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 for the fiscal year ended June 30, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number: 0-29754
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.)
112 East 25th Street, Baltimore, Maryland 21218
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 338-0127
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 16, 1998 was $3,076,307.
The number of shares of common stock outstanding as of September 16, 1998 was
8,479,094.
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 1998 Annual
Meeting of Shareholders (to be filed).
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
1998 ANNUAL REPORT ON FORM 10-K
Table of Contents
Page
PART I
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Executive Officers of the Registrant 8
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 15
PART III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 17
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PART I
ITEM 1. BUSINESS
Background
Amertranz Worldwide Holding Corp. ("Company") provides freight
forwarding services and logistics services, through its wholly owned subsidiary,
Target Airfreight, Inc. ("Target"). Prior to July 13, 1998, the Company also
provided services through its wholly-owned subsidiary, Caribbean Air Services,
Inc. ("CAS"), and, until June 23, 1997, also provided services through its
Amertranz Worldwide, Inc. ("Amertranz") subsidiary. The Company has a network of
offices in 22 cities throughout the 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 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.
In February 1996, 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
conducting 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.
On October 10, 1996, the Company acquired Consolidated Air Services,
Inc. ("Consolidated"), a Phoenix based freight forwarder that had begun its
operation in 1982 focusing primarily on serving the fashion and retail industry
with domestic and international freight forwarding services. As a result,
Consolidated became a wholly-owned subsidiary of the Company with Amertranz
conducting Consolidated's freight forwarding business.
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On May 8, 1997, the Company acquired (by merger into the Company's
Target subsidiary) Target Air Freight, Inc. (a California corporation) a Los
Angeles-based freight forwarder ("Air Freight"). Under the terms of the merger,
the Company issued 900,000 shares of Common Stock and paid $400,000 to Air
Freight's stockholders. Following the merger with Target, Christopher A.
Coppersmith, the principal shareholder of Air Freight became a director of the
Company.
Since the business of the Company's Amertranz subsidiary incurred
operating losses for each of its operating periods, on June 23, 1997 the
Company's Amertranz subsidiary ceased operations and transferred its customer
accounts to the Company's Target subsidiary for fair consideration.
On July 13, 1998, CAS sold substantially all of its operating assets to
a subsidiary of Geologistics Corporation for $27 million in cash (the "CAS
Sale") pursuant to the terms of an Asset Purchase Agreement dated June 15, 1998
(the "Asset Purchase Agreement"). Under the terms of the Asset Purchase
Agreement, CAS retained its accounts receivable, and the Company expects that
CAS will realize an additional $3.1 million from its accounts receivable after
payment of its liabilities.
Following the CAS Sale, the Company operates through its wholly-owned
subsidiary, Target.
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. On June 30, 1998, the Company had a network of offices
in 27 cities throughout the United States and Puerto Rico. Subsequent to the CAS
Sale, the Company has a network of offices in 22 cities throughout the United
States, including exclusive agency relationships in ten cities. The Company has
international freight forwarding operations consisting of strategic
relationships in over 20 countries including share ownership in its exclusive
agents in China, Hong Kong, Malaysia and Singapore.
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, air cargo
carriers, steamship lines, 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 times and rates
generally decrease in inverse proportion to the increasing weight of shipments.
Due to the high volume of freight controlled by the Company, it is able to
obtain favorable contract rates from carriers 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.
Prior to the CAS Sale, CAS had exclusive rights to the use of a
Lockheed L-1011 freighter aircraft operated by Tradewinds Airlines, Inc.
("Tradewinds Air") between the Company's Borinquen, Puerto Rico location and its
Greensboro, North Carolina and Hartford, Connecticut locations, pursuant to the
terms of a Cargo Aircraft Charter
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Agreement dated February 28, 1994, as amended, (the "L-1011 Charter"). 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 for use by
the Company, as needed. While the L-1011 Charter guaranteed to the Company the
use of the L-1011 aircraft as needed, the Company was required to pay only for
its actual use of the aircraft at market rates. In maximizing efficiencies in
the operation of the L-1011 aircraft, freight originating throughout the United
States was generally transported by truck to either Greensboro or Hartford for
loading onto the aircraft, and, similarly, freight originating in Puerto Rico
was flown on the L-1011 aircraft to either Greensboro or Hartford for transport
by truck to its destination. In connection with the CAS Sale, CAS assigned all
of its rights under the L-1011 Charter to the purchaser, and the purchaser
assumed all of CAS' obligations under the L-1011 Charter.
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 HP 9000 mainframe computer and has a proprietary
freight forwarding software system which the Company has named "Trax". Trax 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 through either printed or electronic
medium. Specifically, the Trax 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 Trax to
enhance its ability to maintain a competitive advantage. The Company believes
that the "Year 2000" issue does not have any impact on Trax.
International Operations. During the fiscal year ended June 30, 1997,
the Company increased its international operations through the acquisition of
Target. During the fiscal year ended June 30, 1998, the Company's international
freight forwarding accounted for 18.1% of the Company's operating revenue. On a
pro forma basis (assuming the CAS Sale closed on July 1, 1997), after
elimination of revenue from CAS, international freight forwarding would account
for 40.8% of the Company's operating revenue.
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. As of June 30,
1998, the Company had approximately 3,900 accounts, and, following the CAS Sale,
the Company currently has approximately 2,900 accounts.
The Company markets its services through an organization of
approximately 15 full-time salespersons and 22 independent sales agents (25
full-time and 22 independent agents prior to the CAS Sale) supported by the
sales efforts of senior management, 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's Fashion Services Division targets customers from
manufacturers to retail establishments and provides specific expertise in
handling fashion-related shipments. The Fashion Services Division specializes in
the movement of wearing apparel for manufacturing customers to their department
store customers located throughout the United States.
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Many of the Company's customers utilize more than one 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.
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 Pittston BAX Group, Inc.,
primarily solicit the shipment of heavy cargo in competition with forwarders.
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
Geologistics Americas, 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
Circle International 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.
Employees
The Company and its subsidiaries had approximately 331 full-time
employees as of June 30, 1998 and, following the CAS Sale, approximately 154
full-time employees. 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 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.
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ITEM 2. PROPERTIES
As of June 30, 1998, the Company leased terminal facilities consisting
of office and warehouse space in 17 cities located in the United States and
Puerto Rico, and also utilized ten offices operated by exclusive agents.
Following the CAS Sale, the Company leased terminal facilities consisting of
office and warehouse space in 13 cities located in the United States, and also
utilized ten offices operated by exclusive agents. The Company's headquarters
are located in Baltimore, Maryland. The Company's facilities range in size from
1,000 square feet to 100,000 square feet and consist of offices and warehouses
with loading bays. All of such properties are leased from third parties.
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 warehouse facilities are set forth in the
following table:
Approximate Square Feet Lease
Location of Floor Space Expiration
Los Angeles, CA 100,280 July 2002
*Aquadilla, PR 45,000 Month-to-Month
The Company has an additional fourteen terminal facilities in the following
locations:
Atlanta, Georgia Indianapolis, Indiana
Charlotte, North Carolina Miami, Florida
Chicago, Illinois Newark, New Jersey
Dallas, Texas New York, New York
Greensboro, North Carolina San Francisco, California
*Hartford, Connecticut *San Juan, Puerto Rico
Houston, Texas Seattle, Washington
- --------------------------
* Transferred to the purchaser as part of the CAS Sale.
ITEM 3. LEGAL PROCEEDINGS
On June 15, 1998, the Company was served with a complaint filed in the
United States District Court for the Eastern District of New York (case number
CV 98 3777), by Martin Hoffenberg, a former consultant to the Company. The
Company, its Amertranz, Target, and CAS subsidiaries, Stuart Hettleman and
Richard A. Faieta, officers and directors of the Company, and TIA and CFS
(principal shareholders of the Company), are named defendants in the lawsuit.
The complaint is based on events occurring prior to February 1996, when Mr.
Hoffenberg controlled the Amertranz Worldwide subsidiary as its president and
chairman, and on events occurring subsequent thereto, when Mr. Hoffenberg served
as a consultant to the Company. The complaint alleges breach of contract,
violations of the federal anti-racketeering laws, fraud, and failure to pay
wages and benefits. The complaint seeks economic damages in excess of $5.6
million, and punitive damages of $7.5 million. The Company intends to vigorously
defend the action. The Company believes that the complaint is without merit and
that any material recovery by Mr. Hoffenberg is unlikely.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a listing of the executive officers of the Company as
of June 30, 1998. There are no family relationships between any Directors and
Officers of the Company.
NAME AGE POSITION
Stuart Hettleman 48 President and Chief Executive
Officer
Richard A. Faieta 52 Executive Vice President
Philip J. Dubato 42 Vice President, Chief Financial
Officer and Secretary
Christopher Coppersmith 48 President, Target Airfreight, Inc.
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, and a director
and Executive Vice President of Target since May 8, 1997. 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, and a director of Target since May
8, 1997. 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, Inc., a
domestic and international freight forwarder. In connection with the CAS Sale,
Mr. Faieta resigned as a director and officer of the Company, CAS and each of
the Company's other subsidiaries; and became President of Geologistics Air
Services, Inc.
PHILIP J. DUBATO has been Vice President, Chief Financial Officer and Secretary
of the Company since February 3, 1997 and a director of the Company since
September 18, 1998. From 1984 through 1996, Mr. Dubato was employed by LEP
Profit International, Inc., a domestic and international freight forwarder,
where he held successive positions as Controller, Chief Financial Officer and
Executive Vice President.
CHRISTOPHER COPPERSMITH has been President of Target Airfreight, Inc. (acquired
by the Company in May 1997) since November 1996, and a director of the Company
since May 1997. From 1974 through October 1996, Mr. Coppersmith was Executive
Vice President and Chief Operating Officer of Target Airfreight, Inc.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to February 25, 1998, the Company's common stock, $.01 par value
(the "Common Stock") and Redeemable Common Stock Purchase Warrants (the
"Warrants") were listed on the NASDAQ SmallCap Market under the symbols AMTZ and
AMTZW, respectively. Since February 25, 1998 both the Common Stock and the
Warrants have been traded on the Over-The-Counter (OTC) market under the same
symbols (AMTZ and AMTZW).
The following table shows the high and low sales prices of the Common
Stock and Warrants for each of the quarters during the fiscal years indicated,
as reported by NASDAQ and as available through the OTC market. The quotations
represent prices between dealers and do not reflect the retailer markups,
markdowns or commissions, and may not represent actual transactions. There have
been no dividends declared.
COMMON STOCK WARRANTS
Fiscal Year Ended June 30, 1997
First Quarter High - 6 5/8 High - 1 7/8
Low - 4 5/8 Low - 1
Second Quarter High - 5 1/2 High - 1 3/4
Low - 3 7/8 Low - 1/2
Third Quarter High - 4 1/2 High - 1 1/16
Low - 3 3/4 Low - 3/8
Fourth Quarter High - 3 7/8 High - 1/2
Low - 1 Low - 1/8
Fiscal Year Ended June 30, 1998
First Quarter High - 1 3/4 High - 1/2
Low - 7/8 Low - 1/8
Second Quarter High - 2 1/4 High - 7/16
Low - 1 Low - 1/16
Third Quarter High - 2 1/4 High - 1/4
Low - 9/16 Low - 3/16
Fourth Quarter High - 1 9/16 High - 3/16
Low - 1 1/16 Low - 1/16
On September 16, 1998 there were 930 shareholders of record of the
Company's Common Stock and 795 holders of record of the Company's Warrants. The
closing price of the Common Stock on that date was $0.8125 per share. The
closing price of the Warrants on that date was $0.0625 per Warrant.
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ITEM 6. SELECTED FINANCIAL DATA
AMERTRANZ WORLDWIDE HOLDING CORP. (1)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Year Year
Years Ended December 31, Ended June 30, Ended June 30, Ended June 30,
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating revenue $38,576 $38,211 $27,446 $75,352 $97,784
Cost of transportation 30,254 30,300 20,961 57,199 76,677
------ ------ ------ ------ ------
Gross profit 8,322 7,911 6,485 18,153 21,107
Selling, general &
administrative
expenses 4,634 4,513 8,772 23,985 19,933
Restructuring charge - - - (3,407) -
Operating income (loss) $3,688 $3,398 $(2,288) $(9,239) $1,173
Net income (loss) $2,553 $2,366 $(6,397) (10,508) $7,404
Net income (loss) per common share $ (1.84) $(1.74) $0.90
Balance Sheet Data:
Total assets $22,740 $29,821 $38,547
Working capital (deficit) (13,937) (12,541) (2,340)
Current liabilities 22,470 27,158 26,085
Long-term indebtedness 8,018 4,094 4,138
Shareholders' equity (deficit) $(7,749) (1,430) 8,324
<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
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, cost of
transportation would be higher but would be more than offset by a reduction in
selling, general and administrative expenses.
</FN>
</TABLE>
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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 $97.8 million, $75.4 million, and $27.4 million, and had a
net profit of $7.4 million, and net losses of $10.5 million, and $6.4 million,
for the fiscal years ended June 30, 1998 and 1997 and the six months ended June
30, 1996, respectively. The fiscal year 1998 profit includes a $7.6 million net
income tax benefit arising from the CAS Sale which closed on July 13, 1998, and
the fiscal year 1997 loss included a charge of $3.4 million attributed to
restructuring costs in connection with the closing of the Company's Amertranz
subsidiary. The Company had consolidated earnings (losses) before interest,
taxes, depreciation and amortization (EBITDA) of approximately $2.6 million,
($8.3 million), and ($2.0 million), for the fiscal years ended June 30, 1998 and
1997 and the six months ended June 30, 1996, respectively.
While the businesses of the Company's CAS subsidiary has generated
positive cash flows for several years, the business of the Company's Amertranz
subsidiary had incurred operating losses for each of its operating periods.
Because of continuing losses in the Amertranz subsidiary, on June 23, 1997 the
Company's Amertranz subsidiary ceased operations and transferred its customer
accounts to the Company's Target subsidiary for fair consideration.
Following the closing of the Company's Amertranz subsidiary, the
Company entered into an Extension and Composition Agreement dated as of November
7, 1997 (the "Composition Agreement") with certain general unsecured trade
creditors of the Company's Amertranz subsidiary, whereby $1,581,799 of trade
debt of the Amertranz subsidiary was acquired by the Company in exchange for the
issuance of 158,180 shares of the Company's Class E Preferred Stock. In
addition, and as part of the Composition Agreement, $312,140 of trade debt of
the Amertranz subsidiary was acquired by the Company from certain unsecured
trade creditors of the Amertranz subsidiary in exchange for the Company's
obligation to pay a reduced amount totaling $125,185. This transaction resulted
in $187,129 of debt cancellation income. Currently, approximately $2.0 million
of the Company's outstanding accounts payable represent unsecured trade payables
of the Company's closed Amertranz subsidiary.
On November 28, 1997, the Company acquired $1,000,000 of secured debt
of the Amertranz subsidiary in exchange for the issuance of 100,000 shares of
its Class D Preferred Stock. While repayment of this $1,000,000 was subordinated
to the Company's obligations under its accounts receivable financing facility,
the total outstanding indebtedness of the Company (on a consolidated basis) has
been reduced by a like amount.
On July 13, 1998, in the CAS Sale, the Company's CAS subsidiary sold
substantially all of its operating assets to a subsidiary of Geologistics
Corporation for $27 million in cash pursuant to the terms of an Asset Purchase
Agreement dated June 15, 1998. Under the terms of the Asset Purchase Agreement,
CAS retained its accounts receivable, and the Company expects that CAS will
realize an additional $3.1 million from CAS's accounts receivable after payment
of its liabilities.
Results of Operations
This Annual Report on Form 10-K contains certain forward-looking
statements reflecting the Company's current expectations with respect to its
operations, performance, financial condition, and other developments. Such
statements are necessarily estimates reflecting the Company's best judgement
based upon current information and involve a number of risks and uncertainties.
While it is impossible to identify all such factors, factors which could cause
actual results to differ materially from expectations are: (i) the Company's
recent losses and ability to achieve profitability, (ii) competitive practices
in the industries in which the Company competes, (iii) the Company's dependence
on current management, (iv) the impact of current and future laws and
governmental regulations affecting the transportation industry in general and
the Company's operations in particular, (v) general economic conditions, and
(vi) other factors which may be identified from time to time in the Company's
Securities and Exchange Commission filings and other public announcements. There
can be no assurance that these and other factors will
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not affect the accuracy of such forward-looking statements. Forward-looking
statements are preceded by an asterisk (*).
Years Ended June 30, 1998 and 1997
Operating Revenue. Operating revenue increased to $97.8 million for the
year ended June 30, 1998 from $75.4 million for the year ended June 30, 1997, a
29.8% increase. Of this increase, 61% resulted from growth in the Company's CAS
subsidiary and the balance was due to the operations of the Company's Target
subsidiary which the Company acquired in May 1997.
Cost of Transportation. Cost of transportation was 78.4% of operating
revenue for the year ended June 30, 1998, and 75.9% of operating revenue for the
year ended June 30, 1997. This increase is due to (i) the February 2, 1998 start
up of a new service between Indianapolis and Aquadilla, Puerto Rico by the
Company's CAS subsidiary, (ii) the Company's Target subsidiary international
freight forwarding services, which historically reflect a higher cost of
transportation as a percentage of sales, and (iii) the Company's Target
subsidiary's agency network which is significantly larger than the Amertranz
agency network.
Gross Profit. As a result of the factors described in the previous
paragraph, gross profit for the year ended June 30, 1998 decreased to 21.6% of
operating revenue from 24.1% of operating revenue for the year ended June 30,
1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were 20.4% of operating revenue for the year ended June
30, 1998, and 31.8% (excluding restructuring charges in connection with the
closing of the Company's Amertranz subsidiary) of operating revenue for the year
ended June 30, 1997. This decrease was primarily due to (i) the closing of the
Amertranz subsidiary prior to beginning of the 1998 fiscal year (while the
Amertranz subsidiary was included for almost all of the 1997 fiscal year); and
(ii) the historically lower selling, general and administrative expenses as a
percentage of sales of the Company's Target subsidiary (acquired in May 1997),
and the inclusion of those results in the Company's consolidated results of
operations for the year ended June 30, 1998.
Net Income (Loss). The Company realized a net profit of $7,403,643 for
the year ended June 30, 1998, compared to a net loss of ($10,508,334) for the
year ended June 30, 1997. This increase was due to the $7,662,135 net income tax
benefit realized as the result of the CAS Sale on July 13, 1998, the increased
operating revenue from growth in the Company's CAS subsidiary, the operations of
the Company's Target subsidiary, the decrease in expenses as a result of the
closing of the Company's Amertranz subsidiary, the decrease in restructuring
charges (which were recorded in their entirety in the prior year) in connection
with the closing of the Amertranz subsidiary, and $187,129 of debt cancellation
income (see "Liquidity and Capital Resources", below).
Years Ended June 30, 1997 and 1996
The Company began its existence as the holding company for the combined
operations of Amertranz and the freight forwarding business of TIA and CFS on
February 8, 1996. From and after February 8, 1996, the freight forwarding
business of TIA and CFS was operated through the Company's CAS subsidiary. Prior
to such date, the operations of Amertranz and the freight forwarding business of
TIA and CFS were independent of each other. For the fiscal year ended June 30,
1997, the consolidated financial statements included the accounts of Holding,
CAS, Amertranz, Consolidated (since October 1, 1996) and Target (since May 1,
1997). The following discussion relates to the combined results of the Company
for the period June 30, 1997 compared to the results of Holdings, CAS and
Amertranz 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 July
1, 1995 through February 7, 1996.
12
<PAGE>
Year Ended
June 30, 1997 June 30, 1996
(Pro Forma/Unaudited)
Operating revenue $75,352,065 $47,922,981
Cost of transportation 57,198,797 36,828,542
Gross profit 18,153,268 11,094,376
Selling, general and
administrative expenses 23,985,223 11,025,323
Net loss before restructuring charg ($ 7,100,852) ($4,317,845)
Restructuring charge 3,407,482 -
Net loss ($10,508,334) ($4,317,845)
Operating Revenue. Operating revenue increased by $27.4 million, or
57.2%, from $47.9 million for the period July 1, 1995 through June 30, 1996, to
$75.4 million for the period July 1, 1996 through June 30, 1997. This increase
resulted almost entirely from the Company's Amertranz subsidiary's operating
revenues which were included in the 1997 period but only in the period February
8, 1996 through June 30, 1996 for the twelve months ended June 30, 1996, and the
1997 acquisitions of Consolidated and Target.
Cost of Transportation. Cost of transportation decreased to 75.9% of
operating revenues for the period July 1, 1996 through June 30, 1997, from 76.8%
of operating revenues for the period July 1, 1995 through June 30, 1996. This
improvement is almost entirely from the Company's Amertranz subsidiary's
historically lower cost of transportation as a percentage of sales which were
included in the 1997 period but only the period February 8, 1996 through June
30, 1996 for the twelve months ended June 30, 1996.
Gross Profit. As a result of the factors described in the two previous
paragraphs, gross profit for the period July 1, 1996 through June 30, 1997,
increased to 24.1% of operating revenues from 23.2% of operating revenue for the
period July 1, 1995 through June 30, 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to 31.8% of operating revenues for the period
July 1, 1996 through June 30, 1997, from 23.0% of operating revenues for the
period July 1, 1995 through June 30, 1996. This increase is almost entirely
attributable to the Company's Amertranz subsidiary's historically higher
selling, general and administrative expenses as a percentage of its sales which
were included in the 1997 period but only the period February 8, 1996 through
June 30, 1996 for the twelve months ended June 30, 1996, and the 1997
acquisitions of Consolidated and Target.
Liquidity and Capital Resources
During the year ended June 30, 1998, net cash used by operating
activities was $1.1 million. Cash used in investing activities was $556,557
which consisted of capital expenditures. Cash provided by financing activities
was $1.1 million which primarily consisted of the non-payment of interest on
short term debt due to affiliates, net borrowings under the Company's BNY
Facility (described below), and financing under a capital lease.
Capital expenditures for the year ended June 30, 1998 were $556,557.
BNY Facility. During the year ended June 30, 1998, the Company's
subsidiaries (the "Borrowers") maintained a $10 million revolving credit
facility ("BNY Facility") with BNY Financial Corp. ("BNY"), guaranteed by the
Company. The interest rate of the BNY Facility is prime plus 2%. Under the terms
of the BNY Facility, the Borrowers can borrow the lesser of $10 million or 85%
of eligible accounts receivable. The borrowings under the BNY Facility are
secured by a first lien on all of the Company's and its subsidiaries' assets. As
of June 30, 1998, there were outstanding borrowings of $6,745,853 under the BNY
Facility which represented 86% of the amount available thereunder, and the
amount available for borrowing under the BNY Facility was approximately
$1,061,000. This debt was repaid on July 13, 1998 by CAS with the proceeds from
the CAS Sale (and CAS acquired the
13
<PAGE>
Amertranz subsidiary's portion of the debt). The BNY Facility remains in place
and available for use by the Company's Target subsidiary.
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, 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"), bearing 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%. All obligations under the Revolver Note were guaranteed
by the Company and its Amertranz subsidiary and 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 BNY in
connection with the BNY Facility and the second position lien granted to TIA in
connection with the TIA Loan (described below). As of June 30, 1998, the Company
had outstanding borrowings of $905,913 under the Revolver Note. All obligations
under the Revolver Note were repaid on July 13, 1998 with the proceeds from the
CAS Sale.
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, bearing
interest at the rate of 8% per annum ("Exchange Note"). In June 1996, TIA
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 Company's
initial public offering, $2,000,000 was used to repay a portion of the Exchange
Note. The Company's indebtedness under the Exchange Note was subordinated to the
Company's obligations under the BNY Facility. As of June 30, 1998, the Company
had an outstanding balance of $7,332,126 (including $1,332,126 of accrued
interest), under the Exchange Note. All obligations under the Exchange Note were
repaid on July 13, 1998 with the proceeds from the CAS Sale.
* Working Capital Requirements. Cash needs of the Company are currently
met by funds generated from operations, the BNY Facility and funds remaining
from the CAS Sale. The Company believes that its current financial resources
will be sufficient to finance its operations and obligations for the long and
short term. However, the Company's actual working capital needs for the long and
short terms will depend upon numerous factors, including the Company's operating
results, the cost of increasing the Company's sales and marketing activities,
and, competition, none of which can be predicted with certainty.
As of June 30, 1998, the Company had a working capital deficiency of
$2.3 million. Approximately $2 million of this amount represents unsecured trade
payables of the Amertranz subsidiary. In addition, $11 million of the Company's
current liabilities as of June 30, 1998 represent obligations to TIA, CFS, and
BNY which were repaid on July 13, 1998 with the proceeds from the CAS Sale. On a
pro forma basis, taking into account the effect of the CAS Sale, as of June 30,
1998, the Company had working capital of approximately $8.2 million.
14
<PAGE>
Impact of the CAS Sale
On July 13, 1998, in the CAS Sale, the Company's CAS subsidiary sold
substantially all of its operating assets to a subsidiary of Geologistics
Corporation for $27 million in cash pursuant to the terms of an Asset Purchase
Agreement dated June 15, 1998. Under the terms of the Asset Purchase Agreement,
CAS retained its accounts receivable, and the Company expects that CAS will
realize an additional $3.1 million from CAS's accounts receivable after payment
of its liabilities.
On a pro forma basis (assuming that the CAS Sale closed on July 1,
1997), the Company's results from operations would be adjusted to reflect the
elimination of all revenue and direct expenses of CAS, the elimination of
interest expense due to the repayment of debt, an increase in interest income
resulting from the investment of the CAS Sale proceeds in overnight repurchase
agreements, and the elimination of tax benefits relating to the CAS Sale.
These pro forma adjustments would result in the following:
Pro Forma/Unaudited
Year Ended
June 30, 1998
Statement of Operations Data:
Operating revenue $43,408,396
Net income (loss) (2,647,673)
Net (loss) per
common share ($0.33)
Balance Sheet Data:
Total assets $40,852,384
Working capital 8,179,538
Current liabilities 16,351,162
Long-term indebtedness 138,006
Shareholders' equity $24,363,216
* The above pro forma financial information is unaudited and not
necessarily indicative of the consolidated results which actually would have
occurred if the sale had been concluded at the beginning of the period
presented, nor does it purport to represent the future financial position and
results of operations for future periods.
* While the Company's CAS subsidiary has been historically profitable,
the Company's strategy in entering into and concluding the CAS Sale was to
deleverage the Company's balance sheet by repaying approximately $15 million in
outstanding liabilities and provide required working capital to take advantage
of growth opportunities available to the Company's Target subsidiary. These
opportunities include improved vendor pricing and attracting quality personnel
and agents on a world-wide basis, which the Company believes will drive its
future profitability.
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
15
<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 1998 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 1998
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 1998
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 1998
Annual Meeting of Shareholders.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 - K
(a) 1. Financial Statements
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
AMERTRANZ WORLDWIDE HOLDING CORP. PAGE
Report of Independent Public Accountants F-1
Consolidated Balance Sheets as of June 30, 1998 and 1997 F-2
Consolidated Statements of Operations for the Years Ended June 30, 1998 and 1997
and the Six Months Ended June 30, 1996 F-3
Consolidated Statements of Shareholders' Deficit for the Years Ended
June 30, 1998 and 1997 and the Six Months Ended June 30, 1996 F-4
Consolidated Statements of Cash Flows for the Years Ended June 30, 1998 and 1997
and the Six Months Ended June 30, 1996 F-6
Notes to Consolidated Financial Statements F-8
AMERTRANZ WORLDWIDE HOLDING CORP. (FORMERLY THE FREIGHT FORWARDING
BUSINESS OF TIA AND CFS)
Independent Auditors' Report F-23
Balance Sheets as of December 31, 1994 and 1995 F-24
Statements of Operations and Changes in Accumulated Deficit for the Years
December 31, 1993, 1994 and 1995 F-25
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 F-26
Notes to Financial Statements F-27
</TABLE>
(a) 2. Financial Statement Schedules
Schedule II - Schedule of Valuation and Qualifying Accounts S-1
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
Exhibit No.
3.1 Certificate of Incorporation of Registrant, as amended
3.2 By-Laws of Registrant, as amended (incorporated by reference to Exhibit
3.2 to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended March 31, 1998, File No. 0-29754)
4.1 Warrant Agent Agreement (incorporated by reference to Exhibit 4.3 to
the Registrant's Registration Statement on Form S-1, Registration No.
333-03613)
4.2 Form of Amendment No. 1 to Warrant Agent Agreement dated June 13, 1997
(incorporated by reference to Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1, Registration No. 333-30351)
4.3 Certificate of Designations with respect to the Registrant's Class A
Preferred Stock (contained in Exhibit 3.1)
4.4 Certificate of Designations with respect to the Registrant's Class B
Preferred Stock (contained in Exhibit 3.1)
4.5 Certificate of Designations with respect to the Registrant's Class C
Preferred Stock (contained in Exhibit 3.1)
4.6 Certificate of Designations with respect to the Registrant's Class D
Preferred Stock (contained in Exhibit 3.1)
17
<PAGE>
4.7 Certificate of Designations with respect to the Registrant's Class E
Preferred Stock (contained in Exhibit 3.1)
10.1 1996 Stock Option Plan (incorporated by reference to Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
December 31, 1997, File No. 0-29754)
10.2 Accounts Receivable Management and Security Agreement, dated January
16, 1997 by and between BNY Financial Corp., as Lender, and Amertranz
Worldwide, Inc., Caribbean Air Services, Inc., and Consolidated Air
Services, Inc., as Borrowers, and guaranteed by Amertranz Worldwide
Holding Corp. ("BNY Facility Agreement") (incorporated by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1997, File No. 0- 29754)
10.3 Letter Amendment to BNY Facility Agreement, dated April 16, 1997 ("BNY
Letter Amendment") (incorporated by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended March
31, 1997, File No. 0-29754)
10.4 Shadow Warrant entered into in connection with the BNY Letter Amendment
(incorporated by reference to Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1997,
File No. 0-29754)
10.5 Letter Amendment to BNY Facility Agreement, dated September 25, 1997
(incorporated by reference to Exhibit 10.5 to the Registrant's Annual
Report on Form 10-K for the Year Ended June 30, 1997, File No. 0-29754)
10.6 Loan and Security Agreement dated October 25,1995 between Amertranz
Worldwide, Inc. and TIA, Inc., as amended January 24, 1996
(incorporated by reference to Exhibit 10.5 to the Registrant's
Registration Statement on Form S-1, Registration No. 333-03613)
10.7 Form of Amended and Restated Promissory Note of Amertranz Worldwide,
Inc. payable to TIA, Inc. in principal amount of $800,000 (incorporated
by reference to Exhibit 10.6 to the Registrant's Registration Statement
on Form S-1, Registration No. 333-03613)
10.8 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 (incorporated by reference
to Exhibit 10.9 to the Registrant's Registration Statement on Form S-1,
Registration No. 333-03613)
10.9 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 (incorporated by reference to Exhibit
10.10 to the Registrant's Registration Statement on Form S-1,
Registration No. 333-03613)
10.10 Employment Agreement dated June 24, 1996 between Amertranz Worldwide
Holding Corp. and Stuart Hettleman (incorporated by reference to
Exhibit 10.13 to the Registrant's Annual Report on Form 10-K for the
Fiscal Year Ended June 30, 1996, File No. 0-29754)
10.11 Employment Agreement dated June 24, 1996 between Amertranz Worldwide
Holding Corp. and Richard A. Faieta (incorporated by reference to
Exhibit 10.14 to the Registrant's Annual Report on Form 10-K for the
Fiscal Year Ended June 30, 1996, File No. 0-29754)
10.12 Consulting Agreement dated February 7, 1996 among Amertranz Worldwide
Holding Corp., Amertranz Worldwide, Inc. and Martin Hoffenberg
(incorporated by reference to Exhibit 10.11 to the Registrant's
Registration Statement on Form S-1, Registration No. 333-03613)
10.13 Cargo Aircraft Charter Agreement dated February 28, 1994 between TIA,
Inc. and Florida West Airlines, Inc., as amended and assigned November
29, 1995 (incorporated by reference to Exhibit 10.15 to the
Registrant's Registration Statement on Form S-1, Registration No.
333-03613)
10.14 Asset Purchase Agreement dated as of June 15, 1998, by and among
Amertranz Worldwide Holding Corp., Caribbean Air Services, Inc., and
Geologistics Corporation (incorporated by reference to Exhibit 2.1 to
the Registrant's Current Report on Form 8-K, dated July 13, 1998, File
No. 0-29754)
18
<PAGE>
10.15 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 (incorporated by
reference to Exhibit 10.17 to the Registrant's Registration Statement
on Form S-1, Registration No. 333-03613)
10.16(P) Lease Agreement for Los Angeles Facility (incorporated by reference to
Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the
Year Ended June 30, 1997, File No. 0-29754)
21 Subsidiaries of Amertranz Worldwide Holding Corp. (incorporated by
reference to Exhibit 21 to the Registrant's Annual Report on Form 10-K
for the Year Ended June 30, 1997, File No. 0-29754)
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
(b) Reports on Form 8-K
On June 23, 1998, the Registrant filed a current Report on Form 8-K,
dated June 15, 1998, reporting the execution by the Registrant and Geologistics
Corporation of an Asset Purchase Agreement with respect to the sale of
substantially all of the assets of the Registrant's Caribbean Air Services, Inc.
subsidiary to a subsidiary of Geologistics Corporation
On July 27, 1998, the Registrant filed a current Report on Form 8-K,
dated July 13, 1998, reporting the sale of substantially all of the assets of
the Registrant's Caribbean Air Services, Inc. subsidiary to a subsidiary of
Geologistics Corporation
19
<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: October 8, 1998 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 October 8, 1998
Stuart Hettleman Officer and Director
/s/ Michael Barsa Director October 8, 1998
Michael Barsa
/s/ Philip J. Dubato Vice President, Chief October 8, 1998
Philip J. Dubato Financial Officer,
Principal Accounting Officer
and Director
C74809.198
20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amertranz Worldwide Holding Corp.:
We have audited the accompanying consolidated balance sheets of Amertranz
Worldwide Holding Corp., a Delaware corporation, as of June 30, 1998 and 1997,
and the related consolidated statements of operations, shareholders' equity and
cash flows for the years ended June 30, 1998 and 1997 and for the six months
ended June 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Amertranz Worldwide
Holding Corp. as of June 30, 1998 and 1997, and the results of its operations
and cash flows for the years ended June 30, 1998 and 1997 and for the six months
ended June 30, 1996, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index of financial statements is presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated 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
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
September 18, 1998
F-1
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 879,797 $ 1,382,243
Accounts receivable, net of allowance for doubtful
accounts of $514,542 and $782,607, respectively 14,555,151 12,490,694
Deferred income taxes (Note 9) 7,705,092 --
Prepaid expenses and other current assets 604,588 743,569
----------- -----------
Total current assets 23,744,628 14,616,506
PROPERTY AND EQUIPMENT, net (Note 4) 755,822 734,900
OTHER ASSETS 238,904 223,768
DEFERRED INCOME TAXES (Note 9) 184,895 --
GOODWILL, net of accumulated amortization of
$1,305,445 and $709,091, respectively (Notes 3 and 5) 13,622,579 14,245,932
----------- -----------
Total assets $38,546,828 $29,821,106
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,542,850 $ 8,131,715
Accrued expenses 2,007,845 2,050,245
Accrued transportation expenses 3,863,230 3,303,366
Reserve for restructuring 264,143 2,681,956
Note payable to bank (Note 6) 6,745,853 6,467,558
Note payable to affiliate (Note 6) 905,913 789,728
Note payable to creditors 53,835 --
Current portion of long-term debt due to affiliate (Note 6) 3,332,126 3,633,273
Current portion of long-term debt (Note 6) 50,000 50,000
Dividends payable 117,524 12,875
Taxes payable 110,000 25,000
Lease obligation-current portion (Note 8) 91,735 12,063
----------- -----------
Total current liabilities 26,085,054 27,157,779
LONG-TERM DEBT DUE TO AFFILIATE (Note 6) 4,000,000 4,000,000
LONG TERM DEBT (Note 6) 10,500 87,500
LEASE OBLIGATION--LONG-TERM (Note 8) 127,506 6,251
----------- -----------
Total liabilities $30,223,060 $31,251,530
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY (Note 7):
Preferred Stock, $10 par value; 2,500,000 shares authorized,
621,387 and 498,000 shares issued and outstanding, respectively 6,213,870 4,980,000
Common stock, $.01 par value; 15,000,000 shares authorized,
8,419,094 and 6,826,504 shares issued and outstanding,
respectively 84,190 68,265
Paid-in capital 22,546,331 20,972,256
Accumulated deficit (20,509,373) (27,439,695)
Less: Treasury stock, 106,304 shares held at cost (11,250) (11,250)
----------- -----------
Total shareholders' equity (deficit) 8,323,768 (1,430,424)
----------- -----------
Total liabilities and shareholders' equity 38,546,828 $29,821,106
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
F-2
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months
Year Ended Year Ended Ended
June 30, 1998 June 30, 1997 June 30, 1996
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING REVENUE $97,784,411 $75,352,065 $27,445,583
COST OF TRANSPORTATION 76,677,883 57,198,797 20,961,019
----------- ----------- -----------
Gross profit 21,106,528 18,153,268 6,484,564
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES:
Selling, general and administrative expenses 19,933,230 23,985,223 8,772,226
Restructuring charge - 3,407,482 -
----------- ----------- -----------
Total 19,933,230 27,392,705 8,772,226
----------- ----------- ------------
Operating income (loss) 1,173,298 (9,239,437) (2,287,662)
OTHER INCOME (EXPENSE):
Interest expense (1,645,902) (1,335,833) (4,057,864)
Other income (expense), net 214,112 66,936 (50,998)
----------- ------------ ------------
Loss before income taxes (258,492) (10,508,334) (6,396,524)
Income tax benefit, net (Note 9) (7,662,135) - -
----------- ------------ ------------
Net income (loss) $ 7,403,643 ($10,508,334) ($6,396,524)
=========== ============ ===========
Net income (loss) per share:
Basic $0.90 ($1.74) ($1.84)
----------- ------------ -----------
Diluted (1) $0.53 - -
----------- ------------ -----------
Weighted average shares outstanding:
Basic 7,949,705 6,048,148 3,482,504
----------- ------------ -----------
Diluted (1) 13,468,964 - -
=========== ============ ===========
<FN>
(1) Diluted loss per share in 1997 and 1996 was anti-dilutive.
</FN>
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
F-3
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997 AND THE
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in Treasury Stock Accumulated
--------------- ------------ ------- -------------- -----------
Shares Amount Shares Amount Capital Shares Amount Deficit Total
------ ------ ------ ------ ------- ------ ------ ------- -----
<S> <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)
Common stock issued in
connection with the IPO - - 2,300,000 $23,000 $11,013,288 - - - $11,036,288
Preferred stock issued in
exchange for a principal
reduction in the Exchange Note 200,000 2,000,000 - - - - - - 2,000,000
Common stock issued in connection
with the acquisition of Target - - 900,000 9,000 1,014,750 - - - 1,023,750
Acquisition of Consolidated 20,000 200,000 - - 371,000 - - - 571,000
Stock Options exercised - - - - 5,543 - - - 5,543
Preferred stock issued in
connection with the Private
Placement 257,500 2,575,000 - - - - - (372,145) 2,202,855
Cash dividends associated with the
Class C Preferred stock - - - - - - - (12,875) (12,875)
Preferred Stock dividends associated
with the Class A Preferred stock 20,500 205,000 - - - - - (205,000) -
Net loss - - - - - - - (10,508,334) (10,508,334)
----------------------------------------------------------------------------------------------------
Balance June 30, 1997 498,000 $4,980,000 6,826,504 $68,265 $20,972,256 106,304 ($11,250)($27,439,695) ($1,430,424)
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
F-4
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997 AND THE
SIX MONTHS ENDED JUNE 30, 1996 -- (Continued)
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in Treasury Stock Accumulated
--------------- ------------ ------- -------------- -----------
Shares Amount Shares Amount Capital Shares Amount Deficit Total
------ ------ ------ ------ ------- ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
Additional costs associated with
the Private Placement - - - - - - - (34,908) (34,908)
Common stock issued in connection
with the conversion of Class A
Preferred Stock (110,250) (1,102.500) 1,102.500 11,025 1,091,475 - - - 0
Stock options exercised - - 52,590 525 (525) - - - 0
Preferred stock issued for repayment
of secured long-term debt of
Amertranz Worldwide, Inc. 100,000 1,000,000 - - - - - - 1,000,000
Preferred stock issued for purchase
of $1,581,800 of trade debt of
Amertranz Worldwide, Inc. 158,180 1,581,800 - - - - - - 1,581,800
Common stock issued in connection
with the conversion of Class B
Preferred Stock (20,000) (200.000) 200.000 2,000 198,000 - - - 0
Common stock issued in connection
with the conversion of Class C
Preferred Stock (23,750) (237,500) 237,500 2,375 235,125 - - - 0
Preferred stock dividends associated
with the Class A Preferred Stock 12,696 126,960 - - - - - (126.960) 0
Preferred stock dividends associated
with the Class D Preferred Stock 6,511 65,110 - - - - - (65.110) 0
Cash dividends associated with the
Class C Preferred Stock - - - - - - - (246.343) (246,343)
Warrants issued in connection with
the sale of the assets of CAS - - - - 50,000 - - - 50,000
Net income - - - - - - - 7,403,643 7,403,643
------------------------------------------------------------------------------------------------------
Balance, June 30, 1998 621,387 $6,213,870 8,419,094 $84,190 $22,546,331 106,304($11,250)($20,509,373) $8,323,768
======= ========== ========= ======= =========== =============== ============ ==========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
F-5
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months
Year Ended Year Ended Ended
June 30, 1998 June 30, 1997 June 30, 1996
------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $7,403,643 ($10,508,334) ($6,396,524)
Bad debt expense (268,065) 411,285 (13,187)
Depreciation and amortization 1,196,480 870,123 361,467
Deferred income tax benefit (7,889,987) - -
Write off and write down of fixed assets - 727,938 -
Decrease in debt issuance costs - 103,466 3,208,809
Restructuring charge - 3,407,482 -
Adjustments to reconcile net loss to net cash used in operating activities-
Increase in accounts receivable (1,796,390) (485,963) (3,628,728)
Decrease (increase) in prepaid expenses and other current assets 138,981 (257,630) (22,301)
(Increase) decrease in other assets (15,136) 32,913 (1,214,586)
Increase (decrease) in accounts payable and accrued expenses 204,052 (2,000,123) 1,132,292
---------- ------------ ---------
Net cash used in operating activities (1,026,422) (7,698,843) (6,572,758)
---------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (556,557) (468,912) (123,068)
Acquisition of Consolidated - 105,602 -
Acquisition of Target - (452,032) -
Cash advances under notes receivable - - (300,000)
-------------- ------------ ------------
Net cash used in investing activities (556,557) (815,342) (423,068)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering ("IPO") - net of costs - 12,190,682 -
Proceeds from Private Placement - net of costs (34,908) 2,202,855 -
Issuance of common stock in connection with the IPO - 23,000 -
Dividends paid (128,819) - -
Stock options exercised - 5,543 -
Net borrowings (repayments) from note payable to bank 278,295 4,676,355 (56,515)
Proceeds (repayment) from short-term debt 698,853 (4,104,227) 5,190,064
Repayment of long-term debt (50,000) (2,000,000) (3,990,064)
Proceeds (repayment) from revolving loan due to affiliate 116,185 (3,454,235) 3,954,989
Proceeds (payment) of lease obligations 200,927 (21,035) (8,139)
Purchase of treasury stock - - (11,250)
Cash portion of assets distributed to TIA - - (2,590,031)
------------- -------------- -------------
Net cash provided by financing activities 1,080,533 9,518,938 2,489,054
Net (decrease) increase in cash and cash equivalents (502,446) 1,004,753 (4,506,772)
CASH AND CASH EQUIVALENTS, beginning of the year 1,382,243 377,490 4,884,262
---------- -------- ---------
CASH AND CASH EQUIVALENTS, end of the year 879,797 $1,382,243 377,490
=========== ========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Payments For:
Interest $ 821,336 $ 468,588 $ 825,563
Income taxes $ 82,492 $ 46,396 $ 434,199
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
F-6
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (Continued)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
Six Months
Year Ended Year Ended Ended
June 30, 1998 June 30, 1997 June 30, 1996
------------- ------------- -------------
<S> <C> <C> <C>
TIA, Inc. conversion of 110,250 Class A Preferred Shares $(1,102,500) - -
Issuance of Common Stock for TIA, Inc. conversion of
110,250 Class A Preferred Shares $ 11,025 - -
Issuance of Common Stock for Stock Options exercised $ 525 - -
Issuance of 100,000 Class D Preferred Stock for repayment
of secured long-term debt of Amertranz Worldwide, Inc. $ 1,000,000 - -
Issuance of 158,180 Class E Preferred Stock for the purchase
of $1,581,800 of trade debt of Amertranz Worldwide, Inc. $ 1,581,800 - -
Conversion of 20,000 Class B Preferred Shares $ (200,000) - -
Issuance of Common Stock for conversion of 20,000
of Class B Preferred Shares $ 2,000 - -
Conversion of 23,750 Class C Preferred Shares $ (237,500) - -
Issuance of Common Stock for conversion of 23,750
Class C Preferred Shares $ 2,375 - -
Issuance of preferred stock as partial repayment of long-term debt - $ 2,000,000 -
Issuance of preferred stock for the Private Placement - $ 2,575,000 -
Issuance of preferred stock for the acquisition of Consolidated - $ 200,000 -
Issuance of preferred stock as dividends for the Class A preferred stock - $205,000 -
Issuance of note payable to Consolidated stockholders - $ 150,000 -
Issuance of common stock in connection with the acquisition of Target - $9,000 -
On October 10, 1996, Consolidated merged with and into the Company pursuant to
the terms of a merger agreement dated as of September 30, 1996. In conjunction
with the acquisition, the resulting goodwill is as follows:
Net assets assumed - ($ 121,539) -
Purchase Price - 786,428 -
------------
Goodwill - $ 664,889 -
============
On May 8, 1997, Target merged with and into the Company pursuant to the terms of
a merger agreement dated as of April 17, 1997. In conjunction with the
acquisition, the resulting goodwill is as follows:
Net liabilities assumed - $ 709,157 -
Purchase Price - 1,488,782 -
------------
Goodwill - $ 2,197,939 -
===============
On February 7, 1996 the Company 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
=============
The accompanying notes are an integral part of
these consolidated statements.
</TABLE>
F-7
<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 6, 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 $12,213,682 were used to pay down existing debt of $6,503,000 and the balance
was used 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. SUBSEQUENT EVENT
On July 13, 1998, the Company's CAS subsidiary sold substantially all of the
operating assets of CAS to Geologistics Air Services, Inc., an indirect
wholly-owned subsidiary of Geologistics Corporation ("Geologistics"), for $27
million in cash (the "CAS Sale"), in accordance with the terms of the Asset
Purchase Agreement among the parties dated June 15, 1998 (the "Asset Purchase
Agreement").
Under the terms of the Asset Purchase Agreement CAS retained its accounts
receivable, and the Company expects that CAS will realize an additional $3.1
million from CAS's accounts receivable after payment of its liabilities.
Other than with respect to certain obligations pursuant to leases and other
agreements included in the assigned assets, Geologistics did not assume any
obligations of the Company or CAS.
In connection with the CAS Sale, Richard A. Faieta, a director and President of
CAS and a director and Executive Vice President to the Company became President
of Geologistics Air Services, Inc. and resigned as a director and officer of the
Company, CAS and each of the Company's other subsidiaries.
For the fiscal year ended June 30, 1998 revenues from the operations of CAS
contributed approximately $54 million to the Company's total revenues, and
income from the operations of CAS contributed approximately $4.5 to the
Company's operating income.
The following unaudited pro forma financial information for the Company gives
effect to the CAS Sale as if the CAS Sale occurred at the beginning of the
fiscal period presented. These pro forma results have been prepared for
comparative purposes only, and do not purport to be indicative of the results of
operations which actually would have resulted had the sale occurred on the date
indicated or which may result in the future.
F-8
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Pro Forma/Unaudited
Year Ended
June 30, 1998
-------------
Statement of Operations Data:
Operating revenue $43,408,396
Net income (loss) (2,647,673)
Net (loss) per
common share ($0.33)
Balance Sheet Data:
Total assets $40,852,384
Working capital 8,179,538
Current liabilities 16,351,162
Long-term indebtedness 138,006
Shareholders' equity $24,363,216
3. 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
For the fiscal year ended June 30, 1998, the consolidated financial statements
include the accounts of Holding, CAS, Target, Amertranz and Consolidated.
For the fiscal year ended June 30, 1997, the consolidated financial statements
include the accounts of Holding, CAS, Amertranz, Consolidated (since October 1,
1996) and Target (since May 1, 1997).
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. In accordance with Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Acquired Assets and for Long-Lived Assets to be Disposed of",
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 carrying amount.
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-9
<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.
In October, 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation". This statement establishes a fair
value based method of accounting for an employee stock option or similar equity
instrument but allows companies to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees". Companies
electing to continue using the accounting under APB Onion No. 25 must, however,
make pro forma disclosures of net income and earnings per share as if the fair
value based method of accounting defined in SFAS No. 123 had been applied (Note
7). These disclosure requirements are effective for fiscal years beginning after
December 16, 1995. The Company has elected to continue accounting for its
stock-based compensation awards to employees and directors under the accounting
prescribed by APB Opinion No. 25 and to provide the disclosures required by SFAS
No. 123.
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, 1998 includes $323,000 of overnight repurchase agreements.
There were no such agreements at June 30, 1997.
Self Insurance
The Company's CAS subsidiary is generally self-insured for losses and
liabilities related to medical and dental claims. Losses are accrued based upon
estimates of the aggregate liability for medical and dental claims incurred
based on experience. In addition to this self-insurance, an insurance policy is
maintained which insures for losses over $50,000 for each individual insured and
on an aggregate basis for losses over an amount determined by formula.
CAS has been self-insured for medical claims since February 6, 1996. For each of
the years ended June 30, 1998 and 1997, CAS accrued approximately $38,000
relating to medical claims.
Per Share Data
In 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings
per Share". This statement establishes standards for computing and presenting
earnings per share ("EPS"), replacing the presentation of currently required
Primary EPS with a presentation of Basic EPS. For entities with complex capital
structures, the statement requires the dual presentation of both Basic EPS and
Diluted EPS on the face of the statement of operations. Under this new standard,
Basic EPS is computed based on the weighted average number of shares actually
outstanding during the year. Diluted EPS includes the effect of potential
dilution from the exercise of outstanding dilutive stock options and warrants
into common stock using the treasury stock method.
F-10
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
For the period ended June 30, 1998, the Company adopted SFAS No. 128, "Earnings
Per Share". In accordance with the requirements of SFAS No. 128, net earnings
per common share amounts ("basic EPS") were computed by dividing net earnings
after deducting preferred stock dividend requirements, by the weighted average
number of common shares outstanding and contingently issuable shares (which
satisfy certain conditions) and excluding any potential dilution. Net earnings
per common share amounts - assuming dilution ("diluted EPS") were computed by
reflecting potential dilution from the exercise of stock options.
A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net earnings for the year ended June 30, 1998 is as
follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1998
------------------------
Income Shares Per Share
(Numerator) (Denominator) Amounts
----------- ------------- -------
<S> <C> <C> <C>
Net earnings $7,403,643
Preferred stock dividends (246,343)
--------
BASIC EPS
Net earnings attributable to common stock $7,157,300 7,949,705 $0.90
========== ========= =====
EFFECT OF DILUTIVE SECURITIES
Convertible Preferred Stock 5,327,969
Stock Options 191,290
Stock Warrants 0
----------
DILUTED EPS
Net earnings attributable to common stock
and assumed preferred conversions
and option exercises $7,157,300 13,468,964 $0.53
========== ========== =====
</TABLE>
Options to purchase 225,800 shares of common stock were not included in the
computation of diluted EPS because the exercise prices of those options were
greater than the average market price of the common shares. The options were
still outstanding at the end of the period.
Adoption of SFAS No. 128 requires that the Company's reported loss per share for
fiscal 1997 and 1996 be restated. There are no material differences between the
amounts previously recorded and the restated amounts. For the year ended June
30, 1997 and the six months ended June 30, 1996 no diluted EPS is presented, as
the effect of dilutive securities would be anti-dilutive on loss per common
share. A reconciliation between the numerators and denominators of the basic EPS
computations for net losses for the year ended June 30, 1997 and the six months
ended June 30, 1996 is as follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1997 Six Months Ended June 30, 1996
------------------------ -------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- ------- ------------------------- -------
<S> <C> <C>
Net loss ($10,508,334) ($6,396,524)
Preferred stock dividends (12,875) 0
------------- ------------
BASIC EPS
Net loss attributable to common stock($10,521,209) 6,048,148 ($1.74) ($6,396,524) 3,482,504 ($1.84)
============= ========= ======= ============ ========= =======
</TABLE>
For the year ended June 30, 1997, 2,008,889 shares of convertible preferred
stock were not included in the computation of diluted EPS due to their effect
being anti-dilutive.
F-11
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Fair Value of Financial Instruments
Cash equivalents are reflected at cost which approximate their fair values. The
fair value of notes and loans payable outstanding is estimated by discounting
the future cash flows using the current rates offered by lenders for similar
borrowings with similar credit ratings. The carrying amounts of the accounts
receivable and debt approximate their fair value.
Foreign Currency Transactions
In the normal course of business the Company has accounts receivable and
accounts payable that are transacted in foreign currencies. The Company accounts
for transaction differences, in accordance with Statement of Financial
Accounting Standard Number 52, "Foreign Currency Translation", and accounts for
the gains or losses in operations. For all periods presented, these amounts were
immaterial to the Company's operations.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for reporting and
display of comprehensive income and its components (revenue, expenses, gains and
losses) in a full set of general purpose financial statements. The Company does
not expect the adoption to have a material impact on the financial statements.
Reclassifications
Certain amounts in the prior years' consolidated financial statements have been
reclassified to conform with the 1998 presentation.
4. PROPERTY AND EQUIPMENT, NET
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Property and Equipment consists of the following:
Furniture and fixtures $ 726,888 $ 730,341
Computer equipment 658,617 665,738
Leasehold improvements 202,059 25,538
Vehicles 116,036 171,801
----------- -----------
1,703,600 1,593,418
Less: Accumulated depreciation and amortization 947,778 858,518
----------- -----------
$ 755,822 $ 734,900
=========== ===========
</TABLE>
5. ACQUISITIONS
(a) On February 7, 1996, 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-12
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(b) On October 10, 1996, the Company acquired all of the issued and outstanding
stock of Consolidated Air Services, Inc. ("Consolidated") for 20,000 shares of
Holding's Class B Preferred Stock valued at $571,000 or approximately $28.55 per
share. The Consolidated transaction has been accounted for as a purchase and
resulted in goodwill of approximately $665,000 which represents the excess cost
over the fair value of the assets acquired.
(c) On May 8, 1997, the Company acquired all of the issued and outstanding stock
of Target Airfreight, Inc. ("Target") for $400,000 cash and 900,000 shares of
Holding's common stock valued at $1,023,750 or approximately $1.14 per share.
The Target transaction has been accounted for as a purchase and resulted in
goodwill of approximately $2.2 million which represents the excess cost over the
fair value of the assets acquired.
(d) The following unaudited pro forma financial information for the Company for
the years ended June 30, 1997 and 1996, gives effect to the Consolidated and
Target acquisitions as if they occurred at the beginning of the fiscal period
presented. These pro forma results have been prepared for comparative purposes
only, and do not purport to be indicative of the results of operations which
actually would have resulted had the acquisitions occurred on the date indicated
or which may result in the future:
<TABLE>
<CAPTION>
Pro Forma
---------
Year Ended Six Months Ended
June 30, 1997 June 30, 1996
------------- ----------------
<S> <C> <C>
Operating revenue $ 100,026,271 $ 44,281,278
Net loss ($ 10,545,825) ($ 6,385,598)
Net loss per share ($ 1.55) ($ 1.46)
</TABLE>
6. DEBT
As of June 30, 1998 and 1997, long-term and short-term debt consisted of the
following:
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Promissory note to TIA and CFS (a) $7,332,126 $6,680,200
Revolving loan to TIA and CFS (b) 905,913 789,728
Asset-based financing (c) 6,745,853 6,467,558
Notes payable to TIA (d) - 953,073
Promissory note to
Consolidated Shareholders (e) 60,500 137,500
----------- -------
Total debt 15,044,392 15,028,059
Less: Current portion (11,033,892) (10,940,559)
----------- ------------
Long-term debt 4,010,500 4,087,500
============ ============
</TABLE>
(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. 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. As of June 30, 1998 and 1997,
$7,332,126 (includes $1,332,126 of accrued interest) and $6,680,200 (includes
$680,200 of accrued interest), respectively, was outstanding under this note.
All obligations under this note were repaid on July 13, 1998 with the proceeds
from the CAS Sale.
F-13
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(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 secured by all
of the assets of CAS and is guaranteed by Holding and Amertranz. Furthermore,
the note discussed here and in (a) above are subordinated to the Company's
revolving credit obligations to BNY (see below). On January 16, 1997, upon the
closing of the BNY Facility, the Company repaid $3,570,768 of this note. As of
June 30, 1998 and 1997, $905,913 and $789,728, respectively, was outstanding
under this facility. All obligations under this note were repaid on July 13,
1998 with the proceeds from the CAS Sale.
(c) In January, 1997, the Company's subsidiaries ("Borrowers") entered into an
Accounts Receivable Management and Security Agreement with BNY Financial Corp.
("BNY") whereby the Borrowers receive advances of up to 85% of the net amounts
of eligible accounts receivable outstanding to a maximum of $10,000,000. The
credit line ("BNY Facility") is subject to interest at a rate of 2.0% per annum
over the prevailing prime rate as defined by BNY (8.5% as of June 30, 1998). At
June 30, 1998, the outstanding balance on the BNY Facility was $6,745,853 which
represented 86% of the approximate $7,807,000 available thereunder. BNY has a
security interest in all present and future accounts receivable, machinery and
equipment and other assets of the Borrowers and the BNY Facility is guaranteed
by Holding. This debt was repaid on July 13, 1998 with the proceeds from the CAS
Sale (and CAS acquired the Amertranz subsidiary's portion of the debt). The BNY
Facility remains in place and available for use by the Company's Target
subsidiary.
(d) In October 1995, Amertranz obtained a $500,000 subordinated secured loan
from TIA, which was increased to $800,000 in January 1996 ("TIA Loan"). The
original TIA Loan bears interest at the rate of 12% per annum. As of June 30,
1997, the Company had $953,073 (including $153,073 of accrued interest)
outstanding under the TIA Loan. On November 28, 1997, the Company acquired this
debt ($1,000,000) in exchange for the issuance of 100,000 shares of the
Company's Class D Preferred Stock.
(e) In connection with the acquisition of Consolidated, the Company issued a
promissory note to the Consolidated stockholders in the aggregate principal
amount of $150,000. During fiscal year 1998, this note was reduced by $27,000 as
a result of a net worth reconciliation, pursuant to the terms of the acquisition
agreement. At June 30, 1998, the amount outstanding under this note was $60,500.
This note bears interest at the rate of 8% per annum and now matures July 1,
1999.
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 thereof. 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.
The indebtedness to TIA and CFS is subordinated to the obligations under the BNY
Facility.
7. SHAREHOLDERS' DEFICIT
Preferred Stock
As of June 30, 1998, the authorized preferred stock of the Company is 2,500,000
shares. As of June 30, 1998, 621,387 shares of preferred stock are outstanding
as follows:
F-14
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
Number of Shares Outstanding
----------------------------
Class A (a) Class B (b) Class C (c) Class D (d) Class E (e) Total
----------- ----------- ----------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 220,500 20,000 257,500 - - 498,000
Issuances 12,696 - 106,511 158,180 277,387
Conversions (110,250) (20,000) (23,750) - - (154,000)
------- ------ -------- ------- -------- -------
Balance at June 30, 1998 122,946 - 233,750 106,511 158,180 621,387
======= ======= ======= ======= ======= =======
</TABLE>
(a) Class A 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 Class A Preferred Stock will pay cumulative cash dividends at an annual rate
of $1.00 per share in cash or, at the option of the Company, in shares of Class
A Preferred Stock, at the rate of $10.00 per share. The Company is prohibited
from paying any cash dividends on common stock unless all required Class A
Preferred Stock dividends have been paid. Each share of Class A Preferred Stock
may be converted at any time, at the option of the holder, into common stock at
a conversion price (subject to adjustment) of the lower of (i) $6.00 per share,
or (ii) 80% of the average of the closing bid and asked price per share of
Common Stock on the day prior to the conversion date. Class A Preferred Stock
holders are entitled to a liquidation preference of $10.00 per share plus all
accrued and unpaid dividends.
On December 31, 1996, June 30, 1997, December 31, 1997 and June 30, 1998, the
Company issued 10,000, 10,500, 6,887 and 5,809 respectively, shares of Class A,
non-voting, cumulative, convertible preferred stock with a par value of $10.00
representing the semi-annual dividend due the Class A preferred shareholders.
On September 23, 1997, 110,250 shares of Class A Preferred Stock were converted
into 1,102,500 shares of the Company's Common Stock.
(b) Class B Preferred Stock. On October 10, 1996, the Company issued 20,000
shares of Class B, non-voting, convertible preferred stock with a par value of
$10.00 for all of the issued and outstanding shares of Consolidated.
No dividends are paid on Class B Preferred Stock, and the shares carry no
liquidation preference or voting rights. Each share of Class B Preferred Stock
may be converted, at the option of the holder thereof at any time after October
10, 1997, into 10 shares of the Company's common stock.
On November 24, 1997, 20,000 shares of Class B Preferred Stock were converted
into 200,000 shares of the Company's common stock.
(c) Class C Preferred Stock. On June 13, 1997, the Company issued 257,500 shares
of Class C, non-voting, cumulative, convertible preferred stock with a par value
of $10.00 upon completion of a $2,575,000 private placement of equity securities
to individual investors (the "Private Placement").
The Class C Preferred Stock will pay cumulative cash dividends at an annual rate
of $1.00 per share payable the last day of each calendar quarter in cash or, at
the option of the Company, in shares of common stock provided a registration
statement with respect to the underling shares of common stock is in effect. The
Company is prohibited from paying any dividends on common stock or Class A
Preferred Stock unless all required Class C Preferred Stock dividends have been
paid. Each share of Class C Preferred Stock may be converted at any time, at the
option of the
F-15
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
holder, into 10 shares of common stock. Prior to June 13, 1998, resales of
shares of Class C Preferred Stock acquired in the Private Placement and all
shares of Common Stock underlying such securities were prohibited without the
approval of GKN Securities Corp. ("GKN"), the placement agent for the Private
Placement.
During fiscal year ending June 30, 1998, 23,750 shares of Class C Preferred
Stock were converted into 237,500 shares of the Company's common stock.
(d) Class D Preferred Stock. On November 28, 1997, the Company acquired from
TIA, Inc. $1,000,000 of secured debt of the Amertranz subsidiary in exchange for
the issuance of 100,000 shares of the Company's non-voting, cumulative,
convertible Class D Preferred Stock, par value $10.00 per share.
The Class D Preferred Stock will pay cumulative cash dividends at an annual rate
of $1.00 per share in cash or, at the option of the Company, in shares of Class
D Preferred Stock, at the rate of $10.00 per share. The Company is prohibited
from paying any cash dividends on common stock and other junior securities
unless all required Class D Preferred Stock dividends have been paid. Each share
of Class D Preferred Stock may be converted at any time, at the option of the
holder, into common stock at a conversion price (subject to adjustment) of the
lower of (i) $6.00 per share, or (ii) 80% of the average of the closing bid and
asked price per share of Common Stock on the day prior to the conversion date.
Class D Preferred Stock holders are entitled to a liquidation preference of
$10.00 per share plus all accrued and unpaid dividends.
On December 31, 1997 and June 30, 1998, the Company issued 1,479 and 5,032
respectively, shares of Class D, non-voting, cumulative, convertible preferred
stock with a par value of $10.00 representing the semi-annual dividend due the
Class D Preferred shareholders.
(e) Class E Preferred Stock. The Company entered into an Extension and
Composition Agreement dated as of November 7, 1997 (the "Composition Agreement")
with certain general unsecured trade creditors of the Company's Amertranz
subsidiary, whereby $1,581,799 of trade debt of the Amertranz subsidiary was
acquired by the Company in exchange for the issuance of 158,180 shares of the
Company's non-voting Class E Preferred Stock, par value $10.00 per share.
The Class E Preferred Stock will pay dividends as follows:
(i) Semi-annual dividends (the "Semi-Annual Dividends") payable as of
each February 15 and September 30 of each year (the "Semi-Annual Distribution
Dates"), commencing February 15, 1998, to holders of outstanding shares of Class
E Preferred Stock of record on such Semi-Annual Distribution Date. The
Semi-Annual Dividends are payable solely from the Company's "Reported Net
Profits" (as defined below), for the six month period ending on June 30 or
December 31 immediately preceding the Semi-Annual Distribution Date (the "Six
Month Period"). As used herein, "Reported Net Profits" means the net income of
the Company before amortization of goodwill for the applicable period as
reported by the Company in its applicable financial statements filed on its
Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as the case may be,
filed with the Securities and Exchange Commission. The Semi-Annual Dividend on
each outstanding share of Class E Preferred Stock on each Semi-Annual
Distribution Date will be equal to the quotient obtained by dividing (a) 20% of
the Reported Net Profits for the preceding Six Month Period, by (b) the number
of issued shares of Class E Preferred Stock including outstanding shares and
shares which have been redeemed or otherwise acquired by the Company. In the
event that in any Six Month Period the Company shall report a net loss, before
amortization of goodwill (the "Net Loss"), the Net Loss shall be carried forward
into succeeding Six Month Periods and shall be used to reduce the Reported Net
Profits reported in succeeding Six Month Period(s).
F-16
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(ii) In addition to the Semi-Annual Dividends, additional dividends
(the "Additional Dividends") are payable as of February 15, 1998, September 30,
1998, February 15, 1999, and September 30, 1999 (the "Additional Distribution
Date"), to holders of outstanding shares of Class E Preferred Stock of record on
such Additional Distribution Date. The Additional Dividend on each outstanding
share of Class E Preferred Stock on each Additional Distribution Date will be
equal to the quotient obtained by dividing (a) the amount required to be paid by
the Company's Target subsidiary to the Company's Amertranz subsidiary, pursuant
to the Customer Sale Agreement dated as of June 20, 1997, by and between
Amertranz and Target, with respect to the Six Month Period immediately preceding
the relevant Additional Distribution Date, by (b) the number of issued shares of
Class E Preferred Stock including outstanding shares and shares which have been
redeemed or otherwise acquired by the Company.
(iii) In addition to the Semi-Annual Dividends and the Additional
Dividends, special dividends (the "Special Dividends") are payable on
outstanding shares of Class E Preferred Stock from the net cash proceeds to the
Company from the sale of any equity securities prior to mandatory conversion or
redemption of the Class E Preferred Stock, as follows: To the extent at least
30% of such net cash proceeds are not used to redeem shares of Class E Preferred
Stock (such amount not used to redeem shares of Class E Preferred Stock is
hereinafter referred to as the "Aggregate Special Dividend Proceeds"), a Special
Dividend will be paid on each outstanding share of Class E Preferred Stock. The
Special Dividend to be paid on each outstanding share of Class E Preferred Stock
will be equal to the quotient obtained by dividing (a) the Aggregate Special
Dividend Proceeds, by (b) the number of issued shares of Class E Preferred Stock
including outstanding shares and shares which have been redeemed or otherwise
acquired by the Company. Any Special Dividend is payable on the tenth business
day following the receipt by the Company of such net cash proceeds to holders of
outstanding shares of Class E Preferred Stock of record on such date.
The cumulative amount of all Semi-Annual Dividends, Additional Dividends, and
Special Dividends (collectively, "Dividends") to be paid on each share of Class
E Preferred Stock throughout the time such share is outstanding shall not exceed
the par value. Furthermore, the aggregate amount of Dividends payable on any
Semi-Annual Distribution Date or Additional Dividend Date, as the case may be,
will be reduced by the amount of certain other payments required to be made by
the Company on such date pursuant to the Composition Agreement, and any such
reduction will be applied pro rata among all outstanding shares of Class E
Preferred Stock. No Dividends will be paid if such payment would cause a default
under, or violate the terms or conditions of, any agreement between the Company
and one or more of its secured creditors. Any Dividends not paid as a result of
any agreement between the Company and one or more of its secured creditors shall
accrue and be paid when permitted.
With respect to the distribution of assets upon liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the shares of the
Class E Preferred Stock shall rank: (i) senior to the Company's Common Stock;
(ii) junior to the Company's Class C 10% Convertible Preferred Stock and Class D
Preferred Stock; and (iii) pari passu with any other class of capital stock or
series of preferred stock now existing or established hereafter by the Board of
Directors.
All unredeemed shares of Class E Preferred Stock will be deemed canceled on the
books and records of the Company and/or its transfer agent on December 1, 2004
(the "Conversion Date") with no further action on the part of any holder
thereof. In exchange for such cancellation, each holder will receive, as soon as
practicable after the Conversion Date, such number of shares of Common Stock
equal to: (i) the product obtained by multiplying (a) the number of shares of
Class E Preferred Stock held of record by such holder, by (b) the par value,
divided by (ii) the greater of (a) the closing market price of the Common Stock
on the Conversion Date, as quoted on the market on which the shares are traded,
or (b) an amount equal to the sum of (A) $3.00, plus (B) an amount equal to the
product obtained by multiplying (1) $3.00, by (2) a fraction, the numerator of
which is the aggregate Dividends paid on a share of Class E Preferred Stock and
the denominator of which is 1.25. If any conversion of Class E Preferred Stock
would result in a fractional share of Common Stock, such fractional share shall
be disregarded and the number of
F-17
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
shares of Common Stock issuable upon the conversion of the Class E Preferred
Stock shall be rounded to the nearest whole number of shares. Prior to mandatory
conversion, the Company may redeem all or any portion of the outstanding shares
of Class E Preferred Stock, at any time, for an amount in cash equal to the par
value for each share of Class E Preferred Stock so redeemed.
Warrants
As of June 30, 1998, the Company had 5,074,283 warrants outstanding to purchase
5,074,283 shares of common stock at $6.00 per share and a warrant outstanding to
purchase 109,448 shares of common stock at $1.56 per share.
In connection with the Company's February 1996 and May 1996 bridge financings,
the Company issued warrants to purchase 1,386,783 shares of common stock at an
exercise price and on terms identical to the warrants issued in the IPO.
In connection with the IPO of July 3, 1996, 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 June 28, 1997.
In connection with the Private Placement of June 13, 1997, the Company issued
257,500 shares of Class C Preferred Stock and 1,387,500 warrants. Each warrant
entitles the holder thereof to purchase one share of common stock for $6.00
during the four-year period commencing June 28, 1997.
The Company may redeem the warrants at a price of $.01 per warrant at any time
after they become exercisable upon not less than 30 days' prior written notice
if the last sale price of the common stock has been at least $10.00 for each of
the 20 consecutive trading days ending on the third day prior to the date on
which the notice of redemption is given.
In connection with the CAS Sale, the Company engaged an investment banking firm
to market the sale and issued to the investment banking firm a warrant to
purchase 109,448 shares of common stock for $1.56 per share, at any time until
January 21, 2002.
Stock Option Plan
In June 1996, the Board of Directors of the Company adopted the Amertranz
Worldwide Holding Corp. 1996 Stock Option Plan ("1996 Plan"), which was
subsequently approved by shareholders. The 1996 Plan authorizes the granting of
awards, the exercise of which would allow up to an aggregate of 1,000,000 shares
of the Company's common stock to be acquired by the holders of said awards. The
awards can take the form of incentive stock options ("ISOs") or nonqualified
stock options ("NSOs") and may be granted to key employees, officers, directors
and consultants. Any plan participant who is granted an Incentive Stock Option
and possesses more than 10% of the voting rights of the Company's outstanding
common stock must be granted an option price at at least 110% of the fair market
value on the date of grant and the option must be exercised within five years
from the date of grant. Under the 1996 Plan, stock options have been granted to
employees and directors for terms of up to 10 years at exercise prices ranging
from $.10 to $6.00 and are exercisable in whole or in part at stated times from
the date of grant up to four years from the date of grant. At June 30, 1998,
332,209 stock options granted to employees and directors were exercisable. The
Company accounts for equity-based awards granted to employees and directors
under APB Opinion No. 25 under which no compensation cost has been recognized
for stock options granted at market value (Note 3). Had compensation cost for
these stock options been determined consistent with SFAS No. 123, the Company's
net loss and net loss per share would have been increased to the following pro
forma amounts:
F-18
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
Year Ended Year Ended Six Months Ended
June 30, 1998 June 30, 1997 June 30, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Net income
(loss): As Reported $ 7,403,643 ($10,508,334) ($6,396,524)
Pro Forma $ 6,978,972 ($10,833,762) ($6,997,862)
Basic EPS: As Reported $0.90 ($1.74) ($1.84)
Pro Forma $0.86 ($1.79) ($2.01)
Diluted EPS: As Reported $0.53 - -
Pro Forma $0.51 - -
</TABLE>
The effects of applying SFAS No. 123 in the pro forma disclosure are not
indicative of future amounts as additional awards in future years are
anticipated.
Prior to the adoption of the 1996 Plan, there were 224,399 options granted to
purchase common stock at exercise prices ranging from $0.048 to $0.408. These
options were granted to the stockholders of Amertranz and the holders of certain
convertible promissory notes of Amertranz pursuant to the terms of the Asset
Exchange Agreement. At each of June 30, 1998 and 1997, 181,809 options were
outstanding and 181,809 were exercisable.
The following table reflects activity under the plan for the three-year period
ended June 30, 1998:
<TABLE>
<CAPTION>
Year Ended Year Ended Six Months Ended
June 30, 1998 June 30, 1997 June 30, 1996
------------- ------------- -------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 431,207 3.08 526,399 2.76 42,590 .16
Granted - - - - 483,809 2.99
Exercised (14,198) .16 (38,392) .68 - -
Forfeited (7,050) 4.25 (56,800) 2.06 - -
Cancelled (2,850) 4.25 - - - -
Outstanding at end of year 407,609 $3.16 431,207 $3.08 526,399 $2.76
Exercisable at end of year 332,209 $2.71 278,109 $2.18 196,005 $ .34
</TABLE>
The weighted average fair value and exercise price for options granted at an
exercise price equal to fair market is $3.18 and $.06, respectively. The
weighted average fair value and exercise price for options granted at an
exercise price below fair market is $2.51 and $.06, respectively.
The fair value of each stock option grant is estimated as of the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:
1996
----
Risk-Free Interest Rates 6.05%
Expected Lives 5
Expected Volatility 64.00%
Expected Dividend Yields 0.00%
F-19
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The following table summarizes information about stock options outstanding at
June 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Number Weighted Weighted Number Weighted
Outstanding Average Average Exercisable Average
at Remaining Exercise at Exercise
Exercise Prices 6/30/98 Contractual Life Price 6/30/98 Price
- --------------- ------- ---------------- ----- ------- -----
<S> <C> <C> <C> <C> <C>
$0.04 - $0.50 181,809 1.51 $0.35 181,809 $0.35
$4.00 - $6.00 225,800 2.93 $5.41 150,400 $5.56
------- --------
$0.04 - $6.00 407,609 2.29 $3.16 332,209 $2.71
======= =======
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Leases
As of June 30, 1998, future minimum lease payments for capital leases and
operating leases relating to equipment and rental premises are as follows:
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL LEASES OPERATING LEASES
----------- -------------- ----------------
<S> <C> <C> <C>
1999 113,000 1,096,883
2000 114,478 656,643
2001 24,610 491,445
2002 - 260,721
--------- ---------
Total minimum lease payments 252,088 $2,505,692
==========
Less--Amount representing interest (32,847)
-----------
$219,241
</TABLE>
Employment Agreements
The Company has employment agreements with certain employees expiring at various
times through July 2001. 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, 1998,
excluding bonuses, was approximately $840,000.
Litigation
On June 15, 1998 the Company was served with a complaint by a former consultant
to the Company. The Company, three officers of the Company and two principal
shareholders of the Company are named defendants in the lawsuit. The complaint
alleges breach of contract, violations of the federal anti-racketeering laws,
fraud and failure to pay wages and benefits. The complaint seeks economic
damages in excess of $5.6 million, and punitive damages of $7.5 million. The
Company intends to vigorously defend the action. The Company believes that the
complaint is without merit and that any material recovery by the plaintiff is
unlikely.
F-20
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
9. INCOME TAXES
The Company has a tax net operating loss carry forward of approximately
$21,200,000, available to offset future regular federal taxable income, which
expire from 2011 through 2013 and which are limited to annual maximum amounts,
due to ownership changes, as defined in regulations under Section 382 of the
Internal Revenue Code. In 1998, management determined that it has become more
likely than not that the Company will realize its net deferred tax assets and it
has therefore reduced the valuation allowance by approximately $6,309,000. The
determination that the net tax asset is realizable is based on the CAS Sale
subsequent to year-end, which resulted in a gain of approximately $16,690,000.
The Company's reversal of the valuation allowance against its net deferred tax
assets and realization of net operating loss carry forwards resulted in a
realization of net income tax benefits of approximately $7,662,000 in the fiscal
year ended June 30, 1998.
The components of current and deferred income tax expense (benefit) for the year
ended June 30, 1998 are as follows:
(In thousands)
Current: $ 228
State
Deferred: -
State
Federal, primarily NOL carry forwards (7,890)
------------
Net income tax benefit $ (7,662)
===========
A reconciliation of income taxes between the statutory and effective tax rates
on income before income taxes is as follows:
<TABLE>
<CAPTION>
Six Months Years Ended
Ended June 30, June 30
-------------- -------
(In thousands) 1996 1997 1998
-------------- ---------- --------
<S> <C> <C> <C>
Income tax benefit at U.S. statutory rate $ (2,175) $ (3,573) $ (88)
Tax deductible goodwill (2,158)
State and local income taxes 228
(net of federal benefit)
Valuation Allowance 2,155 3,533 (5,688)
Non deductible expenses 20 40 44
----------- ----------- -----------
$ - $ - $ (7,662)
=========== =========== ===========
</TABLE>
F-21
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The components of deferred income taxes are as follows:
Years Ended June 30
-------------------
(In thousands) 1997 1998
----- -----
NOLs 4,457 7,328
Accrued amounts and other - 1,131
------ ------
4,457 8,459
Depreciation and amortization - 185
----- -----
4,457 8,644
Valuation allowance (4,457) (754)
------ ------
- 7,890
====== ======
10. RELATED PARTY TRANSACTIONS
(a) Under the terms of a cargo aircraft charter agreement with Tradewinds
Airlines, Inc. ("Tradewinds Air"), a subsidiary of Tradewinds Holdings, Inc., of
which TIA owns approximately 30% of the outstanding common stock, CAS has
exclusive rights until June 30, 2000 to the use of a leased L-1011 freighter
aircraft. While CAS is guaranteed the use of the L-1011 aircraft as needed, it
pays only for actual use of the aircraft at market rates. At June 30, 1998, CAS
had outstanding payables to Tradewinds Air of approximately $1,697,520 and
accrued expenses of $352,411.
(b) CAS had sales to Target of $317,795, and related accounts receivable of
approximately $191,000 as of and for the year ended June 30, 1998.
(c) In connection with the acquisition of Consolidated, the Company issued a
Promissory Note in the amount of $150,000. During fiscal year 1998 the
Promissory Note was reduced by $27,000 as a result of a net worth
reconciliation, per terms of the acquisition agreement. At June 30, 1998, the
amount outstanding under this note was $60,500. The note bears interest at 8%
and now matures July 1, 1999.
(d) The President of Target, who is also a Director of the Company, owns 10% of
the shares of Target Airfreight (Hong Kong) Limited ("Target - HKG") and Target
- - HKG owns shares in Target Airfreight (Asia) PTE., Limited ("Target SIN").
Target had sales to Target - HKG and Target - SIN of $742,908 and $2,697,282,
respectively, for the year ended June 30, 1998; and accounts receivable of
$198,036 and $808,962, respectively, at June 30, 1998.
At June 30, 1998, Target owes $304,725 and $182,878 to Target - HKG and Target -
SIN, respectively.
F-22
<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-23
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
BALANCE SHEETS
December 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
---- ----
ASSETS
<S> <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
=========== ===========
See accompanying notes to financial statements.
</TABLE>
F-24
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
STATEMENTS OF OPERATIONS AND
CHANGES IN ACCUMULATED DEFICIT
Years Ended December 31, 1993, 1994 and 1995
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1993 1994 1995
---- ---- ----
<S> <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)
------------- ------------ ------------
ome 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)
============= ============ ============
See accompanying notes to the financial statements.
</TABLE>
F-25
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993, 1994 and 1995
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 868,859 $ 2,553,102 $ 2,366,129
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 416,830 377,569 367,111
Net disposals of property and equipment -- 46,978 --
Bad debt expense 153,574 70,000 41,000
Changes in assets and liabilities:
Increase in accounts receivable (771,087) (949,027) (224,790)
Increase in income taxes receivable -- -- (65,000)
Increase in inventory (11,309) -- --
(Increase) decrease in prepaid expenses (140,608) 581,376 26,961
Increase (decrease) in accounts payable 487,518 (274,010) (9,167)
Decrease in accrued liabilities (706,398) (165,264) (243,925)
Increase (decrease) in income taxes payable -- 68,201 (108,201)
------- -------- --------
Total adjustments (571,480) (244,177) (216,011)
--------- --------- -----------
Net cash provided by operating activities 297,379 2,308,925 2,150,118
Cash flows from investing activities:
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
======= =========== ========
See accompanying notes to the financial statements.
</TABLE>
F-26
<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.
F-27
<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)
Cash and Cash Equivalents
Cash at December 31, 1995 includes $2,290,000 of overnight repurchase
agreements.
Property and Equipment
Property and equipment are depreciated using the straight-line method
over the estimated useful lives of the assets of five years for ground support
equipment and 5 to 10 years for furniture, fixtures and leasehold improvements.
Income Taxes
The operations of the Business are included in the federal and state
income tax returns of TIA 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-28
<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.
F-29
<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
(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.
(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-30
<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>
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-31
<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>
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-32
<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-33
<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-34
<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>
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
======== ======= ======== ======== ========
For the fiscal year ended June 30, 1997
Allowance for doubtful accounts $ 371 $ 783 $ - $ (367) $ 787
======== ======= ======== ======== ========
Accumulated depreciation and amortization
of property and equipment $ 210 $ 352 $ 469 $ (172) $ 859
======== ======= ======== ======== ========
Accumulated amortization of debt
issuance cost $ 3,264 $ 104 $ - $ - $ 3,368
======== ======= ======== ======== ========
Accumulated amortization of goodwill $ 191 $ 518 $ - $ - $ 709
======== ======= ======== ======== ========
Reserve for restructuring $ - $ 3,408 $ - $ (726) $ 2,682
======== ======= ======== ======== ========
For the fiscal year ended June 30, 1998
Allowance for doubtful accounts $ 787 $ 207 $ - $ (479) $ 515
======== ======= ======== ======== ========
Accumulated depreciation and amortization
of property and equipment $ 859 $ 536 $ (447) $ - $ 948
======== ======= ======== ======== ========
Accumulated amortization of debt
issuance cost $ 3,368 $ - $ - $ - $ 3,368
======== ======= ======== ======== ========
Accumulated amortization of goodwill $ 709 $ 596 $ - $ - $ 1,305
======== ======= ======== ======== ========
Reserve for restructuring $ 2,682 $ - $ - $ (2,418) $ 264
======== ======= ======== ======== ========
</TABLE>
S-1
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned, being of legal age, in order to form a corporation
under and pursuant to the laws of the State of Delaware, does hereby set forth
as follows:
FIRST: The name of the corporation is
AMERTRANZ WORLDWIDE HOLDING CORP.
SECOND: The address of the initial registered and principal office of
this corporation in this state is c/o United Corporate Services, Inc., 15 East
North Street, in the city of Dover, County of Kent, State of Delaware 19901 and
the name of the registered agent at said address is United Corporate Services,
Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the corporation laws of
the State of Delaware.
FOURTH: The corporation shall be authorized to issue the following
shares:
Class Number of Shares Par Value
COMMON 15,000,000 $ .01
FIFTH: The name and address of the incorporator are as follows:
NAME ADDRESS
Ray A. Barr 10 Bank Street
White Plains, New fork 10606
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
(1) The number of directors of the corporation shall be such as from
time to time shall be fixed by, or in the manner provided in the by-laws.
Election of directors need not be by ballot unless the By-Laws so provide.
(2) The Board of Directors shall have power without the assent or vote
of the stockholders:
(a) To make, alter, amend, change, add to or repeal the By-Laws of
the corporation; to fix and vary the amount to be reserved for any proper
purpose; to authorize and cause to be executed mortgages and liens upon all or
any part of the property of the corporation; to determine the use and
disposition of any surplus or net profits; and to fix the times for the
declaration and payment of dividends.
(b) To determine from time to time whether, and to what times and
places, and under what conditions the accounts and books of the corporation
(other than the stock ledger) or any of them, shall be open to the inspection of
the stockholders.
-1-
<PAGE>
(3) The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders, at any
meeting of the stockholders called for the purpose of considering any such act
or contract, or through a written consent in lieu of a meeting in accordance
with the requirements of the General Corporation Law of Delaware as amended from
time to time, and any contract or act that shall be so approved or be 50
ratified by the vote of the holders of a majority of the stock of the
corporation which is represented in person or by proxy at such meeting, (or by
written consent whether received directly or through a proxy) and entitled to
vote thereon (provided that a lawful quorum of stockholders be there represented
in person or by proxy) shall be as valid and as binding upon the corporation and
upon all the stockholders as though it had been approved, ratified, or consented
to by every stockholder of the corporation, whether or not the contract or act
would otherwise be open to legal attack because of directors' interest, or for
any other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the corporation; subject, nevertheless, to the provisions of the
statutes of Delaware, of this certificate, and to any by-laws from time to time
made by the stockholders; provided, however, that no by-laws so made shall
invalidate any prior act of the directors which would have been valid if such
by-law had not been made.
SEVENTH: No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The corporation shall indemnify to the fullest
extent permitted by Sections 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case way be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this twelfth day of January, 1996.
-2-
<PAGE>
/S/RAY A. BARR
Ray A. Barr, Incorporator
-3-
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned, being the President of Amertranz Worldwide Holding
Corp., hereby certifies that:
FIRST: The name of the Corporation is Amertranz Worldwide Holding Corp.
SECOND: The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on January 16,
1996.
THIRD: ARTICLE FOURTH of said Certificate of Incorporation is hereby
amended in its entirety to read as follows:
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 17,500,000
shares consisting of (1) 2,500,000 shares of preferred stock,
$10.00 par value (the "Preferred Stock"); and (2) 15,000,000
shares of common stock, $.01 par value (the "Common Stock").
The Board of Directors shall have authority to establish the classes,
designations, powers, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations and restrictions thereof in
respect of the Preferred Stock and the Common Stock.
FOURTH: The foregoing amendment has been duly advised and adopted by
the Board of Directors of the Corporation and approved by the stockholders of
the Corporation in accordance with the applicable provisions of Section 242 of
the General Corporation Law of the State of Delaware by written consent of the
stockholders of the Corporation given in accordance with the provisions of
Section 228 of the General Corporation Law of the State of Delaware. Prompt
written notice of adoption of the foregoing amendment has been given to all
stockholders who have not consented to such adoption in writing in accordance
with the provisions of Section 228(d) of the General Corporation Law of
Delaware.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on this
13th day of June, 1996.
ATTEST: /s/ Stuart Hettleman
President
/s/ Michael Barsa
Secretary
<PAGE>
CERTIFICATE OF DESIGNATION
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned, being the President of Amertranz Worldwide Holding
Corp., hereby certifies pursuant to Section 151 (g) of the General Corporation
Law of Delaware:
The Board of Directors of the Corporation have by resolution duly
adopted, approved the powers, designations, preferences and relative,
participating optional or other rights of the shares of Preferred Stock, $10.00
par value, of the Corporation as follows:
Par Value. The shares of Class A Preferred Stock shall have a par or
stated value of $10.00 per share.
Dividends: Holders of Class A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of legally
available funds, dividends at an annual rate of $1.00 per share, payable
semi-annually in arrears on June 30 and December 31 of each year, in cash or in
shares of Class A Preferred Stock at the rate of $10.00 per share. Dividends
shall accrue and are cumulative from the most recent date to which dividends
have been paid. The Class A Preferred Stock shall have priority as to dividends
over the Common stock and all other series or classes of the Company's stock
that rank junior to the Class A Preferred Stock ("Junior Dividend Stock"). No
dividend (other than dividends payable solely in Common Stock, Junior Dividend
Stock or warrants or other rights to acquire Common Stock or Junior Dividend
Stock) may be paid or set apart for payment on, and no purchase, redemption or
other acquisition may be made by the Company of, the Common Stock or Junior
Dividend Stock unless all accrued and unpaid dividends on the Class A Preferred
Stock, including the full dividend for the then-current semi-annual dividend
period, shall have been paid.
Preference on Liquidation. In a case of the voluntary or involuntary
liquidation, dissolution or winding up of the Company, holders of shares of
Class A Preferred Stock then outstanding shall be entitled to be paid out of the
assets of the Company available for distribution to stockholders an amount in
cash equal to $10.00 per share, plus an amount equal to any accrued and unpaid
dividends, whether or not declared, to the payment date, before any payment or
distribution shall be made to the holders of Common Stock or any other series or
class of stock that ranks junior as to liquidation rights to the Class A
Preferred Stock.
Voting. The holders of Class A Preferred Stock shall have no voting
rights except as required by law. In exercising any voting rights, each
outstanding share of Class A Preferred Stock shall be entitled to one vote.
Conversion Rights. Each holder of Class A Preferred Stock shall have
the right, at the holder's option, to convert any or all shares into Common
Stock at any time at a conversion price (subject to adjustment as described
below) of the lower of (i) the price per share of Common Stock in the Initial
Public Offering of the Corporation's Common Stock, or (ii) 80% of the average of
the closing bid and asked price per share of Common Stock on the day prior to
the conversion date.
The Conversion price is subject to adjustment in certain events,
including (i) the payment of a dividend on any class of the Company's capital
stock in shares of Common Stock or any other securities issued by the Company or
any of its subsidiaries; (ii) subdivisions or combinations of the Common Stock;
(iii) the issuance to all holders of Common Stock of rights or warrants to
subscribe for or purchase Common Stock or securities convertible into or
exchangeable for Common Stock, for a consideration per share of Common Stock
less than the current market price per share of the date of issuance of the
securities.
Registration Rights. At the request of a holder of shares of Class A
Preferred Stock, the Company shall register for resale under the Securities Act
of 1933, as amended ("Securities Act") any shares of Common Stock issued upon
conversion of shares of the Class A Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on this
18th day of June, 1996.
/s/ Stuart Hettleman
Stuart Hettleman, President
Attest:
/s/ Michael Barsa
Michael Barsa
-2-
<PAGE>
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE CERTIFICATE OF DESIGNATION
OF AMERTRANZ WORLDWIDE HOLDING CORP.
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON JULY 1, 1996
Amertranz Worldwide Holding Corp., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware does
hereby certify:
1. The name of the corporation is Amertranz Worldwide
Holding Corp.
2. That a Certificate of Designation was filed with the
Secretary of State of Delaware on July 1, 1996, and that
said Certificate requires correction as permitted by
Section 103 of the General Corporation Law of the State
of Delaware.
3. The inaccuracy or defect of said Certificate to be
corrected is as follows:
The number of shares designated as Class A Preferred
Stock was omitted. The Certificate is corrected by
inserting a paragraph immediately after the second
paragraph and immediately preceding the paragraph
entitled "Par Value" to read as follows:
"Class A Preferred Stock. Five Hundred
Thousand (500,000) shares of the Preferred
Stock authorized in the Certificate of
Incorporation are to be designated as Class A
Preferred Stock."
IN WITNESS WHEREOF, said Amertranz Worldwide Holding Corp. has caused
this Certificate to be signed by Stuart Hettleman, its President, this 10th day
of June, 1997.
AMERTRANZ WORLDWIDE HOLDING CORP.
By: /s/ Stuart Hettleman
<PAGE>
CERTIFICATE OF DESIGNATION
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned, being the President of Amertranz Worldwide Holding
Corp. (the "Company"), hereby certifies, pursuant to Section 151(g) of the
General Corporation Law of Delaware, that the Board of Directors of the
Corporation has duly adopted and approved the powers, designations, preferences
and relative, participating optional or other rights of the shares of Preferred
Stock, $10.00 par value per share, of the Corporation as follows:
RESOLVED, that the following is hereby adopted and approved:
Class B Preferred Stock: Twenty-five thousand (25,000) shares of the
Preferred Stock authorized in the Certificate of Incorporation are to be
designated as Class B Preferred Stock.
Par value: The shares of Class B Preferred Stock shall have a par or
stated value of $10.00 per share.
Dividends: No dividend will be paid or declared and set aside by the
Board of Directors for holders of Class B Preferred Stock.
No Preference on Liquidation: In the event of the voluntary or
involuntary liquidation, dissolution or winding up of the Company, holders of
shares of Class B Preferred Stock then outstanding shall not be entitled to be
paid out of the assets of the Company before any payment or distribution is made
to the holders of Common Stock or any other series or class of stock.
Voting: The holders of Class B Preferred Stock shall have no voting
rights except as required by law. In exercising any voting rights, each
outstanding share of Class B Preferred Stock shall be entitled to one vote.
Conversion Rights: Each holder of Class B Preferred Stock shall have
the right to convert any or all shares of Class B Preferred Stock into shares of
fully paid and nonassessable Common Stock, at the conversion rate of one (1)
share of Class B Preferred Stock for ten (10) shares of Common Stock. In the
event of any change in the outstanding shares of Common Stock by reason of any
share dividend or split, recapitalization or other similar corporate change, the
conversion rate shall be accordingly adjusted. The right of such conversion may
be exercised at the option of the holder of shares of Class B Preferred Stock at
any time and from time to time following the first anniversary of the merger of
Consolidated Air Services,Inc., an Arizona corporation, with and into the
Company pursuant to the Agreement of Merger dated as of September 30, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on this
8th of October, 1996.
/s/ Stuart Hettleman
Stuart Hettleman, President
ATTEST:
/s/ Michael Barsa
<PAGE>
CERTIFICATE OF MERGER
OF
CONSOLIDATED AIR SERVICES, INC.
INTO
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned corporation does hereby certify:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger is as follows:
Name State of Incorporation
Consolidated Air Services, Inc. Arizona
Amertranz Worldwide Holding Corp. Delaware
SECOND: That an Agreement of Merger between the parties to the merger
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of section 252 of
the General Corporation Law of the State of Delaware.
THIRD: That the name of the surviving corporation of the merger is
Amertranz Worldwide Holding Corp., a Delaware corporation.
FOURTH: That the Certificate of Incorporation of Amertranz Worldwide
Holding Corp., a Delaware corporation which is surviving the merger, shall be
the Certificate of Incorporation of the surviving corporation.
FIFTH: That the executed Agreement of Merger is on file at the
principal place of business of the surviving corporation, the address of which
is 2001 Marcus Avenue, Lake Success, New York 11042.
SIXTH: That a copy of the Agreement of Merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: The authorized capital stock of each foreign corporation which
is a party to the merger is as follows:
Number Par Value
Corporation Class of Shares per Share
Consolidated Air Services, Inc. Common 100,000 $1.00
Number Par Value Corporation Class of
EIGHTH: That this Certificate of Merger shall be effective upon filing
with the Secretary of State of the State of Delaware.
Dated: October 10, 1996
AMERTRANZ WORLDWIDE HOLDING CORP.
By: /s/ Stuart Hettleman
Stuart Hettleman, President
<PAGE>
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
CLASS C 10% CONVERTIBLE PREFERRED STOCK
of
AMERTRANZ WORLDWIDE HOLDING CORP.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Amertranz Worldwide Holding Corp., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies that, pursuant to the authority vested in the Board of Directors of
the Corporation (the "Board of Directors") under its Certificate of
Incorporation, and in accordance with Section 151 of the Delaware General
Corporation Law, the Board of Directors has adopted the following resolution:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, the Board of Directors does hereby create,
authorize and provide for the issuance of a series of the Corporation's
preferred stock, par value $10.00 per share, and hereby states the designation
and number of shares, and fixes the relative rights, preferences, privileges,
powers and restrictions thereof as follows:
Class C 10% Convertible Preferred Stock:
1. Designation and Amount. The designation of this series, which
consists of 400,000 shares of Preferred Stock, is the Class C 10% Convertible
Preferred Stock (the "Preferred Stock") and the stated value shall be Ten
Dollars ($10.00) per share (the "Stated Value").
2. (a) Rank. All shares of the Preferred Stock shall rank senior to the
Corporation's common stock, par value $0.01 per share (the "Common Stock"), and
to any other class of capital stock or series of preferred stock now existing or
established hereafter by the Board of Directors (collectively, the "Junior
Securities"), as to the distribution of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, and with
respect to the payment of dividends. The Corporation shall not issue any class
or series of capital stock which ranks pari passu with the Class C Preferred
Stock; provided, however, that the Corporation shall have the right to create a
series of Class D preferred stock ("Class D Preferred Stock"), which shall rank
pari passu with the Preferred Stock, for issuance to certain holders of the
Corporation's indebtedness existing as of May 1, 1997 only in the event any or
all of such indebtedness is converted into Class D Preferred Stock in accordance
with the terms of an agreement between such holders and the Corporation dated as
of May 1, 1997. Such Class D Preferred Stock, if created, shall have the same
terms as the Corporation's existing Class A Preferred Stock, except that the
Class D Preferred Stock will rank pari passu with the Preferred Stock.
3. Dividends.
(a) The Corporation shall pay out of funds legally available
therefor a fixed dividend on each outstanding share of Preferred Stock at a rate
per annum equal to 10.0% of the Stated Value thereof. Dividends shall be payable
in arrears quarterly as of March 31, June 30, September 30 and December 31 of
each year (each a "Dividend Payment Date") to the holders of record of the
Preferred Stock on the preceding March 15, June 15, September 15 and December 15
(each a "Regular Dividend Date"). Dividends shall also be immediately payable
upon (i) conversion of the Preferred Stock into shares of Common Stock in
accordance with Section 5(a) (such dividends accruing through the date of
conversion), (ii) the occurrence of a Liquidation Event as provided in Section
4(a) (such dividends accruing through the date of distribution of the Company's
assets) and (iii) the redemption of the Preferred Stock as provided in Section 6
(such dividends accruing through the date of redemption). Dividends accruing for
any period less than a full dividend period will be computed on the basis of a
360-day year comprised of twelve 30-day months. Dividends shall be payable on a
cumulative basis, such that any unpaid dividends shall accumulate and the
arrearage shall be paid in full prior to any dividends being paid to holders of
Junior Securities.
<PAGE>
(b) 1) Except in connection with the payment of dividends upon a
Liquidation Event or redemption of the Preferred Stock, any dividend on the
Preferred Stock pursuant to Section 3(a) shall be, at the option of the
Corporation, payable either (i) in cash or (ii) if and only if a registration
statement registering the issuance by the Company of shares of Common Stock as
dividends under the Securities Act of 1933 is current and effective through the
issuance of a number of shares (rounded to the nearest whole share) of Common
Stock (the "Dividend Shares") equal to the dividend amount divided by the
average last sale price of a share of Common Stock on the five trading days
ending two business days prior to each Dividend Payment Date.
(c) In the event that full dividends are not paid or made
available to the holders of all outstanding shares of Preferred Stock and of any
Class D Preferred Stock and funds available for payment of dividends shall be
insufficient to permit payment in full to holders of all such stock of the full
preferential amounts to which they are then entitled, then the entire amount
available for payment of dividends shall be distributed ratably among all such
holders of Preferred Stock and of any Class D Preferred Stock in proportion to
the full amount to which they would otherwise be respectively entitled.
4. Liquidation Preference.
(a) If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or State bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 60 consecutive days and, on account of any such event, the Corporation
shall liquidate, dissolve or wind up, or if the Corporation shall otherwise
liquidate, dissolve or wind up (any and all of the foregoing being referred to
as a "Liquidation Event"), no distribution shall be made to the holders of any
Junior Securities unless prior thereto the holders of shares of the Preferred
Stock and any outstanding shares of Class D Preferred Stock shall have received
the Liquidation Preference (as defined in Section 4(c)) with respect to each
share. If upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the holders of the Preferred Stock and holders
of any Class D Preferred Stock shall be insufficient to permit the payment to
such holders of the Liquidation Preference (as defined below) payable thereon,
then the entire assets and funds of the Corporation legally available for
distribution to the Preferred Stock and any Class D Preferred Stock shall be
distributed ratably among such shares in proportion to the ratio that the
Liquidation Preference payable on each such share bears to the aggregate
Liquidation Preference payable on all such shares.
(b) For purposes hereof, the "Liquidation Preference" of a holder
of Preferred Stock means the greater of (i) the Stated Value of the shares of
Preferred Stock held by the holder plus the amount of any accrued and unpaid
dividends (in cash) through the date of final distribution to the holder thereof
(or with respect to any other event as of the date the measurement of such
Liquidation Preference is relevant to such event) and (ii) the amount equal to
what the holder would have received had he converted the Preferred Stock into
Common Stock on the business day immediately prior to the record date for such
Liquidation Event.
(c) The Corporation shall not effect any distribution as a result
of a Liquidated Event, unless each holder of Preferred Stock has been mailed
written notice of such distribution at least 20 days prior thereto and in no
event later than 10 days prior to the record date for the determination of
shareholders entitled to participate in such distribution.
5. Conversion Rights.
(a) Each holder of shares of the Preferred Stock may, at any time
and from time to time upon surrender of the certificates therefor, convert any
or all of its shares of Preferred Stock into shares of Common Stock. Each share
of Preferred Stock shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (x) the Stated
Value thereof by (y) the Conversion Price (as defined below) then in effect.
-2-
<PAGE>
Additionally, at the time of delivery of the shares of Common Stock upon
conversion, the Company shall pay any and all dividends accrued on the Preferred
Stock through the date of conversion in cash or shares of Common Stock.
(b) Conversion Price. Subject to Section 5(c) below, the
"Conversion Price" shall be equal to $1.00 per share of Common Stock.
(c) Conversion Price and Other Adjustments. The Conversion Price
and the number of shares of Common Stock issuable upon conversion of the
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) Adjustment Due to Stock Split, Stock Dividend, Etc. If at
any time when any shares of Preferred Stock are issued and outstanding, the
number of outstanding shares of Common Stock is increased by a stock split,
stock dividend, combination, reclassification or other similar event, the
Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Transfer Agent of such change on or before the
effective date thereof.
(ii) Adjustment Due to Merger, Consolidation, Etc. If, at any
time when any shares of Preferred Stock are issued and outstanding, there shall
be (each of the following being referred to as a "Merger Event") (a) any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination described in
Section 5(c)(i) above), (b) any consolidation or merger of the Corporation with
any other corporation (other than a merger in which the Corporation is the
surviving or continuing entity and its capital stock is unchanged), (c) any sale
or transfer of all or substantially all of the assets of the Corporation or (d)
any share exchange pursuant to which all of the outstanding shares of Common
Stock are converted into other securities or property, then the holders of
Preferred Stock shall thereafter have the right to receive upon conversion of
their Preferred Stock, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock, such shares of
stock, securities and other property as would have been issuable or payable in
connection with the Merger Event with respect to or in exchange for the number
of shares of Common Stock immediately theretofore issuable and receivable upon
the conversion of the Preferred Stock held by such holders had such Merger Event
not taken place, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the holders of the Preferred Stock to the
effect that the provisions hereof (including, without limitation, provisions for
adjustment of the Conversion Price and the corresponding number of shares of
Common Stock issuable upon conversion of the Preferred Stock) shall thereafter
be applicable, as nearly as may be practicable in relation to any shares of
stock or securities thereafter deliverable upon the conversion thereof. The
Corporation shall not effect any transaction described in this subsection (ii)
unless (x) each holder of the Preferred Stock has been mailed written notice of
such transaction at least 20 days prior thereto and in no event later than 10
days prior to the record date for the determination of shareholders entitled to
vote with respect thereto, and (y) the resulting successor or acquiring entity
(if not the Corporation) assumes by written instrument the obligations of this
subsection (ii). The above provisions shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
Notwithstanding the foregoing, upon receipt of notice of any
Merger Event, each holder of Preferred Stock shall have the right, by written
notice to the Corporation at any time prior to the Merger Event, to elect, in
his sole discretion, to treat such Merger Event as a Liquidation Event, and be
paid his Liquidation Preference on consummation of the Merger Event.
(iii) Adjustment Due to Distribution. In the event that at
any time or from time to time the Corporation shall distribute to all holders of
Common Stock (a) any dividend or other distribution of cash, evidences of its
indebtedness, shares of its capital stock or any other properties or securities
or (b) any options, warrants or other rights to subscribe for or purchase any of
the foregoing (other than, in each case, the issuance of any rights under a
shareholder rights plan (a "Distribution"), then, in each such case, after the
date of record for determining shareholders entitled to such Distribution, but
prior to the date of Distribution, the holders of Preferred Stock shall be
entitled, upon conversion of shares of Preferred Stock, to receive the amount of
such assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution. The Conversion Price for shares
of Preferred Stock not converted prior to the date of Distribution will be
reduced to a price determined by decreasing the Conversion Price in effect
immediately prior to the record date
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<PAGE>
of the Distribution by an amount equal to the fair market value of the assets so
distributed per share of Common Stock (calculated as if all shares of Common
Stock issuable upon conversion of outstanding shares of Preferred Stock had been
converted as of the record date of the Distribution). For purposes of
determining the fair market value of any assets so distributed, the fair market
value of any cash distributed shall be the amount of such cash and the fair
value of any other assets so distributed shall be determined in good faith by
the Board of Directors of the Corporation, whose determination shall be
evidenced by a board resolution, a copy of which will be sent to the holders of
the Preferred Stock upon request.
(iv) Adjustment Due to Rights Issue. If, at any time
when shares of Preferred Stock are issued and outstanding, the Corporation shall
distribute to all holders of its Common Stock any rights, options or warrants
entitling the holders thereof to subscribe for shares of Common Stock, or
securities convertible into or exchangeable or exercisable for Common Stock
(collectively, "Rights") at a price per share that is less than the Current
Market Value (as defined in Section 5(g)) as of the date such Right first
becomes exercisable (the "Exercisability Date"), then the Conversion Price for
shares of Preferred Stock not converted prior to such Exercisability Date shall
be reduced to a price determined by multiplying the Conversion Price in effect
immediately prior to the Exercisability Date by a fraction, (i) the numerator of
which is an amount equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Exercisability Date plus (y) the
quotient (expressed as a number) obtained by dividing (A) the aggregate minimum
consideration receivable by the Corporation upon the exercise of all such
Rights, by (B) the Current Market Value in effect immediately prior to the
Exercisability Date and (ii) the denominator of which is the total number of
shares of Common Stock Deemed Outstanding (as defined below) immediately after
the Exercisability Date. For purposes of this Section 5(c)(iv), "Common Stock
Deemed Outstanding" shall mean the number of shares of Common Stock actually
outstanding plus the maximum total number of shares of Common Stock issuable
upon the exercise, conversion or exchange of all Rights or securities issuable
upon exercise of Rights.
(v) Other Events. If any event occurs as to which the
foregoing provisions of this Section 5(c) are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors of the Corporation, fairly and adequately protect the conversion
rights of the Preferred Stock in accordance with the essential intent and
principles of such provisions, then the Board of Directors shall make such
adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board of Directors, to protect such conversion rights as
aforesaid, but in no event shall any such adjustment have the effect of
increasing the Conversion Price or decreasing the number of shares of Common
Stock issuable upon conversion of any shares of Preferred Stock.
(d) Conversion and Liquidation Preference Election Procedures.
In order to convert shares of Preferred Stock into full shares of Common Stock
(or to elect to receive the Liquidation Preference as a result of a Merger Event
in lieu of the adjustment required pursuant to Section 4(c)), a holder shall:
(i) prior to 5:00 p.m., New York City time on the Election Date (as defined in
subsection (iv) below), fax or otherwise deliver notice ("Notice of Election")
to the Corporation that the holder elects to convert the same (or elects to
receive the Liquidation Preference), which notice shall be signed by the holder
and shall specify the number of shares of Preferred Stock to be converted (or
liquidated), the Conversion Price and a calculation of the number of shares of
Common Stock issuable upon such conversion (or the amount of cash to be received
in respect of the Liquidation Preference) and (ii) surrender the original
certificates representing the Preferred Stock being converted (the "Preferred
Stock Certificates"), duly endorsed, along with a copy of the Notice of Election
within three business days thereafter to the office of the Corporation or the
Transfer Agent, if any, for the Preferred Stock. The Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion (or payment of the Liquidation Preference) unless either
the Preferred Stock Certificates are delivered to the Corporation or its
Transfer Agent as provided above, or the holder notifies the Corporation or its
Transfer Agent that such certificates have been lost, stolen or destroyed
(subject to the requirements of subparagraph (i) below). In the case of a
dispute as to the calculation of the Conversion Price (or Liquidation
Preference) other than manifest error by a holder, the Corporation shall
promptly issue such number of shares of Common Stock that are not disputed in
accordance with subparagraph (ii) below (or deliver the Liquidation Preference
pursuant to Section 4(c)). The Corporation shall submit the disputed
calculations to its independent auditors via facsimile within two business days
of receipt of the Notice of Election. The accountant shall audit the
calculations and notify the Corporation and the holder of the results no later
than two business days from the time it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive, absent manifest error.
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(i) Lost or Stolen Certificates. Upon receipt by the
Corporation of evidence of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing shares of Preferred Stock, and (in the
case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Corporation shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date. However, the
Corporation shall not be obligated to reissue such lost or stolen Preferred
Stock Certificate(s) if the holder contemporaneously delivers to the Corporation
a Notice of Election electing to convert such shares of Preferred Stock.
(ii) Delivery of Common Stock Upon Conversion. Upon
the surrender of Preferred Stock Certificates as described above by a holder of
Preferred Stock accompanied by a Notice of Election, the Corporation shall issue
and, within three business days after the later of the Election Date and the
date of such surrender (or, in the case of lost, stolen or destroyed
certificates, after provision of agreement and indemnification pursuant to
subparagraph (i) above) (the "Delivery Period"), deliver to or upon the order of
the holder (a) that number of shares of Common Stock applicable to that portion
of shares of Preferred Stock converted as shall be determined in accordance
herewith, (b) a certificate representing the balance of the shares of Preferred
Stock not converted, if any, and (c) dividends in the form of either (x) a check
payable to the holder for any and all dividends accrued on the Preferred Stock
being converted, through the date of conversion, or (y) shares of Common Stock.
Upon delivery of a Notice of Election and surrender of the Preferred Stock
Certificate related thereto (or an indemnification agreement if required
pursuant to paragraph (i) above), the Corporation's obligation to deliver shares
of Common Stock shall be absolute and unconditional and the Corporation agrees
not to assert (and hereby waives to the fullest extent permitted by law) any
defenses against its obligation to so deliver such shares. In the event the
Corporation fails to deliver such shares, the Corporation understands that the
holder will be entitled to pursue actual damages (whether or not such failure is
caused by the Corporation's failure to maintain a sufficient number of
authorized shares of Common Stock as required pursuant to the terms of Section
5(e) hereof), and each holder shall have the right to pursue all remedies
available at law or in equity (including a decree of specific performance or
injunctive relief).
(iii) No Fractional Shares. If any conversion of
Preferred Stock would result in a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon the conversion of the Preferred Stock shall be rounded to the
nearest whole number of shares.
(iv) Election Date. The "Election Date" shall be the
date specified in the Notice of Election; provided, however, that if the copy of
the Notice of Election is not submitted by facsimile (or by other means
resulting in notice) to the Corporation before 5:00 p.m., New York City time, on
the Election Date indicated in the Notice of Election, then the Election Date
shall be the next day. Upon submission by a holder of the Preferred Stock of a
Notice of Election with respect to shares of Preferred Stock, such shares shall
be irrevocably deemed converted into shares of Common Stock (or liquidated in
accordance with the Liquidation Preference) and the holder's rights as a holder
of such shares of Preferred Stock shall cease and terminate, excepting only the
right to receive certificates for such shares of Common Stock in accordance with
and subject to this Section 5(d).
(v) Rights of Reversion. Any holder that delivers to
the Corporation a Notice of Election at any time during the period beginning on
the date the Corporation first mails notice to holders of Preferred Stock of any
contemplated Liquidation Event, Merger Event or redemption ( in each case, an
"Event") and the day immediately prior to the date the Event is to be effected
or consummated, shall have the absolute right, his in discretion, and in the
event the Event is not effected or consummated as contemplated, to rescind such
Notice of Election by written notice delivered to the Corporation within 10 days
after the date on which the Corporation delivers notice to such holder of the
cancellation of the Event ("Notice of Cancellation"). A Notice of Cancellation
shall be delivered by the Corporation to each holder of Preferred Stock within 3
days of the cancellation of any contemplated Event.
(e) Reservation of Shares. A number of shares of the
authorized but unissued Common Stock sufficient to provide for the conversion of
the Preferred Stock outstanding at the then current Conversion Price shall at
all times be reserved by the Corporation, free from preemptive rights, for such
conversion. If the Corporation shall issue any securities or make any change in
its capital structure which would change the number of shares of Common Stock
into which each share of the Preferred Stock shall be convertible at the then
current Conversion Price, the Corporation shall at the same time also make
proper provision so that thereafter there shall be a sufficient number of shares
of Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Preferred Stock
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on such new basis. If, at any time, a holder of shares of Preferred Stock
submits a Notice of Election and the Corporation does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in accordance with the provisions of this Section, the Corporation
shall issue to the holder all of the shares of Common Stock which are available
to effect such conversion and shall thereafter use its best efforts to obtain,
as soon as practicable, shareholder approval to authorize the issuance of
sufficient shares of Common Stock to effect conversion of the Preferred Stock
outstanding.
(f) Calculation of Adjustment. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 5,
the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or properties which
at the time should be received upon conversion of a share of Preferred Stock.
(g) Current Market Value. For purposes of this Certificate of
Designation, "Current Market Value" per share of Common Stock or any other
security at any date means (i) if the security is not registered under the
Exchange Act, (a) the value of the security, determined in good faith by the
Board of Directors and certified in a board resolution, based on the most
recently completed arm's-length transaction between the Corporation and a Person
other than an affiliate of the Corporation (or between any two such Persons) and
the closing of which occurs on such date or shall have occurred within the
six-month period preceding such date, or (b) if no such transaction shall have
occurred on such date or within such six-month period, the value of the security
as determined by an independent financial expert or (ii) if the security is
registered under the Exchange Act, the average of the closing bid prices for
each trading day during the period commencing 10 trading days before such date
and ending on the date one day prior to such date, or if the security has been
registered under the Exchange Act for less than 10 consecutive trading days
before such date, the average of the closing bid prices for all of the trading
days before such date for which daily closing bid prices are available;
provided, however, that if the closing bid price is not determinable for at
least five trading days in such period, the "Current Market Value" of the
security, shall be determined as if the security were not registered under the
Exchange Act.
6. Redemption. Subject to the conversion rights set forth in Section 4
of this Certificate, the Company may redeem the Preferred Stock at any time,
upon 30 day's written notice, for an amount in cash equal to its Stated Value
plus all accrued and unpaid dividends through the date of redemption if (i) a
registration statement registering the resale of the shares of Common Stock
issuable upon conversion of all the then outstanding shares of Preferred Stock
is current and effective and (ii) the last sale price of the Common Stock has
been at least $2.50 on all 20 of the trading days ending on the third date prior
to the date on which notice of redemption is given.
7. Voting Rights. The holders of record of shares of Preferred Stock
shall not be entitled to any voting rights other than those voting rights
required by applicable law.
8. No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Certificate and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holders
against impairment.
9. Cancellation of Preferred Stock. In the event any shares of
Preferred Stock shall be converted pursuant to Section 5, or redeemed pursuant
to Section 6, the shares so converted shall be canceled, shall return to the
status of unissued preferred stock of no designated series, and shall not be
issuable by the Corporation as Class C 10% Convertible Preferred Stock.
10. Amendments and Other Actions. So long as shares of Preferred Stock
are outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent) of the holders of all of the then outstanding
shares of Preferred Stock:
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<PAGE>
(a) alter or change the rights, preferences or privileges of
the Preferred Stock or any other capital stock of the Corporation so as to
affect adversely the Preferred Stock; or
(b) create any new class or series of senior to or pari passu
with the Preferred Stock, other than the Class D Preferred Stock.
Notwithstanding the foregoing, the Corporation when authorized by
resolutions of its Board of Directors may amend or supplement this Certificate
without the consent of, any Holder to cure any ambiguity, defect or
inconsistency or make any other change provided that such amendments or
supplements shall not adversely affect the interests of the Holders.
11. Registration and Transfer. The Corporation shall maintain at its
principal executive offices (or at the principal executive offices of its
transfer agent or such other office or agency of the Corporation as it may
designate by notice to the holders of the Preferred Stock) a stock register for
the Preferred Stock in which the Corporation shall record the names and
addresses of person in whose name the shares of Preferred Stock are issued, as
well as the name and address of each transferee. Holders of share certificates
for the Preferred Stock may present such certificates for transfer and exchange
at such offices.
Prior to due presentment for registration of transfer of any
Preferred Stock, the Corporation may deem and treat the person in whose name any
Preferred Stock is registered as the absolute owner of such Preferred Stock and
the Corporation shall not be affected by notice to the contrary.
No service charge shall be made to a holder of Preferred Stock
for any registration, transfer or exchange.
12. Transfer Without Registration. If, at the time of the surrender of
any share certificate in connection with any transfer or exchange of shares of
Preferred Stock, such shares shall not be registered under the Securities Act
and under applicable state securities or blue sky laws, the Corporation may
require, as a condition of allowing such transfer or exchange (i) that the
holder or transferee, as the case may be, furnish to the Corporation a written
opinion of counsel (which opinion and counsel shall be reasonably acceptable to
the Corporation) to the effect that such transfer or exchange may be made
without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Corporation a letter in form and substance acceptable to the
Corporation stating that the transferee is acquiring such shares for investment
purposes only and not with a view towards distribution thereof and (iii) that
the transferee be an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act; provided, however, that no such opinion, letter or
status as an "accredited investor" shall be required in connection with a
transfer pursuant to Rule 144 under the Securities Act (but such other customary
documentation reasonably requested by the Corporation shall be required).
13. Method of Payment. Payments will be made as to dividends (if cash
payment is elected by the Corporation), Liquidation Preferences, redemptions and
all other payments by wire transfer of immediately available funds to the
accounts specified by the holders thereof or, if no such account is specified by
a holder, by mailing a certified check to such holder's registered address.
IN WITNESS WHEREOF, AMERTRANZ WORLDWIDE HOLDING CORP. has caused this
Certificate of Designations to be duly executed by its Chief Executive Officer,
who affirms that the information contained in the foregoing Certificate of
Designations is true under the penalties of perjury this 13th day of June, 1997.
AMERTRANZ WORLDWIDE HOLDING CORP.
By: /s/ Stuart Hettleman
Stuart Hettleman
Chief Executive Officer
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<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
AMERTRANZ WORLDWIDE HOLDING CORP.
THE UNDERSIGNED, being the President of Amertranz Worldwide
Holding Corp., hereby certifies that:
FIRST: The name of the Corporation is Amertranz Worldwide Holding Corp.
SECOND: The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on January 16,
1996.
THIRD: ARTICLE FOURTH of said Certificate of Incorporation is hereby
amended in its entirety to read as follows:
"The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 32,500,000 shares
consisting of (1) 2,500,000 shares of preferred stock, $10.00 par value
(the "Preferred Stock"); and (2) 30,000,000 shares of common stock,
$.01 par value (the "Common Stock")."
The Board of Directors shall have authority to establish the classes,
designations, powers, preferences and relative participating, optional or other
special rights, and the qualifications, limitations and restrictions thereof in
respect of the Preferred Stock and the Common Stock.
FOURTH: The foregoing amendment has been duly advised and adopted by
the Board of Directors of the Corporation and approved by the stockholders of
the Corporation in accordance with the applicable provisions of Section 242 of
the General Corporation Law of the State of Delaware by written consent of the
stockholders of the Corporation given in accordance with the provisions of
Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on this
9th day of July, 1997.
ATTEST:
/s/ Philip J. Dubato /s/ Stuart Hettleman
Secretary President
C64892.198
<PAGE>
CERTIFICATE OF DESIGNATIONS
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned, being the President of Amertranz Worldwide
Holding Corp. (the "Company"), hereby certifies, pursuant to Section 151(g) of
the General Corporation Law of Delaware, that the Board of Directors of the
Corporation has duly adopted and approved the powers, designations, preferences
and relative, participating optional or other rights of the shares of Preferred
Stock, $10.00 par value per share, of the Corporation as follows:
RESOLVED, that the following is hereby adopted and approved:
Class D Preferred Stock: Two hundred thousand (200,000) shares
of the Preferred Stock authorized in the Certificate of Incorporation are to be
designated as Class D Preferred Stock.
Par Value. The shares of Class D Preferred Stock shall have a
par or stated value of $10.00 per share.
Rank. All shares of the Class D Preferred Stock shall rank
senior to the Company's common stock, par value $.01 per share (the "Common
Stock"), and to any other class of capital stock or series of preferred stock
now existing or established hereafter by the Board of Directors other than the
Company's Class C 10% Convertible Preferred Stock (the "Class C Preferred Stock;
the Common Stock and all such classes of capital stock other than the Class C
Preferred Stock are hereinafter collectively referred to as the "Junior
Securities"), as to the distribution of assets upon liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, and with respect to
the payment of dividends. The Company shall not issue any class or series of
capital stock which ranks pari passu with the Class D Preferred Stock except the
Class C Preferred Stock.
Dividends: Holders of Class D Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
legally available funds, dividends at an annual rate of $1.00 per share, payable
semi-annually in arrears on June 30 and December 31 of each year, in cash or in
shares of Class D Preferred Stock at the rate of $10.00 per share. Dividends
shall accrue and are cumulative from the most recent date to which dividends
have been paid. The priority of dividends payable on shares of Class D Preferred
Stock shall rank pari passu with the priority of dividends payable on the
Company's Class C Preferred Stock and shall have priority over dividends or any
distributions payable on any Junior Securities.
Preference on Liquidation. In a case of the voluntary or
involuntary liquidation, dissolution or winding up of the Company, holders of
shares of Class D Preferred Stock then outstanding shall be entitled to be paid
out of the assets of the Company available for distribution to stockholders an
amount in cash equal to $10.00 per share, plus an amount equal to any accrued
and unpaid dividends, whether or not declared, to the payment date, before any
payment or distribution shall be made to the holders of any Junior Securities.
The liquidation preference payable on shares of Class D Preferred Stock shall
rank pari passu with the liquidation preference payable on the Company's Class C
Preferred Stock and shall have priority over any liquidation distributions
payable on any Junior Securities.
Voting. The holders of Class D Preferred Stock shall have no
voting rights except as required by law. In exercising any voting rights, each
outstanding share of Class D Preferred Stock shall be entitled to one vote.
Conversion Rights. Each holder of Class D Preferred Stock
shall have the right, at the holder's option, from time to time and at any time,
to convert any or all such shares of Class D Preferred Stock into Common Stock.
Each share of Class D Preferred Stock shall be convertible into such number
<PAGE>
of fully paid and nonassessable shares of Common Stock as is determined by
dividing (i) the par or stated value thereof by (ii) the Conversion Price (as
hereinafter defined) then in effect. The "Conversion Price" shall be equal to
the lower of the following, subject to adjustment as described below: (a) $6.00
per share of Common Stock, or (b) 80% of the average of the closing bid and
asked price per share of Common Stock on the day prior to the conversion date.
The Conversion Price is subject to adjustment in certain
events, including (i) the payment of a dividend on any class of the Company's
capital stock in shares of Common Stock or any other securities issued by the
Company or any of its subsidiaries; (ii) subdivisions or combinations of the
Common Stock; (iii) the issuance to all holders of Common Stock of rights or
warrants to subscribe for or purchase Common Stock or securities convertible
into or exchangeable for Common Stock, for a consideration per share of Common
Stock less than the current market price per share of the date of issuance of
the securities.
Registration Rights. At the request of a holder of shares of
Class D Preferred Stock, the Company shall register for resale under the
Securities Act of 1933, as amended ("Securities Act") any shares of Common Stock
issued upon conversion of shares of the Class D Preferred Stock.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
on this 26th day of November, 1997.
/s/ Stuart Hettleman
Stuart Hettleman, President
Attest:
/s/ Hillel Tendler
Hillel Tendler, Assistant Secretary
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<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
CLASS E PREFERRED STOCK OF
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned, being the President of Amertranz Worldwide
Holding Corp. (the "Company"), hereby certifies, pursuant to Section 151(g) of
the General Corporation Law of Delaware, that the Board of Directors of the
Corporation has duly adopted and approved the powers, designations, preferences
and relative, participating optional or other rights of the shares of preferred
stock, Ten Dollars ($10.00) par value per share, of the Corporation as follows:
RESOLVED, that the following is hereby adopted and approved:
1. Designation and Amount. Two hundred fifty thousand (250,000)
shares of the preferred stock authorized in the Certificate of Incorporation are
to be designated as Class E Preferred Stock (the "Preferred Stock").
2. Par Value. The Shares of Preferred Stock shall have a par or
stated value of Ten Dollars ($10.00) per share (the "Stated Value").
3. Dividends. Holders of Preferred Stock shall be entitled to
receive out of legally available funds, dividends payable as follows:
(i) Semi-annual dividends (the "Semi-Annual Dividends")
shall be payable as of each February 15 and September 30 of each
year (the "Semi-Annual Distribution Dates"), commencing February
15, 1998, to holders of outstanding shares of Preferred Stock of
record on such Semi-Annual Distribution Date. The Semi-Annual
Dividends shall be payable solely from the Company's "Reported
Net Profits" (as defined below), for the six (6) month period
ending on June 30 or December 31 immediately preceding the
Semi-Annual Distribution Date (the "Six Month Period"). As used
herein, "Reported Net Profits" means the net income of the
Company before amortization of goodwill for the applicable period
as reported by the Company in its applicable financial statements
filed on its Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, as the case may be, filed with the United States
Securities and Exchange Commission. The Semi-Annual Dividend on
each outstanding share of Preferred Stock on each Semi-Annual
Distribution Date shall be equal to the quotient obtained by
dividing (a) twenty percent (20%) of the Reported Net Profits for
the preceding Six Month Period, by (b) the number of issued
shares of Preferred Stock including outstanding shares and shares
which have been redeemed or otherwise acquired by the Company. In
the event that in any Six Month Period the Company shall report a
net loss, before amortization of goodwill (the "Net Loss"), the
Net Loss shall be carried forward into succeeding Six Month
Periods and shall be used to reduce the Reported Net Profits
reported in succeeding Six Month Period(s).
(ii) In addition to the Semi-Annual Dividends, additional
dividends (the "Additional Dividends") shall be payable as of
February 15, 1998, September 30, 1998, February 15, 1999, and
September 30, 1999 (the "Additional Distribution Date"), to
holders of outstanding shares of Preferred Stock of record on
such Additional Distribution Date. The Additional Dividend on
each outstanding share of Preferred Stock on each Additional
Distribution Date shall be equal to the quotient obtained by
dividing (a) the amount required to be paid by Target Airfreight,
Inc., a Delaware corporation and wholly-owned subsidiary of the
Company ("Target"), to Amertranz Worldwide, Inc., a Delaware
corporation and wholly-
-1-
<PAGE>
owned subsidiary of the Company ("Worldwide"), pursuant to the
Customer Sale Agreement dated as of June 20, 1997, by and between
Worldwide and Target, with respect to the Six Month Period
immediately preceding the relevant Additional Distribution Date,
by (b) the number of issued shares of Preferred Stock including
outstanding shares and shares which have been redeemed or
otherwise acquired by the Company.
(iii) In addition to the Semi-Annual Dividends and the
Additional Dividends, special dividends (the "Special Dividends")
shall be payable on outstanding shares of Preferred Stock from
the net cash proceeds to the Company from the sale of any equity
securities prior to mandatory conversion or redemption of the
Preferred Stock, as follows: To the extent at least thirty
percent (30%) of such net cash proceeds are not used to redeem
shares of Preferred Stock (such amount not used to redeem shares
of Preferred Stock being hereinafter referred to as the
"Aggregate Special Dividend Proceeds"), a Special Dividend shall
be paid on each outstanding share of Preferred Stock. The Special
Dividend to be paid on each outstanding share of Preferred Stock
shall be equal to the quotient obtained by dividing (a) the
Aggregate Special Dividend Proceeds, by (b) the number of issued
shares of Preferred Stock including outstanding shares and shares
which have been redeemed or otherwise acquired by the Company.
Any Special Dividend shall be payable on the tenth (10th)
business day following the receipt by the Company of such net
cash proceeds to holders of outstanding shares of Preferred Stock
of record on such date.
The cumulative amount of all Semi-Annual Dividends, Additional
Dividends, and Special Dividends (collectively, "Dividends") to be paid on each
share of Preferred Stock throughout the time such share is outstanding shall not
exceed the Stated Value. Anything contained herein to the contrary
notwithstanding, the aggregate amount of Dividends payable on any Semi-Annual
Distribution Date or Additional Dividend Date, as the case may be, shall be
reduced by the amount of all payments required to be made by the Company on such
date pursuant to Paragraphs 4(A), 4(B) and 4(D) of the Extension and Composition
Agreement dated as of November 7, 1997, by and among the Company, Worldwide, and
certain general unsecured creditors of Worldwide, and any such reduction shall
be applied pro rata among all outstanding shares of Preferred Stock. Anything
contained herein to the contrary notwithstanding, no Dividends shall be paid if
such payment would cause a default under, or violate the terms or conditions of,
any agreement between the Company and one or more of its secured creditors. Any
Dividends not paid as a result of any agreement between the Company and one or
more of its secured creditors shall accrue and be paid when permitted.
4. Rank. With respect to the distribution of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the shares of the Preferred Stock shall rank: (i) senior to the
Company's common stock, par value $.01 per share (the "Common Stock"); (ii)
junior to the Company's Class C 10% Convertible Preferred Stock and Class D
Preferred Stock; and (iii) pari passu with any other class of capital stock or
series of preferred stock now existing or established hereafter by the Board of
Directors.
5. Voting. The holders of the Preferred Stock shall have no
voting rights except as required by law. In exercising any voting rights, each
outstanding share of the Preferred Stock shall be entitled to one vote.
6. Mandatory Conversion. All unredeemed shares of Preferred
Stock shall be deemed canceled on the books and records of the Company and/or
its Transfer Agent on December 1, 2004 (the "Conversion Date") with no further
action on the part of any holder of shares of Preferred Stock. In
-2-
<PAGE>
exchange for such cancellation, each holder of shares of Preferred Stock shall
receive, as soon as practicable after the Conversion Date, such number of shares
of Common Stock equal to:
(i) the product obtained by multiplying
(a) the number of shares of Preferred Stock held of record by
such holder, by
(b) the Stated Value,
divided by
(ii) the greater of
(a) the closing market price of the Common Stock on the
Conversion Date, as quoted on the market on which the shares are traded, or
(b) an amount equal to the sum of
(A) Three Dollars ($3.00), plus
(B) an amount equal to the product obtained by
multiplying (1) Three Dollars ($3.00), by (2) a fraction, the numerator of which
is the aggregate Dividends paid as on a share of Preferred Stock and the
denominator of which is one and one-quarter (1.25).
If any conversion of Preferred Stock would result in a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon the conversion of the Preferred Stock shall
be rounded to the nearest whole number of shares.
7. Redemption. Prior to mandatory conversion, as set forth in
Section 6 of this Certificate, the Company may redeem all or any portion of the
outstanding shares of Preferred Stock, at any time, upon 15 days' written
notice, for an amount in cash equal to the Stated Value for each share of
Preferred Stock so redeemed.
8. Registration and Transfer. The Company shall maintain at
its principal executive offices (or at the principal executive offices of its
Transfer Agent or such other office or agency of the Company as it may
designate) a stock register for the Preferred Stock in which the Company shall
record the names and addresses of person in whose name the shares of Preferred
Stock are issued, as well as the name and address of each transferee. Holders of
share certificates for the Preferred Stock may present such certificates for
transfer and exchange at such offices. Prior to due presentment for registration
of transfer of any shares of Preferred Stock, the Company may deem and treat the
person in whose name any shares of Preferred Stock are registered as the
absolute owner of such shares of Preferred Stock and the Company shall not be
affected by notice to the contrary. No service charge shall be made to a holder
of Preferred Stock for any registration, transfer or exchange.
9. Transfer Without Securities Registration. The Company is
not required to register any shares of Preferred Stock or any shares of Common
Stock into which outstanding shares of Preferred Stock are convertible pursuant
to the Securities Act of 1933, as amended (the "Securities Act"), or any
applicable state securities or blue sky laws (the "State Acts"). If, at the time
of the surrender of any share certificate in connection with any transfer or
exchange of shares of Preferred Stock, such shares are not registered under the
Securities Act and applicable State Acts, the Company may require, as a
condition of allowing such transfer
-3-
<PAGE>
or exchange (i) that the holder or transferee, as the case may be, furnish to
the Company a written opinion of counsel (which opinion and counsel shall be
reasonably acceptable to the Company) to the effect that such transfer or
exchange may be made without registration under the Securities Act and
applicable State Acts, (ii) that the holder or transferee execute and deliver to
the Company a letter in form and substance acceptable to the Company stating
that the transferee is acquiring such shares for investment purposes only and
not with a view towards distribution thereof and (iii) that the transferee is an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided, however, that no such opinion, letter or status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act (but such other customary documentation reasonably
requested by the Company shall be required).
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
on this 30th of January, 1998.
/s/ Stuart Hettleman
Stuart Hettleman, President
ATTEST:
/s/ Philip J. Dubato
Philip J. Dubato, Secretary
-4-
<PAGE>
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE CERTIFICATE OF DESIGNATION
OF AMERTRANZ WORLDWIDE HOLDING CORP.
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON FEBRUARY 5, 1998
Amertranz Worldwide Holding Corp., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware does
hereby certify:
1. The name of the corporation is Amertranz Worldwide Holding Corp.
2. That a Certificate of Designation was filed with the Secretary of
State of Delaware on February 5, 1998, and that said Certificate
requires correction as permitted by Section 103 of the General
Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate to be corrected is
as follows:
The procedure for redemption by the Company of outstanding shares
of Class E Preferred Stock set forth in Section 7 of said
Certificate was not in accordance with the corporate action
referred to therein. The Certificate is corrected by revising
said Section 7 to read in its entirety as follows:
"7. Redemption. Prior to mandatory conversion, as set forth in
Section 6 of this Certificate, the Company may redeem all or any
portion of the outstanding shares of Preferred Stock, at any
time, effective upon written notice, for an amount in cash equal
to the Stated Value for each share of Preferred Stock so
redeemed."
IN WITNESS WHEREOF, said Amertranz Worldwide Holding Corp. has caused
this Certificate to be signed by Stuart Hettleman, its President, this 24th day
of September, 1998.
AMERTRANZ WORLDWIDE HOLDING CORP.
By: /s/ Stuart Hettleman
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-3, File No. 333-30351 and File No. 333-03613.
ARTHUR ANDERSEN LLP
New York, New York
October 7, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements as of and for the period ended June 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001009480
<NAME> AMERTRANZ WORLDWIDE HOLDING CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 880
<SECURITIES> 0
<RECEIVABLES> 15,070
<ALLOWANCES> 515
<INVENTORY> 0
<CURRENT-ASSETS> 23,745
<PP&E> 1,967
<DEPRECIATION> 1,211
<TOTAL-ASSETS> 38,547
<CURRENT-LIABILITIES> 26,085
<BONDS> 0
0
6,214
<COMMON> 84
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<TOTAL-LIABILITY-AND-EQUITY> 38,547
<SALES> 97,784
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<CGS> 76,678
<TOTAL-COSTS> 76,678
<OTHER-EXPENSES> 19,933
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,646
<INCOME-PRETAX> (258)
<INCOME-TAX> (7,662)
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<NET-INCOME> 7,404
<EPS-PRIMARY> 0.90
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</TABLE>
