not be deemed an acceptance of an
Account and Fidelity shall be free to reject any Account submitted by the
Company if Fidelity deems the Account unacceptable, even though Fidelity may
have previously approved such Account Debtor. Except as Fidelity may otherwise
agree in writing, the payment terms of all Accounts submitted to Fidelity shall
not exceed "net 30 days" unless otherwise agreed to in writing by Fidelity.
2.5. Accounts shall be submitted to Fidelity on an Eligibility
Certificate. The Eligibility Certificate shall be in the form attached hereto as
Exhibit "A", and shall be signed by a person acting or purporting to act on
behalf of the Company. There shall be no more than one (1) Eligibility
Certificate submitted each week unless Fidelity otherwise agrees in writing. At
the time the Eligibility Certificate is presented, the Company shall also
deliver to Fidelity an updated aging accompanied by sales journal, cash receipts
journal and credit flash adjustment register generated since the date of the
prior funding. All invoices shall plainly state on their face that amounts
payable thereunder are payable only to the remittance address set forth below.
Copies of invoices shall be provided to Fidelity upon request. Payment by
Fidelity of the sum specified in Section 3.1 below with respect to an Account
shall constitute acceptance of such Account by Fidelity at which time the
Account shall become an Eligible Account.
2.6. Any and all Eligible Accounts shall be purchased with full
recourse against the Company, including but not limited to recourse as to the
insolvency or other financial inability of the Account Debtor to pay. Any
Eligible Account not paid after ninety (90) days from invoice date, shall no
longer constitute an Eligible Account and shall be excluded from the Eligibility
Base on the ninety-first (91st) day after the invoice date.
2.7. If the aggregate outstanding face amount of all outstanding
Eligible Accounts which have been purchased by Fidelity from the Affiliated
Companies ever exceeds the Eligibility Base, Fidelity shall be repaid such
excess, either by means of the Affiliated Companies immediately on demand paying
Fidelity an amount at least equal to such excess, Fidelity deducting such excess
amount from the purchase price for the next Eligible Accounts purchased
hereunder or Fidelity charging such excess amount against the Reserve Account,
as Fidelity may elect.
87985 04465 CORP 77059 4
<PAGE>
2.8. The Company hereby sells, transfers, conveys and assigns to
Fidelity all its right, title and interest in and to each Eligible Account
together with all Related Rights, effective at the time of acceptance thereof by
Fidelity. Upon Fidelity's acceptance of each Eligible Account, Fidelity shall be
the sole owner and holder of such Eligible Account and the Related Rights. The
Company agrees to execute and deliver to Account Debtors obligated under
Eligible Accounts such written notices of sale of the eligible Accounts as
Fidelity may request.
Section 3. Advances and Interest.
3.1. Fidelity shall purchase an Eligible Account at a purchase price
equal to the face amount of the Eligible Account multiplied by the Advance Rate.
The purchase price shall be advanced by Fidelity to the Company as directed by
the Company.
3.2. The Company shall pay to Fidelity interest on the daily balance of
all sums (the "Advances") remitted, paid, or otherwise advanced by Fidelity to
the Company or for the Company's benefit (including but not limited to the
purchase price of Eligible Accounts purchased by Fidelity hereunder), net of all
payments received from the Company's Account Debtors or otherwise received by
Fidelity on the Company's behalf, which are credited to the Company's account.
3.3. Interest shall be charged on the Advances on each day at a rate
equal to the Prime Rate in effect on such day, plus four percent (4%) per annum
(the "Interest Rate"), but in no event to exceed the maximum rate permitted by
applicable law. If the Prime Rate changes after the date hereof, the Interest
Rate shall be automatically increased or decreased, as the case may be, without
notice to the Company from time to time as of the effective time of each change
in the Prime Rate. Interest shall be due and payable on the last day of each
calendar month and may, in Fidelity's sole discretion, be charged against the
Reserve Account or other sums that may be due to the Company hereunder.
3.4. All past due amounts owed hereunder, including but not limited to
interest that is not paid when due because there is a negative balance in the
Reserve Account or otherwise, shall bear interest at the Late Payment Rate and
shall be payable on demand.
Section 4. Fees and Expenses.
4.1. The Affiliated Companies shall pay to Fidelity an annual
commitment fee in the amount of one percent (1%) of the Commitment, payable on
the date of the first purchase of Eligible Accounts hereunder and on each annual
anniversary date occurring hereafter. The Company hereby authorizes Fidelity, at
its sole discretion, to deduct the commitment fee from the purchase price for
such Eligible Accounts or to charge the commitment fee against the Reserve
Account.
87985 04465 CORP 77059 5
<PAGE>
4.2. As consideration for Fidelity's commitment to purchase Eligible
Accounts hereunder, the Affiliated Companies agree to pay to Fidelity a monthly
minimum fee (the "Monthly Minimum Fee") of not less than $11,000 for each
calendar month (or fraction thereof, on a prorated basis) during the Term. In
the event that the interest actually earned and received by Fidelity during any
calendar month (or fraction thereof on a prorated basis) is less than the
Monthly Minimum Fee, the Affiliated Companies shall pay to Fidelity the
difference between such amount and the Monthly Minimum Fee, regardless of
Fidelity's prior compensation.
4.3. The Company agrees to reimburse Fidelity upon demand for all
reasonable attorney's fees, court costs and other expenses incurred by Fidelity
in preparation, negotiation, and enforcement of this Agreement and protecting or
enforcing its interest in the Eligible Accounts or the Collateral, in collecting
the Eligible Accounts or the Collateral, or in the representation of Fidelity in
connection with any bankruptcy case or insolvency proceeding involving the
Company, the Collateral, any Account Debtor, or any Eligible Account. The
Company hereby authorizes Fidelity, at its sole discretion, to deduct such fees,
costs and expenses from the purchase price for Eligible Accounts. The fees of
Fidelity's attorneys for work in connection with the negotiation, preparation
and execution of the Affiliated Company Agreements will be $10,000 plus
expenses.
4.4. Fidelity shall be entitled to deduct from the Reserve Account
charges for the following routine expenses incurred by Fidelity in the course of
performing its functions with respect to the Eligible Accounts: long-distance
telephone charges, postage, credit reports, wire transfers, overnight mail
delivery, UCC and tax lien searches and filing fees ("Adjustments").
4.5. The Affiliated Companies shall pay to Fidelity a liquidation fee
("Liquidation Fee") in the amount of five percent (5%) of the face amount of
each Eligible Account outstanding at any time during a Liquidation Period (as
defined below). The Liquidation Fee shall be payable on the earlier to occur of
(i) the date on which Fidelity collects the applicable Eligible Account and (ii)
the ninetieth (90th) day from invoice date of the Eligible Account. The
Liquidation Fee shall be paid either by means of Fidelity charging the
Liquidation Fee against the Reserve Account or by the Affiliated Companies
directly to Fidelity the amount of the Liquidation Fee, as Fidelity may elect.
The Liquidation Fee is in addition to any termination fee provided for in
Section 12.4. For purposes of this section, "Liquidation Period" means a period
beginning on the earliest date of (i) the commencement against or by either
Affiliated Company of any voluntary or involuntary case under the federal
Bankruptcy Code, (ii) the general assignment by either Affiliated Company for
the benefit of its creditors; (iii) the appointment or taking possession by a
receiver, liquidator, assignee, custodian or similar official of all or a
substantial part of either Affiliated Company's assets, or (iv) the cessation of
business of either Affiliated Company and ending on the date on
87985 04465 CORP 77059 6
<PAGE>
which Fidelity has actually received all fees, costs, expenses and other amounts
owing to it hereunder.
Section 5. Reserve Account. Fidelity shall create and maintain a
reserve account (the "Reserve Account") in the amount of thirty percent (30%)
(the "Reserve Percentage") of the face amount of the Eligible Accounts out of
any payments or credits otherwise to be made to Fidelity with respect to such
Eligible Accounts, provided that if the Advance Rate is increased pursuant to
paragraph 2.2, the Reserve Percentage shall simultaneously be decreased to
twenty percent (20%). In no event shall the Reserve Account at any time equal
less than the Reserve Percentage of all Eligible Accounts remaining unpaid.
Fidelity may charge against the Reserve Account any amount for which either
Affiliated Company may be obligated to Fidelity at any time, whether under the
terms of either Affiliated Company Agreement, or otherwise, including but not
limited to amounts owed under Sections 3 and 4 hereof, any damages suffered by
Fidelity as a result of either Affiliated Company's breach of any provision of
Section 6 hereof or the other Affiliated Company Agreement (whether intentional
or unintentional), any losses (under any one or more Schedules of Accounts) due
to an Account Debtor's insolvency or other financial inability to pay, any
Disputes, Adjustments or attorneys' fees and disbursements due under Section 4.4
hereof or the other Affiliated Company Agreement. The Company recognizes that
any balance in the Reserve Account represents bookkeeping entries and not cash
funds. It is further agreed that with respect to the balances in the Reserve
Account, Fidelity is authorized to withhold such payments and credits otherwise
due to the Company under the terms of this Agreement for reasonably anticipated
claims such as, for example, chargebacks or credits against either of the
Affiliated Companies for Account Debtor claims. If the amount of the Reserve
Account exceeds the Reserve Percentage of the face amount of the Eligible
Accounts remaining unpaid, Fidelity shall distribute such excess amount to the
Company on a weekly basis; provided that no Event of Default has occurred and is
continuing and the Company has not ceased selling Accounts to Fidelity. If an
Event of Default has occurred and is continuing, or, in the event the Company
shall cease selling Accounts to Fidelity, Fidelity shall not pay the amount in
the Reserve Account until all Accounts of the Affiliated Companies have been
collected or Fidelity has determined, in its sole discretion, that it will make
no further efforts to collect any Accounts and all sums due Fidelity hereunder
have been paid. Fidelity shall make available to the Company, through Fidelity's
computer link capabilities or otherwise, within fifteen (15) days of the close
of the preceding calendar month, a summary or statement of the Company's
account, prepared from Fidelity's records, which will conclusively be deemed
correct and accepted by the Company unless the Company gives Fidelity a written
statement of exceptions within thirty (30) days after receipt of such extract or
statement.
Section 6. The Company's Representations and Covenants. The
Company represents, warrants and covenants to Fidelity that:
87985 04465 CORP 77059 7
<PAGE>
6.1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of its incorporation and is
qualified and authorized to do business and is in good standing in all states in
which such qualification and good standing are necessary or desirable. The
execution, delivery and performance by the Company of this Agreement does not
and will not constitute a violation of any applicable law or of the Company's
articles or certificate of incorporation or Bylaws or any material breach of any
other document, agreement or instrument to which the Company is a party or by
which the Company is bound. The Agreement is a legal, valid and binding
obligation of the Company enforceable against it in accordance with its terms.
The Company is conducting its business in material compliance with all
applicable federal, state or local laws, and has and is in compliance with all
licenses and permits required under any such laws.
6.2. No Eligible Account shall be subject to any lien, encumbrance,
security interest or other claim of any kind or nature. The Company will not
transfer, sell, pledge or give a security interest in any of its Accounts to
anyone other than Fidelity nor will the Company factor or sell any of its
Accounts except to Fidelity. There are no financing statements now on file in
any public office governing any property of the Company of any kind, real or
personal, in which the Company is named in or has signed as the debtor, except
the financing statement or statements filed or to be filed in respect of this
Agreement or those statements now on file that have been disclosed in writing by
the Company to Fidelity. The Company will not execute any financing statement in
favor of any other person or entity, excepting Fidelity, during the term.
6.3. Immediately prior to the execution and delivery of each
Eligibility Certificate, the Company will be the sole owner and holder of each
of the Accounts described thereon and the Related Rights. Upon Fidelity's
acceptance of each Eligible Account, it shall become the sole owner and holder
of such Eligible Account.
6.4. The amount of each Eligible Account is due and owing to the
Company and represents an accurate statement of a bona fide sale, delivery and
acceptance of Merchandise or performance of service by the Company to or for an
Account Debtor. The terms for payment of Eligible Accounts are thirty (30) days
from date of invoice and the payment of such Eligible Accounts is not contingent
upon the fulfillment by the Company of any further performance of any nature
whatsoever. To the best of the Company's knowledge, there are and shall be no
set-offs, allowances, discounts, deductions, counterclaims, or disputes with
respect to any Eligible Account, either at the time it is accepted by Fidelity
for purchase or prior to the date it is to be paid. "Dispute," as used in the
last preceding sentence, shall mean any claim by an Account Debtor against the
Company, of any kind whatsoever, valid or invalid, that is asserted by the
Account Debtor as a basis for refusing to pay an Eligible Account either in
whole or in part. The Company agrees to inform Fidelity in writing immediately
upon learning that there
87985 04465 CORP 77059 8
<PAGE>
exists or may exist any dispute, or other matter which diminishes or may
diminish the dollar amount or timely collection of such Eligible Account.
6.5. The Company shall accept no returns and shall grant no allowance
or credit to any Account Debtor without notice to and the prior written approval
of Fidelity. The Company shall provide to Fidelity for each Account Debtor on
Eligible Accounts that have been purchased, a weekly report in form and
substance satisfactory to Fidelity itemizing all such returns and allowances
made during the previous week with respect to such Eligible Accounts and a check
(or wire transfer) payable to Fidelity for the amount thereof. Each Account
Debtor's business is solvent to the best of the Company's knowledge.
6.6. Fidelity shall have the right to audit the Company's books and
records once per calendar quarter, and during the continuance of an Event of
Default, from time to time, upon reasonable notice to the Company. The Company
shall pay all costs associated with such audits which shall be $700 per day per
person plus reasonable out-of-pocket expenses.
6.7. The address set forth below the Company's signature hereon is the
Company's mailing address, its chief executive office, principal place of
business and the office where all of the books and records concerning the
Eligible Accounts are maintained. The Company shall not change its mailing
address, chief executive office, principal place of business or place where such
records are maintained without thirty (30) days prior written notice to
Fidelity.
6.8. The application ("Application") made by the Company in connection
with this Agreement, and the statements made therein are true and correct at the
time that this Agreement is executed.
6.9. In no event shall the funds paid to the Company hereunder be used
directly or indirectly for personal, family, household or agricultural purposes.
6.10. The Company shall maintain its books and records in accordance with
generally accepted accounting principles and shall reflect on its books the
absolute sale of the Eligible Accounts to Fidelity. The Company shall furnish
Fidelity, upon request, such information and statements as Fidelity shall
request from time to time regarding the Company's business affairs, financial
condition and results of its operations. Without limiting the generality of the
foregoing, the Company shall provide Fidelity, on or prior to the 30th day of
each month, unaudited consolidated and consolidating financial statements with
respect to the prior month and, within ninety (90) days after the end of each of
the Company's fiscal years, reviewed annual consolidated and consolidating
financial statements and such certificates relating to the foregoing as Fidelity
may request including, without limitation, a monthly certificate from the
president and chief financial officer
87985 04465 CORP 77059 9
<PAGE>
of the Company stating whether any Events of Default have occurred and stating
in detail the nature of the Events of Default. In addition, the Company will
furnish to Fidelity upon request a current listing of all open and unpaid
accounts payable and accounts receivable, names, addresses and contact persons
for Account Debtors, and such other items of information that Fidelity may deem
necessary or appropriate from time to time.
6.11. The Company has paid and will pay all taxes and governmental charges
imposed with respect to sales of the Merchandise and furnish to Fidelity upon
request satisfactory proof of payment and compliance with all federal, state and
local tax requirements.
6.12. The Company will promptly notify Fidelity of any attachment or any
other legal process levied against the Company.
6.13. Waivers and releases for all labor, services, equipment or material
of the Company and others will be submitted on Fidelity's form concurrently with
each Eligibility Certificate. The Company has served or caused to be served any
and all preliminary notices required by law to perfect or enforce any mechanic's
lien or stop notice or bonded stop notice for the Eligible Accounts and the
information contained in those notices is true and correct to the best of the
Company's knowledge.
6.14. There is no fact which the Company has not disclosed to Fidelity in
writing which could materially adversely affect the properties, business or
financial condition of the Company, or any of the Eligible Accounts or
Collateral, or which it is necessary to disclose in order to keep the foregoing
representations and warranties from being misleading.
Section 7. Notice of Purchase. The Company shall execute and deliver to
Fidelity and/or file at such times and places as Fidelity may designate Uniform
Commercial Code Financing Statements to give notice of Fidelity's purchase of
the Eligible Accounts as required by the Uniform Commercial Code.
Section 8. Collateral. In order to secure the payment of all
indebtedness and obligations of the Company and the other Affiliated Company to
Fidelity, whether presently existing or hereafter arising, the Company hereby
grants to Fidelity a security interest in and lien upon all of the Company's
right, title and interest in and to (a) any and all Reserve Accounts and all
payments (if any) due or to become due to the Company from the Reserve Accounts;
(b) all accounts, contract rights and general intangibles, receivables and
claims whether now or hereafter arising, all guaranties and security therefor
and all of the Company's right title and interest in the goods purchased and
represented thereby including all of the Company's rights in and to returned
goods and rights of stoppage in transit, replevin and reclamation as unpaid
vendor; (c) all inventory, wherever located and whether now or hereafter
existing, (including, but not limited
87985 04465 CORP 77059 10
<PAGE>
to raw materials and work in process, finished goods and materials used or
consumed in the manufacture or production thereof, goods in which the Company
has an interest in mass or a joint or other interest or rights of any kind, and
goods which are returned to or repossessed by the Company) and all accessions
thereto and products thereof and documents therefor; (d) all equipment, wherever
located and whether now or hereafter existing, and all parts thereof, accessions
thereto, and replacements therefor and all documents and general intangibles
covering or relating thereto; (e) all books and records pertaining to the
foregoing, including but not limited to computer programs, data and lists; and
(f) all proceeds of the foregoing (collectively, the "Collateral"). The Company
agrees to comply with all appropriate laws in order to perfect Fidelity's
security interest in and to the Collateral, to execute any financing
statement(s) or additional documents as Fidelity may require and to deliver to
Fidelity a list of all locations of its inventory and equipment. The occurrence
of any Event of Default (as hereinafter defined) shall entitle Fidelity to all
of the default rights and remedies (without limiting the other rights and
remedies exercisable by Fidelity either prior or subsequent to an Event of
Default) as available to a secured party under the Uniform Commercial Code.
Section 9. Collection.
9.1. The Company shall notify all Account Debtors and take other
necessary or appropriate means to insure that all Accounts, whether or not
purchased by Fidelity, shall be paid directly to Fidelity at the remittance
address set forth below. Fidelity shall have the right at any time to so notify
all Account Debtors if the Company fails to do so. After collection by Fidelity,
all payments on Collateral shall be promptly remitted to the Company, subject to
Fidelity's rights therein as a secured party and its rights to offset any sums
then owing by the Company hereunder.
9.2. Fidelity, as the sole and absolute owner of the Eligible Accounts
purchased hereunder, shall have the sole and exclusive power and authority to
collect each such Eligible Account, through legal action or otherwise, and
Fidelity may, in its sole discretion, settle, compromise, or assign (in whole or
in part) any of such Eligible Accounts, or otherwise exercise any other right
now existing or hereafter arising with respect to any of such Eligible Accounts.
If the Company receives payment of all or any portion of any of such Eligible
Accounts or any other account, the Company shall notify Fidelity immediately and
shall hold all checks and other instruments so received in trust for Fidelity
and shall deliver to Fidelity such checks and other instruments without delay.
9.3. Fidelity shall have the right at any time, either before or after
the occurrence of an Event of Default and without notice to the Company, to
notify any or all Account Debtors on the Collateral of the assignment of the
Collateral to Fidelity and to direct such Account Debtors to make payment of all
amounts due or
87985 04465 CORP 77059 11
<PAGE>
to become due to the Company directly to Fidelity, and to the extent permitted
by law, to enforce collection of any Collateral and to adjust, settle or
compromise the amount or payment thereof. Upon the occurrence and during the
continuance of an Event of Default or any breach of any provisions of this
Agreement, such payments shall be applied by Fidelity to the payment or the
prepayment of the indebtedness and obligations of the Company to Fidelity or
held as cash collateral for such indebtedness and obligations. All amounts and
proceeds (including instruments and writings) received by the Company in respect
of the Collateral shall be received in trust for the benefit of Fidelity
hereunder, shall be segregated from other funds of the Company and shall be
promptly paid over to Fidelity in the same form as so received (with any
necessary endorsement) to be applied in the same manner as payments received
directly by Fidelity.
Section 10. Power of Attorney. The Company grants to Fidelity an
irrevocable power of attorney authorizing and permitting Fidelity, at its
option, with or without notice to the Company to do any or all of the following:
(a) Endorse the name of the Company on any checks or other evidences of
payment whatsoever that may come into the possession of Fidelity regarding
Eligible Accounts or Collateral, including checks received by Fidelity pursuant
to Section 9 hereof;
(b) Receive, open and forward any mail addressed to the Company and put
Fidelity's address on any statements mailed to Account Debtors;
(c) Pay, settle, compromise, prosecute or defend any action, claim,
conditional waiver and release, or proceeding relating to Eligible Accounts or
Collateral;
(d) Upon the occurrence of an Event of Default, notify in the name of
the Company, the U.S. Post Office to change the address for delivery of mail
addressed to the Company to such address as Fidelity may designate. Fidelity
shall turn over to the Company all such mail not relating to Eligible Accounts
or Collateral;
(e) Verify, sign, acknowledge, record, file for recording, serve as
required by law, any claim of mechanic's lien, stop notice or bonded stop notice
in the sole and absolute discretion of Fidelity relating to any Eligible Account
or Collateral;
(f) Insert all recording or service information in any Mechanic's Lien
or Assignment of Rights Under Stop Notice/Bonded Stop Notice which the Company
has signed in connection with this Agreement, recorded or served to enforce
payment of the Eligible
Accounts or Collateral;
(g) Execute and file on behalf of the Company any financing statement
deemed necessary or appropriate by Fidelity to protect
87985 04465 CORP 77059 12
<PAGE>
Fidelity's interest in and to the Eligible Accounts or Collateral,
or under any provision of this Agreement; and
(h) To do all other things necessary and proper in order to carry out
this Agreement. The authority granted to Fidelity herein is irrevocable until
this Agreement is terminated and all Advances are fully satisfied.
Section 11. Default and Remedies. An event of default ("Event of
Default") shall be deemed to have occurred hereunder and Fidelity shall have no
further obligation to purchase Accounts and may immediately exercise its rights
and remedies with respect to the Eligible Accounts and the Collateral under this
Agreement, the Uniform Commercial Code, and applicable law, upon the happening
of one or more of the following:
(a) The Company shall fail to pay as and when due any amount owed to
Fidelity;
(b) The Company shall breach any covenant or agreement made herein or
if any warranty or representation made herein shall be untrue when made and the
same is not cured to Fidelity's satisfaction within ten (10) days after such
breach or occurrence;
(c) Any report, certificate, schedule, financial statement, profit and
loss statement or other statement furnished by the Company, or by any other
person on behalf of the Company, to Fidelity is not true and correct in any
material respect;
(d) There shall be commenced by or against the Company any voluntary or
involuntary case under the federal Bankruptcy Code, or any assignment for the
benefit of creditors, or appointment of a receiver or custodian for a
substantial portion of its assets;
(e) The Company shall become insolvent in that its debts are greater
than the fair value of its assets, or the Company is generally not paying its
debts as they become due;
(f) Any involuntary lien, garnishment, attachment or the like shall be
issued against or shall attach to the Eligible Accounts or the Collateral and
the same is not released within ten (10) days;
(g) A material adverse change shall have occurred in the Company's
financial condition, business or operations;
(h) The Company shall have a federal or state tax lien filed against
any of its properties, or shall fail to pay any federal or state tax when due,
or shall fail to file any federal or state tax form as and when due; and
(i) An Event of Default shall occur under the other Affiliated Company
Agreement.
87985 04465 CORP 77059 13
<PAGE>
Section 12. Miscellaneous
12.1 Equitable Relief. In the event that the Company commits any act or
omission which prevents or unreasonably interferes with: (a) Fidelity's exercise
of the rights and privileges arising under the power of attorney granted in
Section 10 of this Agreement; or (b) Fidelity's perfection of or levy upon the
security interest granted in the Collateral, including any seizure of any
Collateral, such conduct will cause immediate, severe, incalculable and
irreparable harm and injury, and shall constitute sufficient grounds to entitle
Fidelity to an injunction, writ of possession, or other applicable relief in
equity, and to make such application for such relief in any court of competent
jurisdiction, without any prior notice to the Company.
12.2 Cumulative Rights. All rights, remedies and powers granted to
Fidelity in this Agreement, or in any other instrument or agreement given by the
Company to Fidelity or otherwise available to Fidelity in equity or at law, are
cumulative and may be exercised singularly or concurrently with such other
rights as Fidelity may have. These rights may be exercised from time to time as
to all or any part of the Eligible Accounts purchased hereunder or the
Collateral as Fidelity in its discretion may determine. In the event that the
transaction between the Company and Fidelity is construed to be a loan from
Fidelity to the Company, such loan shall be secured by Eligible Accounts and the
Collateral and Fidelity shall have all rights and remedies available to a lender
or a secured party under the UCC or otherwise in addition to its rights and
remedies hereunder. Fidelity may not waive its rights and remedies unless the
waiver is in writing and signed by Fidelity. A waiver by Fidelity of a right or
remedy under this Agreement on one occasion is not a waiver of the right or
remedy on any subsequent occasion. A purchase of an Account by Fidelity during
the continuance of an Event of Default shall not obligate Fidelity to purchase
any other Accounts during the continuation of such Event of Default.
12.3 Notices. Any notice or communication with respect to this
Agreement shall be given in writing, sent by (i) personal delivery, or (ii)
expedited delivery service with proof of delivery, or (iii) United States mail,
postage prepaid, registered or certified mail, or (iv) prepaid telegram, telex
or telecopy, addressed to each party hereto at its address set forth below or to
such other address or to the attention of such other person as hereafter shall
be designated in writing by the applicable party sent in accordance herewith.
Any such notice or communication shall be deemed to have been given either at
the time of personal delivery or, in the case of delivery service or mail, as of
the date of first attempted deliver at the address and in the manner provided
herein, or in the case of telegram, telex or telecopy, upon receipt. The Company
hereby agrees that Fidelity may publicize the financing transaction contemplated
by this Agreement in newspapers, trade and similar publications including,
without limitation, the publication of a "tombstone".
87985 04465 CORP 77059 14
<PAGE>
12.4 Term. The term of this Agreement shall be for two (2) year(s) from
the date hereof (the "Term"). The Affiliated Companies shall have no right to
terminate the Affiliated Company Agreements; provided that the termination of
either Affiliated Company Agreement shall cause the termination of the other
Affiliated Company Agreement and in the event this Agreement is terminated for
any reason during the first year of the Term, the Affiliated Companies shall pay
to Fidelity an early termination fee in the amount of five percent (5%) of the
Commitment, and in the event this Agreement is terminated for any reason during
the second year of the Term, the Affiliated Companies shall pay to Fidelity an
early termination fee in the amount of three percent (3%) of the Commitment to
the maximum extent permitted by applicable law. Any termination of this
Agreement shall not affect Fidelity's security interest in the Collateral and
Fidelity's ownership of the Eligible Accounts, and this Agreement shall continue
to be effective, until all transactions entered into and obligations incurred
hereunder have been completed and satisfied in full.
12.5 Right of First Offer. The Company hereby agrees that in the event
the Company receives a written commitment either during or at the end of the
Term from a third party to provide financing or factoring to the Company, which
commitment the Company intends to accept (the "new commitment"), the Company
will (i) advise Fidelity in writing of the identity of the offeror and the
complete terms of the new commitment and (ii) if Fidelity elects, in its sole
discretion, to offer to modify this Agreement to contain the same terms as the
new commitment, accept Fidelity's offer.
12.6 Severability. Each and every provision, condition, covenant and
representation contained in this Agreement is, and shall be construed, to be a
separate and independent covenant and agreement. If any term or provision of
this Agreement shall to any extent be invalid or unenforceable, the remainder of
the Agreement shall not be affected thereby.
12.7 Parties in Interest. All grants, covenants and agreements
contained in this Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns;provided, however, that the
Company may not delegate or assign any of its duties or obligations under this
Agreement without the prior written consent of Fidelity. FIDELITY RESERVES THE
RIGHT TO ASSIGN ITS RIGHTS AND OBLIGATIONS UNDER THIS IN WHOLE OR IN PART TO ANY
PERSON OR ENTITY.
12.8 GOVERNING LAW; SUBMISSION TO PROCESS. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF MASSACHUSETTS AND THE LAWS OF THE UNITED STATES OF AMERICA. THE COMPANY
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN MASSACHUSETTS, AND AGREES AND CONSENTS THAT SERVICE OF
PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT,
THE PURCHASE OF ELIGIBLE ACCOUNTS OR ANY OTHER RELATIONSHIP BETWEEN FIDELITY AND
THE COMPANY BY ANY MEANS ALLOWED
87985 04465 CORP 77059 15
<PAGE>
UNDER STATE OR FEDERAL LAW. ANY LEGAL PROCEEDING ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT, THE PURCHASE OF ELIGIBLE ACCOUNTS OR ANY OTHER
RELATIONSHIP BETWEEN FIDELITY AND THE COMPANY SHALL BE BROUGHT AND LITIGATED
EXCLUSIVELY IN ANY ONE OF THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF
MASSACHUSETTS HAVING JURISDICTION. THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT
TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH PROCEEDING
IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER.
12.9 WAIVER OF JURY TRIAL, PUNITIVE AND CONSEQUENTIAL DAMAGES, ETC.
EACH OF THE COMPANY AND FIDELITY HEREBY (A) IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR ASSOCIATED HEREWITH; (B) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (C) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS PARAGRAPH.
12.10 COMPLETE AGREEMENT. THIS AGREEMENT, THE SECURITY DOCUMENTS
DESCRIBED HEREIN, AND THE ACKNOWLEDGEMENT DELIVERED IN CONNECTION HEREWITH SET
FORTH THE ENTIRE UNDERSTANDING AND AGREEMENT OF THE PARTIES HERETO WITH RESPECT
TO THE TRANSACTIONS CONTEMPLATED HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. NO
MODIFICATION OR AMENDMENT OF OR SUPPLEMENT TO THIS AGREEMENT OR TO SUCH
ACKNOWLEDGEMENT SHALL BE VALID OR EFFECTIVE UNLESS THE SAME IS IN WRITING AND
SIGNED BY THE PARTY AGAINST WHOM IT IS SOUGHT TO BE ENFORCED.
87985 04465 CORP 77059 16
<PAGE>
The undersigned have entered into this Agreement as of the 16th day of
March, 1995.
FIDELITY FUNDING OF AMERTRANZ WORLDWIDE, INC.
CALIFORNIA, INC. a Delaware corporation
a California corporation
By: __________________________ By:_____________________________
Name: Name:
Title: Title:
Remittance P. O. Drawer 840425
Address: Dallas, Texas 75284-0425
Mailing 14850 Montfort Drive 2001 Marcus Avenue
Address: Suite 200 Lake Success, NY 11042
Dallas, Texas 75240
Street 14850 Montfort Drive Same
Address: Suite 200
Dallas, Texas 75240
87985 04465 CORP 77059 17
<PAGE>
EXHIBIT A
ELIGIBILITY CERTIFICATE AS OF
SCHEDULE NUMBER
THE COMPANY:
ACCOUNTS RECEIVABLE AVAILABILITY
DATE
1. Accounts Receivable (A/R)
[line 5 prev. report] $ __________
2. Plus New Receivables + __________
3. Less Collections - __________
4. Less Credits and Adjustment - __________
5. Current A/R Balance as of =
_______________ (Date) $ __________
6. Less ineligible A/R
a. Past Due (90 days) $ __________
b. Cross Aging $ __________
c. COD Sales $ __________
d. Foreign Sales $ __________
e. Contra accounts,
Affiliate/Intercompany $ __________
f. Other
$ __________
Total Ineligible A/R: - $ __________
7. Eligible A/R (line 4 minus line 5) = $ __________
8. Advance Rate x 70%
----------
9. A/R Availability = $ __________
==============================================================
10. Maximum Availability $ 1,750,000
----------
11. Ending Balance as of
_______________ (date) - $ ___________
12. Availability
(lesser of line 9 or 10 minus 11)
= $ ___________
13. Advance Request (This Certificate) $
14. New Balance (line 11 plus line 13) = $ ___________
15. Net Availability (Over Advance) $ ___________
87985 04465 CORP 77059 18
<PAGE>
The undersigned, [name] , [title] does hereby certify that he has made a
thorough inquiry into all matters certified herein and, based upon such inquiry
and experience does hereby certify that:
1. He is the duly elected, qualified, and acting __________, of the
Company.
2. This Eligibility Certificate is being submitted to Fidelity Funding of
California, Inc. pursuant to that certain Purchase and Sale Agreement dated as
of _______________, 199__ between the Company and Fidelity (as from time to time
supplemented or amended, the "Agreement").
3. All representations and warranties made in the Agreement (assuming that
the Accounts listed on this Eligibility Certificate are purchased under the
Agreement) or any other instrument, document, certificate or other agreement
executed in connection therewith (collectively, the "Transaction Documents")
delivered on or before the date hereof are true on and as of the date hereof
(except to the extent that the facts upon which such representations are based
have been changed by the transactions contemplated in the Agreement) as if such
representations and warranties had been made as of the date hereof.
4. No Event of Default (as defined in the Agreement) exists on the date
hereof.
5. The Company has performed and complied with all agreements and
conditions required in the Transaction Documents to be performed or complied
with by it on or prior to the date hereof.
6. After Fidelity makes the advances requested by this Eligibility
Certificate, the aggregate face amount of all outstanding Eligible Accounts of
the Affiliated Companies which have been purchased by Fidelity does not exceed
the lesser of (i) the Commitment and (ii) the Eligibility Base.
7. All information contained in this Eligibility Certificate is true,
correct and complete.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of
March 16 , 1995.
______________/s/_________________
Name:
Title:
87985 04465 CORP 77059 19
<PAGE>
July 5, 1995
VIA FEDERAL EXPRESS
Mr. Michael Barsa
Amertranz Worldwide, Inc.
Amerford Domestic, Inc.
2001 Marcus Avenue
Lake Success, New York 11042
Re: Amendment of Purchase and Sale Agreement dated March
16, 1995 (the "Amertranz Agreement") between FIDELITY
FUNDING OF CALIFORNIA, INC. ("Fidelity") and AMERTRANZ
WORLDWIDE, INC. ("Amertranz") and Purchase and Sale
Agreement dated March 16, 1995 (the "Amerford
Agreement") between FIDELITY FUNDING OF CALIFORNIA,
INC. ("Fidelity") and AMERFORD DOMESTIC, INC.
("Amerford")
Dear Mr. Barsa:
This letter agreement ("Letter Agreement") will confirm the understanding
and agreement between Fidelity and Amertranz and Amerford (Amertranz and
Amerford being hereinafter collectively referred to as the "Affiliated
Companies") amending the terms of the Amertranz Agreement and the Amerford
Agreement (hereinafter collectively referred to as the "Agreements"):
1. Effective July 3, 1995, for the purpose of the Agreements, the following
terms have the meaning hereinafter set forth:
(a) "Advance Rate" shall mean eighty percent (80%).
(b) "Reserve Percentage" shall mean twenty percent (20%).
2. If, as of September 1, 1995, the Affiliated Companies have either:
(a) failed to have each implemented new internal accounting systems (which
such implementation has been verified by Fidelity in its sole discretion,
reasonably exercised); or
(b) failed to have collectively received at least a one million dollar
($1,000,000) contribution of capital, then the Affiliated Companies agree that
Fidelity may, in its sole and absolute discretion, decrease the Advance Rate to
70% and increase the Reserve Percentage to 30%.
3. The benefits of this Letter Agreement shall inure to the respective
successors and assigns of the parties, hereto and of the indemnified parties,
and the obligations and liabilities assumed in this Letter Agreement by the
parties hereto shall be binding upon their respective successors and assigns.
4. This Letter Agreement may not be amended or modified except in writing.
This Letter Agreement and the Agreements represent the entire understanding
between the parties, and all prior discussions and negotiations are merged in
it. This Letter Agreement shall be governed by and construed in accordance with
the laws of the State of Massachusetts without giving effect to conflicts of law
principles thereof which might refer such interpretations to the laws of a
different state or jurisdiction.
<PAGE>
Michael Barsa
July 5, 1995
Page 2
5. This Letter Agreement may be separately executed in any number of
counterparts, each of which shall be an original, but all of which, taken
together, shall be deemed to constitute one and the same agreement.
If the foregoing correctly sets forth our Agreements, we would appreciate
your signing and returning to us the enclosed copies of this letter, whereupon
this letter shall constitute a binding Agreement between us.
Sincerely,
FIDELITY FUNDING OF CALIFORNIA, INC.
By:________________ /s/________________
Name:
Title:
Intending to be legally bound, the undersigned hereby accepts and agrees to the
foregoing in its entirety.
AMERTRANZ WORLDWIDE, INC.
By: ________________/s/_____________
Name:
Title:
Intending to be legally bound, the undersigned hereby accepts and agrees to the
foregoing in its entirety.
AMERFORD DOMESTIC, INC.
By: __________________/s/________________
Name:
Title:
87985 09982 CORP 86028
<PAGE>
Michael Barsa
July 5, 1995
Page 3
CONSENT AND AGREEMENT
MARTIN HOFFENBERG, PHILIP S. ROSSO, S. GARY FRIEDMAN, AMERFORD DE CARIBE,
INC. and INTEGRITY LOGISTICS, INC. do hereby consent to the provisions of this
Letter Agreement and the transactions contemplated herein and hereby ratify and
confirm the Guaranties dated as of March 16, 1995 made by each of them for the
benefit of Fidelity, and each agrees that the obligations and covenants
thereunder are unimpaired hereby and shall remain in full force and effect.
GUARANTOR:
________________/s/_______________
MARTIN HOFFENBERG
GUARANTOR:
_______________/s/__________________
PHILIP S. ROSSO
GUARANTOR:
_____________/s/____________________
S. GARY FRIEDMAN
GUARANTOR:
AMERFORD DE CARIBE, INC.
By:______________/s/_________________
Name:
Title:
GUARANTOR:
INTEGRITY LOGISTICS, INC.
By:_______________/s/________________
Name:
Title:
87985 09982 CORP 86028
<PAGE>
Michael Barsa
July 5, 1995
Page 4
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Second Amendment to Purchase and Sale Agreement (this "Amendment") is
made and entered into and effective as of October 25, 1995, by and between
Amertranz Worldwide, Inc. (the "Company") and Fidelity Funding of California
Inc. ("Fidelity").
A. The Company and Fidelity have entered into that certain Purchase and
Sale Agreement dated as of March 16, 1995, as amended by the letter agreement
dated as of July 5, 1995, (as so amended, the "Original Agreement"). Capitalized
terms used in this Amendment shall have the same meanings given to them in the
Original Agreement.
B. The Company and Fidelity desire to amend the Original Agreement and
hereby agree as follows:
1. Amendments. Fidelity and the Company hereby agrees as follows:
(a) Paragraph 1.1 of the Original Agreement is hereby amended by adding the
following definition of "New Financing" immediately following the definition of
"Merchandise":
"`New Financing' means any financing obtained by the Company from a
financing source other than Fidelity, Tia, Inc. or any Affiliate of such
entities or pursuant to Paragraph 3 of the Loan and Security Agreement dated
October 25, 1995 between the Company and TIA, Inc."
Paragraph 1.1 of the Original Agreement is hereby amended by adding the
following definition of "Subordinated Obligations" immediately following the
definition of "Reserve Account":
"`Subordinated Obligations' means any and all indebtedness or obligations
owing by the Company to Tia, Inc. pursuant to that certain Loan Agreement dated
as of October 25, 1995, between the Company and Tia, Inc. (as amended, modified
or restated from time to time)."
(b) Section 6 of the Original Agreement is hereby amended by adding the
following paragraph 6.15:
"6.15. The Company will use the proceeds of any New Financing obtained
prior to February 29, 1996, to pay the Subordinated Obligations in full."
(c) Section 11 of the Original Agreement is hereby amended by adding the
following clauses (j) and (k) thereto:
"(j) The Company breaches or defaults in the performance of any agreement
or instrument by which the Subordinated Obligations are evidenced, governed or
secured, and any such breach or default continues beyond any applicable period
of grace provided therefor; and
(k) The Company fails to receive at least $1,500,000 in New Financing prior
to February 29, 1996."
2. Representations and Warranties of the Company. In order to induce
Fidelity to enter into this Agreement, the Company represents and warrants to
Fidelity that:
87985 09982 CORP 96845
4
<PAGE>
Michael Barsa
July 5, 1995
Page 5
(a) The representations and warranties contained in Section 6 of the
Original Agreement are true and correct at and as of the time of the
effectiveness hereof.
(b) The Company is duly authorized to execute and deliver this Amendment
and is and will continue to be duly authorized to perform its obligations under
the Original Agreement, as amended hereby. The Company has duly taken all
corporate action necessary to authorize the execution and delivery of this
Amendment and to authorize the performance of the obligations of the Company
hereunder.
(c) The execution and delivery by the Company of this Amendment, the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby do not and will not conflict with any
provision of law, statute, rule or regulation or of the articles of
incorporation and bylaws of the Company, or of any material agreement, judgment
license, order or permit applicable to or binding upon the Company, or result in
the creation of any lien, charge or encumbrance upon any assets or properties of
the Company. Except for those which have been duly obtained, no consent,
approval, authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by the Company
of this Amendment or to consummate the transactions contemplated hereby.
(d) When duly executed and delivered, each of this Amendment and the
Original Agreement, as amended hereby, will be a legal and binding instrument
and agreement of the Company, enforceable in accordance with its terms, except
as limited by bankruptcy, insolvency and similar laws and by general principals
of equity.
3. Miscellaneous.
(a) The Original Agreement as hereby amended is hereby ratified and
confirmed in all respects. The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any rights, power or remedy of Fidelity under the Agreement nor constitute a
waiver of any provision thereof.
(b) All representations, warranties, covenants and agreements of the
Company herein shall survive the execution and delivery of this Amendment and
the performance hereof, and shall further survive until the Original Agreement,
as amended hereby, is terminated.
(c) This Amendment may be separately executed in counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to constitute one and same Amendment.
IN WITNESS WHEREOF, the Company and Fidelity have executed this Amendment
as of the date first written above.
FIDELITY: THE COMPANY:
FIDELITY FUNDING OF CALIFORNIA, INC., AMERTRANZ WORLDWIDE, INC.,
a California corporation a Delaware corporation
By: ______________/s/_____________ By:____________/s/_______________
Name: Name:
Title: Title:
87985 09982 CORP 96845
5
<PAGE>
Michael Barsa
July 5, 1995
Page 6
CONSENT AND AGREEMENT
Each of the undersigned hereby consents to the provisions of this
Amendment and the transactions contemplated herein and to the provisions of the
Subordination Agreement dated of even date herewith among the Company, Fidelity
and Tia, Inc. Each of the undersigned hereby ratifies and confirms the General
Continuing Guaranty dated as of March 16, 1995, made by him for the benefit of
Fidelity, and agrees that his obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.
___________/s/________________
Martin Hoffenberg
__________/s/_________________
Philip S. Rosso
__________/s/_________________
S. Gary Friedman
87985 09982 CORP 96845
<PAGE>
Michael Barsa
July 5, 1995
Page 7
CONSENT AND AGREEMENT
Each of the undersigned hereby consents to the provisions of this
Amendment and the transactions contemplated herein and to the provisions of the
Subordination Agreement dated of even date herewith among the Company, Fidelity
and Tia, Inc. Each of the undersigned hereby ratifies and confirms the General
Continuing Guaranty dated as of March 16, 1995, made by it for the benefit of
Fidelity, and agrees that its obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.
AMERFORD DECARIBE, INC.
__________/s/_____________
Name:
Title:
INTEGRITY LOGISTICS, INC
_________/s/______________
Name:
Title:
AMERFORD DOMESTIC, INC.
_________/s/______________
Name:
Title:
87985 09982 CORP 96845
<PAGE>
Michael Barsa
July 5, 1995
Page 8
[Execution]
THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Third Amendment to Purchase and Sale Agreement (this "Amendment") is
made and entered into and effective as of February 7, 1996, by and between
Amertranz Worldwide, Inc. (the "Company") and Fidelity Funding of California
Inc. ("Fidelity").
C. The Company and Fidelity have entered into that certain Purchase and
Sale Agreement dated as of March 16, 1995, as amended by the letter agreement
dated as of July 5, 1995, and the Second Amendment to Purchase and Sale
Agreement dated as of October 25, 1995 (as so amended, the "Original
Agreement"). Capitalized terms used in this Amendment shall have the same
meanings given to them in the Original Agreement.
D. The Company and Fidelity desire to amend the Original Agreement and
hereby agree as follows:
1. Amendments. Fidelity and the Company hereby agrees as follows:
(a) Paragraph 1.1 of the Original Agreement is hereby amended by adding the
following definition of "Caribbean" immediately following the definition of
"Affiliated Company Agreements":
"`Caribbean' means Caribbean Air Services, Inc., a Delaware corporation."
Paragraph 1.1 of the Original Agreement is hereby amended by adding the
following definition of "Distribution" immediately following the definition of
"Dispute":
"`Distribution' means any payment of any dividend or any other distribution
in respect of any class of capital stock of (or any other interest in) the
Company or any other capital contribution, purchase, redemption, acquisition or
retirement of any shares of the capital stock of the Company (whether such
interests are now or hereafter issued, outstanding or created) or any other
reduction or retirement of the capital stock of the Company."
Paragraph 1.1 of the Original Agreement is hereby amended by adding the
following definition of "Freight Group" immediately following the definition of
"Event of Default":
"`Freight Group' means collectively, Tia, Inc., a Delaware corporation, and
Caribbean Freight Systems, Inc., a Puerto Rico corporation."
Paragraph 1.1 of the Original Agreement is hereby amended by adding the
following definition of "Holding" immediately following the definition of "Event
of Default":
"`Holding' means Amertranz Worldwide Holding Corp., a Delaware
corporation."
Paragraph 1.1 of the Original Agreement is hereby amended by adding the
following definition of "IPO" immediately following the definition of "Interest
Rate":
"`IPO' means the proposed initial public offering by Holding of 1,500,000
shares of its common stock together with one warrant per share."
87985 09982 CORP 107302 8
<PAGE>
Michael Barsa
July 5, 1995
Page 9
Paragraph 1.1 of the Original Agreement is hereby amended by adding the
following definitions of "Subordinated Promissory Note" and "Subordinated
Security Agreement" immediately following the definition of "Subordinated
Obligations":
"`Subordinated Promissory Note' means those certain Secured Promissory
Notes dated February 7, 1996, issued by Holding.
`Subordinated Security Agreement' means that certain Security Agreement
dated February 7, 1996, executed and delivered by the Company for the benefit of
the Freight Group."
(b) Paragraph 6.15 of the Original Agreement is hereby amended in its
entirety to read as follows:
"6.15. A portion of the proceeds of the IPO (if consummated) shall be used
to pay the Subordinated Obligations in full."
(c) Section 6 of the Original Agreement is hereby amended by adding the
following paragraph 6.16:
"6.16. The Company shall not make any Distribution."
(d) Section 11 of the Original Agreement is hereby amended by adding the
following clauses thereto:
"(l) Holding shall fail to pay as and when due any amount owed to the
Freight Group;
(m) Caribbean shall fail to pay as and when due any amount owed to the
Freight Group;
(n) The occurrence of any `default' under the Subordinated Security
Agreement;
(o) The occurrence of any `Event of Default' under the Subordinated
Promissory Note; and
(p) Any person or entity which has entered into a subordination agreement
with Fidelity breaches any covenant, agreement, term or condition of such
agreement, or any representation or warranty made therein is untrue."
2. Representations and Warranties of the Company. In order to induce
Fidelity to enter into this Agreement, the Company represents and warrants to
Fidelity that:
(a) The representations and warranties contained in Section 6 of the
Original Agreement are true and correct at and as of the time of the
effectiveness hereof.
(b) The Company is duly authorized to execute and deliver this Amendment
and is and will continue to be duly authorized to perform its obligations under
the Original Agreement, as amended hereby. The Company has duly taken all
corporate action necessary to authorize the execution and delivery of this
Amendment and to authorize the performance of the obligations of the Company
hereunder.
87985 09982 CORP 107302 9
<PAGE>
Michael Barsa
July 5, 1995
Page 10
(c) The execution and delivery by the Company of this Amendment, the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby do not and will not conflict with any
provision of law, statute, rule or regulation or of the articles of
incorporation and bylaws of the Company, or of any material agreement, judgment
license, order or permit applicable to or binding upon the Company, or result in
the creation of any lien, charge or encumbrance upon any assets or properties of
the Company. Except for those which have been duly obtained, no consent,
approval, authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by the Company
of this Amendment or to consummate the transactions contemplated hereby.
(d) When duly executed and delivered, each of this Amendment and the
Original Agreement, as amended hereby, will be a legal and binding instrument
and agreement of the Company, enforceable in accordance with its terms, except
as limited by bankruptcy, insolvency and similar laws and by general principals
of equity.
3. Condition to Effectiveness. This Amendment shall become effective as of
the date first above written when and only when Fidelity shall have received, at
Fidelity's offices the following documents, each document being duly authorized,
executed and delivered, and in form and substance satisfactory to Fidelity:
(a) A counterpart of this Amendment;
(b) A subordination agreement of each of Tia, Inc., Caribbean Freight
Systems, Inc., and each purchaser of the Subordinated Promissory Notes;
(c) A Guaranty of Holding;
(d) A subordination agreement of each of David Pulk and MH Capital
Partners;
(e) A First Amendment to Subordination Agreement executed by each of
Michael Barsa, Jean Barsa, Allan Rubin, Michael Kilzi, Bruce Brandi, David Pulk
and MH Capital Partners; and
(f) Officer's Certificate of each of Holding, Tia, Inc. and Caribbean
Freight Systems, Inc.
4. Miscellaneous.
(a) The Original Agreement as hereby amended is hereby ratified and
confirmed in all respects. The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any rights, power or remedy of Fidelity under the Agreement nor constitute a
waiver of any provision thereof.
(b) All representations, warranties, covenants and agreements of the
Company herein shall survive the execution and delivery of this Amendment and
the performance hereof, and shall further survive until the Original Agreement,
as amended hereby, is terminated.
(c) This Amendment may be separately executed in counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to constitute one and same Amendment.
87985 09982 CORP 107302 10
<PAGE>
Michael Barsa
July 5, 1995
Page 11
IN WITNESS WHEREOF, the Company and Fidelity have executed this Amendment
as of the date first written above.
FIDELITY: THE COMPANY:
FIDELITY FUNDING OF CALIFORNIA, INC., AMERTRANZ WORLDWIDE, INC.,
a California corporation a Delaware corporation
By:_____________/s/________________ By:_____________/s/______________
Name: Name:
Title: Title:
87985 09982 CORP 107302 11
<PAGE>
Michael Barsa
July 5, 1995
Page 12
CONSENT AND AGREEMENT
Each of the undersigned hereby consents to the provisions of this Amendment
and the transactions contemplated herein and to the provisions of the
Subordination Agreement dated of even date herewith among the Company, Fidelity
and Tia, Inc. Each of the undersigned hereby ratifies and confirms the General
Continuing Guaranty dated as of March 16, 1995, made by him for the benefit of
Fidelity, and agrees that his obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.
________/s/_____________
Martin Hoffenberg
_______/s/______________
Philip S. Rosso
87985 09982 CORP 107302 12
<PAGE>
Michael Barsa
July 5, 1995
Page 13
CONSENT AND AGREEMENT
Each of the undersigned hereby consents to the provisions of this
Amendment and the transactions contemplated herein and to the provisions of the
Subordination Agreement dated of even date herewith among the Company, Fidelity
and Tia, Inc. Each of the undersigned hereby ratifies and confirms the General
Continuing Guaranty dated as of March 16, 1995, made by it for the benefit of
Fidelity, and agrees that its obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.
AMERFORD DECARIBE, INC.
__________/s/____________
Name:
Title:
INTEGRITY LOGISTICS, INC.
__________/s/____________
Name:
Title:
AMERFORD DOMESTIC, INC.
_________/s/_____________
Name:
Title:
87985 09982 CORP 107302 13
<PAGE>
<PAGE>
NEITHER THIS NOTE, THE SHARES OF COMMON STOCK INTO WHICH THIS NOTE IS
CONVERTIBLE, NOR THE SHARES OF COMMON STOCK ISSUABLE IN PAYMENT OF INTEREST HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN NOTE PURCHASE
AGREEMENT OF EVEN DATE (THE "NOTE PURCHASE AGREEMENT").
7% Convertible Subordinated Promissory Note
Due June 30, 1996
$____________________________ _______________________, 1995
Amertranz Worldwide, Inc., a Delaware corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to
___________________________________________________________ or registered
assigns, on the 30th day of June, 1996 (the "Due Date"), the principal amount of
_________________________________________ Dollars ($__________) and to pay
interest on the Due Date (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid portion of said principal amount from the date
hereof at the rate of 7% per annum.* Both the principal hereof and Interest
Shares are payable at the principal office of the Company in Lake Success, New
York, in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts.
1. Authorized Issue. This Note is one of a duly authorized issue of 7%
Convertible Subordinated Promissory Notes due June 30, 1996 (herein called the
"Notes") made or to be made by the Company in aggregate amount of up to
$2,000,000, in original authorized principal amount, similar in terms except for
dates, principal amounts and named payees, offered by the Company pursuant to a
Note Purchase Agreement dated July ____, 1995.
2. (a) Mandatory Conversion. This Note shall cease to be debt or obligation
of the Company and shall, without any affirmative act by either the Company or
the holder hereof, be converted into and shall represent one (1) share of the
Company's Common Stock, $.01 par value, for each $.50 principal amount of Note
upon the Company concluding, on or before the due date, a transaction with
Caribbean Freight Systems, Inc. and/or TIA, Inc. (collectively "CAS") (the
"Transaction Event") on substantially the terms provided for in the Letter of
Intent dated May 10, 1995, between the company and CAS attached as Exhibit A to
the Note -------- * The interest provided for herein shall be paid in kind by
the Company by the Delivery of one (1) shares of the Company's Common Stock,
$.01 par value, for each $.50 of accrued interest (the "Interest Shares").
<PAGE>
Purchase Agreement, or upon such other and different conditions as the Company,
in its sole discretion shall negotiate.
(b) Optional Conversion. Any Note may be converted in full or in part by
the holder thereof by surrender of such Note with the notice of conversion
thereon duly executed by such holder (specifying the portion or the principal
amount thereof, and accrued interest thereon, to be converted in the case of a
partial conversion) to the Company at its principal office, or at the office of
the agency maintained for such purpose. Upon any partial conversion of a Note,
the Company at its expense will forthwith issue and deliver to or upon the order
o(pound) the holder thereof a new Note or Notes in principal amount equal to the
unpaid and unconverted principal amount of such surrendered Note, such new Note
or Notes to be dated and to bear Lnterest from the date to which interest has
been paid on such surrendered Note. Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which such
Note shall have been so surrendered to the Company or such agency; and at such
time the rights of the holder or such Note as such shall, to the extent of the
principal amount thereof, and accrued interest thereon, converted, cease, and
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record thereof.
(c) As promptly as practicable after the conversion (whether mandatory or
optional) of any Note in full or in part, and in any event within 15 calendar
days thereafter, the Company at its expense (including the payment by it or any
applicable issue taxes) will issue and deliver to the holder of such Note, or as
such holder (upon payment of such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion.
(d) The Company will at all times reserve and keep available, solely for
issuance and delivery upon the conversion of the Notes, all shares of Common
Stock from time to time issuable upon the conversion of the Notes. All shares of
Common Stock issuable upon conversion of the Notes shall be duly authorized and,
when issued, validly issued, fully paid and nonassessable with no liability on
the part of the holders thereof.
3. Restrictions on Transfer. (a)(i) Unless a Registration Statement with
respect thereto under the Securities Act is at the time in effect, this Note,
the shares of Common Stock into which the Note may be converted, and the
Interest Shares shall not be transferred (such term to include any disposition
which would constitute a sale within the meaning of the Securities Act), except
upon compliance with the conditions specified in this subsection 3(a) and unless
such Registration Statement is effective or such
- 2 -
<PAGE>
conditions are complied with, the company may issue or cause to be issued stop
orders preventing any such transfer.
(ii) The holder of this Note by the acceptance thereof agrees, prior to any
transfer or attempted transfer of this Note, that it shall not transfer this
Note unless a Registration Statement under the Securities Act is in effect with
respect to such transfer or, prior to such transfer, it shall have delivered to
the company an opinion of counsel experienced in Securities Act matters
reasonably acceptable to the Company and counsel to the Company in a form
reasonably acceptable to the Company, or a "no action" letter from the
Securities and Exchange Commission, to the effect that the proposed transfer may
be effected without registration under the Securities Act. The legend set forth
on the facing page of this Note shall be removed from any such Note to be
disposed of in accordance with this clause (ii) unless, in the opinion of
counsel f or the company, such legend is required by the applicable provisions
of the Securities Act.
4. Subordination of Indebtedness.
(a) This Note is issued subject to the provisions of this Section 4; and
each person taking or holding this Note, accepts and agrees to be bound by these
provisions.
(b) Attached hereto and made a part hereof and incorporated by reference
herein as if fully set forth at length is a Subordination Agreement (the
"Subordination Agreement") by and between Fidelity Funding of California, Inc.
("Fidelity") and the company. The holder of this Note adopts the Subordination
Agreement as if an original party thereto. To the extent that the provisions of
this Note or of the Note Purchase Agreement conflict with the Subordination
Agreement, the terms os the Subordination Agreement shall control.
(c) This Note is a junior secured obligation of the Company and is fully
subordinated to all "senior indebtedness" of the Company now existing or
hereafter incurred. Senior indebtedness is all indebtedness, liabilities and
obligations of the Company for money borrowed from or advanced by Fidelity or
any obligation owed by the Company to Fidelity as a senior obligation as defined
in the Subordination Agreement, and any deferrals, renewals or extensions of any
such senior indebtedness and notes or other instruments or evidences of
indebtedness issued in respect of or in exchange for any such senior
indebtedness or any funding to pay or replace any such senior indebtedness or
credit unless in the instrument creating or evidencing the same, or pursuant to
which it is outstanding, it is provided that such indebtedness or such deferral,
renewal or extension thereof is not senior in right of payment to this Note. No
payment or distribution of any kind or
- 3 -
<PAGE>
character on account of principal, premium any, or interest on this Note shall
be permitted during the continuance of any default in the payment of principal,
premium, if any, or interest on any senior indebtedness.
5. Default. If one or more of the following events (herein called "Events
of Default") shall occur for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body), and the holder of any Note shall have given fifteen (15) days prior
written notice to the Company by certified or registered mail, return receipt
requested, and the Company shall not have cured shall default within such
period:
(i) default in the due and punctual payment of the principal or, or
interest on, any Note when and as the same shall become due and payable, whether
at maturity or at a date fixed for prepayment or by acceleration or otherwise;
(ii) breach by the Company of any covenant contained m this Note and/or
default by the Company in any provision of the Note Purchase Agreement executed
in connection with the sale and purchase of the Notes; or
(iii) the Company makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally as they become due;
or
(iv) an order, judgment or decree is entered adjudicating the Company or
any subsidiary bankrupt or insolvent; or
(v) the Company petitions or applies to any tribunal for the appointment of
a trustee or receiver of the Company, or of any substantial part of the assets
of the Company, or commences any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a subsidiary) relating to the Company
or an subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction whether
now or hereafter in effect; or
(vi) any such petition or application is filed, or any such proceedings are
commenced, against the Company, and the Company by any act indicates its
approval thereof, consent or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee or receiver, or approving the
petition in any such proceedings, and such order, judgment or decree remains
unstayed and in effect for wore than 60 days; or
- 4 -
<PAGE>
(vii) any order, judgment or decree is entered in any proceedings against
the company or any subsidiary decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60 days;
or
(viii) any order, judgment or decree is entered in any proceedings against
the Company or any subsidiary decreeing a split-up of the Company which requires
the divestiture of a substantial part of the consolidated assets of the Company
and its subsidiaries, or the divestiture of the stock of a subsidiary and such
order, judgment or decree remains unstayed and in effect for more than 60 days;
Then and in each and every such case, so long as such Event of Default shall not
have been remedied, the holder of any Note, by notice in writing to the Company,
may declare the principal of this Note then outstanding and the interest accrued
thereon if not already due and payable, to be due and payable immediately, or
convertible pursuant to paragraph 2 hereof, and upon any such declaration the
same shall become and shall be immediately due and payable, anything in this
Note contained to the contrary notwithstanding, the declaration of a default by
any holder shall constitute and operate as a declaration of default of all
Notes.
6. Miscellaneous. (a) To the extent permitted by applicable law, the
Company hereby agrees to waive, and does hereby absolutely and irrevocably waive
and relinquish, the benefit and advantage of any valuation, stay, appraisement,
extension or redemption law now existing or which may hereafter exist, which,
but for this provision, might be applicable to any sale made under the judgment,
order or decree of any court, or otherwise, based on the Notes or on any claim
for principal or interest on the Notes.
(b) Each Note is issued upon the express condition, to which each
successive holder expressly assents and by receiving the same agrees, that no
recourse under or upon any obligation, covenant or agreement of the Notes, or
for the payment of the principal of, or premium, if any, or the interest on, a
Note, or for any claim based on a Note, or otherwise in respect hereof, shall be
had against any incorporator or any past, present or future stockholder, officer
or director, as such, of the Company or of any successor corporation, whether by
virtue of the constitution, statute or rule of law or by any assessment or
penalty or otherwise howsoever, all such individual liability being hereby
expressly waived and released as a condition of and as a part of the
consideration for the execution and issue of the Notes; provided, however, that
nothing herein shall prevent enforcement of the liability, if any, of any
stockholder or subscriber to capital stock upon or in respect of capital stock
not fully paid.
- 5 -
<PAGE>
(c) Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of any Note and of indemnity reasonably
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of any such
Note if mutilated, the Company will make and deliver a new Note of like tenor in
lieu of any such Note so lost, stolen, destroyed or mutilated. Any new Note made
and delivered in accordance with the provisions or this subsection 8(c) shall be
dated as of the date from which unpaid interest has then accrued on the Note so
lost, stolen, destroyed or mutilated.
(d) Any notice or demand which by any provision of the Notes is required or
provided to be given or served to or upon the Company shall be deemed to have
been sufficiently given or served for all purposes by being sent as registered
mail, postage prepaid, addressed to the Company at its principal office.
(e) No course of dealing between the Company and the holder of any Note or
any delay on the part of the holder in exercising any rights under a Note shall
operate as a waiver of any rights of any holder of the Note.
(f) Any and all covenants or events of default under the Notes, except Ror
the due and punctual payment of principal and interest, way be waived by the
holders of a majority Ln interest of the principal amount of outstanding Notes
sold (the "Majority Noteholders").
7. Binding Effect. The Company agrees that the provisions of this Note
shall bind and shall inure to the benefit of the parties hereto and their
successors and assigns.
8. Amendment and Waiver. Except as otherwise provided herein, this Note may
be amended, and the performance and observance of any term of this Note may be
waived, with (and only with) the written consent of the Company and such Note
purchaser as to whom performance is to be waived.
9. Interest Rate. If any interest rate specified herein is held to be
impermissible, then the rate charged on the indebtedness represented hereby
shall be reduced to the highest rate then permitted by law.
10. Communications. All notices and other communications provided for
hereunder or under the Notes shall be in writing, and, if to you, shall be
delivered or mailed by registered mail addressed to you at your address as shown
in the records of the Company in this Note hereto or to such other address as
you may designate to the Company in writing and, if to the Company, shall be
delivered or mailed by registered mail to the Company at 2001
- 6 -
<PAGE>
Marcus Avenue, Lake Success, New York 11042-1011, or to such other address as
the Company may designate to you in writing.
11. New York Law. This Note shall be construed in accordance with and
governed by the lass of the State of New York without regard to principles of
conflicts of law, and cannot be changed, discharged or terminated orally but
only by an instrument in writing signed by the party against whom enforcement of
any change, discharge or termination is sought.
12. Headings. The headings of the sections of this Note are inserted for
convenience only-and do not affect the meaning of such section.
IN WITNESS WHEREOF, AMERTRANZ WORLDWIDE, INC. has caused this Note to be
signed in its corporate name by a duly authorized officer and to be dated the
date and year first above written.
AMERTRANZ WORLDWIDE, INC.
By: _______________________________
Martin Hoffenberg
Vice Chairman
C64895.198
- 7 -
<PAGE>
AmerTranz Worldwide, Inc.
2001 Marcus Avenue
Lake Success, New York 11042
As of February , 1996
TO ALL CONVERTIBLE NOTEHOLDERS
Dear ________________:
You are the holder of the Convertible Subordinated Promissory Note ( the
"Note") of AmerTranz Worldwide, Inc. ("AmerTranz") dated __________, 1995, in
the principal amount of $_________________, due _____________, 1996, bearing
interest at [7% or 9 3/4 % per annum];
AmerTranz intends on or about February 6, 1996 to close a transaction (the
"Transaction") wherein AmerTranz will acquire the air freight operating business
of Caribbean Freight Systems, Inc. and TIA, Inc. (collectively, "Freight
Group").
Pursuant to the terms of the Note and the Assets Exchange Agreement between
AmerTranz and Freight Group, at the closing of the Transaction the principal and
accrued interest due pursuant to the Note will be automatically converted into
_____________ shares of Common Stock, $.01 par value, of AmerTranz (the
"AmerTranz Shares").
In order to induce AmerTranz and Freight Group to enter into the Assets
Exchange Agreement, you hereby assign all of your right, title, and interest in
the Note to AmerTranz Worldwide Holding Corp. ("Holding") in exchange for
_______________ shares of Common Stock, $.01 par value, of Holding (the "Holding
Shares"). You and Holding agree that the Holding Shares represent the parties'
agreement with respect to the market value of the Note. Upon receipt of this
executed agreement, Holding will issue to you a stock certificate in the
aforesaid amount and such certificate when so issued and delivered shall
represent validly issued, fully paid and nonassessable shares of such Common
Stock of Holding. Upon the closing of the Transaction, Holding will become the
parent company of AmerTranz, and AmerTranz shall become a wholly owned
subsidiary of Holding.
You hereby warrant and represent that you have good and marketable title to
the Note, free and clear of all liens, claims, and encumbrances. You confirm
that you have no claim or cause of action against AmerTranz arising out of or in
connection with, the Note, and that you hold no other notes of AmerTranz except
the Note. AmerTranz confirms that it has no claim or cause of action against you
arising out of or in connection with the Note.
- 1 -
<PAGE>
The Holding Shares acquired by you are being acquired in a private
transaction not involving a public offering and have not been registered under
the Securities Act of 1933, as amended (the "Act"), and will be issued to you by
Holding in reliance upon an exemption from registration under Sections 4(2)
and/or 4(6) of the Act.
You hereby represent and warrant:
(i) I am acquiring the Holding Shares for my own account for investment
purposes only and not with a view to resale or redistribution. I understand and
acknowledge that the Holding Shares are being issued to me in a transaction
exempt from the registration requirements of the Act and that Holding is relying
upon my representations for the purpose of determining the availability of an
applicable exemption.
(ii) I am an accredited investor as that term is defined under the General
Rules and Regulations under the Act.
(iii) I have received such information requested by me concerning the
business, management and financial affairs of Holding in order to evaluate the
merits and risks of making this investment.
(iv) I have had the opportunity to ask questions of, and receive answers
from, the officers of Holding concerning the terms and conditions of this
investment and to obtain information relating to the organization, operation and
business of the Holding and of Holding's contracts, agreements and obligations.
I am familiar with the present capital structure of Holding, as well as the
fact that the percentage of ownership which the Holding Shares represent in
Holding will be diluted by reason of the contemplated future issuance of equity
or convertible debt securities of Holding as set forth in the Assets Exchange
Agreement.
In entering into this Agreement and in purchasing the Holding Shares, I
further acknowledge that:
(i) Holding has informed me that the Holding Shares have not been offered
for sale by means of general advertising or solicitation.
(ii) The Holding Shares may not be resold by me absence of registration
under the Act or exemption from registration.
(iii) The following legend shall be placed on the Certificate(s) evidencing
the Holding Shares:
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<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
(iv) Holding may place a stop transfer order on its transfer books against
the Holding Shares, which stop order shall be removed upon receipt of the
opinion of counsel referred to in the legend described in clause (iii) above.
I understand that all documents, records, and books pertaining to this
investment have been made available for inspection to me, my attorneys and/or
accountants.
I have had a reasonable opportunity to ask questions of and receive answers
from a person acting on behalf of Holding concerning the exchange of the Holding
Shares and all such questions have been answered to my full satisfaction.
I hereby acknowledge and agree, subject to any applicable state securities
law, that the acquisition hereunder is irrevocable, that it is not entitled to
cancel, terminate or revoke this Agreement or any agreements hereunder and that
this Agreement and such other agreements shall be binding upon and inure to the
benefit of the parties and their heirs, executors, administrators, successors,
legal representatives, and assigns. Anything herein to the contrary
notwithstanding, including the irrevocable nature hereof, this letter and the
obligations of the parties hereunder shall without any further action be deemed
to be void and of no further force and effect and this letter canceled,
terminated and revoked if the Transaction is not closed on or prior to February
15, 1996, with time being of the essence.
Please indicate your acknowledgment and agreement with the terms of this
letter agreement by signing your name below where indicated.
Very truly yours,
AMERTRANZ WORLDWIDE, INC.
By:____________________________
ACKNOWLEDGED AND AGREED TO:
- ----------------------------------
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<PAGE>
<PAGE>
NEITHER THIS NOTE, THE SHARES OF COMMON STOCK INTO WHICH THIS NOTE IS
CONVERTIBLE, NOR THE SHARES OF COMMON STOCK ISSUABLE IN PAYMENT OF INTEREST HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITION OF A CERTAIN NOTE PURCHASE
AGREEMENT OF EVEN DATE (THE "NOTE PURCHASE AGREEMENT").
9 3/4% Convertible Subordinated Promissory Note
Due _______________
As of ____________, 1995
Amertranz Worldwide, Inc., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to ____________, with address at 33
Berkshire Road, Woodcliff Lake, New Jersey 07675, or registered assigns, on
____________, the principal amount of
_________________________________________________ ($_______) Dollars together
with interest (computed on the basis of a 360-day year of twelve 30-day months)
which shall accrue on the unpaid portion of said principal amount from the date
hereof at the rate of _____% per annum . The interest provided for herein shall
be paid in kind by the Company by the delivery of one (1) share of the Company's
Common Stock, $.01 par value (the "Common Stock"), for each $1.00 of accrued
interest (the "Interest Shares"). Both the principal hereof and Interest Shares
are payable at the offices of the Company, 2001 Marcus Drive, Lake Success, New
York 11042.
1. Authorized Issue. This Note is one of a duly authorized issue of 9 3/4%
Convertible Subordinated Promissory Notes due _______________ (the "Notes") made
or to be made by the Company in aggregate original authorized principal amount
of up to $500,000, similar in terms except for principal amounts and named
payees, offered by the Company pursuant to a Note Purchase Agreement dated as of
October 10, 1995.
2. Conversion.
(a) Mandatory Conversion. This Note shall cease to be debt or obligation of
the Company and shall, without any affirmative act by either the Company or the
holder hereof, be converted into and shall represent one (1) share of the
Company's Common Stock for each One ($1.00) Dollar in unpaid principal amount of
Note, upon the effective date of a merger or exchange or acquisition of assets
between the Company and Caribbean Freight Systems, Inc. and/or TIA, Inc.
(collectively "CAS") on substantially the terms provided for in the Letter of
Intent dated May 10, 1995 between the Company and CAS, or upon such other and
different conditions as the Company, in its sole discretion, shall negotiate.
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(b) Optional Conversion. At the option of the holder hereof, this Note may
be converted at any time, in full or in part, into shares of Common Stock in the
same manner and upon the same terms as provided in Subsection 2(a) hereof, by
surrender of this Note with notice of conversion thereon duly executed by such
holder (specifying the portion of the principal amount thereof, and accrued
interest thereon, to be converted in the case of partial conversion) to the
Company at its principal office, or at the office of the agency maintained for
such purpose. Upon any partial conversion of a Note, the Company at its expense
will forthwith issue and deliver to or upon the order of the holder thereof a
new Note or Notes in principal amount equal to the unpaid and unconverted
principal amount of such surrendered Note, such new Note or Notes to be dated
and to bear interest from the date to which interest has been paid on such
surrendered Note. Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which such Note shall
have been so surrendered to the Company or such agency; and at such time the
rights of the holder of such Note as such shall, to the extent of the principal
amount thereof, and accrued interest thereon, converted, cease, and the person
or persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record thereof.
(c) As promptly as practicable after the conversion (whether mandatory or
optional) of this Note in full or in part, and in any event within fifteen (15)
calendar days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will issue and deliver to the holder of this
Note, or as such holder (upon payment by such holder of any applicable transfer
taxes) may direct, a certificate or certificates for the number of full shares
of Common Stock issuable upon such conversion.
(d) The Company will at all times reserve and keep available, solely for
issuance and delivery upon the conversion of the Notes, authorized but unissued
shares of Common Stock which shall be issuable upon the conversion of the Notes.
All shares of Common Stock issuable upon conversion of the Notes shall be when
issued, validly issued, fully paid and nonassessable, with no liability on the
pat of the holders thereof.
3. Restrictions on Transfer.
(a) Unless a Registration Statement with respect thereto under the
Securities Act is at the time in effect, this Note, the shares of Common Stock
into which the Note may be converted, and the Interest Shares shall not be
transferred (such term to include any disposition which would constitute a sale
within the meaning of the Securities Act), except upon compliance with the
conditions specified in this Subsection 3(a) and unless such Registration
Statement is effective or such conditions are complied with, the Company may
issue or cause to be issued to stop orders preventing any such transfer.
(b) The holder of this Note by the acceptance hereof agrees, prior to any
transfer or attempted transfer of this Note, that it shall not transfer this
Note unless a Registration Statement under the Securities Act is in effect with
respect to such transfer or, prior to such transfer, it shall have delivered to
the Company an opinion of counsel acceptable to the
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<PAGE>
Company, to the effect that the proposed transfer may be effected without
registration under the Securities Act. In the event such transfer is approved by
the Company, the legend set forth on the facing page of this Note may be removed
from the Note unless, in the opinion of counsel for the Company, such legend is
required by the applicable provisions of the Securities Act.
4. Subordination of Indebtedness.
(a) This Note is issued subject to the provisions of this Section 4; each
person taking or holding this Note accepts and agrees to be bound by these
provisions.
(b) Attached hereto and made a part hereof, and incorporated by reference
herein as if fully set forth at length, is a Subordination Agreement (the
"Subordination Agreement") between and among TIA, the Company and Michael Barsa.
To the extent that the provisions of this Note or the Note Purchase Agreement
conflict with the Subordination Agreement, the terms of the Subordination
Agreement shall control.
(c) This Note is a junior obligation of the Company and is fully
subordinated to all Senior Indebtedness (as hereinafter defined) of the Company
now existing or hereafter incurred. "Senior Indebtedness" is all indebtedness,
liabilities and obligations of the Company for money borrowed from or advanced
by TIA, or any obligation owed by the Company to TIA as defined in the
Subordination Agreement, and any deferrals, renewals or extensions of any Senior
Indebtedness and notes or other instruments of indebtedness issued in respect of
or in exchange for any Senior Indebtedness or any funding to pay or replace any
Senior Indebtedness, unless in the instrument creating or evidencing the same,
or pursuant to which it is outstanding, it is provided that such indebtedness or
such deferral, renewal or extension thereof is not senior in right of payment to
this Note. No payment or distribution of any kind or character on account of
principal or interest on this Note shall be permitted during the continuance of
any default in the payment of principal, premium, if any, or interest on any
Senior Indebtedness.
5. Default. If one or more of the following events (herein called "Events
of Default") shall occur for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body), and the holder of any Note shall have given fifteen (15) days prior
written notice to the Company by overnight courier, registered mail, postage
prepaid, return receipt requested, and the Company shall not have cured shall
default within such period:
(i) default in the due and punctual payment of the principal of, or
interest on, any Note when and as the same shall become due and payable, whether
at maturity or at a date fixed for prepayment or by acceleration or otherwise;
(ii) breach by the Company of any covenant contained in this Note and/or
default by the Company in any provision of the Note Purchase Agreement executed
in connection with the sale and purchase of the Notes; or
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<PAGE>
(iii) the Company makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally as they become due;
or
(iv) an order, judgment or decree is entered adjudicating the Company or
any subsidiary bankrupt or insolvent; or
(v) the Company petitions or applies to any tribunal for the appointment of
a trustee or receiver of the Company, or of any substantial part of the assets
of the Company, or commences any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a subsidiary) relating to the Company
or a subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction whether
nor or hereafter in effect; or
(vi) any such petition or application is filed, or any such proceedings are
commenced, against the Company, and the Company by any act indicates its
approval thereof, consent or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee or receiver, or approving the
petition in any such proceedings, and such order, judgment or decree remains
unstayed and in effect for more than sixty (60) days; or
(vii) any order, judgment or decree is entered in any proceeding against
the Company or any subsidiary decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than sixty
(60) days; or
(viii) any order, judgment or decree is entered in any proceeding against
the Company or any subsidiary decreeing a split-up of the Company which requires
the divestiture of a substantial part of the consolidated assets of the Company
and its subsidiaries, or the divestiture of the stock of a subsidiary and such
order, judgment or decree remains unstayed and in effect for more than 60 days;
then and in each and every such case, so long as such Event of Default shall not
have been remedied, the holder of this Note, by notice in writing to the
Company, may declare the principal of this Note then outstanding and the
interest accrued thereon to be due and payable immediately, or convertible
pursuant to Subsection 2(b) hereof, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in this Note contained
to the contrary notwithstanding, the declaration of a default by any holder
shall constitute and operate as a declaration of default of all Notes.
6. Miscellaneous. (a) To the extent permitted by applicable law, the
Company hereby agrees to waive, and does hereby absolutely and irrevocably waive
and relinquish, the benefit and advantage of any valuation, stay, appraisement,
extension or redemption law now existing or which may hereafter exist, which,
but for this provision, might be applicable to any sale made under the judgment,
order or decree of any court, or otherwise, based on this Note or on any claim
for principal or interest on this Note.
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<PAGE>
(b) This Note is issued upon the express condition, to which each
successive holder expressly assents and by receiving the same agrees, that no
recourse under or upon any obligation, covenant or agreement of this Note, or
for the payment of the principal or interest on this Note, or for any claim
based on this Note, shall be had against any incorporator or any past, present
or future stockholder, officer, or director, as such, of the Company or of any
successor corporation, whether by virtue of statute, rule of law or otherwise,
all such individual liability being hereby expressly waived and released as a
condition of and as a part of the consideration for the execution and issue of
this Note; provided, however, that nothing herein shall prevent enforcement of
the liability, if any, of any stockholder or subscriber to capital stock on or
in respect of capital stock not fully paid.
(c) Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Note and of indemnity reasonably
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of this Note if
mutilated, the Company will make and deliver a new Note of like tenor in lieu of
this Note so lost, stolen, destroyed or mutilated. Any new Note made and
delivered in accordance with the provisions of this Subsection 6 (c) shall be
dated as of the date from which unpaid interest has then accrued on the Note so
lost, stolen, destroyed or mutilated.
(d) No course of dealing between the Company and the holder of any of the
Notes or any delay on the part of the holder in exercising any rights under any
of the Notes shall operate as a waiver of any rights of any holder of this Note.
(e) Any and all covenants or events of default under the Notes, except for
the due and punctual payment of principal and interest, may be waived by the
holders of a majority in interest of the principal amount of outstanding Notes
sold (the "Majority Noteholders").
(f) This Note may be prepaid in whole or in pat at any time without penalty
or premium.
7. Binding Effect. The Company agrees that the provisions of this Note
shall bind and shall inure to the benefit of the parties hereto and their
successors and assigns.
8. Amendment and Waiver. Except as otherwise provided herein, this Note may
be amended, and the performance and observance of any term of this Note may be
amended, and the performance and observance of any term of this Note may be
waived, with (and only with) the written consent of the Company and the holder
of this Note.
9. Interest Rate. If any interest rate specified herein is held to be
impermissible, then the rate charged on the indebtedness represented hereby
shall be reduced to the highest rate then permitted by law.
10. Notices. All notices and other communications provided for hereunder
shall be
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<PAGE>
deemed to have been sufficiently given or served for all purposes if delivered
personally, the next day if deposited with an overnight courier service, or five
(5) business days after mailing by registered mail, postage prepaid, return
receipt requested, addressed, if to the Company, at the Company's address set
forth above or if addressed to the holder, at the address set forth above, or to
such other address as the holder hereof may designate to the Company in writing.
11. New York Law. This Note shall be construed in accordance with and
governed by the laws of the state of New York without regard to principles of
conflicts of law, and cannot be changed, discharged or terminated orally but
only by an instrument in writing signed by the party against whom enforcement of
any change, discharge or termination is sought.
12. Headings. The headings of the section of this Note are inserted to
convenience only and do not affect the meaning of such section.
IN WITNESS WHEREOF, AMERTRANZ WORLDWIDE, INC. has caused this Note to be
signed in its corporate name by a duly authorized officer and to be dated the
date and year first above written.
AMERTRANZ WORLDWIDE, INC.
By_____________________________
Chairman
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<PAGE>
AmerTranz Worldwide, Inc.
2001 Marcus Avenue
Lake Success, New York 11042
As of February , 1996
TO ALL CONVERTIBLE NOTEHOLDERS
Dear ________________:
You are the holder of the Convertible Subordinated Promissory Note ( the
"Note") of AmerTranz Worldwide, Inc. ("AmerTranz") dated __________, 1995, in
the principal amount of $_________________, due _____________, 1996, bearing
interest at [7% or 9 3/4 % per annum];
AmerTranz intends on or about February 6, 1996 to close a transaction (the
"Transaction") wherein AmerTranz will acquire the air freight operating business
of Caribbean Freight Systems, Inc. and TIA, Inc. (collectively, "Freight
Group").
Pursuant to the terms of the Note and the Assets Exchange Agreement between
AmerTranz and Freight Group, at the closing of the Transaction the principal and
accrued interest due pursuant to the Note will be automatically converted into
_____________ shares of Common Stock, $.01 par value, of AmerTranz (the
"AmerTranz Shares").
In order to induce AmerTranz and Freight Group to enter into the Assets
Exchange Agreement, you hereby assign all of your right, title, and interest in
the Note to AmerTranz Worldwide Holding Corp. ("Holding") in exchange for
_______________ shares of Common Stock, $.01 par value, of Holding (the "Holding
Shares"). You and Holding agree that the Holding Shares represent the parties'
agreement with respect to the market value of the Note. Upon receipt of this
executed agreement, Holding will issue to you a stock certificate in the
aforesaid amount and such certificate when so issued and delivered shall
represent validly issued, fully paid and nonassessable shares of such Common
Stock of Holding. Upon the closing of the Transaction, Holding will become the
parent company of AmerTranz, and AmerTranz shall become a wholly owned
subsidiary of Holding.
You hereby warrant and represent that you have good and marketable title to
the Note, free and clear of all liens, claims, and encumbrances. You confirm
that you have no claim or cause of action against AmerTranz arising out of or in
connection with, the Note, and that you hold no other notes of AmerTranz except
the Note. AmerTranz confirms that it has no claim or cause of action against you
arising out of or in connection with the Note.
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5361[6/11/96]
<PAGE>
The Holding Shares acquired by you are being acquired in a private
transaction not involving a public offering and have not been registered under
the Securities Act of 1933, as amended (the "Act"), and will be issued to you by
Holding in reliance upon an exemption from
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<PAGE>
registration under Sections 4(2) and/or 4(6) of the Act.
You hereby represent and warrant:
(i) I am acquiring the Holding Shares for my own account for investment
purposes only and not with a view to resale or redistribution. I understand and
acknowledge that the Holding Shares are being issued to me in a transaction
exempt from the registration requirements of the Act and that Holding is relying
upon my representations for the purpose of determining the availability of an
applicable exemption.
(ii) I am an accredited investor as that term is defined under the General
Rules and Regulations under the Act.
(iii) I have received such information requested by me concerning the
business, management and financial affairs of Holding in order to evaluate the
merits and risks of making this investment.
(iv) I have had the opportunity to ask questions of, and receive answers
from, the officers of Holding concerning the terms and conditions of this
investment and to obtain information relating to the organization, operation and
business of the Holding and of Holding's contracts, agreements and obligations.
I am familiar with the present capital structure of Holding, as well as the
fact that the percentage of ownership which the Holding Shares represent in
Holding will be diluted by reason of the contemplated future issuance of equity
or convertible debt securities of Holding as set forth in the Assets Exchange
Agreement.
In entering into this Agreement and in purchasing the Holding Shares, I
further acknowledge that:
(i) Holding has informed me that the Holding Shares have not been offered
for sale by means of general advertising or solicitation.
(ii) The Holding Shares may not be resold by me absence of registration
under the Act or exemption from registration.
(iii) The following legend shall be placed on the Certificate(s) evidencing
the Holding Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
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<PAGE>
"ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
(iv) Holding may place a stop transfer order on its transfer books against
the Holding Shares, which stop order shall be removed upon receipt of the
opinion of counsel referred to in the legend described in clause (iii) above.
I understand that all documents, records, and books pertaining to this
investment have been made available for inspection to me, my attorneys and/or
accountants.
I have had a reasonable opportunity to ask questions of and receive answers
from a person acting on behalf of Holding concerning the exchange of the Holding
Shares and all such questions have been answered to my full satisfaction.
I hereby acknowledge and agree, subject to any applicable state securities
law, that the acquisition hereunder is irrevocable, that it is not entitled to
cancel, terminate or revoke this Agreement or any agreements hereunder and that
this Agreement and such other agreements shall be binding upon and inure to the
benefit of the parties and their heirs, executors, administrators, successors,
legal representatives, and assigns. Anything herein to the contrary
notwithstanding, including the irrevocable nature hereof, this letter and the
obligations of the parties hereunder shall without any further action be deemed
to be void and of no further force and effect and this letter canceled,
terminated and revoked if the Transaction is not closed on or prior to February
15, 1996, with time being of the essence.
Please indicate your acknowledgment and agreement with the terms of this
letter agreement by signing your name below where indicated.
Very truly yours,
AMERTRANZ WORLDWIDE, INC.
By:____________________________
ACKNOWLEDGED AND AGREED TO:
- ----------------------------------
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<PAGE>
<PAGE>
12% Subordinated Promissory Note
Due _____________
$_____ As of ________________
AmerTranz Worldwide, Inc., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to _____________________ ("_____"), with
address at _________________________________ on ____________, the principal sum
of _______________________ ($_______ ) Dollars together with interest which
shall accrue on the unpaid portion of said principal sum from the date hereof at
the rate of 12% per annum.
1. Purchase Agreement. This Note is subject to the terms and conditions of
the Purchase Agreement of even date between the Company and ______ (the Purchase
Agreement").
2. Subordination of Indebtedness. This Note is a junior obligation of the
Company and is fully subordinated to all senior indebtedness of the Company now
existing or hereafter incurred. No payment or distribution of any kind or
character on account of principal or interest on this Note shall be permitted
during the continuance of any default in the payment of principal, premium, if
any, or interest on any such senior indebtedness.
3. Default. If one or more of the following events (herein called "Events
of Default") shall occur for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body), and the holder of this Note shall have given fifteen (15) days prior
written notice to the Company by overnight courier, registered mail, postage
prepaid, return receipt requested, and the Company shall not have cured shall
default within such period:
(a) default in the due and punctual payment of the principal of, or
interest on, this Note when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by acceleration or
otherwise;
(b) breach by the Company of any covenant contained in this Note and/or
default by the Company in any provision of the Purchase Agreement; or
(c) the Company makes an assignment for the benefit of creditors or admits
in writing its inability to pay its debts generally as they become due; or
(d) an order, judgment or decree is entered adjudicating the Company or any
subsidiary bankrupt or insolvent; or
(e) the Company petitions or applies to any tribunal for the appointment of
a trustee or receiver of the Company, or of any substantial part of the assets
of the Company, or
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<PAGE>
commences any proceedings (other than proceedings for the voluntary liquidation
and dissolution of a subsidiary) relating to the Company or a subsidiary under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction whether nor or hereafter in
effect; or
(f) any such petition or application is filed, or any such proceedings are
commenced, against the Company, and the Company by any act indicates its
approval thereof, consent or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee or receiver, or approving the
petition in any such proceedings, and such order, judgment or decree remains
unstayed and in effect for more than sixty (60) days; or
(g) any order, judgment or decree is entered in any proceeding against the
Company or any subsidiary decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than sixty
(60) days; or
(h) any order, judgment or decree is entered in any proceeding against the
Company or any subsidiary decreeing a split-up of the Company which requires the
divestiture of a substantial part of the consolidated assets of the Company and
its subsidiaries, or the divestiture of the stock of a subsidiary and such
order, judgment or decree remains unstayed and in effect for more than 60 days;
then and in each and every such case, so long as such Event of Default shall not
have been remedied, the holder of this Note, by notice in writing to the
Company, may declare the principal of this Note then outstanding and the
interest accrued thereon to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable.
4. Enforcement. If the holder of this Note institutes action to enforce or
collect this Note for the non-payment at maturity, including accelerated
maturity, the actual expenditures for such action, including reasonable
attorneys fees, shall be paid by the Company upon the final determination of
such action.
5. Presentment, Demand, Etc. Presentment, demand, notice of dishonor,
notice of protest and protest of this Note are hereby waived by the Company and
all sureties, guarantors and endorsers hereof and their successors and assigns.
No delay or failure on the part of any holder hereof in exercising any right,
remedy or option shall operate as a waiver of any right, remedy or option
hereunder; and no waiver, modification, alteration or change of any of the
provisions hereof shall be effective unless in writing signed by the holder of
this Note at such time and then only to the extent therein set forth.
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<PAGE>
6. Miscellaneous.
(a) To the extent permitted by applicable law, the Company hereby agrees to
waive, and does hereby absolutely and irrevocably waive and relinquish, the
benefit and advantage of any valuation, stay, appraisement, extension or
redemption law now existing or which may hereafter exist, which, but for this
provision, might be applicable to any sale made under the judgment, order or
decree of any court, or otherwise, based on this Note or on any claim for
principal or interest on this Note.
(b) This Note is issued upon the express condition, to which each
successive holder expressly assents and by receiving the same agrees, that no
recourse under or upon any obligation, covenant or agreement of this Note, or
for the payment of the principal or interest on this Note, or for any claim
based on this Note, shall be had against any incorporator or any past, present
or future stockholder, officer, or director, as such, of the Company or of any
successor corporation, whether by virtue of statute, rule of law or otherwise,
all such individual liability being hereby expressly waived and released as a
condition of and as a part of the consideration for the execution and issue of
this Note; provided, however, that nothing herein shall prevent enforcement of
the liability, if any, of any stockholder or subscriber to capital stock on or
in respect of capital stock not fully paid.
(c) Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Note and of indemnity reasonably
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of this Note if
mutilated, the Company will make and deliver a new Note of like tenor in lieu of
this Note so lost, stolen, destroyed or mutilated. Any new Note made and
delivered in accordance with the provisions of this Subsection 6 (c) shall be
dated as of the date from which unpaid interest has then accrued on the Note so
lost, stolen, destroyed or mutilated.
(d) No course of dealing between the Company and the holder of this Note or
any delay on the part of the holder of this Note in exercising any rights
hereunder shall operate as a waiver of any rights of the holder of this Note.
(e) This Note may be prepaid in whole or in pat at any time without penalty
or premium.
7. Binding Effect. The Company agrees that the provisions of this Note
shall bind and shall inure to the benefit of the parties hereto and their
successors and assigns.
8. Amendment and Waiver. Except as otherwise provided herein, this Note may
be amended, and the performance and observance of any term of this Note may be
amended, and the performance and observance of any term of this Note may be
waived, with (and only with) the written consent of the Company and the holder
of this Note.
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<PAGE>
9. Interest Rate. If any interest rate specified herein is held to be
impermissible, then the rate charged on the indebtedness represented hereby
shall be reduced to the highest rate then permitted by law.
10. Notices. All notices and other communications provided for hereunder
shall be deemed to have been sufficiently given or served for all purposes if
delivered personally, the next day if deposited with an overnight courier
service, or five (5) business days after mailing by registered mail, postage
prepaid, return receipt requested, addressed, if to the Company, at the
Company's address set forth above or if addressed to the holder, at the address
set forth above, or to such other address as the holder hereof may designate to
the Company in writing.
11. New York Law. This Note shall be construed in accordance with and
governed by the laws of the state of New York without regard to principles of
conflicts of law, and cannot be changed, discharged or terminated orally but
only by an instrument in writing signed by the party against whom enforcement of
any change, discharge or termination is sought.
12. Headings. The headings of the section of this Note are inserted to
convenience only and do not affect the meaning of such section.
IN WITNESS WHEREOF, AMERTRANZ WORLDWIDE, INC. has caused this Note to be
signed in its corporate name by a duly authorized officer and to be dated the
date and year first above written.
AMERTRANZ WORLDWIDE, INC.
By_____________________________
Martin Hoffenberg
Chairman
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<PAGE>
AmerTranz Worldwide, Inc.
2001 Marcus Avenue
Lake Success, New York 11042
January ____, 1996
[12% NOTEHOLDER]
Dear ______________:
You are the holder of a Subordinated Promissory Note of AmerTranz
Worldwide, Inc. ("AmerTranz") in the principal amount of $_____________, due
________________, 1996, bearing interest at 12% per annum (the "Note").
AmerTranz intends on or about February 1, 1996 to close a transaction (the
"Transaction") wherein AmerTranz will acquire the air freight operating business
of Caribbean Freight Systems, Inc. and TIA, Inc. (collectively, "Freight
Group").
In order to induce AmerTranz and Freight Group to enter into the
Transaction, you hereby assign all of your right, title, and interest in the
Note to AmerTranz Worldwide Holding Corp. ("Holding") in exchange for the
Subordinated Promissory Note of Holding in the principal amount of $___________,
due ______________, 1996, bearing interest at 12% per annum (the "Holding
Note"). Interest upon the principal amount of the Holding Note shall be computed
from ______________, 1995 (the date of the Note). The terms of the Holding Note
will otherwise be identical to the terms of the Note. Upon the closing of the
Transaction, Holding will become the parent company of AmerTranz, and AmerTranz
shall become a wholly owned subsidiary of Holding.
You hereby warrant and represent that you have good and marketable title to
the Note, free and clear of all liens, claims, and encumbrances. You confirm
that you have no claim or cause of action against AmerTranz arising out of or in
connection with, the Note, and that you hold no other notes of AmerTranz except
the Note.
The Holding Note acquired by you is being acquired in a private transaction
not involving a public offering and has not been registered under the Securities
Act of 1933, as amended (the "Act"), and will be issued to you by Holding in
reliance upon an exemption from registration under Sections 4(2) and/or 4(6) of
the Act.
You hereby represent and warrant:
(i) I am an accredited investor as that term is defined under the General
Rules and Regulations under the Act.
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<PAGE>
(ii) I have received such information requested by me concerning the
business, management and financial affairs of Holding in order to evaluate the
merits and risks of making this investment.
(iii) I have had the opportunity to ask questions of, and receive answers
from, the officers of Holding concerning the terms and conditions of this
investment and to obtain information relating to the organization, operation and
business of the Holding and of Holding's contracts, agreements and obligations.
I understand that all documents, records, and books pertaining to this
investment have been made available for inspection to me, my attorneys and/or
accountants.
I have had a reasonable opportunity to ask questions of and receive answers
from a person acting on behalf of Holding concerning the exchange of the Note
for the Holding Note and all such questions have been answered to my full
satisfaction.
I hereby acknowledge and agree, subject to any applicable state securities
law, that the exchange hereunder is irrevocable, that it is not entitled to
cancel, terminate or revoke this Agreement or any agreements hereunder and that
this Agreement and such other agreements shall be binding upon and inure to the
benefit of the parties and their heirs, executors, administrators, successors,
legal representatives, and assigns.
Please indicate your acknowledgment and agreement with the terms of this
letter agreement by signing your name below where indicated.
Very truly yours,
AMERTRANZ WORLDWIDE, INC.
By:____________________________
AMERTRANZ WORLDWIDE HOLDING
CORP.
By:____________________________
ACKNOWLEDGED AND AGREED TO:
[NOTEHOLDER]
By:_________________________________
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<PAGE>
AMERTRANZ WORLDWIDE, INC.
2001 Marcus Avenue
Lake Success, New York 11042
TO ALL HOLDERS OF 12% SUBORDINATED PROMISSORY NOTES OF AMERTRANZ
WORLDWIDE, INC.
Dear________________________:
You are the holder of a 12% Subordinated Promissory Note (the "Note")
of AmerTranz Worldwide, Inc. ("AmerTranz") in the principal amount of
________________, due _________________, 1996. In order to close the transaction
wherein AmerTranz is acquiring the air freight forwarding operating assets of
Caribbean Freight Systems, Inc. and TIA, Inc. (the "Transaction") and the
borrowing of up to $2,800,000 from such lenders for whom GKN Securities Corp.
("GKN") will act as agent (the "Bridge Financing") it is necessary to change the
maturity date of your Note to conform with the maturity date of the notes to be
issued to the lenders participating in the Bridge Financing. The maturity date
of the notes issued in connection with the Bridge Financing is as follows:
(i) the second anniversary of the date hereof, (ii) the date of successful
consummation by the Company of an initial public offering of its securities, or
(iii) the date of consummation by the Company of a sale by the Company of all or
substantially all of its assets or the sale of all or substantially all of its
outstanding shares of Common Stock, or merger or consolidation of the Company.
Please indicate your acknowledgment and agreement to the change in the
maturity date of the Note by signing your name below where indicated.
Very truly yours,
AMERTRANZ WORLDWIDE, INC.
BY:_____________________________
ACKNOWLEDGED AND AGREED TO:
- -------------------------------------
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<PAGE>
<PAGE>
PROMISSORY NOTE
$10,000,000 Baltimore, Maryland
February 7, 1996
On the date hereof, Amertranz Worldwide Holding Corp. became obligated to
TIA, Inc. and Caribbean Freight Systems, Inc. in the principal amount of
$10,000,000 pursuant to the terms of an Assets Exchange Agreement, dated the
date hereof, by and among such parties, among others (the "Assets Exchange
Agreement").
NOW THEREFORE, FOR VALUE RECEIVED, AMERTRANZ WORLDWIDE HOLDING CORP., a
Delaware corporation (the "Maker") hereby promises to pay to the order of TIA,
INC., a Delaware corporation and CARIBBEAN FREIGHT SYSTEMS, INC., a Delaware
corporation, jointly (collectively, the "Payee") the principal sum of
$10,000,000 (the "Principal Sum"), together with interest on the unpaid balance
of the Principal Sum at the rate hereinafter specified, as follows:
(a) six consecutive monthly payments in the amount of
$80,000 each, on March 1, 1996, April 1, 1996, May 1,
1996, June 1, 1996, and July 1, 1996 (the "Initial
Installments"); and
(b) except as hereinafter provided, consecutive monthly
payments in the amount of $166,667 each, beginning
August 1, 1996, and continuing on the first day of
each month thereafter until the entire unpaid
balance of the Principal Sum, all accrued and
unpaid interest and all other amounts due hereun-
der, are paid in full (the "Subsequent Install-
ments").
Pursuant to the terms of the Assets Exchange Agreement, it is contemplated
that the Maker will effect an initial public offering of its capital stock. To
the extent of the outstanding balance of the Principal Sum, accrued interest,
and other amounts due under this Note, the Maker shall pay to the Payee
$2,000,000 of such proceeds concurrently with the receipt by the Maker of such
proceeds.
Interest on the Principal Sum shall accrue at the rate of 8.0% per annum
from the date hereof.
All payments made under this Note shall be applied first to costs of
collection, then to unpaid late fees, then to accrued and unpaid interest, and
the remainder, if any, to the outstanding balance of the Principal Sum.
All payments shall be made in lawful money of the United States of America
in immediately available funds by wire transfer in accordance with instructions
to be provided by the holder hereof at least five days prior to the date such
payment is due.
The Maker hereby waives presentment, protest and demand, notice of demand,
notice of non-payment and notice of dishonor.
<PAGE>
In the event that any payment due hereunder shall not be paid within 10
days after the date due, the Maker shall pay to the Payee a late charge equal to
5% of the amount due and unpaid.
In the event that any payment due hereunder shall not be paid within 10
days after the date due, the interest rate otherwise in effect from time to time
under this Note shall be increased by 3.0% per annum, which increase shall
remain in effect until the missed payment and any applicable late charge shall
be paid, provided, however, that if this Note is accelerated, such increase
shall remain in effect until all amounts due under this Note are paid in full.
The Maker shall have the right to prepay the whole or any part of the
unpaid balance of the Principal Sum at any time and from time to time without
penalty or premium. Unless the holder hereof shall designate a different order
of application, which the holder hereof may do in its sole discretion, all
payments made under this Note shall be applied first to costs of collection,
then to unpaid late fees, then to accrued and unpaid interest, and the
remainder, if any, to the outstanding balance of the Principal Sum. All
prepayments or portions thereof which are applied against the outstanding
balance of the Principal Sum shall be applied against unpaid installments of the
Principal Sum in the inverse order of their maturity.
The obligations of the Maker under this Note are guaranteed pursuant to the
terms of the Guarantee Agreements of even date herewith, copies of which are
attached hereto (collectively, the "Guarantee"), and are secured pursuant to the
terms of the Security Agreement of even date herewith and the Stock Pledge
Agreement of even date herewith, copies of which are attached hereto
(collectively, the "Security Agreements").
The Maker shall be in default hereunder (an "Event of Default") upon the
occurrence of any one or more of the following events:
a. Any payment due hereunder shall not be paid within 10 days after the
date due.
b. The Maker shall (i) apply for or consent to the appointment of, or there
shall be a taking of possession by, a receiver, custodian, trustee or liquidator
for the Maker, or a substantial portion of the Maker's property, (ii) become
generally unable to pay the Maker's debts as they become due, (iii) make a
general assignment for the benefit of creditors or become insolvent, or (iv)
become the debtor party, voluntarily or involuntarily, to any proceeding under
the U.S. Bankruptcy Code or any similar federal or state statute.
c. A default by the Maker or any Obligor (as defined in the Security
Agreements) shall occur or event of default shall be continuing under any of the
Security Agreements.
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<PAGE>
d. A default by any Guarantor (as defined in the Guarantee) shall occur or
event of default shall be continuing under the Guarantee.
e. A default shall occur under the Net Cash Receipts Note (as defined in
the Assets Exchange Agreement).
f. The Maker liquidates, dissolves, or otherwise terminates or ceases to
exist, merges, consolidates or enters into a share exchange, or ceases to engage
in business.
g. The Maker sells, assigns, pledges or otherwise transfers, distributes,
encumbers or leases all or any substantial portion of its assets outside the
ordinary course of the Maker's business, except with the Payee's consent.
Upon the occurrence of an Event of Default, the entire unpaid balance of
the Principal Sum, together with all costs of collection, late charges and
accrued and unpaid interest under this Note, shall, at the option of the holder
hereof, be accelerated and become immediately due and payable without notice to
the Maker.
No failure or delay by the holder hereof to insist upon the strict
performance of any provision of this Note or to exercise any right, power or
remedy consequent upon an Event of Default hereunder, shall constitute a waiver
of any such provision or of any such Event of Default, or preclude the holder
hereof from exercising any such right, power or remedy at any later time or
times. By accepting payment after the due date of any amount payable under this
Note, the holder hereof shall not be deemed to have waived the right either to
require prompt payment when due of all other amounts due under this Note, to
declare an Event of Default hereunder, or to exercise any other available right,
power or remedy.
The Maker promises to pay to the order of the Payee, upon demand, all
reasonable costs and expenses of collection of this Note, including, but not
limited to, attorneys' fees and expenses, plus interest on all such costs and
expenses from the date of demand at the rate in effect from time to time under
this Note.
The Maker hereby empowers any attorney or the clerk of any court of record
within the United States or elsewhere to appear for the Maker before any court
having jurisdiction upon an Event of Default and to confess judgment against the
Maker for the then unpaid amount of the Principal Sum, all late charges then
due, all accrued and unpaid interest, plus reasonable attorneys' fees, together
with costs of suit, hereby waiving and releasing present- ment, demand for
payment, protest, notice of non-payment or error and all rights of exemption,
appeal, modification, vacation, stay of execution, inquisition and extension
upon any levy on real estate or personal property to which Maker may be entitled
under the laws of any state or territory of the United States now in force or
which hereafter may be passed. The inclusion of a fixed
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<PAGE>
amount of attorneys' fees in any confessed judgment shall not limit the Maker's
liability under this Note for all costs of collection, including attorneys' fees
and expenses.
If judgment is entered against the Maker on this Note, the amount of the
judgment entered (which may include principal, interest, default interest, late
charges, fees and costs) shall bear interest at the higher of (i) the highest
rate authorized under this Note as of the date of entry of the judgment, or (ii)
the highest rate permitted by law as of the date of entry of judgment.
All notices and demands required or permitted hereunder shall be
sufficiently given and deemed received by the Maker on the date hand delivered
to the Maker or, if delivered after 5:00 p.m., on the next business day, on the
business day following the day transmitted to the Maker by overnight courier, or
two business days after the date mailed in the U.S., first class, certified,
return receipt requested, postage prepaid, addressed as follows:
Amertranz Worldwide Holding Corp.
2001 Marcus Avenue
Lake Success, New York 11042
Fax (516) 326-2248
Attn: Chairman
or to such other address as the Maker may notify the Payee or other holder
hereof in writing mailed by certified mail, return receipt requested, to the
address of the Payee as set forth above or such other address as then may have
been designated for payment hereunder. No other method of giving notice or
demand is hereby precluded.
The Maker hereby consents to the exercise of personal jurisdiction over the
Maker by all state and federal courts situate in Baltimore City or Baltimore
County, Maryland, and consents to the laying of venue in each such jurisdiction.
The obligations of the Maker under this Note are irrevocable, absolute and
unconditional, and are not subject to any claim or right of setoff. The Maker
hereby waives all rights to assert any setoff or counterclaim in any proceeding
brought to enforce this Note. THE MAKER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY
IN ANY ACTION OR OTHER PROCEEDING BROUGHT TO ENFORCE OR OTHERWISE RELATING TO
THIS NOTE.
No modification, change, waiver or amendment of this Note shall be
effective unless in writing and signed by the Maker and the Payee or other
holder hereof.
This Note shall be governed by and construed and enforced in accordance
with the laws of the State of Maryland.
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<PAGE>
This Note shall be binding upon the Maker and the Maker's successors and
assigns.
IN WITNESS WHEREOF, this Note has been executed, under seal, with the
intention of making this a sealed instrument, as of the day and year first above
written.
WITNESS/ATTEST: AMERTRANZ WORLDWIDE HOLDING CORP.
_________/s/__________ By: _________/s/____________(SEAL)
Michael Barsa
Vice President
STATE OF NEW YORK)
COUNTY OF NEW YORK)
I HEREBY CERTIFY, that on this 7th day of February, 1996, before me, the
subscriber, a Notary Public of the State aforesaid, personally appeared Michael
Barsa, who acknowledged himself to be the Vice President of Amertranz Worldwide
Holding Corp., a Delaware corporation, and that he, being authorized to do so,
executed this Promissory Note for the purposes contained therein by signing the
Promissory Note on behalf of such entity, in my presence.
____________/s/______________(SEAL)
Notary Public
My Commission Expires:____________
C59906D.198
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<PAGE>
<PAGE>
AGREEMENT
Dated: February __, 1996
Parties:
MARTIN HOFFENBERG, an individual, residing at 24 Ridge Road, Searingtown,
New York 11507 ( Hoffenberg);
AMERTRANZ WORLDWIDE, INC., a Delaware corporation, with principal office at
2001 Marcus Avenue, Lake Success, New York 11042 ( AmerTranz); and
AMERTRANZ WORLDWIDE HOLDING CORP., a Delaware corporation, with principal
office at 2001 Marcus Avenue, Lake Success, New York 11042 (the Company).
W I T N E S S E T H:
WHEREAS, Hoffenberg and AmerTranz have heretofore entered into an
Employment Agreement dated as of January 1, 1995 (the Employment Agreement); and
WHEREAS, the parties wish to provide for a change in Hoffenbergs employment
and to acknowledge the status of Hoffenbergs equity interest in the Company; and
WHEREAS, the parties wish to make provision for certain other matters
describing the relationship among them.
NOW, THEREFORE, the parties agree as follows:
1. The Employment Agreement is hereby terminated, effective immediately.
2. Hoffenberg does hereby resign his positions as an officer, as a director
and as an employee of AmerTranz and its subsidiaries, in any and all positions
in which he has so served, effective immediately.
3. Hoffenberg warrants that except for the Employment Agreement there is no
other contract or commitment providing for his employment with AmerTranz or with
the Company. Hoffenberg confirms that he has no claims or causes of action
against AmerTranz or the Company, except for outstanding loans, accrued salary
and benefits due to him by AmerTranz as reflected on the books of AmerTranz and
as set forth on Schedule A annexed hereto. Annexed hereto as Exhibit B is the
form of general release executed by Hoffenberg and delivered to the Company
simultaneously herewith.
4. Hoffenberg is hereby engaged by the Company as a consultant, to devote
his full business time and attention to the successful performance of all
responsibilities assigned to him in connection with the proposed initial public
offering of securities of the Company and with respect to any other matters that
may be assigned or delegated to him by the Company, for a period of six (6)
months commencing upon the date hereof. In the event that Hoffenberg shall be
derelict in the performance of such services, he shall be given written notice
detailing his failure and permitting him a reasonable period of time to cure or
take good faith action that will cure. If he then fails to cure, the Company may
terminate his consulting at once.
5. Hoffenberg shall indemnify the Company and AmerTranz from and against
any loss or damage that may result from any actions he might take which have not
been authorized pursuant to his consulting engagement with the Company.
6. In accordance with the consulting engagement described herein Hoffenberg
cannot and will not execute any documents binding upon the Company or AmerTranz,
nor will he make any representations on behalf of the Company or AmerTranz.
7. Hoffenberg shall be paid a consulting fee of $75,000 in bimonthly
installments of $6,250, and shall also be entitled to have maintained in force
the health insurance protection heretofore provided to him by AmerTranz and no
other benefits of any kind or nature will be provided to him.
8. During the term of his engagement as a consultant to the Company and for
a period of one (1) year thereafter, Hoffenberg will not engage in any business,
directly or indirectly, which is in competition with the Company or any of its
subsidiaries. Furthermore, he will not solicit the employment or other
affiliation of any person who was an employee of the Company or of any of the
Companys subsidiaries at any time during the term of his consulting engagement
by the Company, nor will he solicit any customer of the Company, for a period of
one (1) year after the term of such engagement. In the event that this provision
is determined by a court of competent jurisdiction to be unenforceable, the
parties hereby consent to the enforcement of this provision to the maximum
extent permitted by applicable law, including, but not limited to, obtaining a
restraining order or preliminary injunction.
9. Based upon the transaction described in an Assets Exchange Agreement to
be entered into among the parties hereto, and other related transactions, the
parties acknowledge and agree that Hoffenberg will exchange certain of his
shares of common stock and convertible notes of AmerTranz for shares of common
stock of the Company. He warrants that upon the consummation of the proposed IPO
he will own shares of the Company beneficially and/or of record aggregating less
than five (5%) percent of the total shares of common stock of the Company then
issued and outstanding.
10. Hoffenberg agrees that upon the execution of the Assets Exchange
Agreement he will execute an irrevocable proxy for all shares of common stock of
the Company owned by him designating TIA, Inc. to vote all of such shares for a
period of five (5) years. However, this shall not be deemed to restrict
Hoffenbergs right to sell any of such shares.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement as of
the date first above written.
----------------------------
Martin Hoffenberg
AMERTRANZ WORLDWIDE, INC.
By:_________________________
Bruce Brandi, President
AMERTRANZ WORLDWIDE HOLDING CORP.
By:_________________________
Stuart Hettleman, President
<PAGE>
Schedule A
Outstanding loans, accrued salary and benefits
per books of AmerTranz Worldwide, Inc.
due Martin Hoffenberg a/o 2/5/96:
Loans (reflecting undistributed profit due to
Hoffenberg as Subchapter S shareholder
of Integrity Logistics, Inc.) $69,000
Accrued Salary and Benefits $38,525
Accrued 1995 Vacation $10,385
Unsubmitted Expense Reports $ 3,000
<PAGE>
C64959.198 A/L 1:6/6-7/96
EMPLOYMENT AGREEMENT
AGREEMENT made this day of September, 1994, by and between BRUCE BRANDI,
residing at 3624 Blakeford Club Drive, Marietta, Georgia 30062 (hereinafter
referred to a the "Employee") and AMERFORD DOMESTIC INC., a New York corporation
with principal offices located 2001 Marcus Avenue, Lake Success, New York
10042-1011 (hereinafter referred to as the "Company").
W I T N E S S E T H :
WHEREAS, the Company, directly through itself and through its parent
corporation, INTEGRITY LOGISTICS, INC. ("Integrity"), is engaged in the business
of providing domestic and international freight forwarding to the general
public; and
WHEREAS, Employee has executive and operational background and expertise in
the freight forwarding industry; and
WHEREAS, the Company desires to secure for the benefit of the Company and
Integrity, the experience, ability and services of the Employee; and
WHEREAS, the Employee desires to commence employment with the Company,
pursuant to the terms and conditions herein set forth, superseding all prior
agreements between the Company, Integrity and Employee;
NOW, THEREFORE, it is mutually agreed by and between the parties hereto as
follows:
ARTICLE I
Employment
Subject to and upon the terms and conditions of this Agreement, the Company
hereby employs and agrees to continue the
<PAGE>
C64959.198 A/L
1:6/6-7/96
employment of the Employee during the term hereof, and the Employee hereby
accepts such continued employment in the capacity as President of this Company.
In this capacity, Employee shall report to the Chairman of the Company. Employee
shall also serve as a member of the Company's Board of Directors.
Employee represents and warrants that he is not a party to any contract or
agreement, written or oral which would prevent, or in any way restrict, Employee
from entering into this Agreement and performing his duties hereunder.
ARTICLE II
Duties
(A) The Employee shall, during the term of his employment with the Company,
and subject to the direction and control of the Company's Board of Directors,
perform such duties and functions as may be called upon to perform by the
Company's Board of Directors provided such is consistent with his title and
position during the term of this Agreement.
(B) The Employee agrees to devote his full time and best efforts to the
performance of his duties for the Company and to render such executive services
to Integrity as requested.
(C) The Employee shall perform to the best of his ability the following
services and duties for the Company and Integrity (by way of example, and not by
way of limitation):
(i) Those duties attendant to the position with the Company for which he is
hired;
(ii) Supervision of the management, personnel and operations of the
Company;
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C64959.198 A/L
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(iii) Supervision of the implementation of all sales, promotion,
advertising, public relations, and personnel programs;
(iv) The development, establishment and promotion of the relationships of
the Company, and Integrity with their respective employees, customers, suppliers
and others in the business community.
(v) Maximization and expansion of the Company's domestic and international
freight forwarding business.
(D) Employee shall be based in the Atlanta metropolitan area, and shall
undertake such occasional travel, within or without the United States as is or
may be reasonably necessary in the interests of the Company. Should the employee
consent to relocate to the Company's executive office, the Company shall bear or
reimburse Employee for all reasonable and necessary relocation expenses
inclusive of moving expenses, transportation for Employee and his family,
including trips to look for a new residence, real estate brokerage commissions,
if any, in connection with the sale of Employee's present residence and purchase
of new resident, if any, loss on sale of present house and closing costs and
attorneys' fees in connection with the sale of Employee's present residence and
purchase of new residence.
Should the Company agree to the Employee's subsequent relocation during the
term of this Agreement, or, if Employee faithfully performs all duties under
this Agreement and notifies Company of his intent to relocate to the Atlanta,
Georgia
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metropolitan area within 90 days of this Agreement's termination, Company
will pay to Employee the relocation costs and expenses set forth herein.
ARTICLE III
Compensation
(A) For the first year of the term hereof, the Company shall pay to the
Employee a salary at the rate of $150,000 per annum, payable in equal weekly
installments of pursuant to such regular pay periods adopted by the Company (the
"Base Salary"). The amount of Base Salary in each of the second and third years
of the term hereof shall be increased by $7,500, effective on the second and
third anniversary date of the Commencement Date of this Agreement.
(B) Employee will receive such bonuses or additional compensation as may be
determined from time to time by the Board of Directors pursuant to the formula
utilized for members of senior management and Employee shall be treated
consistent with other members of senior management such as the Chairman, Vice
Chairman, President and other positions of similar authority. During the first
two (2) years of this Agreement, Employee will receive bonuses equal to at least
75% of bonuses paid to Martin Hoffenberg as additional compensation, if any.
(C) The Company shall deduct from Employee's compensation all federal,
state and local taxes which it may now or may hereafter be required to deduct.
(D) The Company shall loan the Employee; at Employee's request, $25,000 for
a period of two (2) years at an interest
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C64959.198 A/L
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rate equal to he legal minimum established by the Internal Revenue Service.
ARTICLE IV
Benefits
(A) During the term hereof, (i) the Company shall provide Employee with
group health insurance benefits with dependant coverage, major medical
insurance, life insurance and disability insurance that is generally provided to
other members or senior management during the term of this Agreement; (ii)
Employee shall be reimbursed by the Company upon presentation of appropriate
vouchers for all reasonable business expenses incurred by the Employee on behalf
of the Company consistent with the Company's expense, travel and entertainment
policies; (iii) the Company shall pay to employee $500 per month as and for an
automobile allowance. Employee acknowledges that such automobile allowance will
be reported by the Company as other taxable income to Employee.
(B) In the event the Company wishes to obtain Key Man life insurance on the
life of the Employee, Employee agrees to cooperate with the Company in
completing any applications necessary to obtain such insurance and promptly
submit to such physical examinations and furnish such information as any
proposed insurance carrier may request.
ARTICLE V
Non-Disclosure
If the Employee shall leave the employ of the Company Voluntarily prior to
termination of this Agreement or any
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C64959.198 A/L
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extension thereof or be terminated by the Company for cause, he shall not
at any time during or after the termination of his employment hereunder make use
of or disclose to any person, corporation, or other entity, for any purpose
whatsoever, any trade secret or other confidential information concerning the
business of the Company or Integrity and/or their respective finances, sales and
marketing information, freight forwarding information, and other business
information relating to the terms of any business relationships with any vendor,
nor shall Employee make use of, disclose or make known the names, historical
freight forwarding information and financial terms relating to any customer list
of the Company or Integrity (collectively referred to as the "Proprietary
Information"). For the purposes of this Agreement, trade secrets, confidential
information and proprietary information shall mean information disclosed to the
Employee or known by his as a consequence of his employment by the Company, or
services rendered to Integrity, whether or not pursuant to this Agreement, and
not generally known in the industry, concerning the business, finances, methods,
operations, sales, marketing information, freight forwarding information and
information relating to vendor lists and customer lists of the Company or
Integrity. The Employee acknowledges that trade secrets and other items of
confidential information, as they may exist from time to time, are valuable and
unique assets of the Company and Integrity and that disclosure of any such
information would cause substantial injury to the company and Integrity. The
foregoing is intended to be confirmatory of the common law of the
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State of Georgia relating to trade secrets and confidential information.
The covenants of this Article V and Article VI hereof are for the express
benefit of the Company and Integrity, each of which shall be an express
beneficiary thereof.
ARTICLE VI
Restrictive Covenant
(A) In the event of the Employee's discharge for gross misconduct or
neglect in the discharge of Employee's duties, including the material failure to
carry out reasonable and lawful requests of the Company, Employee agrees that he
will not, for a period of two (2) years following such termination, solicit
directly or indirectly, any existing customer or employee of the Company.
(B) In the event of the termination of Employee's employment with the
Company for any other reason other than as outlined in Article VI (A), the
Company may prevent Employee from soliciting directly or indirectly, any
existing customer or employee of the Company for a period not to exceed two (2)
years upon advising Employee in writing no later than 90 days prior to
termination that the Company will continue to pay Employee his salary. Salary
shall be paid in compliance with Article III(A). That salary obligation shall be
reduced by any other income Employee receives during that time period, but
Employee has no duty to seek other employment in mitigation.
(C) If any court shall hold that the duration of non- competition or any
other restriction contained in this Article is unenforceable, it is our
intention that same shall not thereby be
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terminated or voided but shall be deemed amended to delete therefrom such
provision or portion adjudicated to be invalid or unenforceable and any court of
competent jurisdiction may substitute in place and stead any alternate
restriction either as to scope or duration.
ARTICLE VII
Term
This Agreement shall be for a term of three (3) years commencing as of
October 10, 1994 (the "Commencement Date") and terminating on the third
anniversary date of such Commencement Date next ensuing, unless sooner
terminated pursuant to the terms hereof. This Agreement shall thereafter be
renewed and extended on its prevailing terms and conditions for successive two
(2) year terms unless either party shall, not less than six (6) months prior to
the expiration of the initial term or any extended term, give written notice to
the other of his or its intention not to renew.
ARTICLE VIII
Disability During Term
In the event that the Employee becomes totally disabled so that he is
unable or prevented from performing any one or all of his usual duties hereunder
for a period of six (6) consecutive months then, and in that event, the Company
shall continue to compensate him and he shall receive his salary as provided
under Article III of this Agreement for a period of six (6) months commencing
from the date of such total disability. The aforesaid obligations of the Company
shall not extend beyond the term of
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this Agreement. The obligation of the Company to make the aforesaid
payments shall be modified and reduced and the Company shall receive a credit
for all disability insurance payments which Employee may receive or to which he
may become entitled; and provided further that the payments herein provided
shall be extended beyond the term of this Agreement.
ARTICLE IX
Termination
The Company may terminate this Agreement:
(A) Upon the death of Employee during the term thereof, except that the
Employee's legal representatives, successors, assigns and heirs shall have those
rights and interests as otherwise provided in this Agreement.
(B) Upon written notice from the Company to the Employee, if Employee
becomes totally disabled and as a result of such total disability, has been
prevented from and unable to perform all of his duties hereunder for a
consecutive period of six (6) months.
(C) Upon written notice from the Company to the Employee, if the Employee
has committed a material breach of any of the terms of this Agreement and
Employee has failed to cure such breach within ten (10) days from the date
notification is given to Employee by the Company.
ARTICLE X
Stock Options
(A) As an inducement to Employee to enter into this Agreement, Integrity
herewith grants to Employee the personal
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non-assignable right to purchase 600,000 shares of the common stock of
Integrity, $.01 per value subject to vesting and other terms and conditions
contained in this Article X (the "Option"). This figure is based upon the
understanding that the aggregate shareholdings of Messrs Hoffenberg, Rosso and
Friedman in Integrity will be 6,000,000 shares as of the date of the
commencement of this Agreement. Employee's right to purchase shares shall be
adjusted should the aggregate holdings of Messrs. Hoffenberg, Rosso and Friedman
be different than 6,000,000 shares to an amount equal to ten percent (10%) of
that aggregate shareholdings as of the date of the commencement of this
Agreement. Should the number of shares which the Employee have a right to
purchase be so adjusted, the figures stated in the following paragraphs shall
also be similarly adjusted.
Employee shall be granted additional options equal to ten percent (10%) of
any additional options to purchase shares of Integrity granted to Messrs.
Hoffenberg, Rosso and Friedman other than options granted to them for the
purchase of Horizon Forwarders, Inc.
(B) The Option shall be exercisable at an option exercise price of $.16 per
share and to the extent that options have vested pursuant to this Article X and
have become presently exercisable, such options may be exercised in whole or in
part by Employee during his life and during the term or extended term hereof but
in no case after the tenth anniversary of the Commencement Date or in the case
of death by Employee's estate or
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personal representative but only as to the number of vested options as of
the date of death.
(C) Such options, to the extent vested and exercisable, may be exercised
upon Employee's or it representative furnishing to Integrity (i) written notice
of intent to exercise the Option with respect to a specified number of shares,
(ii) payment to Integrity for the amount of the Option exercise price for the
number of shares with respect to which the Option is being exercised, and (iii)
if the Company, Integrity or its counsel shall so require as a result of legal
requirement, a written representation that the shares received upon exercise of
the Option are being acquired for investment purposes only and not with a view
to distribution. Each such notice, payment and representation shall be delivered
to Integrity in the manner provided for the delivery of notices elsewhere in
this Agreement.
To the extent that any options in excess of 180,000 options are exercised
prior to the third anniversary of the Commencement Date, certificates
representing shares in excess of 180,000 shares shall be held in escrow by
counsel for the Company who shall deliver such certificates to Employee upon
receipt of written notice from Employee with copy to Integrity that this
Agreement shall have been automatically renewed for an additional two-year term
upon the third anniversary of the Commencement Date, or alternatively such
counsel shall deliver such certificates to Integrity upon receipt of written
notice from the Company with copy to Employee that this Agreement has not been
renewed after the third anniversary of the Commencement Date.
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The Options provided for herein shall be non- transferable, nor shall such
Options be assignable by Employee. The Options shall be exercised only by
Employee during his lifetime, or by his legal representative or executor in the
event of death of Employee. Such Options shall further cease and terminate in
the event of any execution or levy upon the assets or property of Employee.
(D) The Options shall vest and shall be exercisable at the rate of 120,000
options on each of the first through fifth anniversary dates of the Commencement
Date; provided Employee shall be in the employ of the Company on such vesting
date. Anything to the contrary notwithstanding in the foregoing sentence, in the
event this Agreement shall not have been renewed after the third anniversary of
the Commencement Date (i) 180,000 Options shall be canceled and shall be of no
further force or effect and (ii) to the extent exercised in excess of 180,000
shares, all shares acquired by Employee in excess of 180,000 shares shall be
canceled and retired and not represent any interest in Integrity.
Employee shall be reimbursed by Company and/or Integrity at the rate of
$.16 for each share purchased by Employee in excess of 180,000 shares which are
delivered to Integrity or canceled and retired pursuant to the terms of Article
X(D).
(E) A failure by Employee to exercise all of his stock option rights during
any given year shall not act as a waiver and Employee can exercise his right to
purchase any vested but not
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exercised stock option rights at any time as long as Employee is still
under the employ of the Company on the date of purchase and so long as such is
within ten (10) years of the Commencement Date.
(F) Anything to the contrary notwithstanding in sub- paragraph (D) of this
Article X, the Options shall best on an accelerated vesting schedule as provided
for below in the event the consolidated gross revenues from operations of the
Company and Integrity, in any fiscal year during the term of this Agreement
increase beyond its current combined annualized revenues of $28 million with the
exception of that set forth in Sub-paragraph F(i) and F(ii) below.
Additional Consolidated Number of Options
Gross Revenues to Vest
- -------------- -------
$ 6 million 180,000 Options
$12 million 300,000 Options
$18 million 480,000 Options
$25 million 600,000 Options
(i) Revenues derived from acquisitions made by the Company and Integrity or
through mergers involving the Company and Integrity shall be applied to the
above formula as follows: Revenues derived by Company and Integrity Agreement
Year through Acquisitions and Mergers
One Ten percent
Two Twenty-five percent
Three Fifty percent
Four and thereafter One hundred percent
(ii) There shall be excluded from Additional Consolidated Gross Revenues
international revenues derived from new business which was not due to the
efforts of employee and
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which is being credited to others in calculating a bonus or earn out type
formula. Such revenues shall only be excluded however if set forth in writing
and agreed to by both Employee and the Company.
ARTICLE XI
Participation in Public Offering
In the event that during or after the term hereof or any extended term, but
only with respect to the number of vested options, in the event the Company
effects any public offering of its securities in which Martin Hoffenberg and
Philip Rosso shall participate as selling shareholders (the "Offering"),
Employee shall be entitled to participate in the offering pro rata with Messrs.
Hoffenberg and Rosso.
ARTICLE XII
Arbitration
(A) All claims, disputes and matters in question arising out of, or
relating to, this Agreement or the breach thereof, shall be decided by
arbitration in accordance with the rules of the American Arbitration Association
then in effect, unless the parties mutually agree otherwise. This agreement to
arbitration shall be specifically enforceable under the prevailing arbitration
law.
(B) Notice of the demand for arbitration shall be filed in writing with the
other party to this Agreement within sixty (60) days after written notice of the
claim, dispute or other matter in question has been given, and in no event shall
it be made when institution of legal or equitable proceedings based
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on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations. The location of the arbitration proceeding
shall be in Atlanta, Georgia or other location agreed to by both parties.
(C) The award rendered by the arbitrator(s) shall be final and judgment may
be entered upon it in accordance with applicable law in any court having
jurisdiction.
ARTICLE XIII
Termination of Prior Agreements
This Agreement sets forth the entire agreement between the parties and
supersedes all prior agreements between the parties, whether oral or written.
ARTICLE XIV
Severability
If any provision of this Agreement shall be held invalid and unenforceable,
the remainder of this Agreement shall remain in full force and effect. If any
provision is held invalid or unenforceable with respect to particular
circumstances, it shall remain in full force and effect in all other
circumstances.
ARTICLE XV
Notice
All notices required to be given under the terms of this Agreement shall be
in writing and shall be deemed to have been duly given only if delivered to the
addressee in person or mailed by certified mail, return receipt requested, as
follows:
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IF TO THE COMPANY: Amerford Domestic Inc.
2001 Marcus Avenue
Lake Success, New York 10042-1011
Attn: Martin Hoffenberg
IF TO THE EMPLOYEE: Bruce Brandi
3624 Blakeford Club Drive
Marietta, Georgia 30062
IF TO INTEGRITY: Integrity Logistics, Inc.
2001 Marcus Avenue
Lake Success, New York 11042
Attn: Martin Hoffenberg
ARTICLE XVI
Benefit
This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company, Integrity and the heirs and
personal representatives of the Employee.
ARTICLE XVII
Waiver
The waiver by either party of any breach or violation of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach of construction and validity.
ARTICLE XVIII
Governing Law
The internal law of the State of Georgia shall govern the construction and
validity of this Agreement without regard to conflicts of law.
ARTICLE XIX
Jurisdiction
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Any or all actions or proceedings which may be brought by the Company,
Integrity or Employee under this Agreement shall be brought in courts having a
situs within the State of Georgia and Employee, Integrity and the Company hereby
consents to the jurisdiction of any local, state or federal court located with
the State of Georgia.
ARTICLE XX
Entire Agreement
This Agreement contains the entire agreement between the parties hereto. No
change, addition or amendment shall be made hereto, except by written agreement
signed by the parties hereto. IN WITNESS WHEREOF, the parties hereto have
executed this Agreement in duplicate and affixed their hands and seals the day
and year first above written.
AMERFORD DOMESTIC INC.
By________/s/________________
Vice Chairman (seal)
By____________/s/____________(SEAL)
BRUCE BRANDT (Employee)
AGREED TO AND ACCEPTED BY:
INTEGRITY LOGISTICS, INC.
By______/s/______________
Chairman (seal)
By______/s/______________
Secretary (seal)
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<PAGE>
MODIFICATION AGREEMENT
This Modification Agreement made as of the 7th day of February between
Bruce Brandi ("Brandi") and AmerTranz Worldwide, Inc. ("AmerTranz").
WHEREAS, the parties desire to modify the Employment Agreement (the
"Employment Agreement") between Integrity Logistics, Inc. ("Integrity") and
Brandi dated September 26, 1994; and
WHEREAS, Integrity is a wholly owned subsidiary of AmerTranz; and
WHEREAS, in order to induce TIA, Inc. to enter into a certain Assets
Exchange Agreement dated February 7, 1996, Brandi is willing to modify his
Employment Agreement as follows:
1. AmerTranz hereby assumes the obligations of Integrity under the
Employment Agreement as modified by this Modification Agreement.
2. The term in Article VII shall be changed by deleting "five (5) years" on
the first line and inserting in its place "three (3) years," and the successive
renewal terms set forth therein shall be for two (2) year periods in lieu of one
(1) year periods.
3. "Article X - STOCK OPTIONS" is modified as follows: Except for
references herein to the terms of the options set forth in Article X, such
Article is deleted in its entirety. As part of the Assets Exchange Agreement
Brandi is exchanging vested and non-vested options granted to him under the
Employment Agreement for options in AmerTranz Worldwide Holding Corp.
("Holding"). These option will be subject to the same terms contained in Article
X of the Employment Agreement except that the options can be earned in full over
three (3) years in lieu of five (5) years. Accordingly, as of the date hereof,
20,174 of such options in Holding have vested, with an additional 20,174 of such
options vesting on each of October 10, 1996 and October 10, 1997.
___________/s/________________
Bruce Brandi
AMERTRANZ WORLDWIDE, INC.
By:__________/s/______________
AGREED:
AMERTRANZ WORLDWIDE HOLDING CORP.
By:_______________/s/____________________
<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) $ (1,703,062)
Interest expense(1)..................................... 807,000 52,000 52,000
----------------- ----------------- --------------
Net loss available to common stockholders............... $(3,349,748) $ (691,831) $ (1,651,062)
Weighted average shares outstanding:
Common stock(2)(3)...................................... 4,749,035 5,211,535 5,211,535
Stock options(4)........................................ 87,032 87,032 87,032
----------------- ----------------- --------------
4,836,067 5,298,567 5,298,567
Historical net loss per share............................. $ (0.69) $ (0.13) $ (0.31)
</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.
Subsidiaries of Amertranz Worldwide Holding Corp.
Amertranz Worldwide, Inc., a Delaware corporation
Caribbean Air Services, Inc., a Delaware corporation
Subsidiaries of Amertranz Worldwide, Inc.
Amertranz Logistics, Inc. a Delaware corporation
Integrity Logistics, Inc., a New York corporation
Amertranz Worldwide De Caribe, Inc., a Puerto Rico corporation
7962
<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 17, 1996
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 17, 1996
