SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee Required) for the fiscal year ended June 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required) for the transition period from to .
Commission file number: 333-3613
AMERTRANZ WORLDWIDE HOLDING CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3309110
- - - --------------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2001 Marcus Avenue, Lake Success, New York 11042
- - - ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 326-9000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Each Exchange on Which Registered
None None
---- ----
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
Common Stock, $.01 par value
Redeemable Common Stock Purchase Warrants
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 17, 1996 was $16,776,095.
The number of shares of common stock outstanding as of September 17, 1996 was
5,926,504.
DOCUMENTS INCORPORATED BY REFERENCE
To the extent specified, Part III of this Form 10-K incorporates information by
reference to the Registrant's definitive proxy statement for its 1996 Annual
Meeting of Shareholders (to be filed).
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORPORATION
1996 ANNUAL REPORT ON FORM 10-K
Table of Contents
Page
PART I
Item 1. Business 1
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders and
Executive Officers of the Registrant 5
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 8
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 11
PART III
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain Beneficial Owners
and Management 12
Item 13. Certain Relationships and Related Transactions 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 13
<PAGE>
PART I
ITEM 1. BUSINESS
--------
Background
- - - ----------
Amertranz Worldwide Holding Corp. ("Company") provides freight
forwarding services and logistics services, through its wholly owned
subsidiaries, Amertranz Worldwide, Inc. ("Amertranz") and Caribbean Air
Services, Inc. ("CAS"). The Company has 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 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.
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.
On February 7, 1996 pursuant to the terms of an Assets 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.
As a result Amertranz became a wholly-owned subsidiary of the Company
and continues to conduct Amertranz's freight forwarding and logistics services
businesses, and the freight forwarding business of TIA and CFS was transferred
to the Company and is conducted by CAS.
1
<PAGE>
Description of Business
- - - -----------------------
The Company's freight forwarding services involve arranging for the
total transport of customers' freight from the shippers' location 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 24 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 four countries. The Company
has recently begun to provide logistics services to manufacturers for the
movement of raw materials and finished goods.
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
particular shipments on the basis of cost, delivery time and available cargo
capacity. Through the Company's advanced data processing system, 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.
The rates charged by the Company to its customers are based on
destination, shipments weight and required delivery time. The Company offers
graduated discounts for shipments with later scheduled delivery items 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
29, 1994, amended ("L-1011 Charter"), the Company has exclusive rights, until
June 30, 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.
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.
The Company leases an IBM AS 400 mainframe computer and has a
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.
2
<PAGE>
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 Amertrax
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 costs 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.
Logistics Services. The Company 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.
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 account sales group that targets high-revenue national accounts with
multiple shipping locations. These industry specialists discern the specific
freight transportation requirements of the customers 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 services provider to primary freight forwarder.
3
<PAGE>
Competition
- - - -----------
Although there are no weight restrictions on the Company's shipments,
the Company focuses primarily on cargo shipments weighing more than 50 pounds
and requiring second-day delivery. As a result, the Company does not directly
compete for most of its business with overnight couriers and integrated shippers
of principally small parcels, such as United Parcel Service of America, Inc.,
Federal Express Corporation, DHL Worldwide Express, Inc., Airborne Freight
Corporation and the United States Postal Service. However, some integrated
carriers, such as Emery Air Freight Corporation and Burlington Air Express,
Inc., primarily solicit the shipment of heavy cargo in competition with
forwarders. Most air freight forwarders do not compete with the major commercial
airlines, which to a certain extent depend on forwarders to procure shipments
and supply freight for the available cargo space on their scheduled flights.
There is intense competition within the freight forwarding industry.
While the industry is highly fragmented, the Company most often competes with a
relatively small number of forwarders who have nationwide networks and the
capability to provide a full range of service similar to that offered by the
Company. These include Eagle USA Air Freight, Inc., Pilot Air Freight, Inc., and
LEP Profit International, Inc. There is also competition from passenger and
cargo air carriers and trucking companies. On the international side of the
business, the Company competes with forwarders that have a predominantly
international focus, such as Fritz Companies, Inc., Air Express International
Corporation and Harper Group, Inc. All of these companies, as well as many other
competitors, have substantially greater facilities, resources and financial
capabilities than those of 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.
Employees
- - - ---------
The Company and its subsidiaries had approximately 221 full-time
employees as of June 30, 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.
Regulation
- - - ----------
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.
4
<PAGE>
ITEM 2. PROPERTIES
----------
The Company leases terminal facilities consisting of office and
warehouse space in 24 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 40,000 square feet of warehouse space in Fort
Worth, Texas, for its logistics services business. Management believes that its
current facilities are underutilized. Accordingly, management believes that the
Company's facilities are more than sufficient for its planned growth. The
principal facilities are set forth in the following table:
Approximate Square Feet Lease
Location of Floor Space Expiration
- - - -------- ----------------------- ----------
Fort Worth, TX 46,720 July, 1997
Los Angeles, CA 17,400 February, 1998
Aquadilla, PR 45,000 Month-to-Month
The Company has an additional twenty-one terminal facilities in the
following locations.
Atlanta, Georgia Denver, Colorado Houston, Texas
Chicago, Illinois Detroit, Michigan Indianapolis, Indiana
Cincinnati, Ohio Greensboro, North Carolina Miami, Florida
Cleveland, Ohio Hartford, Connecticut Minneapolis, Minnesota
Dallas, Texas Newark, New Jersey New York, New York
Philadelphia, Pennsylvania San Diego, California San Juan, Puerto Rico
St. Louis, Missouri Kansas City, Missouri San Francisco, California
ITEM 3. 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 discussion, 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. The Company has reached an agreement with the trustee in bankruptcy to
settle the litigation for $50,000. This settlement is conditioned upon the
approval of the United States Bankruptcy Court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None
5
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
- - - ------------------------------------
Following is a listing of the executive officers of the Company. There
are no family relationships between any Directors and Officers of the Company.
NAME AGE POSITION
- - - ---- --- --------
Stuart Hettleman............. 46 President, Chief Executive
Officer, Chief Financial
Officer
Richard A. Faieta............ 50 Executive Vice President
Michael Barsa................ 51 Vice President and Secretary
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. Mr.
Hettleman is also an Executive Officer of several of the Company's predecessors.
Specifically, he has been Vice President of TIA since 1990 and is currently the
Executive Vice President of TIA; and has been Vice President of CFS since 1991
and is currently Executive Vice President of CFS.
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, the Company's predecessors,
since April 1992. From 1987 through 1991 he served as Vice President-Operations
of LEP Profit International Corporation, a domestic and international freight
forwarder.
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.
6
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-------------------------------------------------------------
MATTERS
-------
The Company's initial public offering of its common stock, $.01 par
value (the "Common Stock") and Redeemable Common Stock Purchase Warrants (the
"Warrants") took place on June 28, 1996. Since that date both the Common Stock
and the Warrants have been listed on the NASDAQ SmallCap Market under the
symbols AMTZ and AMTZW, respectively;
The table below indicate the high and low prices of the Common Stock
and Warrants for the year ended June 30, 1996. There have been no dividends
declared.
COMMON STOCK WARRANTS
High - 7 High - 1 7/8
Low - 6 Low - 1
On September 17, 1996 there were 1631 shareholders of record of the
Company's Common Stock and 1415 warrant holders of record of the Company's
Warrants. The closing price of the Common Stock on that date was $5.375 per
share. The closing price of the warrant on that date was $1.625 per warrant.
ITEM 6. SELECTED FINANCIAL DATA
- - - ------- -----------------------
<TABLE>
<CAPTION>
AMERTRANZ WORLDWIDE HOLDING CORP. AND SUBSIDIARIES (1)
(in thousands, except per share data)
Six Months
Years Ended December 31, Ended June 30,
-----------------------------------------------------------------------
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating revenue $29,201 $32,671 $38,576 $38,211 $27,446
Cost of transportation 24,103 24,232 30,254 30,300 20,961
------- -------- -------- -------- --------
Gross profit 5,098 8,439 8,322 7,911 6,485
Selling, general &
administrative
expenses 6,354 6,505 4,634 4,513 8,772
------- -------- -------- -------- --------
Operating income (loss) (1,256) 1,934 3,688 3,398 (2,287)
Net income (loss) before taxes $(2,149) $ 869 $ 2,661 $ 2,366 $ (6,372)
Net loss per common share $ (1.84)
Balance Sheet Data:
Total assets $ 22,740
Working capital (deficit) (13,937)
Current liabilities 22,470
Long-term indebtedness 8,000
Stockholders' equity (deficit) $ (7,749)
<FN>
(1) The amounts for the freight forwarding business of the Company represent the
historical operations associated with the freight forwarding business of TIA and
CFS contributed to the Company in the combination of these businesses. The
freight forwarding business of TIA and CFS did not operate as a separate legal
or reporting entity during the periods presented. The operations data for the
fiscal year ended December 31, 1993 and for the first two months of 1994 include
the effect of the aviation assets which TIA 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.
</FN>
</TABLE>
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Overview
- - - --------
The Company was incorporated in January 1996 to continue the freight
forwarding business of TIA and CFS and acquire Amertranz. The Company generated
operating revenues of $27.4 million and had net losses before taxes of $6.4
million for the period January 1, 1996 through June 30, 1996. The loss included
a one time charge of $3.3 million for debt placement expense in connection with
financings prior to the Company's initial public offering which closed on July
3, 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.
Historically, the CAS business has derived substantial operating
revenues from companies engaging in business in Puerto Rico who were taking
advantage of significant United States income tax benefits available to such
companies. In 1993, Congress reduced the tax benefits available to companies
doing business in Puerto Rico, and legislation enacted into law in August 1996
contains a 10-year phaseout of these tax benefits. This legislation, or in the
event that there is any further modification to these tax benefits available to
United States companies doing business in Puerto Rico, could result in these
companies reducing the level of the business they have been doing in Puerto
Rico, which could have a material adverse effect on the Company's operating
results.
While the freight forwarding business of TIA and CFS has been
historically profitable, Amertranz has incurred losses in the last two years.
Since the formation of the Company in February, 1996, in the combination of
Amertranz and the freight forwarding business of TIA and CFS, 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.
Results of Operations
- - - ---------------------
Six Months Ended June 30, 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 June
30, 1996 and only the operations of the freight forwarding business of TIA and
CFS for the period January 1, 1996 through February 7, 1996.
Operating Revenue. Operating revenue was $27.4 million for the period
January 1, 1996 through June 30, 1996.
Cost of Transportation. Cost of transportation was 76.4% of operating
revenue for the period.
Gross Profit. Gross profit for the period was 23.6% of operating
revenue.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the period was 32.0% of operating revenue.
8
<PAGE>
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.
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.
Liquidity and Capital Resources
- - - -------------------------------
The Company used approximately $7.5 million of cash in operating activities
for the period January 1, 1996 through June 30, 1996. This cash was provided
primarily by cash on hand of approximately $4.9 million, the proceeds of a
revolver note of approximately $4.0 million and an increase in accounts payable
and accrued expenses of approximately $1.1 million. The cash used in operating
activities was primarily attributable to increases in the Company's accounts
receivable of approximately $3.6 million and a net loss incurred by the Company
of approximately $6.4 million during such period. The increase in accounts
receivable is due principally to an increase
9
<PAGE>
in the trade receivables of the CAS operations from a zero balance at the
beginning of the period to approximately $4.5 million at the end of the period.
Prior to the combination with the freight forwarding business of TIA
and CFS on February 7, 1996 and the initial public offering of the Company's
securities on June 28, 1996 ("IPO"), Amertranz' internally generated cash flow
was not sufficient to finance trade receivables and business expansion or to
support operations. Amertranz met its capital requirements prior to that time
primarily through: (i) the private sales of $350,000 of equity and debt
securities between November, 1995 and January, 1996 ("Interim Financings"); (ii)
the private sales of $3.975 million of equity and debt securities in February
and May, 1996 ("Bridge Financings"); (iii) borrowings of $800,000 from TIA (see
below); (iv) borrowings under an accounts receivable financing facility (see
below); and (v) other private financings which were converted into equity as
part of the February 7, 1996 combination. In addition CAS has a credit facility
of up to $4 million from TIA and CFS under a revolving credit loan (see below).
Of the $12,414,000 net proceeds to the Company on its initial public
offering on June 28, 1996 (which closed on July 3, 1996), the Company applied
$4,137,000 to repay the outstanding principal and interest balance on the Bridge
Financings, $373,000 to repay the outstanding principal and interest balance on
the Interim Financing, and $2 million as partial payment on the Exchange Note
(see below). The $5,904,000 balance of proceeds from the IPO was retained by the
Company for working capital and general corporate purposes.
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 June 30, 1996, the Company had outstanding
borrowings of approximately $1,641,347 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 August 2, 1996. However, TIA has agreed to defer repayment of the TIA
Loan 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 of Amertranz and the freight
forwarding business of TIA and CFS, 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 matured on July 6, 1996; however,
TIA and CFS have agreed to defer payment of the Revolver Note 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
June 30, 1996, the Company had outstanding borrowings of approximately
$3,954,989 under the Revolver Note.
10
<PAGE>
Exchange Note. As part of the combination of Amertranz and the freight
forwarding business of TIA and CFS, the Company issued to TIA and CFS a
promissory note in the original principal amount of $10,000,000, which bears
interest at the rate of 8% per annum ("Exchange Note"). 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. Prior to the IPO, 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, and of the proceeds of the IPO, $2,000,000
was used to repay a portion of the Exchange Note. As of June 30, 1996, the
outstanding principal balance under the Exchange Note was $8 million. TIA and
CFS have agreed to defer the balance of payments on the Exchange Note as
described below.
Forbearance by TIA and CFS. Under the terms of the respective
obligations described above, payments on the TIA Loan would have commenced on
July 28, 1996, payments on the Exchange Note were due monthly commencing on
March 1, 1996, and the full outstanding balance of the Revolver Note was due on
July 6, 1996. TIA and CFS have agreed to 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 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 they
will not take any action to foreclose on their security interests in the assets
of the Company, Amertranz or CAS until June 27, 1997 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.
Working Capital Requirements. The Company believes that funds raised in
the IPO, cash flows generated from operations and available funds under its
existing loan facilities will be sufficient to finance its operations and
obligations for the foreseeable future.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements and supplementary data required by this Item 8
are included in the Company's Consolidated Financial Statements and set forth in
the pages indicated in Item 14(a) of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURES
---------------------
None.
11
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information with respect to the identity and business experience of
the directors of the Company and their remuneration in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A and issued in conjunction
with the 1996 Annual Meeting of Shareholders, is incorporated herein by
reference. The information with respect to the identity and business experience
of executive officers of the Company is set forth in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required by this item is incorporated by reference from
the Company's definitive Proxy Statement to be issued in conjunction with the
1996 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information required by this item is incorporated by reference from
the Company's definitive Proxy Statement to be issued in conjunction with the
1996 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information required by this item is incorporated by reference from
the Company's definitive Proxy Statement to be issued in conjunction with the
1996 Annual Meeting of Shareholders.
12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 - K
-----------------------------------------------------------------
(a) 1. Financial Statements
--------------------
<TABLE>
<CAPTION>
AMERTRANZ WORLDWIDE HOLDING CORP. PAGE
<S> <C> <C> <C> <C> <C> <C>
----
Report of Independent Public Accountants F-1
Consolidated Balance Sheet as of June 30, 1996 F-2
Consolidated Statement of Operations for the Six Months Ended June 30, 1996 F-3
Consolidated Statement of Stockholders' Deficit for the Six Month Period Ended June 30, 1996 F-4
Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1996 F-5
Notes to Consolidated Financial Statements F-6
AMERTRANZ WORLDWIDE HOLDING CORP. (FORMERLY THE FREIGHT FORWARDING
BUSINESS OF TIA AND CFS)
Independent Auditors' Report F-12
Balance Sheets as of December 31, 1994 and 1995 F-13
Statements of Operations and Changes in Accumulated Deficit for the Years
December 31, 1993, 1994 and 1995 F-14
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 F-15
Notes to Financial Statements F-16
(a) 2. Financial Statement Schedules
-----------------------------
Report of Independent Public Accountants on Schedule S-1
Schedule II - Schedule of Valuation and Qualifying Accounts S-2
</TABLE>
All other schedules are omitted because they are not applicable, are not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
(a) 3. Exhibits required to be filed by Item 601 of Regulation S-K
-----------------------------------------------------------
The following exhibits are filed herewith via EDGAR:
Exhibit No.
- - - -----------
3.2 Amendment to By-Laws of Amertranz Worldwide Holding Corp. and
complete By-Laws as amended
10.13 Employment Agreement dated June 24,1 996 between Amertranz
Worldwide Holding Corp. and Stuart Hettleman
10.14 Employment Agreement dated June 24, 1996 between Amertranz
Worldwide Holding Corp. and Richard A. Faieta
10.18 Debt restructuring letter agreement between Amertranz
Worldwide Holding Corp., TIA, Inc. and Caribbean Freight
System, Inc.
13
<PAGE>
The following exhibits are incorporated by reference to Amertranz Worldwide
Holding Corp.'s Registration Statement on Form S-1, Registration No. 333-03613
Exhibit No.
- - - -----------
3.1 Certificate of Incorporation of Amertranz Worldwide Holding
Corp., as amended
10.1 1996 Stock Option Plan of Amertranz Worldwide Holding Corp.
10.2 Purchase and Sale Agreement dated March 16, 1995, between
Amertranz Worldwide, Inc. and Fidelity Funding of California,
Inc., as amended July 5, 1995, October 25, 1995, and February
7, 1996
10.3 Form of 7% Convertible Subordinated Promissory Notes of
Amertranz Worldwide, Inc. and form of document evidencing the
exchange thereof for shares of Common Stock, $.01 par value,
of Amertranz Worldwide Holding Corp.
10.4 Form of 9-3/4% Convertible Subordinated Promissory Notes of
Amertranz Worldwide, Inc. and form of document evidencing the
exchange thereof for shares of Common Stock, $.01 par value,
of Amertranz Worldwide Holding Corp.
10.5 Loan and Security Agreement dated October 25,1995 between
Amertranz Worldwide, Inc. and TIA, Inc., as amended January
24, 1996
10.6 Form of Amended and Restated Promissory Note of Amertranz
Worldwide, Inc. payable to TIA, Inc. in principal amount of
$800,000
10.7 Form of 12% Subordinated Promissory Notes of Amertranz
Worldwide, Inc. and form of document evidencing the exchange
thereof for Notes of Amertranz Worldwide Holding Corp. on the
same terms and conditions
10.8 Assets Exchange Agreement dated February 7, 1996 among
Amertranz Worldwide Holding Corp., Caribbean Air Services,
Inc., Amertranz Worldwide, Inc., Caribbean Freight System,
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 System, 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
System, 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
10.15 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
14
<PAGE>
10.17 Lease Agreement dated August 7, 1990 between S Partners and
Caribbean Freight System, Inc. for the premises at 7001 Cessna
Drive, Greensboro, North Carolina, as amended and extended
April 9, 1994
21. Subsidiaries of Amertranz Worldwide Holding Corp.
(b) Reports on Form 8-K
-------------------
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
AMERTRANZ WORLDWIDE HOLDING CORP.
Date: September 27, 1996 By: /s/ Stuart Hettleman
-------------------------------
Stuart Hettleman
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- - - --------- ----- ----
/s/ Stuart Hettleman President, Chief Executive September 27, 1996
- - - --------------------------- Officer, Principal Financial
Stuart Hettleman Officer and Director
/s/ Richard A. Faieta Executive Vice President September 27, 1996
- - - --------------------------- and Director
Richard A. Faieta
/s/ Michael Barsa Vice President and Director September 27, 1996
- - - ---------------------------
Michael Barsa
16
<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 June 30, 1996
and the related consolidated statement of operations, shareholders' deficit and
cash flows for the six month period then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 audit provides 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
Holding Corp. as of June 30, 1996 and the results of its operations and cash
flows for the six month period then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
August 28, 1996
F-1
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1996
------------- -------------
PROFORMA
ASSETS (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 377,490 $ 6,280,562
Accounts receivable, net of allowance for doubtful accounts of $371,322 7,598,390 7,598,390
Prepaid expenses and other current assets 557,192 557,192
----------------- ----------------
Total current assets 8,533,072 14,436,144
PROPERTY AND EQUIPMENT, net (Note 3) 829,442 829,442
DEBT ISSUANCE COST, net of accumulated amortization of $3,264,232 103,466 -
OTHER ASSETS 1,373,314 304,233
GOODWILL, net of accumulated amortization of $191,460 (Notes 2 and 4) 11,900,735 11,900,735
----------------- --------------
Total assets $ 22,740,029 $ 27,470,554
================= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 7,699,721 $ 7,699,721
Accrued expenses 2,028,274 1,842,229
Note payable to affiliate 3,954,989 3,954,989
Current portion of long-term debt (Note 5) 8,766,347 3,961,347
Lease obligation--current portion (Note 7) 21,034 21,034
----------------- ----------------
Total current liabilities 22,470,365 17,479,320
LONG-TERM DEBT (Note 5) 8,000,000 4,480,000
LEASE OBLIGATION--LONG-TERM (Note 7) 18,315 18,315
----------------- ----------------
Total liabilities 30,488,680 21,977,635
----------------- ----------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, $10 par value; 2,500,000 shares authorized, 200,000 shares issued
and outstanding - 2,000,000
Common stock, $.01 par value; 15,000,000 shares authorized, 3,626,504 shares
issued and outstanding 36,265 59,265
Paid-in capital 8,567,675 19,889,712
Accumulated deficit (16,341,341) (16,444,808)
Less: Treasury stock, 106,304 shares held at cost (11,250) (11,250)
----------------- ----------------
Total stockholders' equity (deficit) (7,748,651) 5,492,919
----------------- ----------------
Total liabilities and stockholders' equity (deficit) $ 22,740,029 $ 27,470,554
================= ================
</TABLE>
The accompanying notes are an integral part of this
consolidated balance sheet.
F-2
<PAGE>
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
Six Months
Ended
June 30, 1996
-------------
OPERATING REVENUE $ 27,445,583
DIRECT COSTS 20,961,019
------------
Gross profit 6,484,564
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 8,772,226
Operating (loss) (2,287,662)
OTHER INCOME (EXPENSE):
Interest expense (4,057,864)
Other income (expense), net (50,998)
Net loss $ (6,396,524)
Net loss per common share $ (1.84)
------------
Weighted average number of common shares 3,482,504
------------
The accompanying notes are an integral part of this
consolidated statement.
F-3
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996
Additional
<TABLE>
<CAPTION>
Common Stock Paid-in Treasury Stock Accumulated
Shares Amount Capital Shares Amount (Deficit) Total
------ ------ ------- ------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1996 2,100,000 $21,000 $ - - $ - $( 4,932,989) $(4,911,989)
Liabilities in excess of assets
distributed to TIA/CFS - - - - - 4,988,172 4,988,172
Exchange Note issued to TIA/
CFS in connection with asset
exchange - - - - - (10,000,000) (10,000,000)
Common Stock issued in
connection with assigned
notes 280,888 2,809 1,376,301 - - - 1,379,110
Common Stock issued in
connection with Bridge
and Interim financings 727,560 7,276 2,781,787 - - - 2,789,063
Common Stock issued to
former stockholders of
Amertranz Worldwide 518,056 5,180 4,409,587 - - - 4,414,767
Purchase of treasury
stock - - - 106,304 (11,250) - (11,250)
Net loss - - - - - ( 6,396,524) (6,396,524)
--------- ------- ---------- ------- --------- ------------ ------------
Balance, June 30, 1996 3,626,504 $36,265 $8,567,675 106,304 $(11,250) $(16,341,341) $(7,748,651)
========= ======= ========== ======= ======== ============ ===========
</TABLE>
The accompanying notes are an integral part of this
consolidated statement.
F-4
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(6,396,524)
Bad debt expense (13,187)
Depreciation and amortization 361,467
Decrease in debt issuance costs 3,208,809
Adjustments to reconcile net income to net cash used in operating activities-
Increase in accounts receivable (3,628,728)
Increase in prepaid expenses and other current assets (22,301)
Increase in other assets (1,214,586)
Increase in accounts payable and accrued expenses 1,130,878
Increase in due to affiliates 1,414
Net cash used in operating activities (6,572,758)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (123,068)
Cash advances under notes receivable (300,000)
Net cash used in investing activities (423,068)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from loan payable (56,515)
Proceeds from short-term debt 5,190,064
Repayment of long-term debt (3,990,064)
Proceeds from revolving loan due to affiliate 3,954,989
Payment of lease obligations (8,139)
Purchase of treasury stock (11,250)
Cash portion of assets distributed to TIA (2,590,031)
-----------
Net cash provided by financing activities 2,489,054
-----------
Net decrease in cash and cash equivalents (4,506,772)
-----------
CASH AND CASH EQUIVALENTS, beginning of the year 4,884,262
-----------
CASH AND CASH EQUIVALENTS, end of the year $ 377,490
===========
CASH PAYMENTS FOR:
Interest $ 825,563
Income taxes 434,199
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTMENT & FINANCING ACTIVITIES
On February 7, 1996 Holdings purchased the capital stock of Amertranz
for shares valued at $4,415,000. In conjunction with the acquisition, the
resulting goodwill is as follows:
Net liabilities assumed $ 7,685,000
Purchase price 4,415,000
-----------
Goodwill 12,100,000
Net liabilities retained by TIA/CFS 4,988,172
Cash portion of assets distributed to TIA (2,590,031)
-----------
Net liabilities distributed $ 2,398,141
===========
</TABLE>
The accompanying notes are an integral part of this
consolidated statement.
F-5
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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 (the "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 2,100,000 shares of common stock of the Company and a $10,000,000
promissory note, as discussed in Note 4, in addition to stock in the Company.
The transactions described above have been accounted for as a
recapitalization of TIA and CFS, whereby the historical data for their freight
forwarding operations are being presented as that of Holdings for all periods
presented. The issuance of the $10,000,000 Promissory Note has been reflected as
a charge to retained earnings and the distribution of assets and liabilities to
TIA and CFS has been reflected as a net adjustment to equity, at book value
(which approximates fair value). The transaction with Amertranz has been
accounted for as an acquisition under purchase accounting.
On July 3, 1996, the Company completed an initial public offering
("IPO") of 2,300,000 shares of common stock and redeemable common stock purchase
warrants at an initial offering price of $6.10 per share. Prior to the IPO,
there was no public market for the Company's capital stock. The net proceeds to
the Company of $12,414,117 were used to pay down existing debt of $6,503,000 and
the balance is available for working capital purposes. Additionally, the Company
issued 200,000 shares of Class A, non-voting, cumulative, convertible preferred
stock with a par value of $10.00 in exchange for payment of $2,000,000 of its
promissory note with TIA and CFS.
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,
CAS and Amertranz since February 7, 1996. The accompanying consolidated
statements of operations and changes in retained earnings (deficit) include the
accounts of the former air freight business of TIA (a wholly-owned subsidiary of
Wrexham Aviation Corporation) and CFS, which was not a separate legal or
historical reporting entity for the period January 1, 1996 through February 7,
1996. All significant intercompany accounts and transactions have been
eliminated.
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.
Goodwill
Goodwill represents the excess of cost over the net assets acquired and
is amortized on a straight-line basis over 25 years. Management periodically
assesses whether there has been an impairment in the carrying value of the
excess of cost over the net assets acquired, by comparing current and projected
annual undiscounted cash flows with the related annual amortization. In the
event there is an impairment of goodwill, management would reduce the carrying
value to an amount equal to the projected discounted cash flow of the underlying
assets.
F-6
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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.
Proforma Data
The unaudited proforma balance sheet gives effect to the IPO discussed
in Note 1 as if it had closed on June 30, 1996.
Revenue Recognition
Revenue from freight forwarding is recognized upon delivery of goods
and direct expenses associated with the cost of transportation are accrued
concurrently. Monthly provision is made for doubtful receivables, discounts,
returns and allowances.
Cash and Cash Equivalents
Cash at June 30, 1996 includes $297,000 of overnight repurchase
agreements.
Per Share Data
Earnings per share is computed using the weighted average number of
common shares outstanding and, where applicable, common equivalent shares
issuable upon exercise of stock options redeemable under the treasury stock
method.
3. PROPERTY AND EQUIPMENT, NET
Property and Equipment consists of the following:
Furniture and fixtures $ 303,502
Computer equipment 421,946
Computer software 219,701
Leasehold improvements 63,658
Logos and trademarks 22,349
Vehicle 8,499
--------------
1,039,655
Less: Accumulated depreciation and amortization 210,213
--------------
$ 829,442
==============
4. ACQUISITION
Holding acquired all of the issued and outstanding stock of Amertranz
and the former stockholders of Amertranz received 870,254 shares (which consist
of the investment in Amertranz Worldwide of 518,056 shares, assigned notes of
280,888 shares and 71,310 shares associated with the Interim Financing) of
Holding's common stock and options to purchase 224,399 shares of Holding's
common stock valued at $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.
F-7
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
5. DEBT
As of June 30, 1996, long-term and short-term debt consisted of the
following:
Promissory note to TIA and CFS (a) $ 10,000,000
Revolving loan to TIA and CFS (b) 3,954,989
February Bridge notes (c) 2,775,000
May bridge notes (d) 1,200,000
Asset-based financing (e) 1,641,347
Notes payable to TIA (f) 800,000
Interim financing (g) 350,000
--------------
Total debt 20,721,336
Less: Current portion (12,721,336)
--------------
Long-term debt $ 8,000,000
==============
(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. On July 3, 1996, Holding repaid
$2,000,000 of this debt from the proceeds of the IPO and converted $2,000,000 of
the note into Class A, non-voting, cumulative, convertible preferred stock.
(b) 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 June 30, 1996, $3,954,989 was outstanding under
this facility.
(c) 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. This
debt was repaid on July 3, 1996 with the proceeds of the IPO.
(d) 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 IPO 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
F-8
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
value of the shares of common stock at the time of issuance was $4.25 per share.
This debt was repaid on July 3, 1996 with the proceeds of the IPO.
(e) Amertranz entered into a Purchase and Sale Agreement 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
(8.25% as of June 30, 1996). At June 30, 1996, the outstanding balance on the
credit line was $1,641,347, 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.
(f) 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.
(g) Between November 1995 and January 1996, Amertranz obtained
financing of $350,000 ("Interim Financing") and issued $350,000 in aggregate
principal amount of promissory notes. Repayment of the principal amount due
under these notes, together with interest at the rate of 12% per annum is due
upon the earlier of (i) the closing of the IPO by Holding or (ii) February 7,
1998 or (iii) the sale or merger of Holding. The holders of these notes also
received shares of Amertranz common stock that were converted into 71,310 shares
of Holding common stock. The Company has recorded a debt issuance cost of
$150,000 in connection with the issuance of the stock and will amortize the
amount over the life of the debt. Upon repayment of the debt, the related
unamortized debt issuance cost would be expensed. The effective annual rate of
interest on the notes after giving effect to the debt issuance cost of $150,000
is 98%. The fair value of the shares of common stock at the time of issuance was
$2.22 per share. This debt was repaid on July 3, 1996 with the proceeds of the
IPO.
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.
TIA and CFS have agreed that, upon consummation of the IPO, 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 IPO, 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.
6. STOCKHOLDERS' EQUITY (DEFICIT)
Stock Options and Warrants
As of June 30, 1996, the Company had options outstanding to purchase a
total of 523,399 shares of common stock at exercise prices ranging from $.16 to
$6.00, of which 237,673 options are exercisable. No options were exercised as of
June 30, 1996. 224,399 of 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 1,386,783 shares of common stock at an exercise price equal to the
exercise price of the warrants issued in connection with the Company's February
and May bridge financings.
In connection with the IPO, the Company issued 2,300,000 shares of
common stock and 2,300,000 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
F-9
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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.
Preferred Stock
As of June 30, 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. On July
3, 1996, the Company issued 200,000 shares of Class A, non-voting, cumulative,
convertible preferred stock with a par value of $10.00 in exchange for a paydown
of $2,000,000 on the $10,000,000 promissory note.
The Preferred Stock will pay cumulative cash dividends at an annual
rate of $1.00 per share. The Company is prohibited from paying any dividends on
common stock unless all required preferred dividends have been paid. Each share
of Preferred Stock may be converted at the option of the holder into common
stock at a conversion price of the lower of (i) the IPO price per share of
common stock or (ii) 80% of the average of the closing price per share of common
stock on the day prior to the conversion date. Preferred Stock holders are
entitled to a liquidation preference of $10.00 per share plus all accrued and
unpaid dividends.
7. COMMITMENTS AND CONTINGENCIES
Leases
Future minimum lease payments for capital leases and operating leases
relating to equipment and rental premises are as follows:
YEAR ENDING CAPITAL LEASES OPERATING LEASES
----------- -------------- ----------------
1997 $24,053 $ 803,097
1998 13,234 537,365
1999 6,456 193,626
2000 -- 129,084
2001 -- --
------- ----------
Total minimum lease payments 43,743 $1,663,172
==========
Less--Amount representing interest (4,394)
-------
$39,349
=======
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, 1996,
excluding bonuses, was approximately $1,534,000.
Litigation
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 discussion, breached an 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
F-10
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
complaint seeks damages in excess of $11 million. The Company has reached an
agreement with the trustee in bankruptcy to settle the litigation for $50,000.
This settlement is conditioned upon the approval of the United States Bankruptcy
Court.
8. 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 over the fifteen year carryforward amounts to 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 June 30, 1996, which are fully offset by a
valuation allowance, primarily represent the estimated future tax effects of
federal net operating losses aggregating approximately $3,548,022.
9. 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 June 30, 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.
CAS had sales to Amertranz of approximately $242,000, and related
accounts receivable of approximately $213,000 as of and for the six month period
ended June 30, 1996.
At June 30, 1996, Amertranz owes approximately $213,000 to TIA for air
freight forwarding services.
10. SIGNIFICANT CUSTOMERS
During the six month period ended June 30,1996, no single customer
accounted for sales of 10% or more of the Company's revenue.
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TIA, Inc.:
We have audited the accompanying balance sheets of Amertranz Worldwide
Holding Corp. (formerly The Freight Forwarding Business of TIA and CFS) (note 1)
as of December 31, 1994 and 1995 and the related statements of operations and
changes in accumulated deficit 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 Amertranz Worldwide
Holding Corp. (formerly The Freight Forwarding Business of TIA and CFS) 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-12
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31, 1994 AND 1995
1994 1995
---- ----
ASSETS
<S> <C> <C> <C> <C> <C> <C>
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 STOCKHOLDERS' EQUITY (DEFICIT)
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
----------- ----------
Stockholders' equity (deficit):
Common stock, $.01 par value; 15,000,000 shares
authorized, 2,100,000 shares issued
and outstanding 21,000 21,000
Accumulated deficit (7,299,118) (4,932,989)
----------- -----------
Total stockholders' equity (deficit) (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-13
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AND
CHANGES IN ACCUMULATED DEFICIT
Years Ended December 31, 1993, 1994 and 1995
DECEMBER 31,
----------------------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating revenue $32,670,727 $38,576,285 $38,211,306
Cost of transportation (Note 7) 24,231,379 30,254,733 30,300,476
------------- ------------ ------------
Gross profit 8,439,348 8,321,552 7,910,830
Selling, general and administrative expenses 6,504,897 4,633,676 4,513,154
------------- ------------ ---------
Operating income 1,934,451 3,687,876 3,397,676
Other income (expense):
Interest expense (Note 4) (1,107,520) (1,143,787) (1,155,215)
Other, net 41,928 117,214 123,668
------------- ------------ ------------
Total other expense (1,065,592) (1,026,573) (1,031,547)
------------- ------------ ------------
Income before income taxes 868,859 2,661,303 2,366,129
Income taxes (Note 5) -- 108,201 --
------------- ------------ ------------
Net income 868,859 2,553,102 2,366,129
Accumulated deficit:
Balance at beginning of year (10,721,079) (9,852,220) (7,299,118)
------------- ------------ ------------
Balance at end of year $ (9,852,220) $ (7,299,118) $ (4,932,989)
============= ============ ============
</TABLE>
See accompanying notes to the financial statements.
F-14
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993, 1994 and 1995
DECEMBER 31,
--------------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 868,859 $ 2,553,102 $ 2,366,129
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 416,830 377,569 367,111
Net disposals of property and equipment -- 46,978 --
Bad debt expense 153,574 70,000 41,000
Changes in assets and liabilities:
Increase in accounts receivable (771,087) (949,027) (224,790)
Increase in income taxes receivable -- -- (65,000)
Increase in inventory (11,309) -- --
(Increase) decrease in prepaid expenses (140,608) 581,376 26,961
Increase (decrease) in accounts payable 487,518 (274,010) (9,167)
Decrease in accrued liabilities (706,398) (165,264) (243,925)
Increase (decrease) in income taxes payable -- 68,201 (108,201)
--------- ----------- -----------
Total adjustments (571,480) (244,177) (216,011)
--------- ----------- -----------
Net cash provided by operating activities 297,379 2,308,925 2,150,118
Cash flows from investing activities:
Cash advances under notes receivable -- -- (500,000)
Purchases of furniture, fixtures and equipment (95,567) (42,280) (102,829)
Increase in other assets (7,393) (9,405) --
--------- ----------- -----------
Net cash used in investing activities (102,960) (51,685) (602,829)
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
Cash and cash equivalents at beginning of year 194,814 353,872 2,141,047
--------- ----------- -----------
Cash and cash equivalents at end of year 353,872 2,141,047 2,463,336
========= =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest 586,056 1,666,950 946,155
========= =========== ===========
Cash paid during the year for income taxes $ -- $ -- $ 173,201
========= =========== ===========
</TABLE>
See accompanying notes to the financial statements.
F-15
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS
December 31, 1993, 1994 and 1995
(1) Significant Accounting Policies
Company Background
In January 1996, Amertranz Worldwide Holding Corp. ('Holding') was
incorporated in the state of Delaware. Effective February 7, 1996, Holding
concluded an asset exchange agreement with TIA, Inc. ('TIA'), its 51% owned
subsidiary, 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 freight forwarding business of TIA and CFS. Holding then contributed the
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 in addition to 2,100,000 shares of
common stock in Holding, as discussed in Note 2.
Basis of Financial Statement Presentation
The accompanying balance sheets and statements of operations and
changes in accumulated deficit and cash flows include the accounts of the former
air freight business of TIA (a wholly owned subsidiary of Wrexham Aviation
Corporation) and CFS, which have been combined for reporting purposes as The
Freight Forwarding Business of TIA and CFS (the 'Business'), which is not a
separate legal or historical reporting entity. The Business of TIA and CFS is
treated as the predecessor since TIA and CFS represent the majority and
controlling shareholders of Holding, accordingly the issuance of 2,100,000
shares of stock by Holding for the freight forwarding business of TIA and CFS
has been accounted for as a recapitalization of the Business. Although the
Business is not a separate legal entity, since the Business is treated as the
predecessor the effect of the issuance of the 2,100,000 shares of common stock
of Holding in February 1996 has been reflected in the financial statements as if
it had occurred as of the beginning of the earliest year presented. Since the
Business was combined in February 1996 with Holding the accompanying financial
statements include the accounts of TIA and CFS related to their air freight
businesses and exclude accounts related to the minority interest in CFS.
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.
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 includes $2,290,000 of overnight repurchase
agreements.
F-16
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(1) Significant Accounting Policies - (Continued)
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 and CFS. Income taxes allocated to the Business are
based on the actual income taxes of TIA and CFS for the periods presented.
Deferred tax assets and liabilities are recognized under the asset and
liability method for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
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.
Earnings per Share
Earnings per share information has not been presented since it would
not be representative of future earnings per share information due to the
combination of the Business with Holding and Amertranz on February 7, 1996 and
the related changes in stockholders' equity which took place at that time.
Reclassification
Certain amounts in the 1993 and 1994 financial statements have been
reclassified to conform with the 1995 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of 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-17
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(2) Asset Exchange Agreement
In anticipation of a public offering of securities ("Offering"), in
February 1996 TIA and CFS entered into an asset exchange agreement discussed in
note 1 in which the air freight business of TIA and CFS was combined with
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 and CFS in connection with their air freight
businesses. The air freight business does not include any other assets of TIA
and CFS, including cash, accounts receivable, notes receivable, securities,
equipment, aircraft, parts or tools, nor any liabilities of TIA or CFS.
In exchange for the transfer of the air freight operating assets
described above, TIA and CFS received a promissory note of $10,000,000 and
2,100,000 shares of Holding (allocated to TIA and CFS as notes receivable of
$8,000,000 and $2,000,000, respectively, and 1,680,000 and 420,000 shares,
respectively). The promissory note bears interest at 8%, and is due from March
1, 1996 through July 1, 1996 in monthly payments of $80,000 and from August 1,
1996 in monthly payments of $166,667. In addition, Holding intends to apply
$2,000,000 of the net proceeds from the proposed public offering of securities
discussed in the first paragraph above against the promissory note.
Pursuant to the asset exchange agreement, TIA and CFS agreed to advance
to the aforementioned subsidiary of Holding, on a revolving loan basis, 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. Funds advanced under the revolving loan
with respect to TIA'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 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 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 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 and CFS have agreed that, upon consummation of the Offering,
repayment of the notes will be deferred as discussed in note 2.
F-18
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(4) Notes Payable
Substantially all of TIA's and CFS's activities in 1993, 1994 and 1995
are related to their air freight business and, accordingly, all of the
historical interest expense related to the interest-bearing debt of TIA 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 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 and is
due on demand. Interest expense on this note amounted to approximately $327,000,
$343,000 and $252,000 in 1993, 1994 and 1995, respectively.
A note payable to Wrexham Aviation Corporation, Parent of TIA has a
balance outstanding at both December 31, 1994 and 1995 of $8,940,336, bears
interest at prime plus 1% (9.5% at December 31, 1995), is secured by a second
lien on all assets of TIA and is due on June 16, 1997. Interest expense on this
note amounted to approximately $740,000, $783,000 and $903,000 in 1993, 1994 and
1995, respectively. 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 non-interest 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-19
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(5) Income Taxes
The operations of the Business are included in the federal and state
income tax returns of TIA and CFS. Income taxes allocated to the Business are
based on the actual income taxes of TIA and CFS for the periods presented.
Income tax expense for 1993, 1994 and 1995 consists of:
1993
-----------------------------------------------
CURRENT DEFERRED TOTAL
------- -------- -----
Federal $ -- $ -- $ --
State -- -- --
-----------------------------------------------
$ -- $ -- $ --
========= ========= ========
1994
-----------------------------------------------
CURRENT DEFERRED TOTAL
------- -------- -----
Federal $ 79,494 $ -- $ 79,494
State 28,707 -- 28,707
--------- --------- --------
$ 108,201 $ -- $108,201
========= ========= ========
1995
-----------------------------------------------
CURRENT DEFERRED TOTAL
------- -------- -----
Federal $ -- $ -- $ --
State -- -- --
-----------------------------------------------
$ -- $ -- $ --
========= ========= ========
Income tax expense for 1993, 1994 and 1995 differed from the "expected"
amount for those years (computed by applying the federal corporate rate of 34%
to income before income taxes) for the following reasons:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense $ 295,412 $ 904,843 $804,484
State income taxes, net of federal benefit -- 18,947 --
Change in valuation allowance for deferred tax
assets allocated to income tax expense (295,412) (861,672) (817,928)
Other -- 46,083 13,444
---------- --------- ---------
$ -- $ 108,201 $ --
========== ========= =========
</TABLE>
F-20
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(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> <C> <C> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts receivable $ 88,172 $ 50,664
Alternative minimum tax credit carry forward 79,494 79,494
Reserves and accruals, not deductible until paid for tax
purposes 51,606 40,656
Net operating loss carry forwards 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 and 1995 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 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 carry forwards 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 and CFS have approximately $79,000 available for
carryforward.
F-21
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(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:
1996 $43,332
1997 $20,865
Rent expense for cancelable and noncancellable operating leases for the
years ended December 31, 1993, 1994 and 1995 was approximately $2,012,000,
$675,000 and $330,000, respectively.
(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.
During the year ended December 31, 1995, the Business had sales to a
subsidiary of Holding that amounted to approximately $350,500 and at December
31, 1995 related accounts receivable of $150,500, recorded in the accompanying
balance sheet.
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, TIA has exclusive rights until June 30, 1998 to the use of a leased
L-1011 freighter aircraft. While TIA 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 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 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 in March
1994. Prior to March 1994, TIA 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.
F-22
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(7) Related Party Transactions (Continued)
Total transportation costs purchased from Tradewinds Air and FWA
related to these agreements amounted to approximately $14,959,000 and
$16,691,000 in 1994 and 1995, respectively. 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 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
and 1995. The Business estimates an allowance for doubtful accounts based on the
credit worthiness of its customers as well as general economic conditions.
Consequently, an adverse change in those factors could affect the Business's
estimate of its bad debts.
(9) Contingencies
TIA is responsible for the clean-up of contaminated soil associated
with the removal of an underground storage tank in Greensboro, North Carolina.
TIA removed the waste oil tank during 1994 and has performed a substantial
portion of the remediation procedures on the site. TIA, 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-23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Amertranz Worldwide Holding Corp.:
We have audited, in accordance with generally accepted auditing
standards, the financial statements of Amertranz Worldwide Holding Corp.
included in this annual report on Form 10-K and have issued our report thereon
dated August 28, 1996. Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. This schedule is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Melville, New York
August 28, 1996
S-1
<PAGE>
SCHEDULE II
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Charged to
Beginning Costs and Other Balance at
of Year Expenses Accounts Deductions End of Year
------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
For the fiscal year ended June 30, 1996
Allowance for doubtful accounts $ 401 $ 48 $ -- $(83) $ 371
===== ======= ====== ==== =======
Accumulated depreciation and amortization
of property and equipment $ 106 $ 108 $ -- $ (4) $ 210
===== ======= ====== ==== =======
Accumulated amortization of debt
issuance cost $ -- $ 3,264 $ -- $ -- $ 3,264
===== ======= ====== ==== =======
Accumulated amortization of goodwill $ -- $ 191 $ -- $ -- $ 191
===== ======= ====== ==== =======
</TABLE>
S-2
<PAGE>
AMENDMENT TO BY-LAWS
OF
AMERTRANZ WORLDWIDE HOLDING CORP.
(effective July 31, 1996)
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 5. SPECIAL MEETINGS. - Special meetings of the stockholders for any
purpose or purposes may be called by the President or Secretary, or by
resolution of the directors. [STOCKHOLDERS HOLDING AT LEAST 10% OF THE
OUTSTANDING SHARES ENTITLED TO VOTE AT A STOCKHOLDERS' MEETING SHALL ALSO HAVE
THE RIGHT TO CALL SPECIAL MEETINGS OF THE STOCKHOLDERS.]
(Added material shown in all caps and bracketed)
BYLAMEND.MEM
<PAGE>
BY-LAWS
OF
AMERTRANZ WORLDWIDE HOLDING CORP.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. - The registered office shall be established
and maintained at c/o the corporation, 2001 Marcus Avenue, Lake Success,, New
York 11042 and the corporation shall be the registered agent of this corporation
in charge thereof.
SECTION 2. OTHER OFFICES. - The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. - Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of meeting. In the event the
Board of Directors fails to so determine the time, date and place of meeting,
the annual meeting of stockholders shall be held at the registered office of the
corporation in Delaware.
If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.
SECTION 2. OTHER MEETINGS. - Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting.
SECTION 3. VOTING. - Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote for directors
and the vote upon any question before the meeting, shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
<PAGE>
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM . - Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote the meeting.
SECTION 5. SPECIAL MEETINGS. - Special meetings of the stockholders for any
purpose or purposes may be called by the President or Secretary, or by
resolution of the directors. Stockholders holding at least 10% of the
outstanding shares entitled to vote at a stockholders' meeting shall also have
the right to call special meetings of the stockholders.
SECTION 6. NOTICE OF MEETINGS. - Written notice, stating the place, date
and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than sixty days before the date of the meeting. No business other than that
stated in the notice shall be transacted at any meeting without the unanimous
consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. - Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
- 2 -
<PAGE>
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. - The number of directors shall be three (3).
The directors shall be elected at the annual meeting of the stockholders and
each director shall be elected to serve until his successor shall be elected and
shall qualify. A director need not be a stockholder.
SECTION 2. RESIGNATIONS. - Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES - If the office of any director, member of a committee
or other officer becomes vacant, the remaining directors in office, though less
than a quorum by a majority vote, may appoint any qualified person to fill such
vacancy, who shall hold office for the unexpired term and until his successor
shall be duly chosen.
SECTION 4. REMOVAL. - Any director or directors may be removed either for
or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the stockholders entitled to
vote.
SECTION 5. INCREASE OF NUMBER. - The number of directors may be increased
by amendment of these By-Laws by the affirmative vote of a majority of the
directors, though less than a quorum, or, by the affirmative vote of a majority
in interest of the stockholders, at the annual meeting or at a special meeting
called for that purpose, and by like vote the additional directors may be chosen
at such meeting to hold office until the next annual election and until their
successors are elected and qualify.
SECTION 6. POWERS. - The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or reserved
to the stockholders.
SECTION 7. COMMITTEES. - The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate
members-of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of any member
or such committee or committees, the member or members thereof present at any
such meeting and not disqualified from voting, whether or not he or
- 3 -
<PAGE>
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, or in these By-Laws, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power of authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 8. MEETINGS. - The newly elected Board of Directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent, in
writing, of all the directors.
Unless restricted by the incorporation document or elsewhere in these
By-laws, members of the Board of Directors or any committee designated by such
Board may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at such meeting.
Regular meetings of the Board of Directors may be scheduled by a resolution
adopted by the Board. The Chairman of the Board or the President or Secretary
may call, and if requested by any two directors, must call special meeting of
the Board and give five days' notice by mail, or two days' notice personally or
by telegraph or cable to each director. The Board of Directors may hold an
annual meeting, without notice, immediately after the annual meeting of
shareholders.
SECTION 9. QUORUM. - A majority of the directors shall constitute a quorum
for the transaction of business. If at any meeting of the board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum is obtained, and no further notice thereof need
be given other than by announcement at the meeting which shall be so adjourned.
SECTION 10. COMPENSATION. - Directors shall not receive any stated salary
for their services as directors or as members of committees, but by resolution
of the board a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
- 4 -
<PAGE>
SECTION 11. ACTION WITHOUT MEETING. - Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the board, or of such committee as the case
may be, and such written consent is filed with the minutes of proceedings of the
board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. - The officers of the corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one or
more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as
they may deem proper. None of the officers of the corporation need be directors.
The officers shall be elected at the first meeting of the Board of Directors
after each annual meeting. More than two offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. - The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors. SECTION 4. PRESIDENT. - The President shall be the
chief executive officer of the corporation and shall have the general powers and
duties of supervision and management usually vested in the office of President
of a corporation. He shall preside at all meetings of the stockholders if
present thereat, and in the absence or non-election of the Chairman of the Board
of Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation . Except
as the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
SECTION 6. TREASURER. - The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other
- 5 -
<PAGE>
valuables in the name and to the credit of the corporation in such
depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered
by the Board of Directors, or the President, taking proper vouchers for such
disbursements. He shall render to the President and Board of Directors at the
regular meetings of the Board of Directors, or whenever they may request it, an
account of all his transactions as Treasurer and of the financial condition of
the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
SECTION 7. SECRETARY. - The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by the law or by these By-Laws, and in case of his absence or refusal
or neglect so to do, any such notice may be given by any person thereunto
directed by the President, or by the directors, or stockholders, upon whose
requisition the meeting is called as provided in these By-Laws. He shall record
all the proceedings of the meetings of the corporation and of the directors in a
book to be kept for that purpose, and shall perform such other duties as may be
assigned to him by the directors or the President. He shall have the custody of
the seal of the corporation and shall affix the same to all instruments
requiring it, when authorized by the directors or the President, and attest the
same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. - Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. - A certificate of stock, signed by the
Chairman or Vice-Chairman of the Board of Directors, if they be elected,
President or Vice-President, and the Treasurer or an Assistant Treasurer, or
Secretary or Assistant Secretary, shall be issued to each stockholder certifying
the number of shares owned by him in the corporation. When such certificates are
countersigned (1) by a transfer agent other than the corporation or its
employee, or, (2) by a registrar other than the corporation or its employee, the
signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. - A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation
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against any claim that may be made against it on account of the alleged loss of
any such certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. - The shares of stock of the corporation
shall be transferrable only upon its books by the holders thereof in person or
by their duly authorized attorneys or legal representatives, and upon such
transfer the old certificate shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be cancelled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. - In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any date, which shall not be more than sixty nor less than
ten days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjournment meeting.
SECTION 5. DIVIDENDS. - Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 6. SEAL. - The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
"Corporate Seal, Delaware, 1996". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. - The fiscal year of the corporation shall be
determined By resolution of the Board of Directors.
SECTION 8. CHECKS. - All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
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SECTION 9. NOTICE AND WAIVER OF NOTICE. - Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, postage, prepaid, addressed to
the person entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on the day of
such mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by Statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation of these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special meeting thereof if notice
of the proposed alteration or repeal of By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal of By-Law or By-Laws
to be made, be contained in the notice of such special meeting.
ARTICLE VII
INDEMNIFICATION
No director shall be liable to the corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director, except with
respect to (1) a breach of the director's duty of loyalty to the corporation or
its stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) liability which may be
specifically defined by law or (4) a transaction from which the director derived
an improper personal benefit, it being the intention of the foregoing provision
to eliminate the liability of the corporation's directors to the corporation or
its stockholders to the fullest extent permitted by law. The corporation shall
indemnify to the fullest extent permitted by law each person that such law
grants the corporation the power to indemnify.
C64896.198
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of June 24, 1996 by and between Amertranz
Worldwide Holding Corp., a Delaware corporation ("Company"), and STUART
HETTLEMAN ("Executive").
W I T N E S E T H:
WHEREAS, Executive is currently serving as President and Chief Financial
Officer of the Company and is also serving as Executive Vice President of the
Company's wholly-owned subsidiaries, Amertranz Worldwide, Inc. ("Amertranz") and
Carribbean Air Services, Inc. ("CAS"); and
WHEREAS, the Company has recently filed a registration statement with the
Securities and Exchange Commission (File No. 333-03613) relating to a proposed
public offering (the "Offering") of the Company's Common Stock and warrants to
purchase Common Stock in a firm commitment underwriting to be managed by GKN
Securities Corp. (the "Underwriter"); and
WHEREAS, effective upon the commencement of the Offering (the "Commencement
Date") the parties hereto desire to provide for the employment of the Executive
by the Company as President and Chief Executive Officer of the Company and as
Executive Vice President of Amertranz and CAS upon the terms set forth herein;
and
WHEREAS, the Executive is prepared to accept such employment, upon the
terms and conditions hereinafter described.
NOW THEREFORE, in consideration of the premises and mutual promises and
agreements hereinafter set forth, it is agreed as follows:
1. Effectiveness of this Agreement. This Agreement shall become effective
on the Commencement Date, except that if the Commencement Date does not occur on
or before September 30, 1996, this Agreement shall be null and void and of no
further effect.
2. Employment and Duties.
(a) Executive shall serve as President and Chief Executive Officer of the
Company and as Executive Vice President of each of Amertranz and CAS for a term
commencing on the Commencement Date and expiring on the third anniversary of the
Commencement Date. The Executive agrees to serve the Company faithfully and to
the best of his ability and to perform such services and duties of an executive
nature in connection with the business, affairs and operations of the Company,
Amertranz, CAS and any other subsidiary of the Company as may be reasonably and
<PAGE>
in good faith assigned or delegated to him from time to time by or under the
authority of the Board of Directors of the Company and consistent with the
positions of President and Chief Executive Officer of the Company and Executive
Vice President of Amertranz and CAS, and to use his best efforts in the
promotion and advancement of the Company and its subsidiaries and their welfare
and business. Executive shall perform his duties hereunder, to the extent as is
or may be reasonably necessary in connection therewith, at the Company's
corporate headquarters in Lake Success, New York; provided, however, that the
Company acknowledges that Executive's physical presence at the Company's
headquarters on a daily basis throughout the term is not necessarily required,
having due regard to the ability of Executive to adequately interact with the
Company's other employees by telephone, facsimile and computer. The employment
with the Company shall be Executive's primary employment during the term of this
Agreement; provided, however, that the Company acknowledges that the Executive
shall be permitted to pursue outside business interests during the term, but
only to the extent that such outside business interests do not interfere with
the Executive's duties under this Agreement and do not violate the terms and
conditions of Section 8 hereof.
(b) During the term of employment, Executive shall be nominated by the
management of the Company for election as a director of the Company at each
meeting of shareholders at which his term of office as a director shall expire.
In addition, at his request, the Company shall have Executive elected to the
Board of Directors of each of its subsidiaries, including Amertranz and CAS.
3. Compensation.
(a) Base Salary. In consideration of his employment hereunder, the Company
shall pay to the Executive, in such installments as shall accord with the normal
pay practices of the Company, but no less frequently than monthly, an annual
salary at the initial rate of $130,000 per annum ("Base Salary"). As of each
anniversary of the Commencement Date, the Base Salary will be increased by an
amount equal to the product of (i), (ii) and (iii), where
(i) is the Base Salary then in effect,
(ii) is .5%; and
(iii) is a fraction, the numerator of which is EBITDA (as hereinafter
defined) for the fiscal year of the Company ending prior to such anniversary
date and the denominator of which is $100,000.
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(b) Incentive Compensation. Executive shall be entitled to receive
incentive compensation ("Incentive Compensation") in excess of any Base Salary,
based on the Company's EBITDA in any fiscal year during the term hereof, which
Incentive Compensation will be equal to the product of (i), (ii) and (iii),
where
(i) is the Base Salary in effect as of the end of the applicable fiscal
year;
(ii) is 1%; and
(iii) is a fraction, the numerator of which is EBITDA for such fiscal year
and the denominator of which is $100,000.
Incentive Compensation shall be paid to the Executive no later than 2 1/2 months
after the end of the fiscal year for which it is payable, or three days after
the audited results for the Company for such year becomes available, whichever
is later. In the event the Board of Directors of the Company determines at any
time during such year that all or any part of the Incentive Compensation with
respect to such year has been earned, the Board of Directors in its sole
discretion may pay all or part of such Incentive Compensation prior to the time
the Incentive Compensation is due hereunder.
(c) Definition of EBITDA. For purposes of this Agreement, the term "EBITDA"
shall be the income of the Company, but before any (i) interest expense, (ii)
income taxes or other taxes based on income, (iii) amortization expense, (iv)
depreciation expense and (v) any extraordinary or other one-time income or loss.
The calculation of "EBITDA" shall be derived from the audited financial
statements of the Company, computed in accordance with generally accepted
accounting principles consistently applied.
4. Issuance of Stock Option; Additional Stock Options; Loans for Exercise
of Options; Registration Rights.
(a) Effective upon the Commencement Date, the Company shall issue to
Executive an option (the "Option") to purchase 75,000 shares of Common Stock,
which shall be exercisable at an exercise price equal to the initial offering
price to the public of the Common Stock in the Offering. Such Option shall be
issued pursuant to the Company's 1996 Stock Option Plan (the "Plan"), have a
term of ten years and become exercisable, so long as Executive is employed by
the Company or any of its subsidiaries, in accordance with the following
schedule:
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(i) as to 20,834 shares, the Option shall be exercisable commencing on the
90th day following the Commencement Date;
(ii) as to an additional 16,666 shares, the Option shall be exercisable
commencing on January 2, 1997;
(iii) as to an additional 18,750 shares, the Option shall be exercisable
commencing on January 2, 1998, so long as EBITDA of the Company for the 12
months ended June 30, 1997 exceeds $500,000, provided, however, that if EBITDA
for the 12 months ended June 30, 1997 does not exceed $500,000 but EBITDA for
the 12 months ended June 30, 1998 exceeds $750,000, the Option shall
nevertheless become exercisable as to these 18,750 shares commencing on the date
of determination of EBITDA for the 12 months ended June 30, 1998; and
(iv) as to an additional 18,750 shares, the Option shall be exercisable
commencing on January 2, 1999, so long as EBITDA for the 12 months ended June
30, 1998 exceeds $750,000.
; provided, however, that if (i) Executive is terminated for Cause (as defined
in Section 7 of this Agreement), the Option shall thereupon terminate to the
extent not then exercised, (ii) Executive is terminated without Cause, or dies
or is Permanently Disabled (as defined in Section 5 below) at any time during
the term of employment, any portion of the Option not yet then exercisable shall
thereupon become fully exercisable for the balance of the ten year term of the
Option and (iii) the Executive voluntarily terminates employment, the vested
portion of the Option at the time of termination shall remain exercisable for
the balance of the ten year term of the Option. The Option will, to the maximum
extent permitted under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), be classified as an "incentive stock option" under the
Code.
(b) With respect to shares of Common Stock of the Company which may be
acquired by Executive pursuant to the Option provided for in this Agreement or
options hereafter granted to him, the Company agrees that, to the extent
permitted by applicable Delaware law, the Company will lend or cause to be lent
to Executive, at Executive's request, funds sufficient to enable him to pay the
exercise price of such options from time to time up to the total number of
shares covered by said options, so long as Executive is an employee of the
Company or any of its subsidiaries at the time a request for any such loan is
made. Such loan shall bear interest at the minimum applicable federal rate such
that imputed interest will not result, and will be due 36 months after the loan
is made, unless Executive is terminated for Cause or voluntarily terminates his
employment prior to the
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end of the term of employment, in which case the loan will be due 12 months
following the date of termination. In addition, any such loan shall be secured
by shares of Common Stock owned by Executive the fair market value of which
shall at any time be not less than 100% of the outstanding principal amount of,
and accrued but unpaid interest on, such loan.
(c) Subject to any contract or agreement to which the Company may be a
party with the Underwriter pursuant to which the Company is required to withhold
or delay the filing of any registration statement relating to shares issuable
pursuant to any option plan of the Company, the Company shall file, as promptly
as practicable following the Commencement Date, a registration statement with
the Securities and Exchange Commission on Form S-8 (or other then applicable
form), registering the shares of the Company's Common Stock issuable to
Executive upon exercise of the Option and any other options granted to the
Executive, together with (if required to enable the Executive to resell any such
shares publicly) a selling shareholder prospectus in conformity with Form S-3
(or any then applicable form). The Company covenants and agrees to file all
necessary amendments to such registration statement and to keep same current
during the full option exercise term, at its sole cost and expense.
5. Permanent Disability; Insurance.
(a) In the event of termination of Executive's employment due to Permanent
Disability (as hereinafter defined), the Company shall thereafter pay the
Executive 50% of his then effective Base Salary for the balance of the stated
term of this Agreement. In addition, Executive shall be entitled to (i) a pro
rata portion of the Incentive Compensation payable pursuant to paragraph 3(b) of
this Agreement for the fiscal year in which such termination occurs on the basis
of the elapsed time (in full months) during such year that Executive was
employed prior to the date of termination, (ii) reimbursement of expenses
properly incurred prior to the date of termination (as contemplated by Section
6(b) of this Agreement) and (iii) accrued vacation pay and pension, if any.
"Permanent Disability" for purposes hereof shall be deemed to exist if, in the
judgment of a physician licensed to practice in the state of Executive's
residence who is satisfactory to Executive, Executive will be unable, due to
mental or physical incapacity, disease or injury, to perform the duties of his
office for a period of not less than six months. In the event of a termination
due to Permanent Disability, the Company shall also continue to include
Executive and his family in its group hospitalization, major medical and life
insurance plans (if any) until the end of the stated term, with the expense
thereof to be borne by the Company.
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(b) (i) The Company shall provide term life insurance on the life of the
Executive in the principal amount of $1,000,000 during the term of this
Agreement, and pay all premiums with respect to such insurance. The beneficiary
or beneficiaries of said insurance shall be as designated in writing to Company
by Executive. Executive agrees to submit to any physical examination required by
any prospective insurer, and will otherwise cooperate with the Company in
connection with obtaining such insurance. The Company shall pay additional
compensation to the Executive to hold him harmless from any income taxes he may
owe as a result of the premiums paid by the Company with respect to such
insurance and as a result of such additional compensation.
(ii) Upon termination of his employment hereunder, other than for Cause,
the Company shall be required to transfer and assign to Executive any policy of
life and/or disability insurance then owned by the Company in respect of
Executive.
(iii) In the event the Board of Directors determines to acquire "key man"
insurance on the life of Executive, Executive shall cooperate with the Company
in obtaining such insurance.
6. Executive Benefits; Reimbursement of Expenses.
(a) In addition to the benefits set forth under Section 5 hereof, Executive
shall be entitled to participate in all employee benefit plans which may be
available at the date hereof or in the future by the Company to employees
serving the Company or its subsidiaries in an executive capacity during the term
of employment. Benefits for Executive under such plans shall be at least as
great as those offered to any other employee of Company and its subsidiaries.
Executive shall be entitled to vacations of one month in each calendar year
during the term of employment. Vacation periods need not be consecutive and
shall carry over to the following calendar years to the extent unused.
(b) The Company authorizes Executive to incur such expenses as are
appropriate for the reasonable and proper conduct of the Company's business, and
the Company shall reimburse him no less frequently than monthly for such
expenses upon submission of a reasonably detailed accounting thereof, with
appropriate substantiation.
(c) In addition to expenses reimbursable pursuant to paragraph (b) above,
the Company shall provide Executive with an automobile allowance of $500 per
month during the term of this agreement, and the Company shall reimburse
Executive for the
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insurance, repair, gas, maintenance and mobile telephone expense associated with
Executive's automobile.
7. Termination.
(a) The Company may not terminate this Agreement for any reason except for
(i) Cause (defined to be either (A) the conviction of Executive for, or
Executive pleads nolo contendere to, any crime or offense involving monies or
other property of the Company or any other felony or (B) a violation of the
provisions of Section 8 hereof (subject to the provisions of paragraph (d)
thereof)), or (ii) upon a Permanent Disability as provided in Section 5 hereof.
If the employment of Executive is terminated by the Company for Cause, the
Company shall have no obligation to Executive except any Base Salary earned to
the date of termination, a pro rata portion of the Incentive Compensation
payable pursuant to paragraph 3(b) of this Agreement for the fiscal year in
which such termination occurs on the basis of the elapsed time (in full months)
during such year that Executive was employed prior to the date of termination,
reimbursement of expenses properly incurred prior to such date and accrued
vacation pay and pension, if any. If the employment of Executive is terminated
as a result of a Permanent Disability, the provisions of Section 5 shall apply.
(b) The occurrence of any of the following will entitle Executive to the
benefits set forth in paragraph (c) of this Section 7:
(i) Any material breach of this Agreement by the Company, including but not
limited to any attempt by the Company to terminate the employment of Executive
for any reason other than as set forth in paragraph (a) of this Section 7, any
attempt by the Company to remove the Executive from the position of President
and Chief Executive Officer of the Company or Executive Vice President of
Amertranz or CAS or the assignment of duties to the Executive which are
materially inconsistent with those positions; provided, however, that if the
breach is cured within the ten day period referred to in Section 10(c) of this
Agreement, no breach will be deemed to have occurred hereunder.
(ii) If, at the expiration of the term of this Agreement, the Company fails
to offer Executive the right to continue employment for not less than an
additional three year term on terms and conditions which are at least as
favorable as those in effect at the end of the stated term.
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(iii) If, without the prior written consent of Executive, at any time after
the date hereof, any of the following occurs:
(A) The acquisition, other than from the Company, by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other than TIA, Inc. or
Carribbean Freight Service, Inc. or any of their respective affiliates, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of either the then outstanding shares of Common
Stock of the Company (the "Outstanding Company Common Stock") or the combined
voting power of the then outstanding voting securities of the Company having
general voting power in electing the Board of Directors of the Company (the
"Outstanding Company Voting Securities"); or
(B) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors, provided, however,
that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election, by the Company's stockholders was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual was a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(C) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company or of the sale or other disposition of all or
substantially all of the assets of the Company, or of a reorganization, merger
or consolidation with respect to which all or substantially all of the
individuals and entities who were the respective beneficial owners of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or consolidation do not,
immediately following such reorganization,
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merger or consolidation, beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation resulting from such
reorganization, merger or consolidation, as the case may be.
(c) If any of the events specified in paragraph (b) of this Section 7
occur, Executive may, by written notice to the Company, elect to treat such
breach as a termination without Cause within the meaning of this Agreement and
terminate his employment as an officer and director of the Company and all
subsidiaries. In the event of a termination without Cause, all obligations of
Executive hereunder shall terminate, and Executive shall be entitled to the
following:
(i) Executive may elect to receive either (A), (B) or (C) below (the
"Severance Compensation"):
(A) Continue to receive all compensation and benefits provided by this
Agreement as if he had continued to be employed hereunder for the full term of
employment (without any duty to mitigate damages).
(B) Receive, in lieu of all such compensation and benefits, within ten
business days after the date of termination, an amount equal to the sum of (x)
and (y) below:
(x) all accrued but unpaid Base Salary, Incentive Compensation and other
compensation or other amounts due to Executive under this Agreement as of the
date of termination; and
(y) the discounted present value of all remaining Base Salary and Incentive
Compensation to which Executive would be entitled under this Agreement for all
years remaining under the Agreement. "Base Salary" for purposes of this
subparagraph shall be deemed the annual Base Salary rate in effect at the time
of the discharge, increased by 10% on each successive anniversary of the
Commencement Date. "Incentive Compensation" for purposes of this subparagraph
shall mean, for any year, an amount equal to 50% of the Base Salary payable to
Executive for such year. The discounted present value for the remaining term of
the Agreement shall be
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determined using an interest rate equal to the most recent federal rate
published by the Internal Revenue Service for imputing interest applicable to a
period of time equal to the period between the date of termination and the
expiration date of the stated term of employment.
(C) Receive, in lieu of amounts payable under either (A) or (B), within ten
business days after the date of termination, an amount equal to 299% of the
Executive's Base Salary and Incentive Compensation in respect of the last full
fiscal year Executive was employed under this Agreement.
(ii) The group major medical, hospitalization and life insurance coverage
(if any) provided to Executive and his family at the time of termination shall
be provided for the remainder of the stated term of the Agreement with the cost
thereof to be borne by the Company.
(iii) All stock options, including but not limited to the Option granted
pursuant to Section 4 of this Agreement, which were not exercisable at the time
of termination of employment shall thereupon become exercisable in full.
(d) In the event of termination of employment due to death, such
termination shall not result in the loss of any rights which the Executive may
have as an employee of the Company or any subsidiary at the time of his death
pursuant to any insurance or other death benefit plans or arrangements of the
Company or any subsidiary or pursuant to any employee benefit plans of the
Company or subsidiary or pursuant to any options or rights to acquire shares of
Common Stock of the Company (except to the extent that such loss of rights
arises under the terms of the instruments governing such plans or arrangements).
8. Restrictive Covenants. Executive covenants and agrees that:
(a) Executive will not, at any time during the term of employment hereunder
and for two years thereafter, divulge to any person other than a person
associated with the Company any secret and confidential information concerning
the Company, or any of its subsidiaries, and their respective products,
customers and plans which Executive acquired during the course of Executive's
employment.
(b) Executive will not, directly or indirectly, except for the benefit of
the Company, at any time during the term of
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employment hereunder, become an officer, director, stockholder, partner,
associate, employee, owner, agent, creditor, independent contractor, co-venturer
or otherwise, or be interested in or associated with any other corporation, firm
or business engaged in the same or any similar business competitive with that of
the Company or any of its subsidiaries.
(c) Executive will not, directly or indirectly, except for the benefit of
the Company, during the term of employment and for a period of two years
thereafter:
(i) (A) solicit, cause or authorize, directly or indirectly, to be
solicited for or on behalf of Executive or third parties, from persons who were
customers of the Company at any time within one year prior to the cessation of
Executive's employment hereunder, any business similar to the business
transacted by the Company with such customer; or
(B) accept or cause or authorize, directly or indirectly, to be accepted
for or on behalf of the Executive or third parties, any such business from any
such customers of the Company as defined in the preceding subsection.
(ii) (A) solicit, entice, persuade or induce, directly or indirectly, any
employee of the Company or any of its subsidiaries or any other person who was,
at any time within one year prior to the cessation of Executive's employment
hereunder, then under contract with or rendering services to the Company or any
of its subsidiaries, to terminate his or her employment by, or contractual
relationship with, the Company or its subsidiaries or to refrain from extending
or renewing the same (upon the same or new terms) or to refrain from rendering
services to the Company or its subsidiaries or to become employed by or to enter
into contractual relations with persons other than the Company or its
subsidiaries; or
(B) approach any such employee or other person for any of the foregoing
purposes; or
(C) authorize or knowingly approve or assist in the taking of any such
actions by any person other than the Company or any of its subsidiaries.
; provided, however, that if the employment of Executive has been terminated
without Cause under this Agreement and the Company has failed to deliver to
Executive the Severance Compensation and other benefits due him pursuant to
Section 7(c) hereof, Executive shall not be subject to this paragraph (c)
immediately upon such
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non-delivery; and provided, further, that if Executive, after termination of his
employment hereunder, becomes employed by or otherwise performs services for an
entity which was, prior to the termination, a subsidiary of the Company
(including but not limited to CAS) but which entity is, at the time Executive
becomes employed or first performs services for such entity, no longer a
subsidiary of the Company, the limitations of this paragraph (c) shall not be
deemed to apply to Executive while he is employed by or performs services for
such entity.
(d) Notwithstanding any alleged breach of the provisions of this Section 8
by Executive, this Agreement shall continue in full force and effect, and the
Company shall be required to make all payments and furnish all benefits due to
Executive hereunder, until such time as there is a final judgment by a court of
competent jurisdiction finding that there has been a material breach of this
Section 8 by Executive, which is no longer subject to appeal by Executive.
9. Legal fees. The Company shall pay for all fees and expenses of counsel
to the Executive for serviced rendered by such counsel in connection with this
Agreement.
10. Binding Effect; Governing Law; Notice of Breach and Right to Cure.
(a) The rights and obligations under this Agreement shall inure to the
benefit of and shall be binding upon the Company and its successors and assign,
including any corporation with which the Company shall merge or consolidate or
to which it shall sell all or substantially all of its assets. This Agreement is
otherwise nonassignable.
(b) The interpretation and construction of this Agreement shall be governed
by the laws of the State of New York.
(c) In the event of any material breach by either party of this Agreement,
the non-breaching party shall give the breaching party written notice thereof,
and the breaching party shall have ten days from receipt of such notice to cure
such breach. If the breach is cured within such ten day period, no breach will
be deemed to have occurred hereunder.
11. Arbitration. Disputes between the parties arising under or with respect
to this Agreement shall be submitted to arbitration in the City of New York by a
single arbitrator under the rules of the American Arbitration Association or a
similar organization and the arbitration award shall be binding upon the parties
and enforceable in any court of competent jurisdiction. The cost of arbitration,
including counsel fees, shall be borne by the Company unless the arbitrator
specifically determines that the Executive's position was frivolous and without
reasonable
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foundation in which case the Company and the Executive shall each bear their own
expenses.
12. Miscellaneous.
(a) This Agreement may not be modified, amended or rescinded except by a
writing duly signed by the parties hereto.
(b) All notices or other communications described herein or contemplated
hereby shall be in writing and shall be deemed to have been duly given if
transmitted by facsimile (with proof of delivery) or mailed by registered or
certified mail, return receipt requested, (i) if to the Company, directed to
Amertranz Worldwide Holding Corp., 2001 Marcus Avenue, Lake Success, New York
10042, and (ii) if to Executive, directed to Mr. Stuart Hettleman at
_____________________________, or to such other address as the parties may in
writing establish by notice in accordance herewith.
13. Severability. If any provision herein shall, as a result of arbitration
or court proceedings, be determined to be invalid or contrary to law, then that
provision alone shall be deemed deleted herefrom and the remainder hereof shall
survive.
14. Indemnification. The Company undertakes to indemnify Executive for all
acts or omissions as an officer or director or employee of the Company or any
subsidiary thereof, to the full extent provided or permitted under Delaware law,
against all damages, expenses and costs (including reasonable counsel fees) in
any action or proceeding commenced during the term of employment or after
termination of his employment hereunder. The Company agrees to purchase, as
promptly as practicable after the Commencement Date, and keep in full force and
effect during the term of this Agreement directors and officers liability
insurance in an amount not less than $3 million.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Employment Agreement to be
signed and sealed by its undersigned officer, hereunto duly authorized, and
Executive has set his hand hereto, all as of the day and year first above
written.
ATTEST: AMERTRANZ WORLDWIDE HOLDING
CORP.
/s/ By: /s/
Name: Michael Barsa
Title: Vice President
/s/ /s/
Witness Stuart Hettleman
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<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of June 24, 1996 by and between Amertranz
Worldwide Holding Corp., a Delaware corporation ("Company"), and RICHARD A.
FAIETA ("Executive").
W I T N E S E T H:
WHEREAS, Executive is currently serving as Executive Vice President of the
Company and is also serving as an officer of the Company's wholly-owned
subsidiaries, Amertranz Worldwide, Inc. ("Amertranz") and Carribbean Air
Services, Inc. ("CAS"); and
WHEREAS, the Company has recently filed a registration statement with the
Securities and Exchange Commission (File No. 333-03613) relating to a proposed
public offering (the "Offering") of the Company's Common Stock and warrants to
purchase Common Stock in a firm commitment underwriting to be managed by GKN
Securities Corp. (the "Underwriter"); and
WHEREAS, effective upon the commencement of the Offering (the "Commencement
Date") the parties hereto desire to provide for the employment of the Executive
by the Company as Executive Vice President of the Company, Chief Executive
Officer of Amertranz and President of CAS upon the terms set forth herein; and
WHEREAS, the Executive is prepared to accept such employment, upon the
terms and conditions hereinafter described.
NOW THEREFORE, in consideration of the premises and mutual promises and
agreements hereinafter set forth, it is agreed as follows:
1. Effectiveness of this Agreement. This Agreement shall become effective
on the Commencement Date, except that if the Commencement Date does not occur on
or before September 30, 1996, this Agreement shall be null and void and of no
further effect.
2. Employment and Duties.
(a) Executive shall serve as Executive Vice President of the Company, Chief
Executive Officer of Amertranz and President of CAS for a term commencing on the
Commencement Date and expiring on the third anniversary of the Commencement
Date. The Executive agrees to serve the Company faithfully and to the best of
his ability and to perform such services and duties of an executive nature in
connection with the business, affairs and operations of the Company, Amertranz,
CAS and any other subsidiary of the Company as may be reasonably and in good
faith assigned or delegated to him from time to time by or under the
<PAGE>
authority of the Board of Directors of the Company and consistent with the
positions of Executive Vice President of the Company Chief Executive Officer of
Amertranz and President of CAS, and to use his best efforts in the promotion and
advancement of the Company and its subsidiaries and their welfare and business.
Executive shall perform his duties hereunder, to the extent as is or may be
reasonably necessary in connection therewith, at the Company's location in
Greensboro, North Carolina; provided, however, that the Company acknowledges
that Executive's physical presence at the Company's location in Greensboro on a
daily basis throughout the term is not necessarily required, having due regard
to the ability of Executive to adequately interact with the Company's other
employees by telephone, facsimile and computer. The employment with the Company
shall be Executive's primary employment during the term of this Agreement.
(b) During the term of employment, Executive shall be nominated by the
management of the Company for election as a director of the Company at each
meeting of shareholders at which his term of office as a director shall expire.
In addition, at his request, the Company shall have Executive elected to the
Board of Directors of each of its subsidiaries, including Amertranz and CAS.
3. Compensation.
(a) Base Salary. In consideration of his employment hereunder, the Company
shall pay to the Executive, in such installments as shall accord with the normal
pay practices of the Company, but no less frequently than monthly, an annual
salary at the initial rate of $150,000 per annum ("Base Salary"). As of each
anniversary of the Commencement Date, the Base Salary will be increased by an
amount equal to the product of (i), (ii) and (iii), where
(i) is the Base Salary then in effect,
(ii) is .5%; and
(iii) is a fraction, the numerator of which is EBITDA (as hereinafter
defined) for the fiscal year of the Company ending prior to such anniversary
date and the denominator of which is $100,000.
(b) Incentive Compensation. Executive shall be entitled to receive
incentive compensation ("Incentive Compensation") in excess of any Base Salary,
based on the Company's EBITDA in any fiscal year during the term hereof, which
Incentive Compensation will be equal to the product of (i), (ii) and (iii),
where
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(i) is the Base Salary in effect as of the end of the applicable fiscal
year;
(ii) is 1%; and
(iii) is a fraction, the numerator of which is EBITDA for such fiscal year
and the denominator of which is $100,000.
Incentive Compensation shall be paid to the Executive no later than 2 1/2 months
after the end of the fiscal year for which it is payable, or three days after
the audited results for the Company for such year becomes available, whichever
is later. In the event the Board of Directors of the Company determines at any
time during such year that all or any part of the Incentive Compensation with
respect to such year has been earned, the Board of Directors in its sole
discretion may pay all or part of such Incentive Compensation prior to the time
the Incentive Compensation is due hereunder.
(c) Definition of EBITDA. For purposes of this Agreement, the term "EBITDA"
shall be the income of the Company, but before any (i) interest expense, (ii)
income taxes or other taxes based on income, (iii) amortization expense, (iv)
depreciation expense and (v) any extraordinary or other one-time income or loss.
The calculation of "EBITDA" shall be derived from the audited financial
statements of the Company, computed in accordance with generally accepted
accounting principles consistently applied.
4. Issuance of Stock Option; Additional Stock Options; Loans for Exercise
of Options; Registration Rights.
(a) Effective upon the Commencement Date, the Company shall issue to
Executive an option (the "Option") to purchase 75,000 shares of Common Stock,
which shall be exercisable at an exercise price equal to the initial offering
price to the public of the Common Stock in the Offering. Such Option shall be
issued pursuant to the Company's 1996 Stock Option Plan (the "Plan"), have a
term of ten years and become exercisable, so long as Executive is employed by
the Company or any of its subsidiaries, in accordance with the following
schedule:
(i) as to 20,834 shares, the Option shall be exercisable commencing on the
90th day following the Commencement Date;
(ii) as to an additional 16,666 shares, the Option shall be exercisable
commencing on January 2, 1997;
(iii) as to an additional 18,750 shares, the Option shall be exercisable
commencing on January 2, 1998, so
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<PAGE>
long as EBITDA of the Company for the 12 months ended June 30, 1997 exceeds
$500,000, provided, however, that if EBITDA for the 12 months ended June 30,
1997 does not exceed $500,000 but EBITDA for the 12 months ended June 30, 1998
exceeds $750,000, the Option shall nevertheless become exercisable as to these
18,750 shares commencing on the date of determination of EBITDA for the 12
months ended June 30, 1998; and
(iv) as to an additional 18,750 shares, the Option shall be exercisable
commencing on January 2, 1999, so long as EBITDA for the 12 months ended June
30, 1998 exceeds $750,000.
; provided, however, that if (i) Executive is terminated for Cause (as defined
in Section 7 of this Agreement), the Option shall thereupon terminate to the
extent not then exercised, (ii) Executive is terminated without Cause, or dies
or is Permanently Disabled (as defined in Section 5 below) at any time during
the term of employment, any portion of the Option not yet then exercisable shall
thereupon become fully exercisable for the balance of the ten year term of the
Option and (iii) the Executive voluntarily terminates employment, the vested
portion of the Option at the time of termination shall remain exercisable for
the balance of the ten year term of the Option. The Option will, to the maximum
extent permitted under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), be classified as an "incentive stock option" under the
Code.
(b) With respect to shares of Common Stock of the Company which may be
acquired by Executive pursuant to the Option provided for in this Agreement or
options hereafter granted to him, the Company agrees that, to the extent
permitted by applicable Delaware law, the Company will lend or cause to be lent
to Executive, at Executive's request, funds sufficient to enable him to pay the
exercise price of such options from time to time up to the total number of
shares covered by said options, so long as Executive is an employee of the
Company or any of its subsidiaries at the time a request for any such loan is
made. Such loan shall bear interest at the minimum applicable federal rate such
that imputed interest will not result, and will be due 36 months after the loan
is made, unless Executive is terminated for Cause or voluntarily terminates his
employment prior to the end of the term of employment, in which case the loan
will be due 12 months following the date of termination. In addition, any such
loan shall be secured by shares of Common Stock owned by Executive the fair
market value of which shall at any time be not less than 100% of the outstanding
principal amount of, and accrued but unpaid interest on, such loan.
(c) Subject to any contract or agreement to which the Company may be a
party with the Underwriter pursuant to which the
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<PAGE>
Company is required to withhold or delay the filing of any registration
statement relating to shares issuable pursuant to any option plan of the
Company, the Company shall file, as promptly as practicable following the
Commencement Date, a registration statement with the Securities and Exchange
Commission on Form S-8 (or other then applicable form), registering the shares
of the Company's Common Stock issuable to Executive upon exercise of the Option
and any other options granted to the Executive, together with (if required to
enable the Executive to resell any such shares publicly) a selling shareholder
prospectus in conformity with Form S-3 (or any then applicable form). The
Company covenants and agrees to file all necessary amendments to such
registration statement and to keep same current during the full option exercise
term, at its sole cost and expense.
5. Permanent Disability; Insurance.
(a) In the event of termination of Executive's employment due to Permanent
Disability (as hereinafter defined), the Company shall thereafter pay the
Executive 50% of his then effective Base Salary for the balance of the stated
term of this Agreement. In addition, Executive shall be entitled to (i) a pro
rata portion of the Incentive Compensation payable pursuant to paragraph 3(b) of
this Agreement for the fiscal year in which such termination occurs on the basis
of the elapsed time (in full months) during such year that Executive was
employed prior to the date of termination, (ii) reimbursement of expenses
properly incurred prior to the date of termination (as contemplated by Section
6(b) of this Agreement) and (iii) accrued vacation pay and pension, if any.
"Permanent Disability" for purposes hereof shall be deemed to exist if, in the
judgment of a physician licensed to practice in the state of Executive's
residence who is satisfactory to Executive, Executive will be unable, due to
mental or physical incapacity, disease or injury, to perform the duties of his
office for a period of not less than six months. In the event of a termination
due to Permanent Disability, the Company shall also continue to include
Executive and his family in its group hospitalization, major medical and life
insurance plans (if any) until the end of the stated term, with the expense
thereof to be borne by the Company.
(b) (i) The Company shall provide term life insurance on the life of the
Executive in the principal amount of $1,000,000 during the term of this
Agreement, and pay all premiums with respect to such insurance. The beneficiary
or beneficiaries of said insurance shall be as designated in writing to Company
by Executive. Executive agrees to submit to any physical examination required by
any prospective insurer, and will otherwise cooperate with the Company in
connection with obtaining such insurance. The Company shall pay additional
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<PAGE>
compensation to the Executive to hold him harmless from any income taxes he
may owe as a result of the premiums paid by the Company with respect to such
insurance and as a result of such additional compensation.
(ii) Upon termination of his employment hereunder, other than for Cause,
the Company shall be required to transfer and assign to Executive any policy of
life and/or disability insurance then owned by the Company in respect of
Executive.
(iii) In the event the Board of Directors determines to acquire "key man"
insurance on the life of Executive, Executive shall cooperate with the Company
in obtaining such insurance.
6. Executive Benefits; Reimbursement of Expenses.
(a) In addition to the benefits set forth under Section 5 hereof, Executive
shall be entitled to participate in all employee benefit plans which may be
available at the date hereof or in the future by the Company to employees
serving the Company or its subsidiaries in an executive capacity during the term
of employment. Benefits for Executive under such plans shall be at least as
great as those offered to any other employee of Company and its subsidiaries.
Executive shall be entitled to vacations of one month in each calendar year
during the term of employment. Vacation periods need not be consecutive and
shall carry over to the following calendar years to the extent unused.
(b) The Company authorizes Executive to incur such expenses as are
appropriate for the reasonable and proper conduct of the Company's business, and
the Company shall reimburse him no less frequently than monthly for such
expenses upon submission of a reasonably detailed accounting thereof, with
appropriate substantiation.
(c) In addition to expenses reimbursable pursuant to paragraph (b) above,
the Company shall provide Executive with an automobile allowance of $500 per
month during the term of this agreement, and the Company shall reimburse
Executive for the insurance, repair, gas, maintenance and mobile telephone
expense associated with Executive's automobile.
7. Termination.
(a) The Company may not terminate this Agreement for any reason except for
(i) Cause (defined to be either (A) the conviction of Executive for, or
Executive pleads nolo contendere to, any crime or offense involving monies or
other property of the Company or any other felony or (B) a violation of the
provisions of Section 8 hereof (subject to the provisions of
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<PAGE>
paragraph (d) thereof)), or (ii) upon a Permanent Disability as provided in
Section 5 hereof. If the employment of Executive is terminated by the Company
for Cause, the Company shall have no obligation to Executive except any Base
Salary earned to the date of termination, a pro rata portion of the Incentive
Compensation payable pursuant to paragraph 3(b) of this Agreement for the fiscal
year in which such termination occurs on the basis of the elapsed time (in full
months) during such year that Executive was employed prior to the date of
termination, reimbursement of expenses properly incurred prior to such date and
accrued vacation pay and pension, if any. If the employment of Executive is
terminated as a result of a Permanent Disability, the provisions of Section 5
shall apply.
(b) The occurrence of any of the following will entitle Executive to the
benefits set forth in paragraph (c) of this Section 7:
(i) Any material breach of this Agreement by the Company, including but not
limited to any attempt by the Company to terminate the employment of Executive
for any reason other than as set forth in paragraph (a) of this Section 7, any
attempt by the Company to remove the Executive from the position of Executive
Vice President of the Company or Chief Executive Officer of Amertranz or
President of CAS or the assignment of duties to the Executive which are
materially inconsistent with those positions; provided, however, that if the
breach is cured within the ten day period referred to in Section 10(c) of this
Agreement, no breach will be deemed to have occurred hereunder.
(ii) If, at the expiration of the term of this Agreement, the Company fails
to offer Executive the right to continue employment for not less than an
additional three year term on terms and conditions which are at least as
favorable as those in effect at the end of the stated term.
(iii) If, without the prior written consent of Executive, at any time after
the date hereof, any of the following occurs:
(A) The acquisition, other than from the Company, by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other than TIA, Inc. or
Carribbean Freight Service, Inc. or any of their respective affiliates, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more
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<PAGE>
of either the then outstanding shares of Common Stock of the Company (the
"Outstanding Company Common Stock") or the combined voting power of the then
outstanding voting securities of the Company having general voting power in
electing the Board of Directors of the Company (the "Outstanding Company Voting
Securities"); or
(B) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors, provided, however,
that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election, by the Company's stockholders was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual was a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(C) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company or of the sale or other disposition of all or
substantially all of the assets of the Company, or of a reorganization, merger
or consolidation with respect to which all or substantially all of the
individuals and entities who were the respective beneficial owners of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or consolidation do not,
immediately following such reorganization, merger or consolidation, beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation resulting from such reorganization, merger or
consolidation, as the case may be.
(c) If any of the events specified in paragraph (b) of this Section 7
occur, Executive may, by written notice to the Company, elect to treat such
breach as a termination without Cause within the meaning of this Agreement and
terminate his
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employment as an officer and director of the Company and all subsidiaries. In
the event of a termination without Cause, all obligations of Executive hereunder
shall terminate, and Executive shall be entitled to the following:
(i) Executive may elect to receive either (A), (B) or (C) below (the
"Severance Compensation"):
(A) Continue to receive all compensation and benefits provided by this
Agreement as if he had continued to be employed hereunder for the full term of
employment (without any duty to mitigate damages).
(B) Receive, in lieu of all such compensation and benefits, within ten
business days after the date of termination, an amount equal to the sum of (x)
and (y) below:
(x) all accrued but unpaid Base Salary, Incentive Compensation and other
compensation or other amounts due to Executive under this Agreement as of the
date of termination; and
(y) the discounted present value of all remaining Base Salary and Incentive
Compensation to which Executive would be entitled under this Agreement for all
years remaining under the Agreement. "Base Salary" for purposes of this
subparagraph shall be deemed the annual Base Salary rate in effect at the time
of the discharge, increased by 10% on each successive anniversary of the
Commencement Date. "Incentive Compensation" for purposes of this subparagraph
shall mean, for any year, an amount equal to 50% of the Base Salary payable to
Executive for such year. The discounted present value for the remaining term of
the Agreement shall be determined using an interest rate equal to the most
recent federal rate published by the Internal Revenue Service for imputing
interest applicable to a period of time equal to the period between the date of
termination and the expiration date of the stated term of employment.
(C) Receive, in lieu of amounts payable under either (A) or (B), within ten
business days after the date of termination, an amount equal to 299% of the
Executive's Base Salary and Incentive
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Compensation in respect of the last full fiscal year Executive was employed
under this Agreement.
(ii) The group major medical, hospitalization and life insurance coverage
(if any) provided to Executive and his family at the time of termination shall
be provided for the remainder of the stated term of the Agreement with the cost
thereof to be borne by the Company.
(iii) All stock options, including but not limited to the Option granted
pursuant to Section 4 of this Agreement, which were not exercisable at the time
of termination of employment shall thereupon become exercisable in full.
(d) In the event of termination of employment due to death, such
termination shall not result in the loss of any rights which the Executive may
have as an employee of the Company or any subsidiary at the time of his death
pursuant to any insurance or other death benefit plans or arrangements of the
Company or any subsidiary or pursuant to any employee benefit plans of the
Company or subsidiary or pursuant to any options or rights to acquire shares of
Common Stock of the Company (except to the extent that such loss of rights
arises under the terms of the instruments governing such plans or arrangements).
8. Restrictive Covenants. Executive covenants and agrees that:
(a) Executive will not, at any time during the term of employment hereunder
and for two years thereafter, divulge to any person other than a person
associated with the Company any secret and confidential information concerning
the Company, or any of its subsidiaries, and their respective products,
customers and plans which Executive acquired during the course of Executive's
employment.
(b) Executive will not, directly or indirectly, except for the benefit of
the Company, at any time during the term of employment hereunder, become an
officer, director, stockholder, partner, associate, employee, owner, agent,
creditor, independent contractor, co-venturer or otherwise, or be interested in
or associated with any other corporation, firm or business engaged in the same
or any similar business competitive with that of the Company or any of its
subsidiaries.
(c) Executive will not, directly or indirectly, except for the benefit of
the Company, during the term of employment and for a period of two years
thereafter:
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(i) (A) solicit, cause or authorize, directly or indirectly, to be
solicited for or on behalf of Executive or third parties, from persons who were
customers of the Company at any time within one year prior to the cessation of
Executive's employment hereunder, any business similar to the business
transacted by the Company with such customer; or
(B) accept or cause or authorize, directly or indirectly, to be accepted
for or on behalf of the Executive or third parties, any such business from any
such customers of the Company as defined in the preceding subsection.
(ii) (A) solicit, entice, persuade or induce, directly or indirectly, any
employee of the Company or any of its subsidiaries or any other person who was,
at any time within one year prior to the cessation of Executive's employment
hereunder, then under contract with or rendering services to the Company or any
of its subsidiaries, to terminate his or her employment by, or contractual
relationship with, the Company or its subsidiaries or to refrain from extending
or renewing the same (upon the same or new terms) or to refrain from rendering
services to the Company or its subsidiaries or to become employed by or to enter
into contractual relations with persons other than the Company or its
subsidiaries; or
(B) approach any such employee or other person for any of the foregoing
purposes; or
(C) authorize or knowingly approve or assist in the taking of any such
actions by any person other than the Company or any of its subsidiaries.
; provided, however, that if the employment of Executive has been terminated
without Cause under this Agreement and the Company has failed to deliver to
Executive the Severance Compensation and other benefits due him pursuant to
Section 7(c) hereof, Executive shall not be subject to this paragraph (c)
immediately upon such non-delivery; and provided, further, that if Executive,
after termination of his employment hereunder, becomes employed by or otherwise
performs services for an entity which was, prior to the termination, a
subsidiary of the Company (including but not limited to CAS) but which entity
is, at the time Executive becomes employed or first performs services for such
entity, no longer a subsidiary of the Company, the limitations of this paragraph
(c) shall not be deemed to apply to Executive while he is employed by or
performs services for such entity.
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(d) Notwithstanding any alleged breach of the provisions of this Section 8
by Executive, this Agreement shall continue in full force and effect, and the
Company shall be required to make all payments and furnish all benefits due to
Executive hereunder, until such time as there is a final judgment by a court of
competent jurisdiction finding that there has been a material breach of this
Section 8 by Executive, which is no longer subject to appeal by Executive.
9. Legal fees. The Company shall pay for all fees and expenses of counsel
to the Executive for serviced rendered by such counsel in connection with this
Agreement.
10. Binding Effect; Governing Law; Notice of Breach and Right to Cure.
(a) The rights and obligations under this Agreement shall inure to the
benefit of and shall be binding upon the Company and its successors and assign,
including any corporation with which the Company shall merge or consolidate or
to which it shall sell all or substantially all of its assets. This Agreement is
otherwise nonassignable.
(b) The interpretation and construction of this Agreement shall be governed
by the laws of the State of New York.
(c) In the event of any material breach by either party of this Agreement,
the non-breaching party shall give the breaching party written notice thereof,
and the breaching party shall have ten days from receipt of such notice to cure
such breach. If the breach is cured within such ten day period, no breach will
be deemed to have occurred hereunder.
11. Arbitration. Disputes between the parties arising under or with respect
to this Agreement shall be submitted to arbitration in the City of New York by a
single arbitrator under the rules of the American Arbitration Association or a
similar organization and the arbitration award shall be binding upon the parties
and enforceable in any court of competent jurisdiction. The cost of arbitration,
including counsel fees, shall be borne by the Company unless the arbitrator
specifically determines that the Executive's position was frivolous and without
reasonable foundation in which case the Company and the Executive shall each
bear their own expenses.
12. Miscellaneous.
(a) This Agreement may not be modified, amended or rescinded except by a
writing duly signed by the parties hereto.
(b) All notices or other communications described herein or contemplated
hereby shall be in writing and shall be
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<PAGE>
deemed to have been duly given if transmitted by facsimile (with proof of
delivery) or mailed by registered or certified mail, return receipt requested,
(i) if to the Company, directed to Amertranz Worldwide Holding Corp., 2001
Marcus Avenue, Lake Success, New York 10042, and (ii) if to Executive, directed
to Mr. Richard A. Faieta at _____________________________, or to such other
address as the parties may in writing establish by notice in accordance
herewith.
13. Severability. If any provision herein shall, as a result of arbitration
or court proceedings, be determined to be invalid or contrary to law, then that
provision alone shall be deemed deleted herefrom and the remainder hereof shall
survive.
14. Indemnification. The Company undertakes to indemnify Executive for all
acts or omissions as an officer or director or employee of the Company or any
subsidiary thereof, to the full extent provided or permitted under Delaware law,
against all damages, expenses and costs (including reasonable counsel fees) in
any action or proceeding commenced during the term of employment or after
termination of his employment hereunder. The Company agrees to purchase, as
promptly as practicable after the Commencement Date, and keep in full force and
effect during the term of this Agreement directors and officers liability
insurance in an amount not less than $3 million.
IN WITNESS WHEREOF, the Company has caused this Employment Agreement to be
signed and sealed by its undersigned officer, hereunto duly authorized, and
Executive has set his hand hereto, all as of the day and year first above
written.
ATTEST: AMERTRANZ WORLDWIDE HOLDING
CORP.
/s/ By: /s/
Name: Michael Barsa
Title: Vice President
/s/ /s/
Witness Richard A. Faieta
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<PAGE>
May 1, 1996
Mr. Michael Barsa
Vice President
Amertranz Worldwide Holding Corp.
2001 Marcus Avenue
Lake Success, New York 11042
Re: Obligations owned to TIA/CFS
Dear Mr. Barsa:
It is our understanding that Amertranz Worldwide Holding Corp. ("Company")
is in the process of filing with the U.S. Securities and Exchange Commission a
registration statement on Form S-1 ("Registration Statement") for an initial
public offering of its securities ("IPO") through GKN Securities Corp.
("Underwriter"). In connection with the IPO, the Underwriter has requested that
the Company restructure certain of its debt obligations (all capitalized terms
used herein and not defined shall have the meaning as set forth in the
Registration Statement).
Currently, the Company and its subsidiaries, Amertranz and CAS, have
outstanding the following obligations to TIA and CFS (collectively, the "TIA/CFS
Obligations"):
1. Exchange Note made by the Company in the principal amount of
$10,000,000;
2. TIA Loan made by Amertranz in the principal amount of $800,000; and
3. Revolver Note made by CAS up to an aggregate principal amount of
$4,000,000.
In order to facilitate the IPO, and provided that the contingencies set
forth below are satisfied, each of the undersigned hereby agrees to the
following:
(i) It will defer each monthly payment of interest (which will continue to
accrue during the deferral period) and principal (other than the $2 million
payment described in the Registration Statement as being paid out of the use of
proceeds of the IPO and will not be deferred) on the Exchange Note and the TIA
Loan to the extent such payments for such month in the aggregate would exceed
80% of the Company's EBITDA. Such deferral shall continue until the earlier of
(a) the date after which the Company's EBITDA for any consecutive two month
period exceeds $600,000 or (b) November 1, 1996.
(ii) The full amount due under the Revolver Note will be repaid on the
earlier of (a) the date the Company obtains refinancing of its accounts
receivable facility upon reasonable terms or (b) December 31, 1996.
(iii) $2,000,000 in principal amount of the Exchange Note will be converted
into the Company's Class A Preferred Stock as described in the Registration
Statement.
(iv) It will not take any action against the Company, Amertranz or CAS to
enforce its security interest in the assets of such entity until the earlier of
(a) one year after the effective date of the IPO (b) any action is taken by any
other secured creditor of the Company, Amertranz or CAS to foreclose its
security interest thereon, or (c) any creditor of the Company, Amertranz or CAS
obtains a final judgment against such entity(ies) in an amount of $50,000 or
more, which judgment is not stayed.
<PAGE>
Mr. Michael Barsa
May 1, 1996
Page 2
(v) All defaults to date under any of the TIA/CFS Obligations are waived,
and none of the deferrals and modifications set forth in this letter will be
deemed to be a default under any of the TIA/CFS Obligations.
The agreements by each of the undersigned as set forth in paragraphs (i)
through (v) above are contingent on the following:
1. The surrender to the Company, as of February 7, 1996, by the former
Amertranz stockholders and promissory noteholders of an aggregate of 298,004
shares of Common Stock and options to purchase an aggregate of 153,131 shares of
Common Stock, and the issuance to TIA and CFS, as of February 7, 1996, of an
additional 150,000 shares of Common Stock.
2. The closing of a transaction in which David R. Pulk surrenders to the
Company options to purchase an aggregate of 200,000 shares of Common Stock in
exchange for all of the Company's interests in Amertranz Worldwide, a private
limited company existing under the laws of Belgium and Amertranz do Brasil LTDA,
an entity existing under the laws of Brazil, and the Company, Amertranz and CAS
receive full releases from Mr. Pulk for all claims through the date of the
release.
3. The consummation of the May Bridge Financing by May 10, 1996.
4. If the IPO is not consummated by July 15, 1996, all of the agreements by
each of the undersigned as set forth in paragraphs (i) through (iv) above will
be null and void.
Please indicate the Company's consent to the terms set forth in this letter
by countersigning this letter in the space provided below and returning it to
the undersigned.
Very truly yours,
TIA, INC. CARIBBEAN FREIGHT SYSTEMS, INC.
By: _______/s/______________ By: _________/s/____________
Stuart Hettleman Stuart Hettleman
Executive Vice President Executive Vice President
AGREED THIS 1st DAY OF MAY, 1996.
AMERTRANZ WORLDWIDE HOLDING CORP.
By: ________/s/______________
Michael Barsa
Vice President
C64424.198
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