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Trans Global Services, Inc. Form 10-K 12/31/01
Form 10-K 12/31/01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ________
Commission File No. 0-23382
Trans Global Services, Inc.
(Exact name of Company as Specified in its Charter)
Delaware 62-1544008
(State or other jurisdiction of I.R.S. employer
incorporation or organization) identification no.)
1393 Veterans Memorial Hwy.,
Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (631) 724-0006
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, par value .01 per share
Indicate by a check mark whether the Company (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 twelve months (or such shorter period that the Company 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 a 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 Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of March 19, 2002: $460,768
State the number of shares outstanding of each of the Company's classes of
common stock as of March 19, 2002: 5,481,295 shares of Common Stock, par value
$.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE: None
(This page left intentionally blank)
2
PART I
Item 1. Business
Trans Global Services, Inc. provides technical temporary staffing services. In
performing such services, we provide engineers, designers and technical
personnel on a temporary contract assignment basis pursuant to contracts with
major corporations. The engagement may relate to a specific project or may cover
an extended period based on the client's requirements. We believe that the
market for technical temporary staffing services, such as those which we offer,
results from the trend in employment practices by major corporations principally
in the aircraft and aerospace industries as well as the electronics, energy,
telecommunications, computer science and public utilities industries to reduce
their permanent employee staff and to supplement their staff with temporary
personnel on an as-needed basis. We seek to offer our clients a cost-effective
means of work force flexibility and the elimination of the inconvenience
associated with the employment of temporary personnel, such as advertising,
initial interviewing, fringe benefits and record keeping. Although the employees
provided by the Company are on temporary contract assignment, they work with the
client's permanent employees; however, they may receive different compensation
and benefits than permanent employees.
In providing our services, we engage the employees, pay the payroll and related
costs, including FICA, worker's compensation and similar Federal and state
mandated insurance and related payments. We charge our clients for services
based upon the hourly payroll cost of the personnel. Each temporary employee
submits to us a weekly time sheet with work hours approved by the client. The
employee is paid on the basis of such hours, and the client is billed for those
hours at agreed upon billing rates.
Our strategy has been directed at increasing our customer base and providing
additional services, such as integrated logistics support, to our existing
customer base. We believe that the key to profitability is to provide a range of
services to an increased customer base. In this connection, we are increasing
our marketing effort both through our own personnel and in marketing efforts
with other companies that offer complementary services.
3
Item 1. Business [Continued]
Our Organization
We are a Delaware corporation incorporated in September 1993 under the name
Concept Technologies Group, Inc., which name was changed to Trans Global
Services, Inc. in 1995. Our executive offices are located at 1393 Veterans
Memorial Hwy., Hauppauge, New York 11788, telephone (631) 724-0006.
Our operations are conducted through our three subsidiaries, Resource Management
International, Inc., Avionics Research Holdings, Inc. and Truecom, Inc.
References to us refer to us and our subsidiaries, unless the context indicates
otherwise.
Forward-Looking Statements
Statements in this Form 10-K annual report may be "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, but are not limited to, statements that
express our intentions, beliefs, expectations, strategies, predictions or any
other statements relating to our future activities or other future events or
conditions. These statements are based on current expectations, estimates and
projections about our business based, in part, on assumptions made by
management. These statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual outcomes and results may, and probably will, differ materially
from what is expressed or forecasted in the forward-looking statements due to
numerous factors, including those described above and those risks discussed from
time to time in this Form 10-K annual report, including the risks described
under "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in other documents which we file with
the Securities and Exchange Commission. In addition, such statements could be
affected by risks and uncertainties related to our financial condition, factors
which affect the aircraft and aerospace industries, market and customer
acceptance, competition, government regulations and requirements and pricing, as
well as general industry and market conditions and growth rates, and general
economic conditions. Any forward-looking statements speak only as of the date on
which they are made, and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this Form 10-K.
Risk Factors
Our financial position is impairing our ability to attract new clients and
retain existing clients.
Most of our revenue is derived from major companies in the aircraft and
aerospace industries. These companies review, on a regular basis, our financial
statements to determine whether they believe we have adequate resources to
insure that we will be able to perform our obligations under our agreements. One
of our major customers, The Boeing Company, has discontinued engaging us for new
assignments because of our weak financial position although it is continuing to
use our personnel on existing engagements. We can not assure you that other
clients will not reduce or discontinue the use of our services as a result of
our financial condition or for any other reasons.
4
Item 1. Business [Continued]
Because our major clients are in the aircraft and aerospace industries, our
business is affected by the economic conditions for these industries.
Our largest clients for 2001 and 2000 were in the aircraft and aerospace
industries, accounting for revenue of approximately $20.0 million, or 74% of
revenue, in 2001, and $15.6 million, or 67% of revenue, in 2000. We have, in the
past, incurred significant drops in revenue and increased losses as a result of
economic conditions in these industries, and we were not able to offset the
decreased revenue with revenue from new clients in other industries. We cannot
assure you that the aircraft and aerospace industries will not suffer slowdowns
in the future or that we will be able to develop any significant client base
outside these industries.
We have a working capital deficiency which could impair our ability to continue
in business.
At December 31, 2001, we had a deficiency in working capital of approximately
$365,000. Presently, our primary source of funds is our line of credit from our
asset-based lender. We have had limited success in raising funds and we believe
that, because of our financial condition and stock price, we will continue to
have difficulty in raising funds. The failure to raise funds may affect our
ability to continue in business.
We incurred losses during each of the past three years, and our losses are
continuing.
We sustained a loss of $1.6 million, or $.47 per share (basic and diluted) for
2001. We cannot assure you that we will be able to generate profits in the
future, and our failure to generate profits could affect our ability to continue
our operations.
Our credit agreement expires in October 2002, and we may not be able to renew
the line or obtain an alternative facility.
Our principal source of cash during 2001 was our credit facility with our
asset-based lender. This facility expires on October 16, 2002, subject to a one
year renewal option if mutually agreed. We require this facility in order to
meet our payroll obligations since we pay our employees before we receive
payment from our customers. We will not be able to continue in business unless
we are able to extend our credit facility or otherwise obtain necessary
financing, and the terms of any financing which is available to us may be less
favorable to us than the terms of our present credit arrangement, and any equity
financing would result in substantial dilution to our stockholders.
Because of our financial position, we may have difficulty generating business in
a highly competitive industry.
The technical temporary staffing business is highly competitive with respect to
both clients and employees. In order to attract both clients and employees, we
must show that we have the financial capability to meet our obligations and we
must offer employees benefits that our competitors offer. Our financial position
has in the past limited our ability to grow. Our current financial position,
particularly our lack of working capital, may increase the difficulty in both
retaining existing clients and obtaining new clients.
5
Item 1. Business [Continued]
We need to offer direct payroll deposit to our employees.
At present, because of our financial position, we do not offer our employees a
direct deposit payroll program by which we deposit the employees' compensation
directly into their bank accounts so that the employee's money will be
immediately available. Employees believe that direct payroll deposit is an
important element to consider in evaluating employment opportunities. In order
to offer this service, we require significant additional funds, and these funds
are not available to us. We believe that our ability to attract new employees
will continue to be impaired by our inability to offer employees direct payroll
deposit.
Our business may be impaired by any trends in employment practices which result
in temporary staffing employees being treated the same as permanent employees.
Our temporary staffing business is based in part on providing employees at a
lower cost than employers would pay permanent employees. Many of the temporary
employees work with permanent employees and perform similar duties. Our business
would be impaired if temporary employees are required to be treated like
permanent employees, whether as a result of labor negotiations, court or
administrative decisions, legislation or regulation, or other factors outside of
our control.
We need to attract qualified employees to service our clients.
We are dependent upon both our ability to obtain contracts with clients and to
provide those clients with qualified employees. The market for qualified
personnel is highly competitive, and we compete with other companies in
obtaining contracts with potential clients and in attracting employees. Our
financial condition impairs our ability to attract qualified employees.
We may be held liable for the actions of our employees when on assignment.
Although our client agreements disclaim responsibility for the conduct of our
employees, we may be exposed to liability with respect to actions taken by our
employees while on assignment, such as damages caused by their errors, misuse of
client proprietary information or theft of client property. We do not maintain
insurance coverage against this risk. Due to the nature of our assignments, we
cannot assure you that we will not be exposed to liability as a result of our
employees being on assignment.
We are dependent upon our management.
Our business is dependent upon our senior executive officers, principally Mr.
Joseph G. Sicinski, president and chief executive officer, who is responsible
for the Company's operations, including marketing and business development.
Although we have an employment agreement with Mr. Sicinski, the agreement does
not guarantee that he will continue in his employment with us. Our business may
be adversely affected if any of our key officers left our employ.
6
Item 1. Business [Continued]
We may consider a merger or acquisition.
We are seeking to address our lack of liquidity through a merger or acquisition.
Any such transaction may result in a change of control and substantial dilution
to our stockholders. In addition, such transaction may also result in a
significant change in our business. We cannot assure you that we will be able to
complete any such transaction on terms that are favorable to us or our
stockholders or will result in increased liquidity or profitable operations.
We do not anticipate paying dividends on our common stock.
The rights of the holders of common stock may be impaired by the potential
issuance of preferred stock.
Our certificate of incorporation gives our board of directors the right to
create new series of preferred stock. As a result, the board of directors may,
without stockholder approval, issue preferred stock with voting, dividend,
conversion, liquidation or other rights which could adversely affect the voting
power and equity interest of the holders of common stock. The preferred stock,
which could be issued with the right to more than one vote per share, could be
utilized as a method of discouraging, delaying or preventing a change of
control. The possible impact on takeover attempts could adversely affect the
price of our common stock.
Our common stock is subject to the SEC's penny-stock rules.
Our common stock is subject to the SEC's penny-stock rules, which impose
additional sales practice requirements on broker-dealers which sell our stock to
persons other than established customers and institutional accredited investors.
These rules may affect the ability of broker-dealers to sell our common stock
and may affect the ability of our stockholders to sell any common stock they may
own.
Shares may be issued pursuant to options and warrants.
We may issue stock upon the exercise of options granted up to an aggregate
110,809 shares of common stock pursuant to our long-term incentive plans and
warrants to purchase an aggregate of 738,150 shares.
Markets and Marketing
The market for our services is comprised of major corporations in such
industries as aircraft, aerospace, electronics, energy, engineering, computer
services and telecommunications, where the use of technical temporary staffing
has become an important method of cost reduction. Typically, a client enters
into an agreement with one or a small number of companies to serve as employer
of record for its temporary staff, and its agreements are terminable by the
client without significant notice.
We maintain a computerized data base of technical personnel based upon their
qualifications and experience. The data base, which contains more than 100,000
names, is generated through employees previously employed by us, referrals and
responses to advertisements placed by us in the media, including newspapers,
yellow pages, magazines and trade publications. Part of
7
Item 1. Business [Continued]
our responsibilities for any engagement is the recruitment and initial
interviewing of potential employees, with the client conducting any final
interviews it deems necessary. The majority of work performed by our employees
is performed at the client's premises and under the client's direction, although
we are the employer of record.
We also conduct an ongoing program to survey and evaluate the clients' needs and
satisfaction with our services, which we use as part of our marketing effort.
Although we have four offices, including our main office in Long Island, New
York, throughout the United States, there are no limited geographic markets for
our services. We have in the past established offices in new locations when we
receive a contract in the area and we cannot effectively service such contract
from our existing offices. We intend to continue to establish new offices as
necessary to meet the needs of our customers.
A client will utilize technical temporary staffing services, such as those which
we provide, when it requires a person with specific technical knowledge or
capabilities which are not available from the client's permanent staff or to
supplement its permanent staff for a specific project or to meet peak load
requirements. When the client requires personnel, it provides us with a detailed
job description. We then conduct an electronic search in our computerized resume
data base for candidates matching the job description. In addition, each branch
office maintains a file of active local resumes for candidates available for
assignment in the vicinity of the branch office. The candidates are then
contacted by telephone by our recruiters, who interview interested candidates.
If a candidate is acceptable to us and interested in the position, we refer the
candidate to the client. An employment agreement is executed with us prior to
the commencement of employment.
We serve primarily the aircraft and aerospace industries as well as the
electronics, energy, telecommunications, computer science and public utilities.
We are seeking to expand our efforts to address the general trend of temporary
staffing by major corporations on a national basis. However, we have not been
successful in developing any significant new clients.
Our contracts are generally terminable by the client on short notice.
The following table shows the revenue and the percentage of our total revenue
from those clients that accounted for at least 5% of our revenue in 2001:
Client Revenue Percent
Lockheed-Martin $ 7.9 million 29.2%
Boeing 4.6 million 17.0%
Bell Helicopter Textron 4.2 million 15.5%
Gulfstream Aerospace 3.3 million 12.2%
8
Item 1. Business [Continued]
The following table shows the revenue and the percentage of our total revenue
from our largest clients in 2000:
Client Revenue Percent
Lockheed-Martin $5.7 million 24.5%
Bell Helicopter Textron 4.1 million 17.6%
Boeing 3.6 million 15.5%
Gulfstream Aerospace 2.2 million 9.4%
Because of our financial position, Boeing is no longer giving us any new
assignments, although it is continuing to use our personnel on existing
engagements.
Competition
The business of providing employees on either a permanent or temporary basis is
highly competitive and is typically local in nature. We compete with numerous
technical service organizations, a number of which are better capitalized,
better known, have more extensive industry contacts and conduct extensive
advertising campaigns aimed at both employers and job applicants than we have.
We believe that the ability to demonstrate a pattern of providing reliable
qualified employees is an important aspect of developing new business and
retaining existing business. Furthermore, our ability to generate revenue is
dependent not only upon our ability to obtain contracts with clients, but also
to provide these clients with qualified employees. The market for qualified
personnel is highly competitive, and we compete with other companies in
attracting employees. Our ability to increase our business with existing clients
or to attract other clients will be affected by our working capital.
Accordingly, our failure to increase our working capital has been and is
continuing to effect our ability to expand our business. In addition, our
failure to offer employees the direct deposit of their payroll may affect their
willingness to be employed by us especially in light of our financial condition.
Government Regulations
The technical temporary staffing industry, in which we are engaged, does not
require licensing as a personnel or similar agency. However, as a provider of
personnel for other corporations, we are subject to Federal and State
regulations concerning the employment relationship, including those relating to
wages and hours and unemployment compensation. We also maintain a 401(k) plan
for our employees and we are subject to regulations concerning such plan.
We do not have contracts with any government agencies. However, our clients
include major defense contractors, that have contracts with government agencies.
Our contracts with our clients are based on hourly billing rates for each
technical discipline. Many of the clients' contracts with government agencies
are subject to renegotiation or cancellation for the convenience of the
government. Since the staffing needs of each of our clients are based on the
clients own requirements and the clients' needs are affected by any modification
in requirements, any reduction in staffing by a client resulting from
cancellation or modification of government contracts could adversely impact our
business.
9
Item 1. Business [Continued]
Employees
At December 31, 2001, we had 281 employees, 257 of which were contract service
employees who performed services on the clients' premises and 24 were executive
and administrative employees. Each of our offices is staffed by recruiters and
sales managers. Each contract service employee enters into a contract with us
which sets forth the client for whom and the facility at which the employee's
services are to be performed and the rate of pay. If an employee ceases to be
required by our clients for any reason, we have no further obligation to the
employee. Although assignments can be for as short as 90 days, in some cases,
they have been for several years. The average assignment is in the range of six
to nine months. The majority of our employees are not represented by a labor
union, and we consider our employee relationships to be good.
Executive Officers of the Company
Information concerning our officers and directors is included in "Item 10.
Directors and Executive Officers of the Registrant".
Item 2. Description of Property.
We lease approximately 7,500 square feet of office facilities in Hauppauge, New
York, where we maintain our executive offices. We also rent modest office space
in Phoenix Arizona, Arlington Texas, and Orlando Florida. Our aggregate annual
rent is approximately $200,000, which is subject to annual increases. We believe
that our present office space is adequate for our present needs and that
additional office space is readily available on commercially reasonable terms.
Item 3. Legal Proceedings.
In November 1997, an action was commenced in the Supreme Court of the State of
New York, County of Suffolk, by Ralph Corace against our subsidiary, Resource
Management International, Inc. seeking damages of approximately $1.1 million for
an alleged breach of contract by us. Mr. Corace was the president of Job Shop
Technical Services, Inc., from which we, through Resource Management
International, Inc., purchased assets in November 1994. We believe that the
action is without merit, we are contesting this matter and we have filed
counterclaims against Mr. Corace.
Item 4. Submission of Matters to a vote of Security Holders.
No matters were voted upon during the fourth quarter of 2001.
10
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
Our common stock is traded on the OTC Bulletin Board under the symbol TGSI.
Prior to March 16, 2000, our common stock was traded on the Nasdaq SmallCap
Market.
The high and low closing price for the Company's Common Stock since January 2000
are as follows:
Common Stock
---------------
High Low
2002
First Quarter (through March 19,2002) .99 .10
2001
First Quarter .44 .13
Second Quarter .29 .10
Third Quarter .14 .05
Fourth Quarter .50 .05
2000
First Quarter 2.63 .56
Second Quarter 1.19 .75
Third Quarter .75 .13
Fourth Quarter .45 .13
The closing price per share for our common stock on March 19, 2002 was $.10.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.
As of March 19, 2002, we believe that there were approximately 1,500 beneficial
holders of our common stock.
We have not paid dividends on our common stock since inception, and we do not
expect to pay any dividends for the foreseeable future.
During 2001 and 2000, we issued the following equity securities.
Pursuant to an agreement dated November 15, 2001, we issued 5,000,000 shares of
common stock to The Finx Group, Finx issued 2,500,000 shares of Finx common
stock to us, and Finx agreed to invest $1,000,000, for which we were to issue
shares of preferred stock which were convertible into 3,000,000 shares of common
stock. In December 2001, Finx invested $250,000 and received preferred stock
convertible into 750,000 shares of common stock. In March 2002, the agreement
was terminated, Finx returned to us 4,000,000 shares of common stock, we
returned to Finx the 2,500,000 shares of Finx common stock and all of the
preferred stock which was issued and issuable pursuant to the November agreement
was cancelled. The net effect of the transaction was the issuance by us of
1,000,000 shares of common stock to designees of Finx for $250,000. The
1,000,000 shares are held by designees of Finx, including Mr. Lewis S. Schiller
and members of his family. Mr. Schiller was our chief executive officer and a
director from December 2001 until March 2002.
11
Item 6. Selected Financial Data.
TRANS GLOBAL SERVICES, INC.
SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
Set forth below is selected financial data with respect to the Company for the
years ended December 31, 2001, 2000, 1999, 1998,and 1997. The selected financial
data for the years ended December 31, 2001, 2000 and 1999 have been derived from
the financial statements which appear elsewhere in this Report. The data for the
years ended December 31, 1998 and 1997 have been derived from our audited
financial statements which are not included in this report. This data should be
read in conjunction with the financial statements of the Company and the related
notes which are included elsewhere in this Report.
Statement of Operations Data:
- ------------------------------
Year Ended December 31,
-------------------------------------------------------
2001 2000 1999 1998 1997
Revenue $ 27,127 $ 23,325 $ 36,015 $67,244 $75,725
Net (loss)income (1,816) (1,923) ( 1,853) 805 1,023
Net (loss)income per share
of common stock (basic) ( .54) ( .67) ( .61) .21 .27
Weighted average number of
shares of common stock
outstanding 3,387 2,861 3,048 3,820 3,820
Net (loss) income per
share of common
stock (diluted) ( .54) ( .67) ( .61) .21 .26
Weighted average number of
shares of common stock
outstanding 3,387 2,861 3,048 3,831 3,889
Balance Sheet Data:
December 31,
-----------------------------------------------------
2001 2000 1999 1998 1997
Working capital
(deficiency) $ (365) $ 102 $( 156) $ 972 $ 257
Total assets 3,898 4,794 7,365 12,597 13,942
Total liabilities 2,616 1,960 2,818 3,630 5,943
Accumulated deficit (9,551) (7,735) (5,813) (3,959) (4,765)
Stockholders' equity 1,282 2,834 4,547 8,967 7,999
12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Years ended December 31, 2001, 2000, and 1999
Revenue from technical temporary staffing services is based on the hourly cost
of payroll plus a percentage. The success of our business is dependent upon our
ability to generate sufficient revenue to enable us to cover our fixed costs and
other operating expenses, and to reduce our variable costs. Under our agreements
with our clients, we are required to pay our employees and pay all applicable
Federal and state withholding and payroll taxes prior to the receipt of payment
from the clients. Furthermore, our payments from our clients are based upon the
hourly rate paid to the employee, without regard to when payroll taxes are
payable with respect to the employee.
Accordingly, our cost of services are greater during the first part of the year,
when Federal Social Security taxes and state unemployment and related taxes,
which are based on a specific level of compensation, are due. Thus, until we
satisfy our payroll tax obligations, we will have a lower gross margin than
after such obligations are satisfied. Furthermore, to the extent that we
experience turnover in employees, our gross margin will be adversely affected.
For example, in 2001, Social Security taxes are payable on the first $80,400 of
compensation. Once that level of compensation is paid with respect to any
employee, there is no further requirement for us to pay Social Security tax for
such employee. Since many of our employees receive compensation in excess of
that amount, our costs with respect to any employee are significantly higher
during the period when we are required to pay Social Security taxes than it is
after such taxes have been paid.
Our revenue is derived principally from the aircraft and aerospace industries.
In 2001 revenue totaled approximately $27 million. This reflected an increase of
16.3% from the revenue in 2000. In 2000 we experienced a 35.2% decrease from the
revenue in 1999. The changes over the past two years continues to be directly
related to the fluctuations in the aircraft and aerospace industries and the
continuing delay of requests for personnel by the multi-national fortune 500
clients we serve. During 2001, approximately $20 million, or 74% of our revenue,
was generated from our four largest clients, Lockheed-Martin, Bell Helicopter
Textron, The Boeing Companies and Gulfstream Aerospace. During 2000,
approximately $15.6 million, or 67% of our revenue was derived from our four
largest clients, Lockheed-Martin, Bell Helicopter Textron, The Boeing Companies
and Gulfstream Aerospace. In 1999, approximately $17 million, or 47%, of our
revenue was derived from our three largest clients, Boeing, Lockheed-Martin and
Northrop-Grumman, and 69.5% of our revenue was generated from our six largest
clients. The fluctuation in business from these clients has had a material
impact on our business. In the first quarter of 2002, we are experiencing a
moderate decrease in revenue compared to the fourth quarter of 2001.
In the first quarter of 2002, Boeing advised us that it is no longer engaging us
for new assignments, although it is continuing to use us for personnel who we
have already placed with Boeing. Since Boeing was one of our largest clients in
each of the past four years, the loss of potential new business from Boeing
could have an adverse effect upon our ongoing business. We believe this action
by Boeing is based on our financial condition and our failure to raise
additional funding. We cannot assure you that other clients will not reduce or
discontinue our services for the same reason.
13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations [Continued].
Our gross margins were 8.9% for 2001, 10.1% for 2000, and 8.2% for 1999. The
decrease in the gross margin from 2000 to 2001 reflects the loss of some of our
higher gross margin business. The increased gross margin from 1999 to 2000 can
be attributed to the reduction in business with some of the Company's lower
margin aircraft and aerospace clients combined with a slight increase in revenue
from clients in other industries.
Selling, general and administrative expenses in 2001, decreased by 11.9% from
2000 which was a decrease of 21.6% from those expenses in 1999 excluding related
party expenses. Selling, general and administrative expenses were $2.8 million
in 2001, $3.2 million in 2000 and $4.1 million in 1999. The decline reflects
principally the effects of our cost reduction programs necessitated by the
significant drop in revenue.
In 2001 we wrote off goodwill of approximately $581,000, related to the purchase
of our major subsidiary in 1994, and we increased our amortization of
intangibles by approximately $210,000 to reflect a decrease in the value of our
customer lists, reflecting in part the action taken by the Boeing Company in not
engaging us in new assignments.
As a result of the decrease in gross profit in 2001 and the decrease in revenue
and gross profit in 2000, our gross profit was not sufficient to cover our
selling, general and administrative expenses, resulting in operating losses of
$1.3 million in 2001 and $1.1 million in 2000.
Interest expense for 2001, which was $312,000, decreased by approximately
$160,000, or 33%, over interest expenses of $472,000 for 2000. Approximately
$210,000 of the interest expense in 2000 is attributable to the amortization of
non-cash debt finance costs associated with the 575,000 warrants issued in
January 2000 in connection with the $1.0 million of debt financing raised at
that time. Exclusive of this non-cash debt finance cost, interest expense
increased by approximately $50,000 over that of 2000 due to increased borrowings
and higher rates charged by our current asset-based lender pursuant to the
credit agreement (effective October, 2001). Interest expense for 2000 increased
by 83% from $257,000 in 1999 primarily as a result of the $210,000 non-cash debt
financed cost.
Interest and other income decreased by approximately $195,000 in 2001, due
primarily to the collection in 2000 of the note issued by Arc Networks. Interest
and other income increased by approximately $130,000 in 2000 compared to 1999.
Approximately $80,000 of this increase is attributable to fees paid by Arc
Networks in connection with our agreement to extend the Arc Networks' note.
Our net loss before income taxes was $1.8 million in 2001 compared with a net
loss before income taxes of $1.4 million in 2000 and net loss before income
taxes of $1.6 million for 1999. In 2001 the net loss was $1.8 million or $.54
per share (basic and diluted), in 2000 our net loss was $1.9 million, or $.67
per share (basic and diluted), and in 1999 the net loss was $1.9 million, or
$.61 per share (basic and diluted).
Revenue has decreased in the first quarter of 2002, and we continue to operate
at a loss. We anticipate that we will incur a loss at least into the third
quarter of 2002. We can not predict when or whether we will operate profitably.
Liquidity and Capital Resources
At December 31, 2001, we had a deficiency in working capital of $365,000. Our
working capital is barely sufficient to meet our most immediate needs, and our
failure to increase our working capital is impairing our ability to continue our
operations.
14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations [Continued].
During 2001, our operations utilized cash flow of $996,000. Our principal source
of cash during 2001 was our credit facility with our asset-based lender. This
facility expires, unless renewed, in October 2002. In addition, in December
2001, we received $250,000 from the private sale of securities.
Pursuant to our credit agreement, we can borrow up to 85% of our qualified
accounts receivables at an interest rate of prime plus 2.5% and a fee of .7% of
the receivables financed. The maximum availability on the credit agreement is
$2.5 million. The maximum available under our borrowing formula was $1,621,000
at December 31, 2001 and $1,638,000 at February 28, 2002. We will not be able to
continue in operations if we are not able to extend or replace our credit
agreement.
Because of our present stock price, it is highly unlikely that we will be able
to raise funds through the sale of our equity securities, and our financial
condition prevents us from issuing debt securities.
We will consider a merger or an acquisition if we believe that the company would
provide us with adequate financial resources. Any such transaction will most
likely result in a change of control and substantial dilution to our
stockholders. Although we have engaged in negotiations in the past, none of such
negotiations have resulted in an agreement.
Financial Reporting Release No. 60, which was recently issued by the Securities
and Exchange Commission ("SEC"), requires all registrants to discuss critical
accounting policies or methods used in the preparation of financial statements.
Note 2 to the consolidated financial statements includes a summary of the
significant accounting policies and methods used in the preparation of the
Company's consolidated financial statements. In the opinion of management, the
Company does not have any individual accounting policy which is critical to the
preparation of its consolidated financial statements. In most instances, the
Company must use an accounting policy or method because it is the only policy or
method permitted under accounting principles generally accepted in the
United States of America ("U.S. GAAP").
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not Applicable.
Item 8. Financial Statements.
The Financial Statements begin on Page F-1.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None
15
PART III
Item 10. Directors and Executive Officers of the Company
The following table sets forth certain information concerning the directors and
the executive officers of the Company as of March 31, 2002:
Name Age Position with the Company
Joseph G. Sicinski 70 President, Chief Executive Officer and
director
Joseph E. Link 60 Chief Financial Officer, Secretary, Treasurer
and director
Mr. Joseph G. Sicinski has been president and a director of the Company and its
predecessor since September 1992 and our chief executive officer since April
1998. For more than eight years prior thereto, he was executive vice president
of corporate marketing for Interglobal Technical Services, Inc., which was
engaged in providing technical temporary staffing services. Mr. Sicinski is also
a director of Netsmart Technologies, Inc., a publicly-held company that markets
medical information systems.
Mr. Joseph E. Link has been chief financial officer, secretary, and treasurer
since February 2002 and a director since March 2002. From 1995 to February,
2002, Mr. Link was director of mergers and acquisitions and controller of the
Company.
In 1999, the board of directors created an audit committee. We no longer have an
audit committee following the resignations of our independent directors.
Directors are elected for a term of one year. During 2001 and 2000, we paid
directors who are not also employees a fee of $500 per month.
None of the Company's officers and directors are related.
The Company's Certificate of Incorporation provides that to the fullest extent
provided by Delaware law, a director shall not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Certificate of Incorporation also contains broad indemnification provisions.
These provisions do not affect the liability of any director under Federal or
applicable state securities laws.
On November 12, 2001, just prior to the November 15, 2001 agreement with the
Finx Group, Messrs. Edward D. Bright and James L. Conway resigned as directors.
In February 2002, Mr. Glen R. Charles resigned as a director and chief financial
officer.
Messrs. Lewis S. Schiller, Lee Wingeier and Storm Morgan were elected as
directors in December 2001, and Mr. Schiller was also elected as chief executive
officer at that time. Messrs. Wingeier and Morgan resigned in January 2002 and
Mr. Schiller resigned in March 2002 as part of the termination of the November
15, 2001 agreement with the Finx Group. Mr. Schiller owns more than 5% of our
common stock. Messrs. Wingeier, Morgan and Schiller did not file a Form 3.
16
PART III Continued
Item 11. Executive Compensation
Set forth below is information with respect to compensation paid or accrued by
us for 2001, 2000,and 1999 to our chief executive officer. No other officer had
compensation of $100,000 or more for 2001.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
Compensation (Awards)
Name and Principal Restricted Stock Options,SARS
Position Year Salary Bonus Awards (Dollars) (Number)
Joseph G. Sicinski,
president and chief
executive officer 2001 $266,847 -- -- --
2000 268,038 -- -- --
1999 265,957 -- -- 85,000
Mr. Lewis S. Schiller was chief executive officer from December 21, 2001 until
March 4, 2002, for which he received no compensation.
On January 10, 2001, the exercise price of the outstanding options held by our
officers, directors and employees, including the options to purchase 368,333
shares at $.53 per share held by Mr. Sicinski were repriced at $.125 per share,
which was the fair market value of our common stock on that day. In connection
with the repricing, we agreed that payment of the exercise price could be made
by issuance of a non-interest bearing non-recourse promissory note due the
earlier of January 2006 or the date the shares are sold by the employee. The
shares are held by us as security for payment of the notes. On February 28,
2001, Mr. Sicinski exercised his option to purchase 368,333 shares of common
stock at $.125 per share, for which he issued a promissory note in the principal
amount of $46,041.63. In January 2002, Mr. Sicinski applied a portion of his
accrued but unpaid salary to pay his note.
Employment Contracts, Compensation Agreements and Termination of Employment and
Change in Control Arrangements
In October 1997, Mr. Joseph G. Sicinski entered into a five-year employment
agreement with us pursuant to which he received minimum annual compensation of
$260,000, subject to an annual increase equal to the greater of the increase in
the cost of living index or 5%. In March 1999, the term of the agreement was
extended until September 30, 2005. In addition, Mr. Sicinski is entitled to a
bonus of 5% of the Company's income before taxes, all non-cash adjustments and
all payments to our former parent, provided, that his maximum bonus does not
exceed 200% of his annual salary. We also provide Mr. Sicinski with an
automobile allowance for the use of his personal automobile. Mr. Sicinski is
also entitled to severance payments in the event of a termination of his
employment following a change of control, which would equal the greater of five
times his annual compensation or his annual compensation multiplied by the
number of years remaining in the term.
17
Item 11. Executive Compensation [Continued]
In June 2000, Mr. Sicinski agreed to defer a portion of his salary until such
time as the board of directors of the Company shall determine that sufficient
working capital is available to the Company to reinstate his agreed upon salary.
The amount shown in the Summary Compensation Table reflects the reduced rate of
compensation for 2001 and 2000.
Option Exercises and Outstanding Options
The following table sets forth information concerning the exercise of options
during 2001 and the year-end value of options and warrants held by our officers
named in the Summary Compensation Table. No stock appreciation rights have been
granted.
Aggregate Option Exercises in Last Year and Year-End Option Value
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the- Money
Options at Fiscal Options at Fiscal
Year End -1 Year End-2
Shares Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
- ---- ------------- -------- ------------- -------------
Joseph G. Sicinski 368,333 46,042 --/-- --/--
Options are considered in the money if their exercise price was less than the
last reported sales price of our common stock on December 31, 2001, which was
$.43 per share.
We have three long-term incentive plans, pursuant to which options to purchase
an aggregate of 895,388 shares of common stock may be issued. At December 31,
2001, we had issued on aggregate of 784,579 shares of common stock, and 110,809
shares of common stock, were available for grant. At December 31, 2001, options
to acquire 20,000 shares of stock were outstanding under the plans.
The board of directors or a stock option committee, if appointed, has the
authority to grant the following types of awards under the option plan:
incentive or non-qualified stock options; stock appreciation rights; restricted
stock; deferred stock; stock purchase rights and/or other stock-based awards.
The option plans are designed to provide us with broad discretion to grant
incentive stock-based rights. All officers, including Mr. Joseph G. Sicinski,
who is also a director, are eligible for awards under the option plans. On April
1 of each year, all outside directors are awarded options to purchase 5,000
shares of common stock at the fair market value on that date.
18
Item 11. Executive Compensation [Continued]
Tax consequences of awards provided under the option plans are dependent upon
the type of award granted. The grant of an incentive or non-qualified stock
option does not result in any taxable income to the recipient or deduction to
us. Upon exercise of a non-qualified stock option, the recipient recognizes
income in the amount by which the fair market value on the date of exercise
exceeds the exercise price of the option, and we receive a corresponding tax
deduction. In the case of an incentive stock option, no income is recognized by
the employee, and no deduction is available to us, if the stock issued upon
exercise of the option is not transferred within two years from the date of
grant or one year from the date of exercise, whichever occurs later. However,
the exercise of an incentive stock option may result in additional taxes through
the application of the alternative minimum tax. In the event of a sale or other
disqualifying transfer of stock issued upon exercise of an incentive stock
option, the employee realizes income, and we receive a tax deduction, equal to
the amount by which the lesser of the fair market value at the date of exercise
or the proceeds from the sale exceeds the exercise price. The issuance of stock
pursuant to a stock grant results in taxable income to the recipient at the date
the rights to the stock become nonforfeitable, and we receive a deduction in
such amount. However, if the recipient of the award makes an election in
accordance with the Internal Revenue Code of 1986, as amended, the amount of his
or her income is based on the fair market value on the date of grant rather than
the fair market value on the date the rights become nonforfeitable. When
compensation is to be recognized by the employee, appropriate arrangements may
be made with respect to the payment of withholding tax.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Set forth below is information as of March 19, 2002 as to our chief executive
officer, each director, each person owning of record or known by us, based on
information provided to the Company by the persons named below, to own
beneficially at least 5% of the Company's Common Stock and for all officers and
directors as a group.
Percent of Outstanding
Name and Address Shares Common Stock
- -------------------- ---------- -----------------------
Joseph G. Sicinski
1393 Veterans Memorial Hwy.
Hauppauge, NY 11788 626,666 11.4%
Lewis S. Schiller
21634 Club Vista Terrace
Boca Raton, FL 33433 562,500 10.3%
All directors and officers
as a group (two individuals) 646,666 11.8%
The shares owned by Mr. Schiller, the former chief executive officer and
director of the Company, include 62,500 shares which are owned by his wife, as
to which he disclaims beneficial ownership.
PAGE 19
Item 13. Certain Relationships and Related Transactions
Pursuant to an agreement dated November 15, 2001, we issued 5,000,000 shares of
common stock to The Finx Group, Finx issued 2,500,000 shares of Finx common
stock to us, and Finx agreed to invest $1,000,000, for which we were to issue
shares of preferred stock which were convertible into 3,000,000 shares of common
stock. In December 2001, Finx invested $250,000 and received preferred stock
convertible into 750,000 shares of common stock. In March 2002, the agreement
was terminated, Finx returned to us 4,000,000 shares of common stock, we
returned to Finx the 2,500,000 shares of Finx common stock and all of the
preferred stock which was issued or issuable pursuant to the November 2001
agreement was cancelled. The net effect of the transaction was the issuance by
us of 1,000,000 shares of common stock to designees of Finx for $250,000. The
1,000,000 shares are held by designees of Finx, including Mr. Lewis S. Schiller
and members of his family. Mr. Schiller was our chief executive officer and a
director from December 2001 until March 2002.
In connection with the Finx agreement, in December 2001, we elected Mr. Lewis S.
Schiller as chief executive officer and a director, and Messrs. Lee Wingeier and
Storm Morgan as directors. Messrs. Wingeier and Morgan resigned in January 2002.
Mr. Schiller resigned in March 2002 in connection with the termination agreement
with Finx. We exchanged mutual releases with Mr. Schiller.
On November 12, 2001, just prior to the November 15, 2001 agreement with the
Finx Group, Messrs. Edward D. Bright and James L. Conway resigned as directors.
We exchanged mutual releases with them.
20
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements.
The following financial statements are filed as part of this Form 10-K:
Trans Global Services, Inc. and Subsidiaries
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 2001 and 2000
Consolidated Statements of Operations for the years ended December 31, 2001,
2000 and 1999
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999
Notes to Financial Statements
(b) Financial Statement Schedules.
None
(c) Exhibits
3.1 - (1) Restated Certificate of Incorporation.
3.2 - (2) By-Laws.
10.1- (3) Employment agreement dated October 15, 1997, between the Company and
Joseph G. Sicinski, as amended.
10.2 -(4) 1995 Long-Term Incentive Plan.
10.3 -(5) 1998 Long-Term Incentive Plan
10.4 -(6) 1999 Long-Term Incentive Plan.
10.5 -(2) Form of Series A Common Stock Purchase Warrants.
10.7 Credit Agreement dated June 7, 2000 between the Company and
Sterling National Bank
10.8 -(8) Credit Agreement dated October 16, 2001 between the Company and Metro
Factors.
10.9 Agreement dated November 15, 2001 between the Company and The Finx
Group, Inc.
10.10 Termination agreement dated March 7, 2002 between the Company and
The Finx Group, Inc.
10.11 -(7)2002 Non-Qualified Stock Option Plan.
21.1 -(3)Subsidiaries of the Registrant
24.1 Consent of Moore Stephens, P.C.
25.1 Powers of attorney (See Signature Page).
21
Part IV [Continued]
1. Filed as an exhibit to the Company's registration statement on Form S-1,
File No. 333-14289, and incorporated herein by reference.
2. Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1995 and incorporated herein by reference.
3. Filed as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 and incorporated herein by reference.
4. Filed as an exhibit to the Company's definitive proxy statement for its
special meeting of stockholders for November 1996 and incorporated herein by
reference.
5. Filed as an exhibit to the Company's definitive proxy statement for its
1998 annual meeting of stockholders for August 1998 and incorporated
herein by reference.
6. Filed as an exhibit to the Company's definitive proxy statement for its 2000
annual meeting of stockholders held in May 2000 and incorporated herein by
reference.
7. Filed as an exhibit to the Company's registration statement on Form S-8, File
No. 333-81792 and incorporated herein by reference.
8. Filed as an exhibit to the Company's form 8k dated October 16, 2001, File No.
000-23382 and incorporated herein by reference.
(d) Reports on Form 8-K
None
22
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
TRANS GLOBAL SERVICES, INC.
Date: March 29, 2002 By:
Joseph G. Sicinski
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the Company
and in the capacities and on the dates indicated. Each person whose signature
appears below hereby authorizes Joseph G. Sicinski as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments to this report, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission.
Signature Title Date
Joseph G. Sicinski President, Chief Executive March 29, 2002
Officer and Director
(Principal Executive Officer)
Joseph E. Link Chief Financial Officer (Principal March 29, 2002
Financial and Accounting Officer)
and Director
23
INDEX TO FINANCIAL STATEMENTS
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES PAGE
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 2001 and 2000 F-3
Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999 F-5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 2001, 2000,and 1999 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999 F-8
Notes to Consolidated Financial Statements F-11
24
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of Trans Global Services, Inc.
Hauppauge, New York
We have audited the accompanying consolidated balance sheets of Trans Global
Services, Inc. and its subsidiaries as of December 31, 2001, and 2000, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated 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 consolidated financial position of Trans
Global Services, Inc. and its subsidiaries as of December 31, 2001 and 2000, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that Trans Global Services, Inc. will continue as a going concern. As discussed
in Note 3 to the consolidated financial statements, the Company has suffered
recurring losses from operations, has a working capital deficiency and an
accumulated deficit that raise substantial doubt about it's ability to continue
as a going concern. Management's plans in regard to that matter also are
described in Note 3. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
MOORE STEPHENS, P.C.
Certified Public Accountants
Cranford, New Jersey
February 23, 2002
(except as to Note 19, as to which
the date is March 7, 2002)
25
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2 0 0 1 2 0 0 0
Assets:
Current Assets:
Cash $ 58,695 $ 58,463
Accounts Receivable - Net 2,116,793 1,702,998
Note Receivable -i-engineering.com, Inc. - Net 22,448 225,451
Prepaid Expenses and Other Current Assets 52,781 75,199
---------- ----------
Total Current Assets 2,250,717 2,062,111
---------- ---------
Property and Equipment - Net 92,644 113,683
---------- ---------
Other Assets:
Customer Lists 1,500,000 1,938,703
Goodwill - Net -0- 629,816
Other Assets 54,922
49,864
---------- --------
Total Other Assets 1,554,922 2,618,383
---------- ---------
Total Assets $ 3,898,283 $ 4,794,177
========== ==========
See Notes to Consolidated Financial Statements.
F-3
26
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2 0 0 1 2 0 0 0
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 506,065 $ 465,981
Accrued Payroll and Related Taxes and Expenses 504,318 477,154
Loan Payable - Asset-Based Lender 1,527,847 852,035
Notes Payable - Outside Investors 77,819 165,000
--------- --------
Total Current Liabilities 2,616,049 1,960,170
--------- --------
Commitments and Contingencies -- --
--------- --------
Stockholders' Equity:
Common Stock $.01 Par Value, 25,000,000
Shares authorized. 2001: 5,854,295 issued
4,384,295 outstanding. 2000: 4,089,716
issued 2,619,716 outstanding 58,543 40,897
Capital in Excess of Par Value 13,837,173 13,499,281
Accumulated Deficit (9,551,077) (7,735,359)
---------- ---------
4,344,639 5,804,819
---------- --------
Less:
Notes Receivable; Related Parties (Note 16) ( 91,593) --
Treasury Stock, at cost(1,470,000 common shares)(2,970,812) (2,970,812)
---------- ----------
Total Stockholders' Equity 1,282,234 2,834,007
---------- ----------
Total Liabilities and Stockholders' Equity $ 3,898,283 $ 4,794,177
=========== ===========
See Notes to Consolidated Financial Statements.
F-4
27
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Y e a r s E n d e d
D e c e m b e r 31,
2 0 0 1 2 0 0 0 1 9 9 9
Revenue $ 27,127,271 $ 23,325,194 $ 36,015,273
Cost of Services Provided 24,713,967 20,975,439 33,048,393
---------- ---------- ----------
Gross Profit 2,413,304 2,349,755 2,966,880
---------- ---------- ----------
Operating Expenses:
Selling, General and
Administrative Expenses 2,837,332 3,220,718 4,109,663
Amortization - Intangibles 273,528 273,528 273,528
Impairment Charge- Customer List 213,751 -0- -0-
Write Off-Goodwill 581,240 -0- -0-
--------- --------- -------
Total Operating Expenses 3,905,851 3,494,246 4,383,191
--------- --------- ---------
Operating (Loss) (1,492,547) (1,144,491) (1,416,311)
--------- --------- ---------
Other (Expenses)/ Income:
Interest Expense (311,674) (471,544) (257,039)
Interest Income 6,997 110,036 119,708
Other (Expense)/ Income ( 18,494) 73,146 ( 67,389)
--------- -------- -------
Total Other Expenses - Net (323,171) (288,362) (204,720)
--------- -------- --------
(Loss) before Income
Taxes (1,815,718) (1,432,853) (1,621,031)
Income Taxes -- ( 490,000) ( 232,000)
--------- -------- --------
Net (Loss) $(1,815,718) $(1,922,853) $ (1,853,031)
========= =========== ===========
Basic and Diluted (Loss) Per Share $ ( .54) $ (.67) $ (.61)
Weighted Average Number of Shares
- - Basic and Diluted 3,386,733 2,860,700 3,047,798
See Notes to Consolidated Financial Statements
F-5
28
Trans Global Services, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
Shares Amounts
Common Stock $.01 Par Value
Authorized 25,000,000 shares at
December 31, 1999, 2000, and 2001
Balance - December 31, 1998 3,819,716 $ 38,197
--------- ---------
Balance - December 31, 1999 3,819,716 38,197
Issuance of Shares to I-engineering.com, Inc. 270,000 2,700
--------- ----------
Balance - December 31, 2000 4,089,716 40,897
Exercise of Stock Options 764,579 7,646
Issuance of Shares to the Finx Group, Inc. 1,000,000 10,000
--------- ---------
Balance - December 31, 2001 5,854,295 $ 58,543
========= =========
Capital in Excess of Par Value
Balance - December 31, 1998 $12,887,851
----------
Balance - December 31, 1999 12,887,851
Issuance of Below Market Warrants 210,000
Issuance of Shares of Common Stock to I-engineering.com, Inc. 326,430
Purchase of Treasury Stock 75,000
----------
Balance - December 31, 2000 13,499,281
Variable Price Options 3,827
Cost of Warrants Issued for Professional Services 6,139
Exercise of Stock Options 87,926
Issuance of Common Stock to The Finx Group, Inc. 240,000
-----------
Balance - December 31, 2001 $13,837,173
==========
Notes Receivable
Notes Receivable from Exercise of Stock Options $ ( 91,593)
---------
Balance - December 31, 2001 $ ( 91,593)
==========
See Notes to Consolidated Financial Statements
F-6
29
Trans Global Services, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
Accumulated Deficit
Balance - December 31, 1998 $(3,959,475)
Net (Loss) (1,853,031)
-----------
Balance - December 31, 1999 $(5,812,506)
Net (Loss) (1,922,853)
-----------
Balance - December 31, 2000 (7,735,359)
Net Loss (1,815,718)
----------
Balance - December 31, 2001 $(9,551,077)
===========
Treasury Stock
Purchase of treasury stock - 1999 1,150,000 $(2,566,682)
--------- -----------
Balance December 31, 1999 1,150,000 $(2,566,682)
Purchase of treasury stock - 2000 320,000 ( 404,130)
--------- ------------
Balance - December 31, 2000 1,470,000 $(2,970,812)
--------- -----------
Balance - December 31, 2001 1,470,000 $(2,970,812)
========= ===========
Total Stockholders' Equity
Balance - December 31, 1998 $ 8,966,573
Purchase of treasury stock (2,566,682)
Net Loss for the Year Ended December 31, 1999 (1,853,031)
----------
Balance - December 31, 1999 $ 4,546,860
Issuance of below market warrants 210,000
Issuance of shares of Common Stock - i-engineering.com, Inc. 329,130
Purchase of treasury stock - i-engineering.com, Inc. (329,130)
Net Loss for the Year Ended December 31, 2000 (1,922,853)
----------
Balance - December 31, 2000 $ 2,834,007
Adjustment - Variable Price Options 3,827
Cost of Warrants Issued for Professional Services 6,139
Exercise of Stock Options 95,572
Issuance of Common Stock - The Finx Group, Inc. 250,000
Notes Receivable from Exercised Stock Options (91,593)
Net Loss for the Year Ended December 31, 2001 (1,815,718)
----------
Balance - December 31, 2001 $ 1,282,234
==========
See Notes to Consolidated Financial Statements
F-7
30
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Y e a r s E n d e d
D e c e m b e r 31,
2 0 0 1 2 0 0 0 1 9 9 9
Operating Activities:
Net (Loss) $(1,815,718)$(1,922,853) $(1,853,031)
Adjustments to Reconcile Net (Loss)
to Net Cash (Used In) Provided By
Operations:
Depreciation and Amortization 552,873 344,194 345,921
Write off of Goodwill 581,240 -0- -0-
Change in market value of variable
price stock options 3,827 -0- -0-
Cost of Warrants Issued for Professional
Services 6,139 -0- -0-
Deferred Acquisition Costs -0- -0- 235,560
Debt Issuance Costs -0- 210,000 -0-
Deferred Loan Costs -0- -0- 82,266
Deferred Income Taxes -0- 490,000 232,000
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Assets:
Accounts Receivable-Net (413,795) 815,345 1,404,500
Loan Receivable - Officer -0- -0- 5,000
Prepaid Expenses and Other
Current Assets 22,418 25,666 113,458
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued
Expenses 40,084 63,246 88,110
Accrued Payroll and Related
Taxes and Expenses 27,164 117,859 (169,279)
Accrued Income Taxes Payable -0- -0- ( 13,496)
--------- ---------- --------
Total Adjustments 819,950 2,066,310 2,324,040
----------- --------- ----------
Net Cash - Operating Activities ( 995,768) 143,457 471,009
---------- --------- ----------
See Notes to Consolidated Financial Statements.
F-8
31
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Y e a r s E n d e d
D e c e m b e r 31,
2 0 0 1 2 0 0 0 1 9 9 9
Net Cash -
Operating Activities Forwarded $ (995,768) $ 143,457 $ 471,009
Investing Activities:
Capital Expenditures (44,555) (21,529) (64,090)
Repayments from Arc Networks -0- 1,171,673 117,410
Note Receivable i-engineering.com -0- ( 500,000) -0-
Repayments from i-engineeing.com 203,003 274,549 -0-
Other, net ( 5,058) ( 13,491) 5,034
Investment in Preferred Stock
of Affiliate -0- -0- ( 3,500)
-------- -------- --------
Net Cash - Investing Activities 153,390 911,202 54,854
---------- ----------- --------
Financing Activities:
Net Advances From (Payments To)
Asset-Based Lender 675,812 (1,204,337) ( 590,872)
Proceeds from Sale of Common Stock 250,000 -0- -0-
Note Payable -Outside Investors -0- 1,000,000 -0-
Repayment of Notes Payable
- -Outside Investors ( 87,181) ( 835,000) -0-
Repayment of Note Payable -0- -0- ( 126,767)
Exercise of Stock Options 3,979 -0- -0-
--------- --------- ----------
Net Cash -
Financing Activities 842,610 (1,039,337) ( 717,639)
-------- --------- --------
Net Increase (Decrease)in Cash 232 15,322 ( 191,776)
Cash - Beginning of Year 58,463 43,141 234,917
-------- --------- --------
Cash - End of Year $ 58,695 $ 58,463 $ 43,141
=========== =========== ===========
Supplemental Disclosures of Cash
Flow Information:
Interest $ 302,466 $ 244,741 $ 257,039
Income Taxes $ -0- $ -0- $ -0-
Supplementary Disclosure of Non Cash Investing and Financing Activities during
the three years ended December 31, 2001.
See Notes to Consolidated Financial Statements.
F-9
32
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
On October 31, 2001, the Company issued warrants to purchase an aggregate of
50,000 shares of the Company's common stock at $.125 per share as part of the
fee for the performance of certain professional services. The Company incurred a
charge of $6,139, which charge has been credited to capital in excess of par
value.
In the first quarter of 2001, in exchange for $95,572 of non-recourse notes
receivable the Company issued 764,597 shares of common stock upon the exercise
of stock options. At December 31, 2001, $3,979 of these notes had been
collected.
In connection with the issuance in January 2000 of subordinated notes in the
principal amount of $1,000,000, the Company issued warrants to purchase 250,000
shares of the Company's common stock at $.35 per share to the investors. In
addition, the Company issued warrants to purchase 300,000 shares of the
Company's common stock at $.35 per share to the placement agent and 25,000
shares to a director for services relating to the financing. The Company
incurred a charge of $210,000. This charge has been credited to capital in
excess of par value. The Company used $500,000 of the proceeds of the loan to
make a loan to i-engineering.com, as described in Note 6 of Notes to Financial
Statements, and the Company agreed to transfer to the lenders 10% of the shares
of i- engineering.com, which it acquired.
On May 3, 1999, the Company acquired 1,150,000 shares of Common Stock in
exchange for the Investment in Preferred Stock of an Affiliate, which was held
by the Company in the amount of $2,240,730, and a reduction in Due from
Affiliates in the amount of $325,952.
F-10
33
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
[1] Basis of Presentation
Trans Global Services, Inc. (the "Company" or "Trans Global"), a Delaware
corporation, operates through three subsidiaries, Avionics Research Holdings,
Inc., ["Holdings"], Resource Management International, Inc. ["RMI"], and
Truecom, Inc. ("Truecom"). The Company is engaged in providing technical
temporary staffing services throughout the United States, principally in the
aircraft and aerospace industries.
[2] Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include the
accounts of Trans Global Services, Inc. and its subsidiaries. All intercompany
transactions have been eliminated in consolidation.
Cash and Cash Equivalents - The Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash equivalents. There
were no cash equivalents at December 31, 2001 and 2000.
Prepaid Expenses and Other Current Assets - Prepaid expenses primarily consist
of approximately $53,000 and $71,000 of prepaid insurance at December 31, 2001
and 2000, respectively.
Property and Equipment - Property and Equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed using straight-line and accelerated methods over the estimated useful
lives of the respective assets. Amortization of leasehold improvements is
provided using the straight-line method over the term of the respective lease or
the useful life of the asset, whichever period is less. Estimated useful lives
range from 3 to 5 years as follows:
Furniture and Fixtures 3 - 5 years
Leasehold Improvements 5 years
Equipment 3 - 5 years
Expenditures for maintenance and repairs, which do not improve or extend the
life of the respective assets are expensed currently while major repairs are
capitalized.
F-11
34
TRANS GLOBAL SERVICES, INC. AND SUBSIDIAIRES
NOTES TO FINANCIAL STATEMENTS
Deferred Acquisition Costs - Deferred acquisition costs represent legal,
accounting and other costs associated with the planned business acquisitions by
the Company. Since these acquisitions were not completed those costs were
expensed at December 31, 1999.
Revenue Recognition - The Company records revenue as services are provided.
Stock Options and Similar Equity Instruments - On January 1, 1996, the Company
adopted the disclosure requirements of Statement of Financial Accounting
Standards ["SFAS"] No. 123, "Accounting for Stock-Based Compensation," for stock
options and similar equity instruments [collectively, "Options"] issued to
employees, however, the Company will continue to apply the intrinsic value based
method of accounting for Options issued to employees prescribed by Accounting
Principles Board ["APB"] Opinion No. 25, "Accounting for Stock Issued to
Employees" rather than the fair value based method of accounting prescribed by
SFAS No.123. SFAS No. 123 also applies to transactions in which an entity issues
its equity instruments to acquire goods or services from non- employees. Those
transactions must be accounted for based on the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measurable.
Income Taxes - The Company accounts for income taxes under SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, the asset and liability
method is used to determine deferred tax assets and liabilities based on
differences between financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Earnings Per Share- Earnings per share of Common Stock reflects the weighted
average number of shares outstanding for each year.
The Financial Accounting Standards Board has issued SFAS No.128, "Earnings Per
Share," which is effective for financial statements issued for periods ending
after December 15, 1997. Accordingly, earnings per share data in the financial
statements have been calculated in accordance with SFAS No. 128.
F-12
35
TRANS GLOBAL SERVICES, INC. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
SFAS No. 128 supercedes APB Opinion No.15, "Earnings Per Share," and replaces
its primary earnings per share with a new basic earnings per share representing
the amount of earnings for the period available to each share of common stock
outstanding during the reporting period. SFAS No.128 also requires a dual
presentation of basic and diluted earnings per share on the face of the
statement of operations for all companies with complex capital structures.
Diluted earnings per share reflects the amount of earnings for the period
available to each share of common stock outstanding during the reporting period,
while giving effect to all dilutive potential shares of common stock that were
outstanding during the period, such as common stock that could result from the
potential exercise or conversion of securities into common stock.
The computation of diluted earnings per share does not assume conversion,
exercise or contingent issuance of securities that would have an antidulutive
effect on earnings per share (i.e. increasing earnings per share or reducing
loss per share). The dilutive effect of outstanding options and warrants and
their equivalents are reflected in dilutive earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon the exercise of options and warrants in computing
diluted earnings per share. It assumes that any proceeds would be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the options or
warrants.
Securities that could potentially dilute earnings per share in the future are
disclosed in Notes 15 and 16.
Impairment - The Company reviews certain long-lived assets, including goodwill
and other intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable pursuant
to guidance established in SFAS No. 121, "Accounting for the impairment of
long-lived assets and for long-lived assets to be disposed of." [See Note 7]
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
F-13
36
TRANS GLOBAL SERVICES, INC. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
[2] Summary of Significant Accounting Policies [Continued]
Concentration of Credit Risk - The Company extends credit to customers which
results in accounts receivable arising from its normal business activities. The
Company does not require collateral or other security to support financial
instruments subject to credit risk. It routinely assesses the financial strength
of its customers and believes that its accounts receivable credit risk exposure
is limited. Such estimate of the financial strength of such customers may be
subject to change in the near term. For each of the years ended December 31,
2001 and 2000, a significant portion of the Company's receivables were derived
from four customers [See Note 14].
Due to the nature of its operations, the Company deposits, on a monthly basis,
amounts in excess of the federally insured limit in financial institutions for
the payment of payroll costs. Such amounts are reduced below the federally
insured limit as payroll checks are presented for payment. Such reduction
generally occurs over three to four business days. At December 31, 2001, the
Company had amounts on deposit which exceeded the federally insured limit by
approximately $67,000. The Company has not experienced any losses and believes
it is not exposed to any significant credit risk from cash and cash equivalents.
[3] Going Concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplates continuation of the
Company as a going concern and realization of assets and settlement of
liabilities and commitments in the normal course of business. For the year ended
December 31, 2001, the Company has a loss from operations, a working capital
deficiency of approximately $365,000, and an accumulated deficit, that raise
substantial doubt about the Company's ability to continue as a going concern.
Management plans to seek additional financing through equity issuances, mergers
and/or acquisitions consistent with its original business plan, although it has
no agreements or understandings with respect to any financing, merger or
acquisition and it may not be successful in securing such agreement or
understanding. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
[4] Accounts Receivable and Loan Payable - Asset Based Lender
Receivables are shown net of an allowance for doubtful accounts of $62,500 at
December 31, 2001 and 2000. On June 7, 2000 the Company entered into a one year
revolving credit agreement with an asset-based lender. Pursuant to the credit
agreement, the Company can borrow up to 85% of its qualified accounts receivable
at an interest rate of prime plus 2% with a minimum monthly interest of $12,000.
The maximum availability on the credit agreement is $2.5 million. The borrowings
are secured by a security interest in all of the Company's assets. On July 3,
2001, the Company received notice from its asset-based lender that the lender
would be terminating the credit agreement effective on August 31, 2001. The
lender extended the agreement through October 31, 2001.
F-14
37
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
On October 16, 2001, we entered into a one-year asset-based lending agreement
with Metro Factors, Inc., which provides the Company with a maximum availability
of $2.5 million. Funds can be advanced in an amount equal to 85% of the total
face value of the eligible accounts receivables, with the asset-based lender
having the right to hold in reserve 15% of the outstanding and unpaid
receivables financed. The interest rate is equal to prime plus 2.5% on the
borrowed funds plus a fee of .7% of the receivables financed. The asset-based
lender has a security interest in all of the Company's assets including accounts
receivables, contract rights, personal property, and fixtures. This facility
replaced an agreement with the prior asset-based lender. At December 31, 2001,
borrowings were approximately $1,500,000. At December 31, 2000 the borrowings
from the Company's prior lender amounted to $850,000. The interest rate
(exclusive of any fees) payable by the Company at December 31, 2001 was 7.25%
and at December 31, 2000 and December 31, 1999 11.5% and 9.75% respectively.
[5] Property and Equipment
Property and equipment at December 31, 2001 and 2000 is as follows:
2 0 0 1 2 0 0 0
Equipment $ 504,956 $ 472,929
Furniture and Fixtures 212,446 199,921
Leasehold Improvements 100,510 100,510
--------- ---------
Totals - At Cost 817,912 773,360
Less: Accumulated Depreciation 725,268 659,677
--------- ---------
Totals $ 92,644 $ 113,683
Depreciation expense charged to operations was $65,594 in 2001, $70,666 in
2000 and $72,393 in 1999.
(6) Note Receivable - i-engineering.com
On December 5, 2000 the Company entered into an amendment to its agreement with
i-engineering.com, Inc. that provided for i-engineering.com to make a payment of
$50,000 on January 2, 2001, which was made, with the balance of the note
extended until March 31, 2001. The Company subsequently entered into a further
amendment whereby i-engineering.com would make a payment of $75,000 in April,
which payment was made. The remaining principal balance of the note, together
with interest and additional payments to reimburse the Company for expenses
resulting from the amended terms was to be paid as follows: $75,000 payment by
May 31, 2001, $40,000 by July 2, 2001 and a final payment of $10,000 by July 31,
2001. The final two payments, totaling $50,000,have not yet been received. At
December 31, 2001, the Note Receivable from I-engineering.com, Inc. is shown net
of an allowance of $27,552.
[7] Intangibles
The Company acquired its major subsidiaries during 1994. As part of the purchase
agreements, the Company acquired customer lists and goodwill. The intangible
assets acquired and the related amortization on the straight-line method are
summarized as follows:
F-15
38
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Accumulated Amortization Net of Amortization
Life December 31, December 31,
Years Cost 2001 2000 2001 2000
Customer Lists 15 $3,374,477 $1,660,726 $1,435,774 $1,713,751 $1,938,703
Goodwill- 2000 20 $ 971,623 $ -0- $ 341,807 $ -0- $ 629,816
Goodwill represents the excess of the acquisition costs over the fair value of
net assets of business acquired. Amortization expense is calculated on a
straight-line basis over twenty years. Customer Lists represent listings of
customers obtained through acquisitions to which the Company can market its
services. Customer Lists are recorded at cost and are amortized on a straight-
line basis over the estimated useful life of fifteen years. The Company reviews
Goodwill and other intangibles to assess recoverability from future operations
using undiscounted cash flows. If the review indicates impairment, the Company
will incur a charge against operations to the extent that carrying value exceeds
fair value. Management has determined, that there is no continuing market value
to the goodwill and has written off the balance of $581,240 at December 31,
2001. Management has determined that the estimated fair value of the customer
lists was less than its carrying value as of December 31, 2001, due in part to
the action taken by the Boeing Company in not engaging us in new assignments,
and has increased the amortization of intangibles by approximately $210,000 to
reflect the estimated fair value.
[8] Related Party Transactions
Pursuant to an agreement with i-engineering.com, Inc., the Company (i) loaned
$500,000 to i-engineering.com on a short-term basis, (ii) issued 270,000 shares
of Common Stock to i-engineering.com and (iii) acquired a minority interest in
i-engineering.com. The value of this interest was determined by the market value
of the Company's shares exchanged which was $331,830. Pursuant to the agreement
we elected the chief executive of i-engineering.com as a director of the
Company.
On December 5, 2000, following the failure of i-engineering.com, Inc. to make
timely payment of principal and interest in the aggregate amount of $223,951,
the Company entered into an agreement with i-engineering.com pursuant to which,
among other things, the Company extended payment of the note, i- engineering.com
returned to us the 270,000 shares of Common Stock, and the Company returned to
i-engineering.com, 50% of the shares of i- engineering.com which it received
(other than shares which are to be issued to the holders of the subordinated
notes in the principal amount of $1,000,000 (see Note 9)and placed the remaining
shares in escrow pending payment by i-engineering.com of its notes to the
Company. As of the date of this report, there is approximately $50,000 still due
from i-engineering.com. Because of the financial condition of i-engineering.com,
the Company has valued the receivable at approximately $22,000 (See Note 6).
In September 2000, Arc Networks, which was formerly a subsidiary of the
Company's former controlling stockholder, The Sagemark Companies Ltd.
("Sagemark"), made payment in full on the 10% promissory note due the Company
August 21, 2003 in the principal amount of $1,216,673, (the "Arc Note").
Sagemark was formerly known as Consolidated Technology Group Ltd. On December
31, 1999, Arc Networks was in default on the Arc Note which was guaranteed by
Sagemark and others. In February, April and July 2000 the Company agreed to
extend the maturity date in exchange for $80,000 and a transfer to the Company
of 50,000 shares of its common stock from Sagemark. This transfer reduced
Sagemark's
F- 16
39
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT
holdings in the Company to 329,994, or approximately 11.4%. At December 31,
2001, Sagemark owned approximately 21,000 shares of the Company's common stock
and was not considered an affiliate of the Company.
On May 3, 1999, Sagemark, through a subsidiary, transferred 1,150,000 shares of
the Company's common stock to the Company in consideration of the cancellation
of shares of Sagemarks Series G 2% Cumulative Redeemable Preferred Stock owned
by the Company, including accrued dividends, and certain other obligations due
to the Company. The transfer of the 1,150,000 shares to the Company reduced
Sagemark's holdings in the Company to 379,994 shares, or approximately 14.2% of
its outstanding common stock. Prior to the transfer, Sagemark owned 40.1% of the
Company's outstanding common stock. The effect of this transaction is the
elimination of the investment in preferred stock of affiliate and the reduction
of the amount due from affiliates by $325,952, and an increase in Treasury Stock
of approximately $2.6 million, which resulted in a reduction in stockholders
equity for the same amount.
[9] Notes Payable
In January, 2000, the Company raised $1 million through the issuance of 10%
subordinated promissory notes due July 2001 or earlier upon the Company's
receipt of payment of the note from Arc Networks, Inc. At June 30, 2000, the
unpaid principal balance of the note from Arc Networks ("the Arc Note") was
$994,000. In connection with the subordinated notes, the Company issued warrants
to purchase 575,000 shares of the Company's common stock at $.35 per share to
the investors, the placement agent and others who assisted the Company in the
financing, including a director of the Company. The Company incurred a financing
charge of $210,000 which was credited to paid in capital for the fair value of
the warrants. The Company also agreed to transfer to the lenders 10% of its
equity interest in i-engineering.com (See Notes 6 and 8). At December 31, 2001,
the unpaid balance of these notes, including accrued interest, is approximately
$78,000.
[10] Income Taxes
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating loss
carryforwards. The tax effects of significant items comprising the Company's net
deferred tax asset as of December 31, 2001 and 2000 are as follows:
December 31,
2001 2000
Deferred Tax Liabilities $ -- $ --
-------- --------
Deferred Tax Assets:
Allowance for Doubtful Accounts not
Currently Deductible 25,000 25,000
Net Operating Loss Carryforwards 2,696,000 2,320,000
---------- -----------
Totals forward 2,721,000 2,345,000
F-17
40
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Totals - Carryforward 2,721,000 2,345,000
Valuation Allowance (2,721,000) (2,345,000)
----------- -----------
Net Deferred Tax Asset -0- -0-
Net Deferred Tax Asset - Current Portion -0- -0-
--------- ---------
Net Deferred Tax Asset - Non Current $ -0- $ -0-
The Company's deferred tax asset valuation allowance was $2,721,000 and
$2,345,000 as of December 31, 2001 and 2000, respectively. The valuation
allowance represents the tax effects of net operating loss carryforwards and
other temporary differences which the Company does not expect to realize. The
increase in the valuation allowance amounted to $376,000 and $1,062,000 for the
years ended December 31, 2001 and 2000, respectively.
The current and deferred income tax components of the provision [benefit] for
income taxes consist of the following:
Years Ended December 31,
2001 2000 1999
----- ---- -----
Current:
Federal $ -0- $ -0- $ -0-
State -0- -0- -0-
Tax Benefit of Net Operating
Loss Carryforwards -0- -0- -0-
-------- ------- -------
Totals $ -0- $ -0- $ -0-
Deferred:
Federal $ -0- $ 382,000 $ 181,424
State 108,000 50,576
--------- --------- -------
Totals $ -0- $ 490,000 $ 232,000
-------- ---------- --------
Totals $ -0- $ 490,000 $ 232,000
========== ========== ========
A reconciliation of the federal statutory rate to the Company's effective tax
rate is as follows:
Years Ended December 31,
2001 2000 1999
---- ---- ----
Federal Statutory Rate (34%) (34%) (34%)
State Income Taxes, net of
federal tax ( 7%) ( 7%) ( 7%)
Increase in valuation allowance 41% 75% 55%
----- ----- -----
Effective tax rate -0- 34% 14%
===== ===== =====
F-18
41
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The following summarizes the operating loss carryforwards by year of expiration:
Amount Expiration Date
$ 80,000 December 31, 2009
2,163,000 December 31, 2010
189,000 December 31, 2011
438,000 December 31, 2012
1,500,000 December 31, 2019
1,430,000 December 31, 2020
940,000 December 31, 2021
---------
$6,740,000
==========
Pursuant to Section 382 of the Internal Revenue Code, utilization of these
losses may be limited if substantial changes in Company ownership were to occur.
[11] Commitments
The Company leases office space and several office machines under operating
leases which expire in 2004. The following is an analysis of future minimum
lease commitments as of December 31, 2001:
2002 $ 95,970
2003 27,960
2004 1,120
--------
Total $ 125,050
Rent expense amounted to $231,693, $208,717, and $202,802, for the years ended
December 31, 2001, 2000, and 1999, respectively.
On February 1, 2002, the Company entered into a ten year lease for the office
space used by the Company's New York and corporate operations. The minimum lease
commitment for the next five years is as set forth below. In addition to the
base rent, the Company will also pay any increase in real estate taxes over the
base year that relate to the square footage occupied by the Company.
2002 -$142,478 2005 -$172,136
2003 -$160,482 2006 -$178,315
2004 -$166,195 Thereafter -$996,688
The Company has an employment agreement with its chief executive officer which
expires in 2005. Pursuant to the agreement, the chief executive officer received
minimum annual compensation of $260,000, subject to an annual increase equal to
the greater of the increase in the cost of living index or 5%. The chief
executive officer is entitled to a bonus of 5% of the Company's income before
taxes, as defined, up to a maximum of 200% of his annual salary. The chief
executive officer is also entitled to severance payments in the event of a
termination of his employment following a change of control, which would equal
the greater of five times his annual compensation or his annual compensation
multiplied by the number of years remaining in the term.
F-19
42
TRANS GLOBAL SERVICES,INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
In January 2000, we entered into a two year consulting agreement with Westwind
Holdings, Inc. to provide advisory services to the Company specifically
concerning strategic planning, mergers and acquisitions, public relations,
raising capital and other related matters. The Company agreed to pay $10,000
each month for these services (See Note 20).
[12] Contingencies
In November 1997, an action was commenced in the Supreme Court of the State of
New York, County of Suffolk, by Ralph Corace against RMI seeking damages of
approximately $1.1 million for an alleged breach of contract by the Company. Mr.
Corace was the president of Job Shop Technical Services, Inc., from which the
Company, through a subsidiary, purchased assets in November 1994. We believe
that the action is without merit, we are contesting this matter and we have
filed counterclaims against Mr. Corace.
Although the company is a party to certain legal proceedings that have occurred
in the ordinary course of business, the Company does not believe such
proceedings to be of a material nature with the exception of the above suit. Due
to the uncertainties in the legal process it is reasonably possible that
management's view of the outcome of this may change in the near term.
[13] Fair Value of Financial Instruments
Effective December 31, 1995, the Company adopted SFAS No. 107, which requires
disclosing fair value to the extent practicable for financial instruments which
are recognized or unrecognized in the balance sheet. The fair value of the
financial instruments disclosed therein is not necessarily representative of the
amount that could be realized or settled, nor does the fair value amount
consider the tax consequences or realization or settlement.
For certain financial instruments, including cash, notes receivable, trade
receivables and payables, and short-term debt, it was assumed that the carrying
amount approximated fair value because of the near term maturities of such
obligations.
[14] Economic Dependency
In 2001, four customers accounted for revenue of approximately $20 million, or
74% of the Company's total revenue. Accounts receivable of $1,363,000 were due
from these customers collectively at December 31, 2001. In 2000, these four
customers accounted for revenue of approximately $15.6 million or 67% of the
Company's total revenue. Accounts receivable of $1,050,000 were due from these
customers collectively at December 31, 2000. In 1999, those four customers
accounted for approximately $18.7 million, or 55% of the Company's total
revenue. Accounts receivable of $1,030,000 were due from these customers
collectively at December 31, 1999.
F-20
43
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Revenues for the year
ended December 31
2001 2000 1999
Lockheed-Martin 7,900,000 5,700,000 7,300,000
Bell Helicopter Textron 4,200,000 4,100,000 4,900,000
Boeing 4,600,000 3,600,000 4,600,000
Gulfstream Aerospace 3,300,000 2,200,000 2,960,000
--------- ---------- ----------
20,000,000 15,600,000 19,700,000
[15] Stockholders Equity
At December 31, 2001 and 2000, the authorized capital stock of the Company
consisted of 5,000,000 shares of preferred stock, par value $.01 per share, and
25,000,000 shares of common stock, par value $.01 per share. The Board of
Directors has the right to create and to define the rights, preferences and
privileges of the holders of one or more series of Preferred Stock.
At December 31, 2001 and 2000, no shares of any series of preferred stock were
outstanding. (See Note 19)
At December 31, 2001 and 2000 there were outstanding warrants to purchase
738,150 and 1,504,812 shares of Common Stock respectively, at prices ranging
from $.125 - $21.00 per share.
A summary of warrant activity is as follows:
2001 2000 1999
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding-Beginning
of Years 1,504,812 $ 4.44 892,312 $ 8.64 901,485 $ 9.07
Granted or Sold
during the years 50,000 0.125 612,500 .35 -- --
Cancelled during
the years -- -- -- -- -- --
Expired during
the years (816,662) 7.50 -- -- (9,173) 7.50
Exercised during
the years -- -- -- -- -- --
-------- ----- --------- ----- ------- -----
Outstanding-
End of Year 738,150 2.45 1,504,812 5.27 892,312 8.64
======= ==== ========= ===== ======= =====
Exercisable -
End of Year 662,500 .33 1,429,162 4.44 816,662 7.50
======= ==== ========= ===== ======= =====
In October, 2001 the Company issued warrants to acquire 50,000 shares of common
F-21
44
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Stock at $.125 per share, the market price at that time, in exchange for certain
professional services. The Company recorded compensation expense of $6,139 which
represented the fair market value of the warrants, calculated under the
Black-Sholes model.
The following table summarizes warrant information as of December 31, 2001
Weighted Avg. Weighted Avg.
Range of Exercise Price Remaining Exercise
Shares Contractual Life Price
.125 50,000 5 Years .125
.35 612,500 1 Year .35
21.00 75,650 (A) 21.00
-------
738,150
(A) These warrants are exercisable immediately upon issuance and expire 45 days
after the effective date of the first registration statement under the
Securities Act of 1933, as amended, in which the holders of the warrants are
given the opportunity to include the shares of Common Stock issuable upon
exercise of the warrants.
[16] Stock Option Plans
At December 31, 2001, the Company had three stock option plans covering an
aggregate of 895,388 shares of Common Stock, pursuant to which stock options and
other equity-based incentives may be granted. At December 31, 2001, there were
110,809(30,809 under the 1998 plan and 80,000 under 1999 plan) options to
purchase the Company's common stock available for grant under these plans. On
January 10, 2001, the board of directors reduced the exercise price of all
outstanding stock options (covering approximately 785,000 shares) granted under
the stock option plans to $.125 per share, the fair market value at that time.
As a result of this amendment to the options, the options are treated as
variable-price options, and the Company incurred compensation expense for each
period equal to the increase in the value of the underlying common stock from
the date of the amended option exercise price or the beginning of the period, as
the case may be, to the market price on the date the option is exercised or the
last day of the period. If the stock price declines, the Company will recognize
compensation income, which will be treated as a reduction in general and
administrative expenses, based on the decline in the market price. All but
20,750 of the options were exercised on April 12, 2001 on which date the market
price was $.13 per share. Accordingly, we recognized a non-cash compensation
expense equal to the difference between the strike price ($.125) and the market
price at April 12, 2001 ($.13). This amount ($3,827) was included in general and
administrative expenses. This charge was credited to capital in excess of par
value. Also, on January 10, 2001, the board of directors agreed to accept as
payment for the exercise price, non-interest bearing non-recourse notes due
January 10, 2006, from the exercising option holders.
F-22
45
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
These notes are to be paid from the proceeds of any sales of the shares. These
shares are being held by the Company as security for payment. The exercising
option holder will have the right to vote the shares, such right to terminate if
the note is not paid at maturity. At December 31, 2001, notes receivable in the
amount of $91,593 are presented as contra-equity. On May 11, 2001, the options
for the remaining shares were expired During December 2001, notes in the
principal amount of $3,979 were paid, and in January 2002, notes in the
principal amount of $71,237 were paid principally by applying the accrued but
unpaid salaries due several of the option holders.
Except as described in the preceding paragraph, no compensation cost was
recognized for stock-based employee awards.
A summary of the activity under the Company's stock option plans is as follows:
1993 1995 1995 1998 1999
Plan Plan Plan Plan Plan
Options Outstanding and
Exercisable
- - December 31, 1998 18,992 5,833 293,164 215,000 --
Weighted Average Exercise
Price $ 13.50 $ 5.28 $ 5.39 $ 1.25 --
Granted -- -- 122,224 132,108 --
Exercised -- -- -- -0- --
Canceled or expired -- -- -- (10,000) --
Options Outstanding and
Exercisable
- - December 31, 1999 18,992 5,833 415,388 337,108 --
Weighted Average Exercise
Price $ 13.50 $ 5.28 $ .53 $ .53 $ .9375
Granted -- -- -- 37,333 30,000
Exercised -- -- -- -0- --
Canceled or expired (18,992) (5,833) -- (35,000) --
Options Outstanding and
Exercisable
- - December 31, 2000 -0- -0- 415,388 339,441 30,000
Granted ===== ====== -0- -0- 20,000
Exercised (415,388) (319,191) (30,000)
Canceled or expired -0- ( 20,250) -0-
-------- -------- -------
Options Outstanding and
Exercisable- December 31, 2001 -0- -0- 20,000
======== ======== =======
Weighted Average Remaining
Contractual Life 8.6 years
F-23
46
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
As of December 31, 2001 there were outstanding options to purchase 20,000 shares
of common stock under the Company's 1999 Plan.
If the Company had accounted for the issuance of all options and compensation
based warrants pursuant to the fair value based method of SFAS No. 123, the
Company would have recorded compensation expense totaling $4,772, $42,300, and
$135,441, for the years ended December 31, 2001, 2000 and 1999, respectively,
and the Company's net(loss) and net(loss) per share would have been as follows:
Years Ended
December 31,
2 0 0 1 2 0 0 0 1 9 9 9
Net(Loss) as Reported $(1,815,718) $(1,922,853) $(1,853,031)
========== ========= ===========
Pro Forma Net(Loss) $(1,820,490) $(1,965,153) $(1,988,472)
========== ========= ===========
Basic (Loss)
Per Share as Reported $ (.54) $ (.67) $ (.61)
========== ========= ===========
Pro Forma Basic (Loss)
Per Share $ (.54) $ (.69) $ (.65)
=========== =========== ============
The fair value of options and warrants at date of grant was estimated using the
fair value based method with the following weighted average assumptions:
2001 2000 1999
Expected Life [Years] 5 5 4
Interest Rate 4.85% 6.2% 6.4%
Annual Rate of Dividends 0% 0% 0%
Volatility 201.04% 126.59% 120.53%
The weighted average fair value of options at date of grant using the fair value
based method during 2001, 2000, and 1999, is estimated at $0.24, $0.63, and
$0.44 respectively.
F-24
47
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
[17] Employment Benefit Plans
The Company sponsors a Qualified Retirement Plan under section 401(k) of the
Internal Revenue Code. Employees become eligible for participation after
completing three months of service and attaining the age of twenty-one. The
Company has the option to make a matching contribution to the Plan, however, for
the years ended December 31, 2001, 2000, and 1999, it has not made any matching
contributions to the Plan.
[18] New Authoritative Accounting Pronouncements
The financial Accounting Standards Board ("FASB")has issued Statement No. 141,
"Business Combinations" and Statement No. 142, "Goodwill and Other Intangible
Assets" in June 2001. Those statements will change the accounting for business
combinations and goodwill in two significant ways. First, Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interest method will be
prohibited. Second, Statement No. 142 changes the accounting for goodwill from
an amortization method to an impairment only approach. Thus amortization of
goodwill, including goodwill recorded in past business combinations, will cease
upon adoption of that Statement, which for companies with calendar year ends,
will be January 1, 2002.
The FASB has issued Statement No. 143, Accounting for Asset Retirement
Obligations, in June 2001, which requires that the fair value of a liability for
an asset retirement legal obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. This statement is effective for fiscal years beginning after
June 15, 2002.
In August 2001, FASB issued Statement No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement retains the requirements of SFAS
No. 121 but removes goodwill from its scope and describes a probability weighted
cash flow estimation approach in evaluating possible future cash flows to be
used in impairment testing. Provisions of this statement are effective for
financial statements issued for fiscal years beginning after December 15, 2001,
and interim periods within those fiscal years.
The Company expects that the adoption of the new statements will not have a
significant impact on it's consolidated financial statements.
(19) Agreement with The Finx Group
On November 15, 2001, the Company entered into an agreement with The Finx Group,
Inc. ("Finx"), pursuant to which it issued 5,000,000 shares of common stock to
Finx in December 2001, Finx issued 2,500,000 shares of Finx common stock to the
Company in December 2001, and Finx agreed to invest $1,000,000, for which the
Company was to issue shares of preferred stock which were convertible into
3,000,000 shares of common stock. In December 2001, Finx invested $250,000 and
received preferred stock convertible into 750,000 shares of common stock. On
March 7, 2002, the agreement was terminated, Finx returned to the Company
F-25
48
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
4,000,000 shares of common stock, the Company returned to Finx the 2,500,000
shares of Finx common stock and all of the shares of preferred stock which were
issued or issuable pursuant to the November 2001 agreement were cancelled. The
effects of the cancellation are reflected retroactively in the consolidated
financial statements for the year ended December 31, 2001. The net effect of the
transaction was the issuance by the Company of 1,000,000 shares of common stock
to designees of Finx for $250,000, which is reflected in the financial
statements. The 1,000,000 shares are held by designees of Finx, including Mr.
Lewis S. Schiller and members of his family. Mr. Schiller was our chief
executive officer and a director from December 2001 until March 2002.
(20) Subsequent Events
In January 2002, the Company's board of directors approved the Year 2002
Non-Qualified Stock Option Plan, pursuant to which non-qualified stock options
could be granted for 3,500,000 shares. Pursuant to this plan, the chief
executive officer granted options to purchase a total of 3,100,000 shares of
common stock at an exercise price of $.05 per share. All of such options were
exercised in January and February 2002. The grants included a grant of an option
to purchase 2,500,000 shares to a non-affiliated consultant who exercised such
option in full, and subsequently cancelled the exercise and returned to the
Company 2,300,000 of the shares. As a result of the grant of the options at an
exercise price which was below the then current market price, the Company will
recognize a non-cash charge to earnings of approximately $725,000, on the
800,000 shares of the Company's common stock issued, in the first quarter of
2002.
In February 2002, the Company reduced the exercise price of certain previously
issued warrants to purchase 300,000 shares of common stock from $.35 per share
to $.01 per share and provided that the holder of the warrant could exercise the
warrant on a cashless exercise basis. As a result, the Company issued 297,000
shares of common stock. The effect of the price reduction is not material to the
financial statements.
(21) Selected Quarterly Financial Data (Unaudited)
The following information shows selected items by quarter for the years ended
December 2001 and 2000 respectively.
First Second Third Fourth
Quarter Quarter Quarter Quarter
Net Revenue:
2001 6,678,193 7,274,485 7,098,087 6,076,506
2000 6,503,330 5,498,973 5,455,547 5,867,344
Gross Profit:
2001 477,440 679,687 627,703 628,474
2000 646,011 580,314 512,166 611,264
Net (Loss):
2001 ( 400,343) (187,650) ( 191,720) (1,036,005)-1
2000 ( 308,161) (323,608) ( 443,608) ( 847,476)-2
F-26
49
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Basic and diluted
(Loss) per share:
2001 ( 0.15) ( 0.06) ( 0.06) ( 0.27)
2000 ( 0.11) ( 0.11) ( 0.15) ( 0.30)
1- Includes $213,751 of additional amortization of intangibles and $581,240
of goodwill that was written off at December 31, 2001.
2- Includes an adjustment to the deferred tax asset valuation allowance of
$490,000 in 2000.
F-27
50
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
AGREEMENT
AGREEMENT, dated as of the 15th day of November, 2001, by and between The
Finx Group, Inc., a Delaware corporation with offices at 21634 Club Vista
Terrace, Boca Raton, Florida 33433 ("Finx"), and Trans Global Services, Inc., a
Delaware corporation with offices at 1393 Veterans Memorial Highway, Hauppauge,
New York 11788 ("Trans Global").
W I T N E S S E T H:
WHEREAS, Trans Global requires capital for its operations, and Finx is
willing to make an equity investment in Trans Global; and
WHEREAS, Finx desires to acquire an additional equity interest in Trans
Global through the issuance to Trans Global of shares of Finx' common stock, all
on and subject to the terms of this Agreement;
WHEREFORE, the parties hereto agree as follows:
1. Purchase of Trans Global Series A Preferred Stock.
(a) Finx shall purchase from Trans Global, and Trans Global shall sell to
Finx, an aggregate of one million shares (the "Preferred Shares") of Trans
Global's Series A Preferred Stock, par value $.01 per share ("Series A Preferred
Stock"), for a purchase price of one dollar ($1.00) per share, or an aggregate
of one million dollars ($1,000,000). The holders of the Series A Preferred Stock
shall be entitled to the rights, preferences and privileges, and subject to the
limitations, set forth in the certificate of designation in substantially the
form of Exhibit A to this Agreement.
(b) Finx shall purchase the following number of Preferred Shares on the
following dates, time being of the essence.
(i) Two hundred fifty thousand (250,000) Preferred Shares at a closing (the
"Closing") to be held not later than 1:00 P.M., Eastern Standard Time, on
November 16, 2001, for an aggregate consideration of two hundred fifty thousand
dollars ($250,000).
(ii) Two hundred fifty thousand (250,000) Preferred Shares not later than
1:00 P.M., Eastern Standard Time, on November 30, 2001, for an aggregate
consideration of two hundred fifty thousand dollars ($250,000).
(iii) Five hundred thousand (500,000) Preferred Shares not later than 1:00
P.M., Eastern Standard Time, on December 31, 2001, for an aggregate
consideration of five hundred thousand dollars ($500,000).
(c) Payment for the Preferred Shares shall be made by wire transfer by Finx
to an account designated by Trans Global not later than the business day prior
to the date payment is due pursuant to Section 1(b) of this Agreement.
51
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
2. Exchange of Shares. At the Closing, Finx shall deliver to Trans Global
an aggregate of two million five hundred thousand (2,500,000) shares (the "Finx
Shares") of Finx' common stock, par value $.01 per share ("Finx Common Stock"),
in exchange for which Trans Global shall issue to Finx an aggregate of five
million (5,000,000) shares (the "Trans Global Shares") of Trans Global's common
stock, par value $.01 per share ("TGSI Common Stock").
3. The Closing. The Closing shall be held at the offices of Esanu Katsky
Korins & Siger, LLC, 605 Third Avenue, New York, New York 10158 at 1:00 P.M. on
November 16, 2001 or such other place and time as may be agreed upon by the
parties.
4. Delivery of Certificates into Escrow.
(a) Prior to the Closing, Finx shall deliver or cause to be delivered to
Esanu Katsky Korins & Siger, LLP, as Escrow Agent (the "Escrow Agent"), a
certificate for the Finx Shares, issued in the name of Trans Global.
(b) Prior to the Closing, Trans Global shall deliver to the Escrow Agent:
(i) A certificate of the Trans Global Shares, issued in the name of Finx.
(ii) Three certificates for the Preferred Shares, each in the name of Finx,
of which two shall be for two hundred fifty thousand (250,000) Preferred Shares
and one shall be for five hundred thousand (500,000) Preferred Shares.
5. Deliveries at Closing. At the Closing:
(a) Finx shall wire the sum of two hundred fifty thousand dollars
($250,000) to Trans Global.
(b) Upon receipt of confirmation from Trans Global that it has received the
payment provided for in Section 5(a) of this Agreement, the Escrow Agent shall
deliver:
(i) To Finx:
(A) The certificate for the Trans Global Shares.
(B) A certificate for two hundred fifty thousand (250,000) Preferred Shares.
(ii) To Trans Global, the certificate for the Finx Shares.
(c) Trans Global represents and warrants with respect to the Finx Shares,
and Finx represents and warrants with respect to the Trans Global Shares and the
Preferred Shares, that such shares, and the shares of TGSI Common Stock issuable
upon conversion of the Preferred Shares (the "Conversion Shares"), are being
acquired for the account of Trans Global or Finx, as the case may be, for
52
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
investment and not with a view to the sale of distribution thereof, and that
such shares may not be sold or otherwise transferred except pursuant to an
effective registration statement or pursuant to an exemption to the registration
requirements of the Securities Act, and that, with respect to shares being sold
pursuant to an exemption to such registration requirements other than pursuant
to Rule 144 or Rule 144(k) of the Commission pursuant to the Securities Act, the
issuer may require, as a condition to effecting any such transfer, an opinion of
counsel as to the availability of an exemption.
6. Representations and Warranties of Finx. Finx represents and warrants to Trans
Global as follows:
(a) Finx (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the power and
authority (corporate and other) to own its properties and to carry on its
business as now being conducted, (ii) is duly qualified to conduct its business
in each other jurisdiction wherein the conduct of its business or the ownership
of its properties are such as to require such qualification and the failure to
so qualify would have a Material Adverse Effect, as hereinafter defined, and
(iii) has the power to execute and perform its obligations under this Agreement.
A "Material Adverse Effect," with respect to either party, shall mean a material
adverse effect on the business, operations, assets, operating results,
liabilities, property, employee and customer relations or prospects of such
party or any of its subsidiaries or would impair the rights of the other party
under this Agreement.
(b) The execution, delivery and performance by Finx of this Agreement and
the issuance of the Finx Shares have been duly authorized by all requisite
corporate action. Neither the execution and delivery of this Agreement nor the
performance of its terms, including the issuance and delivery of the Finx Shares
will violate (i) any provision of law or any governmental rule or regulation
applicable to Finx, or its certificate of incorporation or by-laws and/or other
organizational documents, or (ii) any order of any court or other agency of
government binding on Finx or any indenture, agreement or other instrument to
which Finx is a party, or by which Finx or any of its properties are bound, in
either case where the violation would have a Material Adverse Effect, and will
not be in conflict with, result in a breach of or constitute (with due notice
and/or lapse of time) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of Finx.
This Agreement is the legal, valid and binding obligations of Finx, enforceable
in accordance with their terms.
(c) The Finx Shares have been duly authorized for issuance and, when issued
pursuant to this Agreement, will be duly and validly authorized and issued,
fully paid and non-assessable and not subject to any preemptive rights or rights
of first refusal.
(d) Finx has made available to Trans Global with a copy of (i) Finx' Form
10-K for the year ended December 31, 2000, (ii) Finx'
(e)
(f) Form 10-Q for the quarter ended September 30, 2000, and (iii) each
PAGE 53
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
of Finx' Form 8-K filed with the Commission subsequent to December 31, 2000
(collectively, the "Finx SEC Documents"). Finx has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the twelve months prior to the date of this Agreement. The Finx SEC Documents,
as of their respective dates, complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder, and, to the best of Finx'
knowledge, none of the Finx SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Trans Global is aware that Finx sustained
a loss for the year ended December 31, 2000 and the nine months ended September
30, 2001, and that losses are continuing.
(g) Finx has an authorized capital stock consisting of 1,000,000 shares of
preferred stock, par value $.01 per share, and 50,000,000 shares of common
stock, par value $.01 per share.
(h) Except as disclosed in Finx' filings with the Securities and Exchange
Commission, there are no actions, suits or proceedings (whether or not
purportedly on behalf of Finx or any of its subsidiaries) pending or, to the
knowledge of Finx, threatened against or affecting Finx or any of its
subsidiaries at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which involve any of the transactions
contemplated by this Agreement which, if adversely determined against Finx or
any of its subsidiaries, would have a Material Adverse Effect.
(i) Neither Finx nor any of its subsidiaries is in default with respect to
any judgment, writ, injunction, decree, rule or regulation of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which in any instance or
in the aggregate would have a Material Adverse Effect.
(j) No registration with, or consent or approval of, or other action by,
any federal, state or other governmental authority or regulatory body is
required in connection with the execution, delivery and performance by Finx of
this Agreement.
7. Representations and Warranties of Trans Global. Trans Global represents to
Finx as follows:
(a) Trans Global (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has the power and
authority (corporate and other) to own its properties and to carry on its
business as now being conducted, (ii) is duly qualified to conduct its business
in each other jurisdiction wherein the conduct of its business or the ownership
of its properties are such as to require such qualification and the failure to
so qualify would have a Material Adverse Effect, as hereinafter defined, and
(iii) has the power to execute and perform its obligations under this Agreement.
54
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(b) The execution, delivery and performance by Trans Global of this
Agreement and the issuance of the Preferred Shares and the Trans Global Shares
have been duly authorized by all requisite corporate action. Neither the
execution and delivery of this Agreement by Trans Global nor the issuance and
delivery of the Trans Global Shares or the Preferred Shares will violate (i) any
provision of law or any governmental rule or regulation applicable to Trans
Global or the certificate of incorporation or by-law of Trans Global, or (ii)
any order of any court or other agency of government binding on Trans Global or
any indenture, agreement or other instrument to which Trans Global is a party,
or by which Trans Global or any of its properties are bound, in either case
where the violation would have a Material Adverse Effect, and will not be in
conflict with, result in a breach of or constitute (with due notice and/or lapse
of time) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of Trans Global. This
Agreement is the legal, valid and binding obligation of Trans Global and
enforceable in accordance with its terms.
(c) The Trans Global Shares and the Preferred Shares have been duly
authorized for issuance and, when issued pursuant to this Agreement, will be
duly and validly authorized and issued, fully paid and non-assessable and not
subject to any preemptive rights or rights of first refusal. The Conversion
Shares, when issued upon conversion of the Preferred Shares, will be duly and
validly authorized and issued, fully paid and non-assessable and not subject to
any preemptive rights or rights of first refusal.
(d) Trans Global has made available to Finx with a copy of (i) Trans
Global's Form 10-K for the year ended December 31, 2000, (ii) Trans Global's
Form 10-Q for the quarter ended June 30, 2000, (iii) preliminary financial
statements for the three and nine months ended and (iv) each of Trans Global's
Form 8-K filed with the Commission subsequent to December 31, 2000
(collectively, the "Trans Global SEC Documents"). Trans Global has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the twelve months prior to the date of this Agreement. The
Trans Global SEC Documents, as of their respective dates, complied in all
material respects with the requirements of the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder, and, to
the best of Trans Global's knowledge, none of the Trans Global SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Finx
is aware that Trans Global sustained a loss for the year ended December 31, 2000
and the nine months ended September 30, 2001, that losses are continuing, and
that Trans Global requires the proceeds from the sale of the Preferred Shares on
the Closing Date in order to meet its current obligations, including payroll
obligations.
(e) Trans Global has an authorized capital stock consisting of 5,000,000
shares of preferred stock, par value $.01 per share, and 25,000,000 shares of
common stock, par value $.01 per share.
55
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(f) Except as disclosed in Trans Global's filings with the Securities and
Exchange Commission, there are no actions, suits or proceedings (whether or not
purportedly on behalf of Finx or any of its subsidiaries) pending or, to the
knowledge of Trans Global, threatened against or affecting Trans Global or any
of its subsidiaries at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which involve any of the transactions
contemplated by this Agreement or which, if adversely determined against Trans
Global or any of its subsidiaries, would have a Material Adverse Effect.
(g) Neither Trans Global nor any of its subsidiaries is in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which in any
instance or in the aggregate would have a Material Adverse Effect.
(h) No registration with, or consent or approval of, or other action by,
any federal, state or other governmental authority or regulatory body is
required in connection with the execution, delivery and performance by Trans
Global of this Agreement.
8. Conditions to Closing.
(a) The obligation of Finx to purchase the Preferred Shares and to issue the
Finx Shares is subject to the following conditions precedent:
(i) The representations and warranties of Trans Global set forth in
Sections 5(c) and 7 of this Agreement shall be true and correct in all material
respects as of the Closing Date, as evidenced by an officer's certificate to
such effect.
(ii) All of the directors of Trans Global, other than Joseph G. Sicinski
and Glen R. Charles, shall have resigned as directors effective not later than
the Closing.
(iii) Joseph G. Sicinski shall have resigned as chief executive officer of
Trans Global, effective as of the Closing, while retaining the title of
president.
(iv) Effective upon completion of the Closing, the board of directors of
Trans Global shall consist of not less than five individuals, of which at least
a majority shall have been designated by Finx.
(v) Effective upon completion of the Closing, Lewis S. Schiller shall have
been elected as chief executive officer of Trans Global.
(b) The obligation of Trans Global to issue the Preferred Shares and the Trans
Global Shares is subject to the following conditions precedent:
56
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(i) Trans Global shall have received two hundred fifty thousand dollars
($250,000) pursuant to Section 5(a) of this Agreement.
(ii) The representations and warranties of Finx set forth in Sections 5(c)
and 6 of this Agreement shall be true and correct in all material respects as of
the Closing Date, as evidenced by an officer's certificate to such effect.
(c) The stock certificates to be delivered at the Closing may be delivered by
overnight courier service to the parties by the Escrow Agent on or within two
(2) business days after the Closing.
9. Subsequent Closings. The sale of the Preferred Shares pursuant to Sections
1(b)(ii) and (iii) shall be completed by delivery of the Preferred Shares
against payment of the purchase price by wire transfer, at the office of Trans
Global not later than the date set forth in such Sections. Upon receipt of
payment, Trans Global shall instruct the Escrow Agent to deliver the Preferred
Shares to Finx.
10. Registration Rights. Trans Global and Finx Shares and Finx shall be entitled
to the registration rights set forth in registration rights provisions, which
are set forth in Exhibit B to this Agreement and are an integral part of this
Agreement.
11. Miscellaneous.
(a) Any notice, request, demand, statement, authorization, approval or
consent made hereunder shall be in writing and signed by the party giving such
notice, and delivered personally or sent by overnight courier, mail or messenger
against receipt thereof or sent by registered or certified mail, return receipt
requested, or by facsimile transmission or similar means of communication if
receipt is confirmed or if transmission of such notice is confirmed by mail or
overnight courier service as provided in this Section 11(a). Notices shall be
deemed to have been received on the date of receipt or the date delivery is
refused. Notices shall be sent to the parties at the addresses set forth in the
beginning of this Agreement, to the attention of the person signing this
Agreement. Notice by facsimile transmission shall be sent to Trans Global at
(631) 724-0039, and to Finx at (561) 447-9896. Either party may, by like notice,
change the address, person or fax number to which notice shall be sent.
57
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(b) This Agreement shall be binding upon the parties hereto and their respective
successors and assigns.
(c) This Agreement shall be construed in accordance with and governed by the
laws of the State of New York applicable to agreements executed and to be
performed wholly within such State, without regard to principles of conflicts of
laws. Each party hereby (i) irrevocably consents and agrees that any legal or
equitable action or proceeding arising under or in connection with this
Agreement may be brought in any federal or state court situated in New York or
Suffolk County, New York, (ii) irrevocably submits to and accepts, with respect
to its properties and assets, generally and unconditionally, the in personam
jurisdiction of the aforesaid courts and waives the defense of an inconvenient
forum to the maintenance of such action or proceeding, and (iii) agrees that
service in any such action may be made either (A) by mailing or delivering a
copy of such process to such party in the manner set forth in Section 11(a) of
this Agreement, other than by facsimile transmission, or (B) by any other manner
permitted by law.
(d) Neither any failure nor any delay on the part of either party in exercising
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise of any other right, power or privilege.
(e) No modification, amendment or waiver of any provision of this Agreement or
the Note, shall in any event be effective unless the same shall be in writing
and signed by both parties, in the case of a modification or amendment, or by
the party granting the waiver, in the case of a waiver, expressly refers to this
Agreement and states that it is a modification, amendment or waiver, as the case
may be. Any waiver or consent shall be effective only in the specific instance
and for the purpose for which given.
(f) In case any one or more of the provisions contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
(g) This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one instrument.
(h) Section headings used herein are for convenience of reference only and are
not to affect the construction of or be taken into consideration in interpreting
this Agreement.
(i) All references to any gender shall be deemed to include the masculine,
feminine or neuter gender, the singular shall include the plural, and the plural
shall include the singular.
58
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
IN WITNESS WHEREOF, the parties have executed this Agreement or has caused
this Agreement to be duly executed by its duly authorized officer, all as of the
day and year first above written.
THE FINX GROUP, INC.
By:_____________________________
Lewis S. Schiller, President and CEO
TRANS GLOBAL SERVICES, INC.
By:_____________________________
Joseph G. Sicinski, President and CEO
59
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
Exhibit A
CERTIFICATE OF DESIGNATION OF
TRANS GLOBAL SERIVCES, INC.
Series A Convertible Preferred Stock
Pursuant to Section 151(g) of the Delaware General Corporation Law, Trans
Global Services, Inc., a Delaware corporation (the "Corporation"), does hereby
certify as follows:
1. The following resolution was duly adopted by the Board of Directors of the
Corporation on November 8, 2001:
RESOLVED, that pursuant to Article 4 of the Restated Certificate of
Incorporation of this Corporation, there be created a series of the Preferred
Stock, par value $.01 per share ("Preferred Stock"), of this Corporation
consisting of one million (1,000,000) shares, to be designated as the Series A
Convertible Preferred Stock ("Series A Preferred Stock"), and that the holders
of shares the Series A Preferred Stock shall have the rights, preferences and
privileges set forth in Statement of Designations set forth in Exhibit A to
these Minutes; and it was further
RESOLVED, that the officers of this Corporation be, and they hereby are,
authorized and empowered to execute and file with the Secretary of State of the
State of Delaware, a certificate of designation setting forth the rights,
preferences and privileges of the holders of the Series A Preferred Stock.
2. Set forth as Exhibit A to this Certificate of Designation is a true and
correct copy of the rights, preferences and privileges of the holders of the
Series A Preferred Stock.
IN WITNESS WHEREOF, Trans Global Services, Inc. has caused this certificate
to be signed by the president this 16th day of November, 2001.
By:
Joseph G. Sicinski, President
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
Exhibit A
Statement of Designations
The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to, the Series A Convertible
Preferred Stock are as follows:
1. Designation and Number of Shares. The designation of this series of one
million (1,000,000) shares of preferred stock, par value $.01 per share
("Preferred Stock"), created by the Board of Directors of the Corporation
pursuant to the authority granted to it by the certificate of incorporation of
the Corporation is "Series A Convertible Preferred Stock," which is hereinafter
referred to as the "Series A Preferred Stock." In the event of the conversion of
shares of Series A Preferred Stock into this Corporation's common stock, par
value $.01 per share ("Common Stock"), pursuant to Paragraph 4 of this Statement
of Designations, or in the event that the Corporation shall acquire and cancel
any shares of Series A Preferred Stock, the shares of Series A Preferred Stock
so converted or otherwise acquired and canceled shall have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series until such stock is once more designated as part of a particular series
by the Corporation's Board of Directors, and the number of authorized shares of
Series A Preferred Stock shall be reduced by the number of shares so converted
or otherwise acquired and canceled. In addition, if the Corporation does not
issue the maximum number of shares of Series A Preferred Stock, the Corporation
may, from time to time, by resolution of the Board of Directors, reduce the
number of shares of Series A Preferred Stock authorized, provided, that no such
reduction shall reduce the number of authorized shares to a number which is less
than the number of shares of Series A Preferred Stock then issued or reserved
for issuance. The number of shares by which the Series A Preferred Stock is
reduced shall have the status of authorized but unissued shares of Preferred
Stock, without designation as to series, until such stock is once more
designated as part of a particular series by the Corporation's Board of
Directors. The Board of Directors shall cause to be filed with the Secretary of
State of the State of Delaware such certificate as shall be necessary to reflect
any reduction in the number of shares constituting the Series A Preferred Stock.
2. Dividend Rights. The holders of the Series A Preferred Stock shall be
entitled to receive, out of funds of this Corporation legally available
therefor, a dividend per share of Series A Preferred Stock equal to the dividend
per share payable to the holders of Common Stock, multiplied by the number of
shares of Common Stock, computed to the nearest one-thousandth of a share, into
which the Series A Preferred Stock is convertible pursuant to the provisions of
Paragraph 4 of this Statement of Designations at the record date for the
determination of stockholders entitled to such dividends, or, if no such record
date is established, at the date such dividend is declared. The Corporation
shall not declare any dividends on the Common Stock unless dividends are
declared with respect to the Series A Preferred Stock, as provided in this
Paragraph 2.
3. Voting Rights.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(a) Except as otherwise provided by law or this Statement of Designations, the
holder of each share of Series A Preferred Stock shall be entitled to vote on
all matters and shall be entitled to the number of votes per share of Series A
Preferred Stock equal to the number of votes that a holder of the shares of
Common Stock into which Series A Preferred Stock is convertible is entitled to,
at the record date for the determination of the stockholders entitled to vote on
all matters, or, if no such record date is established, at the date such vote is
taken or any written consent of stockholders is solicited.
(b) The consent of the holders of a majority of the outstanding shares of Series
A Preferred Stock shall be required for any amendment to this Statement of
Designations.
(c) The separate vote of the holders of the Series A Preferred Stock shall not
be required to increase or decrease the number of authorized shares of Preferred
Stock.
(d) If the holders of the Series A Preferred Stock shall be entitled to vote as
a class, each share of Series A Preferred Stock shall be entitled to one vote,
and the consent of the holders of the Series A Preferred Stock may be given at a
meeting of the holders of the Series A Preferred Stock or by a written consent
of the holders of a majority of the outstanding shares of Series A Preferred
Stock.
(e) The Corporation may create other series of Preferred Stock or capital stock
which may be senior to, junior to or on a parity with the Series A Preferred
Stock as to dividends or on voluntary or involuntary dissolution, liquidation or
winding up without the consent of the holders of the Series A Preferred Stock.
4. Conversion into Common Stock.
(a) Each holder of the Series A Preferred Stock will have the right, at any time
and from time to time, to convert any shares of Series A Preferred Stock into
shares of Common Stock at the Conversion Rate, as hereinafter defined. The
"Conversion Rate" shall mean the number of shares of Common Stock issuable upon
conversion of one (1) share of Series A Preferred Stock. The Conversion Rate
shall be three (3), subject to adjustment as provided in Paragraph 4(c) of this
Statement of Designations.
(b) Conversion of the Series A Preferred Stock shall be effected by surrender of
the certificate representing the shares of Series A Preferred Stock being
converted to the transfer agent for the Series A Preferred Stock, or, if none
shall have been appointed, to the Corporation, together with the form of notice
of election to convert as may be provided from time to time by the Corporation.
Shares of Series A Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the day of the surrender for
conversion of the certificate therefor, together with the form of notice of
62
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
election provided by the Corporation duly signed by the holder thereof, and the
person or persons entitled to receive shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock as of such time. As promptly as practicable on or after the
conversion date, the Corporation or its transfer agent shall issue and shall
deliver a certificate or certificates for the number of shares of Common Stock
issuable upon such conversion to the person or persons entitled to receive the
same.
(c) The Conversion Rate shall be subject to adjustment as follows:
(i) In case the Corporation shall, after the date the Certificate of
Designation of which this Statement of Designations is a part (A) pay a dividend
or make a distribution on its shares of Common Stock in shares of Common Stock,
(B) subdivide, split or reclassify its outstanding Common Stock into a greater
number of shares, (C) effect a reverse split or otherwise combine or reclassify
its outstanding Common Stock into a smaller number of shares, or (D) issue any
shares by reclassification of its shares of Common Stock, the Conversion Rate in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
proportionately adjusted to reflect, in accordance with generally accepted
accounting principles, such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed in this Paragraph 4(c)(i) shall occur.
(ii) The Corporation may retain a firm of independent public accountants of
recognized standing selected by the Board of Directors (who may be the regular
accountants employed by the Corporation) to make any computation required by
Paragraph 4(c)(i) of this Statement of Designations, and a certificate signed by
such firm shall be conclusive evidence of the correctness of such adjustment.
(iii) In the event that at any time, as a result of an adjustment made
pursuant to Paragraph 4(c)(i) of this Statement of Designations, the holder of
shares of Series A Preferred Stock thereafter shall become entitled to receive
any shares of the Corporation, other than Common Stock, thereafter the number of
such other shares so receivable upon conversion of shares of Series A Preferred
Stock shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in this Paragraph 4.
(iv) In addition to the adjustments provided for in Paragraph 4(c)(i) of
this Statement of Designations, the Corporation may modify the Conversion Rate
in a manner which will increase the number of shares of Common Stock issuable
upon conversion of the Series A Preferred Stock if the Corporation believes that
such adjustment is necessary or desirable in order to avoid adverse Federal
income tax consequences to the holders of the Common Stock.
63
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(v) Whenever any adjustment is required by the provisions of Paragraph 4(c)(i)
of this Statement of Designations, the Corporation shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjustment and the adjusted Conversion Rate, setting forth in reasonable detail
the facts requiring such adjustment. Each such officer's certificate shall be
made available at all reasonable times for inspection by any holder of shares of
Series A Preferred Stock, and the Corporation shall, forthwith after each such
adjustment, mail a copy of such certificate by first class mail to the holder of
Series A Preferred Stock at such holders' addresses set forth in the
Corporation's books and records.
(d) In case:
(i) the Corporation shall pay any dividend or make any distribution upon
Common Stock (other than a regular cash dividend payable out of retained
earnings or cash surplus); or
(ii) the Corporation shall offer to the holders of Common Stock for
subscription or purchase by them any shares of any class or any other rights, or
(iii) any reclassification of the capital stock of the Corporation,
consolidation or merger of the Corporation with or into another corporation,
sale, lease or transfer of all or substantially all of the property and assets
of the Corporation to another corporation, or voluntary or involuntary
dissolution, liquidation or winding up of the Corporation shall be effected;
then in any such case, the Corporation shall cause to be mailed by first class
mail to the record holders of Series A Preferred Stock at least ten (10) days
prior to the date specified in (A) and (B) below, as the case may be, a notice
containing a brief description of the proposed action and stating the date on
which (A) a record is to be taken for the purpose of such dividend, distribution
or rights, or (B) such reclassification, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
any is to be fixed, as of which the holders of Common Stock or other securities
shall receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(e) In case of any consolidation or merger of the Corporation into another
corporation (other than a merger in which merger the Corporation is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock or
the class issuable upon conversion of Series A Preferred Stock), each share of
Series A Preferred Stock shall, immediately prior to the effective time of such
merger or consolidation, automatically be converted into the number of shares of
Common Stock as are issuable upon such conversion based on the Conversion Rate
in effect at the time of such conversion.
64
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(f) No fractional shares or script representing fractional shares shall be
issued upon the conversion of shares of Series A Preferred Stock. If, upon
conversion of any shares of Series A Preferred Stock, any holder would, except
for the provisions of this Paragraph 4(f), be entitled to receive a fractional
share of Common Stock, then the number of shares of Common Stock issuable upon
such conversion shall be rounded up to the next higher whole number of shares.
(g) The Corporation shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock the full
number of shares of Common Stock then issuable upon the conversion of all shares
of Series A Preferred Stock then outstanding.
(h) The Common Stock issuable upon conversion of the Series A Preferred Stock
shall, when so issued, be duly and validly authorized and issued, fully paid and
non-assessable.
5. No Right of Redemption. The Corporation shall have no right to redeem the
Series A Preferred Stock.
6. Liquidation Rights.
(a) In the event of the Liquidation of the Corporation, as hereinafter defined,
whether voluntary or involuntary, holders of the Series A Preferred Stock shall
be entitled to receive out of the assets of the Corporation, after payment of
any preferences which are payable to the holders of any class or series of
capital stock which is senior to the Preferred Stock upon liquidation,
dissolution or winding up, an amount per share equal to one cent ($.01) per
share, before any payment or distribution upon dissolution, liquidation or
winding up shall be made on any series or class of capital stock ranking junior
to Series A Preferred Stock as to such payment or distribution, and after all
such payments or distributions have been made on any series or class of capital
stock ranking senior to the Series A Preferred Stock as to such payment or
distribution. After payment of the preference set forth in this Paragraph 6(a),
the holders of the Series A Preferred Stock shall have participate with the
holders of the Common Stock as if the Series A Preferred Stock and the Common
Stock were a single class of capital stock with each share of Series A Preferred
Stock being deemed to be the number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock on the date of the Liquidation.
(b) The term "Liquidation" shall mean any liquidation, dissolution or winding-up
of the Corporation or sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially all of the
property and assets of the Corporation, except that a Liquidation shall not
include any sale, conveyance, exchange or transfer if approved by the holders of
a majority of the outstanding shares of Series A Preferred Stock.
65
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(c) In the event the assets of the Corporation available for distribution to the
holders of shares of Series A Preferred Stock upon dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to Paragraph 6(a) of this Statement of Designations, no such
distribution shall be made on account of any shares of any other class or series
of capital stock of the Corporation ranking on a parity with the shares of
Series A Preferred Stock upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
Series A Preferred Stock and such other parity shares, ratably, in proportion to
the full distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
7. Notice. The Corporation shall treat the registered holder of any shares of
Series A Preferred Stock as the absolute owner thereof (notwithstanding any
notations of ownership or writing thereon made by anyone other than a duly
authorized officer of the Corporation or its transfer agent, if any) for all
purposes and shall not be affected by any notice to the contrary, and the
Corporation shall not incur any liability as a result of its compliance with the
provisions of this Paragraph 7. Notice to a holder of Series A Preferred Stock
shall be sent by first class mail, postage prepaid, to the addresses of the
registered holders set forth on the Corporation's stock record.
8. Rank of Series. For purposes of this Statement of Designations, any stock of
any series or class of the Corporation shall be deemed to rank:
(a) prior to the shares of Series A Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if the holders of
such class or classes shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of Series A Preferred Stock;
(b) on a parity with shares of Series A Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, whether or not the
dividend rates, dividend payment dates or redemption or liquidation prices per
share or sinking fund provisions, if any, be different from those of Series A
Preferred Stock, if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution, liquidation or
winding up of the Corporation, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without preference or priority,
one over the other, as between the holders of such stock and the holders of
shares of Series A Preferred Stock;
(c) junior to shares of Series A Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if such class shall
be Common Stock or if the holders of shares of Series A Preferred Stock shall be
entitled to receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
preference or priority to the holders of shares of such class or classes.
66
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
9. Transfer Agent and Registrar. The Corporation may appoint a transfer agent
and registrar for the issuance, transfer and conversion of the Series A
Preferred Stock and for the payment of dividends to the holders of the Series A
Preferred Stock.
67
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
Exhibit B
REGISTRATION RIGHTS PROVISIONS
These registration rights provisions constitute an integral part of the
Agreement dated November 15, 2001, between Trans Global and Finx, to which these
Registration Rights Provisions are an exhibit.
1. Definitions. Unless otherwise defined herein, capitalized terms used herein
shall have the following meanings:
"Affiliate" of a Person means any Person that controls, is under common
control with, or is controlled by, such Person. For purposes of this definition,
"control" means the ability of one Person to direct the management and policies
of another Person.
"Agreement" shall mean the agreement dated November 15, 2001, between Trans
Global and Finx. All terms defined in the Agreement and used in these
Registration Rights Provisions shall have the same meaning in these Registration
Rights Provisions as in the Agreement.
"Applicable Securities" shall mean the Finx Common Stock or TGSI Common
Stock, as the case may be.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to be
closed.
"Commission" means the U.S. Securities and Exchange Commission.
"Exchange" means the principal stock exchange or market on which the
Applicable Securities are traded.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, or any similar or successor
statute.
"Excusable Reason" means the occurrence of negotiations with respect
to material agreements prior to the announcement of the execution of the
agreement or the termination of the negotiations and other similar material
corporate events to which the Issuer is a party or expects to be a party
if, in the reasonable judgment of the Issuer, disclosure of the
negotiations or other event would be adverse to the best interests of the
Issuer provided that the Issuer is continuing to treat such negotiations as
confidential and provided further that the period during which the Issuer
is precluded from filing the registration statement (or suspended the use
of an effective registration statement) as a result thereof has not
exceeded ninety (90) days and provided further that the Issuer shall not be
permitted to avoid filing a registration statement (or to suspend the use
of an effective registration statement) for an Excusable Reason more than
once in any one-year period.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
"Expenses" means all expenses incident to the Issuer's performance of
or compliance with its obligations under these Registration Rights
Provisions, including, without limitation, all registration, filing,
listing, stock exchange and NASD fees, all fees and expenses of complying
with state securities or blue sky laws (including fees, disbursements and
other charges of counsel for the underwriters only in connection with blue
sky filings), all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees, disbursements and other charges
of counsel for the Issuer and of its independent public accountants,
including the expenses incurred in connection with "cold comfort" letters
required by or incident to such performance and compliance, any fees and
disbursements of underwriters customarily paid by issuers of securities,
but excluding from the definition of Expenses underwriting discounts and
commissions and applicable transfer taxes, if any, or legal and other
expenses incurred by any sellers, which discounts, commissions, transfer
taxes and legal and other expenses shall be borne by the seller or sellers
of Registrable Common Stock in all cases.
"Holder" shall mean Trans Global, with respect to the Applicable
Securities issued by Finx, and Finx, with respect to the Applicable
Securities issued by Trans Global, and, in either case, any Transferee who
has rights pursuant to this Agreement pursuant to Section 13 of these
Registration Rights Provisions.
"Issuer" means whichever of Trans Global or Finx is the issuer with
respect to the Registrable Common Stock being registered.
"NASD" means the National Association of Securities Dealers, Inc. and
NASD Regulation, Inc.
"Nasdaq" means the Nasdaq Stock Market and includes The Nasdaq
National Market and The Nasdaq SmallCap Market.
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint stock company,
trust, unincorporated organization, governmental or regulatory body or
subdivision thereof or other entity.
"Public Offering" means a public offering and sale of Applicable
Securities pursuant to an effective registration statement under the
Securities Act.
"Registrable Common Stock" means any shares Finx Common Stock issued
pursuant to the Agreement or any shares of TGSI Common Stock which are
either issued pursuant to the Agreement or are Conversion Shares, as the
case may be (including any of such shares which any Holder proposes to
transfer in a private transaction to a Person who would sell the shares
pursuant to a registration statement) but, only for so long as registration
pursuant to the Securities Act is required for public sale without regard
to volume limitations pursuant to Rule 144(k) or any subsequent similar
provision, and as adjusted to reflect any merger, consolidation,
recapitalization, reclassification, split-up, stock dividend, rights
offering or reverse stock split made, declared or effected with respect to
the Applicable Securities.
69
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
"Requesting Holders" has the meaning set forth in Section 3 of these
Registration Rights Provisions.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar or successor statute.
"Selling Holders" means the Holders of Registrable Common Stock
requested to be registered pursuant to Section 2(a) of these Registration
Rights Provisions.
"Shelf Registration" means a shelf registration statement pursuant to
Rule 415 promulgated under the Securities Act.
"Transfer" means any transfer, sale, assignment, pledge, hypothecation
or other disposition of any interest. "Transferor" and "Transferee" have
correlative meanings.
2. Securities Act Registration on Request.
(a) At any time after the Closing, any Holder or Holders holding at least twenty
five percent (25%) of the applicable Registrable Common Stock may make a written
request (the "Initiating Request") to the Issuer for the registration with the
Commission under the Securities Act of all or part of such Initiating Holders'
Registrable Common Stock. Upon the receipt of any Initiating Request for
registration pursuant to this section, the Issuer promptly shall notify in
writing all other Holders of the Applicable Securities of the receipt of such
request and will use its commercially reasonable efforts to effect, at the
earliest possible date, such registration under the Securities Act, including a
Shelf Registration (if then eligible), of
(i) the Registrable Common Stock which the Issuer has been so requested to
register by such Initiating Holder, and
(ii) all other Registrable Common Stock which the Issuer has been requested to
register by any other Holders by written request given to the Issuer within 30
days after the giving of written notice by the Issuer to such other Holders of
the Initiating Request, all to the extent necessary to permit the disposition
(in accordance with Section 2(b) of these Registration Rights Provisions) of the
Registrable Common Stock so to be registered; provided, that any Holder whose
Registrable Common Stock was to be included in any such registration, by written
notice to the Issuer, may withdraw such request, and the Issuer shall not be
required to effect any registration to be effected pursuant to this Section 2(a)
unless at least 10% of the shares of Registrable Common Stock outstanding at the
time of such request is to be included in such registration.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(b) Registration under Section 2(a) of these Registration Rights Provisions
shall be on such appropriate registration form prescribed by the Commission
under the Securities Act as shall be selected by the Issuer and as shall permit
the disposition of the Registrable Common Stock pursuant to the method of
disposition determined by the Selling Holders; provided, however, that if the
Issuer is eligible to use a registration statement on Form S-3 (or any
subsequent similar form), the Issuer shall use such form.
(c) A registration requested pursuant to Section 2(a) of these Registration
Rights Provisions shall not be deemed to have been effected:
(i) unless a registration statement with respect thereto has been declared
effective by the Commission and remains effective in compliance with the
provisions of the Securities Act and the laws of any state or other jurisdiction
applicable to the disposition of all Registrable Common Stock covered by such
registration statement until such time as all of such Registrable Common Stock
have been disposed of in accordance with such registration statement,
(ii) if, after it has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission or
other governmental or regulatory agency or court for any reason other than a
violation of applicable law solely by the Selling Holders and has not thereafter
become effective, or
(iii) if, in the case of an underwritten offering, the conditions to closing
specified in an underwriting agreement to which the Issuer is a party are not
satisfied other than by reason of any breach or failure by the Selling Holders,
or are not otherwise waived.
(d) The Holders of Registrable Common Stock to be included in a registration
statement may, at any time on written notice to the Issuer, terminate a request
for registration made pursuant to this Section 2.
(e) The Issuer shall use its best efforts to keep any Shelf Registration
effective until one (1) year from the effective date of the registration
statement or such earlier date as all of the Registrable Securities shall have
been sold.
(f) No registration effected under this Section 2 shall relieve the Issuer of
its obligation to permit the registration of Registrable Common Stock under
Section 3 of these Registration Rights Provisions.
(g) As a condition to the inclusion of a Holder's Registrable Common Stock in a
registration statement pursuant to Sections 2(a) and 3 of these Registration
Rights Provisions, each Holder shall:
(i) furnish the information and indemnification as set forth in these
Registration Rights Provisions and update such information immediately upon the
occurrence of any events or condition which make the information concerning the
Holder inaccurate in any material respect;
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EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(ii) not sell any Registrable Common Stock pursuant to the registration
statement except in the manner set forth in the Registration Statement;
(iii) comply with the prospectus delivery requirements and the provisions of
Regulation M of the Commission pursuant to the Securities Act;
(iv) not sell or otherwise transfer or distribute any Registrable Common Stock
shares if the Holder possesses any material nonpublic information concerning the
Issuer; and
(v) not sell or otherwise transfer any Registrable Common Stock pursuant to a
registration statement upon receipt of advice from the Issuer that the
registration statement is no longer current until the Holder is advised that the
shares may be sold pursuant to the registration statement.
3. Piggyback Registration.
(a) If at any time after the Closing, the Issuer proposes to register any of its
securities under the Securities Act by registration on any forms other than Form
S-4 or S-8 (or any successor or similar form(s)), whether or not pursuant to
registration rights granted to other holders of its securities and whether or
not for sale for its own account, it shall give prompt written notice to all of
the Holders of its intention to do so and of such Holders' rights (if any) under
this Section 3, which notice, in any event, shall be given at least fifteen (15)
days prior to such proposed registration. Upon the written request of any Holder
receiving notice of such proposed registration that is a Holder of Registrable
Common Stock (a "Requesting Holder") made within ten (10) days after the receipt
of any such notice, the Issuer shall, subject to Section 6(b) of these
Registration Rights Provisions, effect the registration under the Securities Act
of all Registrable Common Stock which the Issuer has been so requested to
register by the Requesting Holders thereof.
(b) If at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Issuer shall determine for any reason
not to register or to delay registration of such securities, the Issuer may, at
its election, give written notice of such determination to each Requesting
Holder and (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Common Stock in connection with
such registration (but not from any obligation of the Issuer to pay the Expenses
in connection therewith), without prejudice, however, to the rights of any
Holder to include Registrable Common Stock in any future registration (or
registrations) pursuant to this Section 3 or to cause such registration to be
effected as a registration under Section 2(a) of these Registration Rights
Provisions, as the case may be, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Common
Stock, for the same period as the delay in registering such other securities.
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EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(c) If such registration involves an underwritten offering, the provision of
Section 6 of these Registration Rights Provisions shall apply.
(d) No registration effected under this Section 3 shall relieve the Issuer of
its obligation to effect any registration upon request under Section 2(a) of
these Registration Rights Provisions.
4. Expenses. The Issuer shall pay all Expenses in connection with any
registration initiated pursuant to Section 2(a) or 3 of these Registration
Rights Provisions, whether or not such registration shall become effective and
whether or not all or any portion of the Registrable Common Stock originally
requested to be included in such registration is ultimately included in such
registration.
5. Registration Procedures.
(a) If and whenever the Issuer is required to effect any registration under the
Securities Act as provided in Sections 2(a) and 3 of these Registration Rights
Provisions, the Issuer shall, as expeditiously as possible:
(i) subject to Section 5(b) of these Registration Rights Provisions,
prepare and file with the Commission (promptly and, in the case of any
registration pursuant to Section 2(a), in any event within forty five (45)
days unless the Initiating Request is made subsequent to December 15th of
any year, in which event the registration statement shall be filed within
fifteen (15) days after the date a Form 10-K is required to be filed) the
requisite registration statement to effect such registration and thereafter
use its best efforts to cause such registration statement to become
effective; provided, however, that the Issuer may discontinue any
registration of its securities that are not shares of Registrable Common
Stock (and, under the circumstances specified in Section 3 of these
Registration Rights Provisions, its securities that are shares of
Registrable Common Stock) at any time prior to the effective date of the
registration statement relating thereto;
(ii) notify each seller of Registrable Common Stock and other
securities covered by such registration statement at any time after an
Initiating Request when an Excusable Reason shall have occurred.
(iii) notify each seller of Registrable Common Stock and other
securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as
a result of which, the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and subject to Section 5(a)(iv)
of these Registration Rights Provisions and except during the time the
Issuer may delay a registration for an Excusable Reason, prepare and file
with the Commission such amendments and supplements to such registration
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EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Common Stock covered by such
registration statement until such time as all of such Registrable Common
Stock has been disposed of in accordance with the method of disposition set
forth in such registration statement;
(iv) if requested by the holders of a majority of the Registrable
Common Stock included or to be included in the registration statement being
filed pursuant to Section 2(a) or 3 of these Registration Rights
Provisions, before filing any registration statement or prospectus or any
amendments or supplements thereto, furnish to and afford the Holders of the
Registrable Common Stock, one firm of counsel for the Holders designated by
the Holders of a majority of the Registrable Common Stock included or to be
included in the registration statement, (the "Holders Counsel") a
reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (at least ten (10) Business Days
prior to such filing). The Issuer shall not file any registration statement
or prospectus or any amendments or supplements thereto in respect of which
the Holders must be afforded an opportunity to review prior to the filing
of such document, if the Holders of a majority of the shares of Registrable
Common Stock covered by such registration statement, the Holders Counsel,
or the managing underwriters, if any, shall reasonably object. Any
registration statement, when declared effective by the Commission or when
subsequently amended (by an amendment which is declared effective by the
Commission) or any prospectus in the form included in the registration
statement as declared effective by the Commission or when subsequently
supplemented will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading;
(v) use its commercially reasonable efforts to obtain the prompt
withdrawal of any order suspending the effectiveness of a registration
statement, and in any event shall, within thirty (30) days of such
cessation of effectiveness, use its commercially reasonable efforts to
amend the registration statement in a manner reasonably expected to obtain
the withdrawal of the order suspending the effectiveness thereof, or file
an additional registration statement pursuant to Rule 415 covering all of
the Registrable Common Stock and use its best efforts to cause the
subsequent Shelf Registration to be declared effective as soon as
practicable after such filing and to remain effective;
(vi) furnish to each seller of Registrable Common Stock covered by
such registration statement such number of copies of such drafts and final
conformed versions of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits and
any documents incorporated by reference), such number of copies of such
drafts and final versions of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
74
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request in writing;
(vii) use its best efforts (A) to register or qualify all Registrable
Common Stock under such other securities or blue sky laws of such states or
other jurisdictions of the United States of America as the sellers of
Registrable Common Stock covered by such registration statement shall
reasonably request in writing, (B) to keep such registration or
qualification in effect for so long as such registration statement remains
in effect, (C) to prevent the issuance of any order suspending the
effectiveness of a registration statement or of any order preventing or
suspending the use of a prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Common Stock for
sale in any jurisdiction, and, if any such order is issued, to use its best
efforts to obtain the withdrawal of any such order at the earliest possible
moment, and (D) to take any other action that may be reasonably necessary
or advisable to enable such sellers to consummate the disposition in such
jurisdictions of the securities to be sold by such sellers, except that the
Issuer shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this Section 5(a)(vii) be obligated to be
so qualified, to subject itself to taxation in such jurisdiction or to
consent to general service of process in any such jurisdiction;
(viii) otherwise comply with all applicable rules and regulations of
the Commission and any other governmental agency or authority having
jurisdiction over the offering, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule~158 promulgated
thereunder, and furnish to each seller of Registrable Common Stock at least
ten days prior to the filing thereof a copy of any amendment or supplement
to such registration statement or prospectus; and
(ix) cause all such Registrable Common Stock covered by such
registration statement to be listed on the Exchange, if any.
(b) The Issuer may require each seller of Registrable Common Stock as to which
any registration is being effected to furnish the Issuer such information
regarding such seller and the distribution of the securities covered by such
registration statement as the Issuer may from time to time reasonably request in
writing and as is required by applicable laws and regulations.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(c) Each Holder agrees that as of the date that a final prospectus is made
available to it for distribution to prospective purchasers of Registrable Common
Stock it shall cease to distribute copies of any preliminary prospectus prepared
in connection with the offer and sale of such Registrable Common Stock. Each
Holder further agrees that, upon receipt of any notice from the Issuer of the
happening of any event of the kind described in Sections 5(a)(ii) and (iii) of
these Registration Rights Provisions, such Holder shall forthwith discontinue
such Holder's disposition of Registrable Common Stock pursuant to the
registration statement relating to such Registrable Common Stock until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by said Sections 5(a)(ii) and (iii), and, if so directed by the
Issuer, shall deliver to the Issuer (at the Issuer's expense) all copies, other
than permanent file copies, then in such Holder's possession of the prospectus
relating to such Registrable Common Stock current at the time of receipt of such
notice.
6. Underwritten Offerings.
(a) If the Issuer proposes to register any of its securities under the
Securities Act as contemplated by Section 3 of these Registration Rights
Provisions and such securities are to be distributed by or through one or more
underwriters, the Issuer shall, if requested by any Requesting Holders, use its
commercially reasonable efforts to arrange for such underwriters to include all
of the Registrable Common Stock to be offered and sold by such Requesting
Holders among the securities of the Issuer to be distributed by such
underwriters; provided, that, if the managing underwriter of such underwritten
offering shall advise the Issuer in writing (with a copy to the Requesting
Holders) that if all the Registrable Common Stock requested to be included in
such registration (together with all other shares of Common Stock of other
stockholders of the Issuer requested to be so included pursuant to "piggyback"
rights granted to such stockholders) were so included, in its opinion, the
number and type of securities proposed to be included in such registration would
exceed the number and type of securities which could be sold in such offering
within a price range acceptable to the Issuer (such writing to state the basis
of such opinion and the approximate number and type of securities which may be
included in such offering without such effect), then the Issuer shall include in
such registration, to the extent of the number and type of securities which the
Issuer is so advised can be sold in such offering, (i) first, securities that
the Issuer proposes to issue and sell for its own account and (ii) second,
Registrable Common Stock requested to be registered by Requesting Holders
pursuant to Section 3 of these Registration Rights Provisions and Common Stock
of any other stockholders of the Issuer requesting registration as aforesaid,
pro rata, among such holders on the basis of the number of shares of Common
Stock requested to be registered by all such holders.
(b) Any Requesting Holder may withdraw its request to have all or any portion of
its Registrable Common Stock included in any such offering by notice to the
Issuer within ten (10) Business Days after receipt of a copy of a notice from
the managing underwriter pursuant to Section 6(a) of these Registration Rights
Provisions.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(c) The Holders of Registrable Common Stock to be distributed by underwriters in
an underwritten offering contemplated by Section 6(a) of these Registration
Rights Provisions, shall be parties to the underwriting agreement between the
Issuer and such underwriters and any such Holder, at its option, may require
that any or all of the representations and warranties by, and the other
agreements on the part of, the Issuer to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holders and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
such Holders. No such Holder shall be required to make any representations or
warranties to or agreements with the Issuer or the underwriters except that each
such Holder shall be required to make representations, warranties and agreements
regarding such Holder, such Holder's Registrable Common Stock and such Holder's
intended method of distribution. The Selling Holders shall appoint an
attorney-in-fact who shall be authorized to negotiate with the underwriter on
behalf of the Selling Holders and to execute the underwriting agreement and
related documentation on their behalf.
7. Preparation; Reasonable Investigation.
(a) In connection with the preparation and filing of each registration statement
under the Securities Act pursuant to these Registration Rights Provisions, the
Issuer shall give each Holder of Registrable Common Stock registered under such
registration statement, the underwriter, if any, and its respective counsel and
accountants the reasonable opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and shall give
each of them such reasonable access to its books and records and such reasonable
opportunities to discuss the business of the Issuer with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the reasonable opinion of any such Holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
(b) Each Holder of Registrable Common Stock shall maintain the confidentiality
of any confidential information received from or otherwise made available by the
Issuer to such Holder of Registrable Common Stock and identified in writing by
the Issuer as confidential and shall not make any sales or purchases of the
Issuer's securities while in possession of confidential information; provided,
however, that any information relating to an Excusable Reason shall be deemed to
be confidential information regardless of whether it is expressly marked as
confidential. Information that (i) is or becomes available to a Holder of
Registrable Common Stock from a public source, (ii) is disclosed to a Holder of
Registrable Common Stock by a third-party source who the Holder of Registrable
Common Stock reasonably believes has the right to disclose such information or
(iii) is or becomes required to be disclosed by a Holder of Registrable Common
Stock by law, including by court order, shall not be deemed to be confidential
information for purposes of these Registration Rights Provisions. Each Holder
shall indemnify and hold harmless the Issuer, its officer, directors and counsel
from and against any loss, liability, damage or expense which they may incur as
a result of any breach of the provisions of this Section 7(b).
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
8. Indemnification.
(a) In connection with any registration statement filed by the Issuer pursuant
to Section 2(a) or 3 of these Registration Rights Provisions, the Issuer shall,
and hereby agrees to, indemnify and hold harmless, each Holder and seller of any
Registrable Common Stock covered by such registration statement and each other
Person, if any, who controls such Holder or seller, and their respective
directors, officers, partners, agents and Affiliates from and against any and
all losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Securities Act, the Exchange Act, or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof), which are collectively referred to as "Losses," arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact made by the Issuer contained in the Registration Statement, or any
amendment thereof, or in any Preliminary Prospectus or the Prospectus, or any
amendment thereof or supplement thereto, or in any blue sky application or other
document executed by the Issuer specifically for that purpose (or based upon
written information furnished by the Issuer) filed in any state or other
jurisdiction in order to qualify any of the Securities or other Securities under
the securities laws thereof (any such application, document or information being
referred to as a "Blue Sky Application"); or (ii) the omission or alleged
omission to state in any such Registration Statement, Preliminary Prospectus or
Prospectus, or amendment thereof or supplement thereto, or Blue Sky Application
a material fact required to be stated therein or necessary to make the
statements made therein not misleading, and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred by it in
connection with investigating or defending against any such loss, claim, damage,
liability or action; provided, however, that the Issuer will not be liable in
any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein or omitted therefrom in
reliance upon and in conformity with written information furnished to the Issuer
by or on behalf of any Holder specifically for use in connection with the
preparation thereof, and further provided, however, that the foregoing indemnity
with respect to any untrue statement, alleged untrue statement, omission, or
alleged omission contained in any Preliminary Prospectus shall not inure to the
benefit of any Holder from whom the person asserting any such loss, claims any
of, damage, or liability purchased any of the securities that are the subject
thereof (or to the benefit of any person who controls such Holder or other
Person), if a copy of the prospectus was not delivered to such person with or
prior to the written confirmation of the sale of such security to such person.
The indemnify provided for in this Section 8(a) shall remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified
party and shall survive any transfer of the Registrable Shares by the
indemnified party. This indemnity agreement will be in addition to any liability
that the Issuer may otherwise have.
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EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(b) In connection with any registration statement filed by the Issuer pursuant
to Section 2(a) or 3 of these Registration Rights Provisions in which a Holder
has registered for sale Registrable Common Stock, each such Holder or seller of
Registrable Common Stock shall, and hereby agrees to, indemnify and hold
harmless the Issuer and each of its directors, officers, employees and agents,
each other Person, if any, who controls the Issuer and each other seller and
such seller's directors, officers, stockholders, partners, employees, agents and
affiliates from and against any and all Losses to which they or any of them may
become subject under the Securities Act, the Exchange Act, or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement, or any amendment
thereof, or in any Preliminary Prospectus or the Prospectus, or any amendment
thereof or supplement thereto, or in a Blue Sky Application, or (ii) the
omission or the alleged omission to state in any such Registration Statement,
Preliminary Prospectus or Prospectus, amendment thereof or supplement thereto,
or Blue Sky Application a material fact required to be stated therein or
necessary to make the statements made therein not misleading, in each case to
the extent, but only to the extent, that the same was made therein or omitted
therefrom in reliance upon and in conformity with written information furnished
to the Issuer by or on behalf of such Holder specifically for use in the
preparation thereof, and agrees to reimburse each such indemnified party for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim, damage, liability or
action. The indemnify provided for in this Section 8(a) shall remain in full
force and effect regardless of any investigation made by or on behalf of the
indemnified party and shall survive any transfer of the Registrable Shares by
the indemnified party. This indemnity agreement will be in addition to any
liability that the Issuer may otherwise have.
(c) Within five (5) days after receipt by an indemnified party under Section
8(a) or (b) of these Registration Rights Provisions of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof; the
failure so to notify the indemnifying party shall relieve the indemnifying party
from any liability under this Section 8 as to the particular item for which
indemnification is then being sought, unless such indemnifying party has
otherwise received actual notice of the action at least thirty (30) days before
any answer or response is required by the indemnifying party in its defense of
such action, but will not relieve it from any liability that it may have to any
indemnified party otherwise than under this Section 8. If any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof; provided, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and either (i) the indemnifying party or parties agree, or
(ii) in the opinion of counsel for the indemnified parties, representation of
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
both the indemnifying party or parties and the indemnified party or parties by
the same counsel is inappropriate under applicable standards of professional
conduct because of actual or potential conflicting interests between them, then
the indemnified party or parties shall have the right to select separate counsel
to assume such legal defense and to otherwise participate in the defense of such
action. The indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed counsel in connection with the assumption
of legal defenses in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel in each jurisdiction
approved by indemnified parties (whether pursuant to this Agreement or other
agreements if the claim relates to the same or similar allegations) holding a
majority of the shares as to which indemnification is claimed), (ii) the
indemnifying party shall not have employed counsel to represent the indemnified
party within a reasonable time after notice of commencement of the action, or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event shall an
indemnifying party be liable under this Section 8 for any settlement, effected
without its written consent, which consent shall not be unreasonably withheld,
of any claim or action against an indemnified party.
(d) If the indemnification provided for in this Section 8 shall for any reason
be unavailable to an indemnified party under Section 8(a) and (b) of these
Registration Rights Provisions in respect of any Losses, then, in lieu of the
amount paid or payable under said Section 8(a) or (b), the indemnified party and
the indemnifying party under said Section 8(a) or (b) shall contribute to the
aggregate Losses (including legal or other expenses reasonably incurred in
connection with investigating the same) (i) in such proportion as is appropriate
to reflect the relative fault of the Issuer and the prospective sellers of
Registrable Common Stock covered by the registration statement which resulted in
such Loss or action in respect thereof, with respect to the statements,
omissions or action which resulted in such Loss or action in respect thereof, as
well as any other relevant equitable considerations, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Issuer, on the one hand, and such prospective sellers, on the other hand,
from their sale of Registrable Common Stock; provided, that, for purposes of
this clause (ii), the relative benefits received by any prospective sellers
shall be deemed not to exceed (and the amount to be contributed by any
prospective seller shall not exceed) the amount received by such seller. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The obligations, if
any, of the Selling Holders of Registrable Common Stock to contribute as
provided in this Section 8(d) are several in proportion to the relative value of
their respective Registrable Common Stock covered by such registration statement
and not joint. In addition, no Person shall be obligated to contribute hereunder
any amounts in payment for any settlement of any action or Losses effected
without such Person's consent.
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EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
(e) The indemnification and contribution required by this Section 8 shall be
made by periodic payments of the amount thereof during the course of any
investigation or defense, as and when bills are received or any Loss is
incurred.
9. Registration Rights to Others. If the Issuer shall at any time hereafter
provide to any holder of any securities of the Issuer rights with respect to the
registration of such securities under the Securities Act or the Exchange Act,
such rights shall not be in conflict with or adversely affect any of the rights
provided in these Registration Rights Provisions to the Holders of Registrable
Common Stock.
10. Rule 144 and Rule 144A. At such time as the Holders become eligible to sell
Applicable Securities pursuant to Rule 144, the Issuer shall take all actions
required to be taken on the part of the Issuer in order to enable Holders to
sell Registrable Common Stock without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, (b) Rule 144A
under the Securities Act, as such Rule may be amended from time to time, or (c)
any similar rules or regulations hereafter adopted by the Commission, including,
without limiting the generality of the foregoing, filing on a timely basis all
reports required to be filed under the Exchange Act.
11. Amendments and Waivers. Any provision of these Registration Rights
Provisions may be amended, modified or waived if, but only if, the written
consent to such amendment, modification or waiver has been obtained from (i)
except as provided in clause (ii) below, the Holder or Holders of at least 66
2/3% of the shares of Registrable Common Stock affected by such amendment,
modification or waiver and (ii) in the case of any amendment, modification or
waiver of any provision of Section 4 of these Registration Rights Provisions or
this Section 11, or as to the percentages of Holders required for any amendment,
modification or waiver, or any amendment, modification or waiver which adversely
affects any right and/or obligation under these Registration Rights Provisions
of any Holder, the written consent of each Holder so affected.
12. Nominees for Beneficial Owners. In the event that any Registrable Common
Stock is held by a nominee for the beneficial owner thereof, the beneficial
owner thereof may, at its election in writing delivered to the Issuer, be
treated as the Holder of such Registrable Common Stock for purposes of any
request or other action by any Holder or Holders pursuant to these Registration
Rights Provisions or any determination of the number or percentage of shares of
Registrable Common Stock held by any Holder or Holders contemplated by these
Registration Rights Provisions. If the beneficial owner of any Registrable
Common Stock so elects, the Issuer may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Common Stock.
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EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
13. Assignment. The provisions of these Registration Rights Provisions shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors and permitted assigns. Any Holder may assign to any Transferee
of its Registrable Common Stock its rights and obligations under these
Registration Rights Provisions (except with respect to shares of Registrable
Common Stock sold pursuant to Rule 144 under the Securities Act, under any
registration statement or otherwise in a manner such that the shares are no
longer subject to restrictions from further public resale under the Securities
Act without regard to volume limitations), provided that the Issuer shall
receive written notice of such transfer and that such Transferee shall agree in
writing with the parties hereto prior to the assignment to be bound by these
Registration Rights Provisions as if it were an original party hereto, whereupon
such assignee shall for all purposes be deemed to be a Holder under these
Registration Rights Provisions. Except as provided above or otherwise permitted
by these Registration Rights Provisions, neither these Registration Rights
Provisions nor any right, remedy, obligation or liability arising hereunder or
by reason hereof shall be assignable by any Holder without the prior written
consent of the other parties hereto. The Issuer may not assign these
Registration Rights Provisions or any right, remedy, obligation or liability
arising hereunder or by reason hereof except in the case of a merger,
consolidation or sale of all or a substantial part of its business.
14. Miscellaneous.
(a) Each of the parties hereto shall execute such documents and other papers and
perform such further acts as may be reasonably required or desirable to carry
out the provisions of these Registration Rights Provisions and the transactions
contemplated hereby.
(b) The headings in these Registration Rights Provisions are for convenience of
reference only and shall not control or affect the meaning or construction of
any provisions of these Registration Rights Provisions.
(c) The Issuer will not hereafter enter into any agreement which is inconsistent
with the rights granted to the Holders in these Registration Rights Provisions.
(d) Each Holder, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under these Registration Rights Provisions. The Issuer agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of these Registration Rights
Provisions and the Issuer hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(e) Notwithstanding any provision of these Registration Rights Provisions,
neither the Issuer nor any other party hereto shall be required to take any
action which would be in violation of any applicable Federal or state securities
law. The invalidity or unenforceability of any provision of these Registration
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.8 AGREEMENT DATED NOVEMBER 15, 2002
Rights Provisions in any jurisdiction shall not affect the validity, legality or
enforceability of any other provision of these Registration Rights Provisions in
such jurisdiction or the validity, legality or enforceability of these
Registration Rights Provisions, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.9 Termination Agreement
TERMINATION AGREEMENT
AGREEMENT, dated as of the 7th day of March, 2002, by and between The Finx
Group, Inc., a Delaware corporation with offices at 21634 Club Vista Terrace,
Boca Raton, Florida 33433 ("Finx"), and Trans Global Services, Inc., a Delaware
corporation with offices at 1393 Veterans Memorial Highway, Hauppauge, New York
11788 ("Trans Global").
W I T N E S S E T H:
WHEREAS, Trans Global and Finx are parties to an agreement dated November
15, 2001, as amended, which agreement, as so amended is referred to as the
"November Agreement," pursuant to which Finx agreed to make an investment in
Trans Global; and
WHEREAS, Finx has made an investment of $250,000 in Trans Global; and
WHEREAS, the parties desire to terminate the November Agreement on and in
accordance with the provisions of this Agreement;
WHEREFORE, the parties hereto agree as follows:
12. Return and Cancellation of Shares. Contemporaneously with the execution of
this Agreement:
(a) Trans Global is hereby instructing Asher S. Levitsky to deliver to American
Stock Transfer & Trust Company ("AST"), for cancellation, stock certificate no.
DE 0932, representing 2,500,000 shares of Finx' common stock, par value $.01 per
share, issued in the name of Trans Global.
(b) Finx is hereby instructing Asher S. Levitsky to deliver to AST for
cancellation, stock certificate no. TG 0614, representing 5,000,000 shares of
Trans Global's common stock, par value $.01 per share ("Trans Global Common
Stock"), issued in the name of The Finx Group Inc.
(c) Finx has previously advised Trans Global that it held a certificate to
purchase 4,000,000 shares of Trans Global Common Stock in the name of Finx.
However, Finx does not believe that such shares were issued, and, in the event
that a certificate for such shares was issued, Finx will deliver the stock
certificate to Trans Global for delivery of such shares to AST for cancellation
for no consideration, and Finx will indemnify Trans Global and hold it harmless
from and against any loss, liability, damage or expense which Trans Global may
incur as a result of such issuance.
(d) Trans Global shall have no obligation to deliver any shares of preferred
stock to Finx or any designee of Finx.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.9 Termination Agreement
13. In consideration for the investment by Finx of $250,000 in Trans Global, the
following shares of Trans Global Common Stock (the "Retained Shares")
certificates may be retained by the designees of Finx named below.
Name Number of Shares
Lewis S. Schiller 500,000
Grazyna B. Wnuk 250,000
Carol Schiller 62,500
Blake Schiller 62,500
Doug Schiller 62,500
Linda Schiller 62,500
1,000,000
14. Representations and Warranties of Finx. Finx represents and warrants to
Trans Global as follows:
(a) During the period from December 21, 2001 until the date of this Agreement,
neither Finx nor any individual who is or was an officer or director of both
Finx and Trans Global has issued, or directly or indirectly, caused the issuance
of any shares of Trans Global Common Stock (other than the shares referred to in
Sections 1(c) and 2 of this Agreement) or options to purchase any shares of
Trans Global Common Stock other than the following:
(i) An option to purchase 2,500,000 shares of Trans Global Common Stock at
an exercise price of $.05 per shares was issued to Frank Speight, which option
was exercised on or about February 1, 2002, and 2,500,000 shares were issued
upon such exercise. On or about February 28, 2002, 2,300,000 shares of Trans
Global Common Stock were returned to Trans Global for cancellation. The exercise
price of the shares has not been received by Trans Global, and Finx will use its
best efforts to obtain for Trans Global as soon as possible payment of the
$10,000 exercise price for the 200,000 shares which were not cancelled.
(ii) An option to purchase 500,000 shares of Trans Global Common Stock at
an exercise price of $.05 per shares was issued to Douglas E. Ashman, which
option was exercised on or about February 5, 2002, and 500,000 shares were
issued upon such exercise. The exercise price was paid to Trans Global, and Mr.
Ashman lent Trans Global $25,000, to be repaid from Trans Global's positive cash
flow from operations or an equity financing as set forth in Trans Global's 9%
promissory note dated March 7, 2002. Except for the loan to Trans Global, Trans
Global has no further or ongoing obligation to Mr. Ashman and is not party to
any agreement with Mr. Ashman.
(iii) An option to purchase 100,000 shares of Trans Global Common Stock at
an exercise price of $.05 per shares was issued to Anton Lee Wingeier, which
option was exercised on or about February 5, 2002, and 100,000 shares were
issued upon such exercise. The exercise price was paid through services rendered
as reflected in the invoices previously submitted to Trans Global in the amount
of $6,022.50, and Mr. Wingeier has agreed to write off any amount in excess of
$5,000. Trans Global has no further or ongoing obligation to Mr. Wingeier and is
not party to any agreement with Mr. Wingeier.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.9 Termination Agreement
(iv) On or about February 20, 2002, the exercise price of the warrant to
purchase 300,000 shares of Trans Global Common Stock held by Steven Drescher or
an affiliate of Mr. Dreschser was reduced to $.01 per share, and the warrants
were amended to provide for cashless exercise, in full satisfaction of all of
Trans Global's obligations to Mr. Drescher and his affiliates and S.G. Martin
Securities, LLP and its affiliates. Pursuant to the cashless exercise
provisions, the warrant was exercised, and 297,000 shares of Trans Global Common
Stock were issued.
(v) Neither Finx nor any of its officers or directors knows of any
obligation of Trans Global which was incurred since December 21, 2001 which was
not disclosed in writing to Mr. Joseph Sicinski.
(vi) No other options were granted either pursuant to the 2002
Non-Qualified Stock Option Plan or otherwise.
(b) The issuance of all of the options and shares of Trans Global Common Stock
described in Section 3(a) of this Agreement were made in full compliance with
the Securities Act of 1933, as amended, and all applicable Federal and state
laws relating to the issuance of securities.
(c) Finx understands that Trans Global will seek to make an acquisition or
financing following the consummation of the transactions described in this
Agreement, but no assurance has been given that it can or will be successful in
such negotiations.
(d) All corporate action necessary for the execution and delivery of this
Agreement by Finx and the performance by Finx of its terms has been taken, and
this Agreement constitutes the valid, binding and enforceable obligation of
Finx.
(e) The Retained Shares were acquired by the persons named in Section 2 of this
Agreement the account of such persons, for investment and not with a view to the
sale or distribution thereof, and the holders of the Retained Shares do not have
any registration rights with respect to such shares. None of the holders of the
Retained Shares will transfer, encumber or otherwise dispose of any of the
Retained Shares except in compliance with applicable Federal and state
securities laws. The certificates for the Retained Shares bear Trans Global's
standard investment legend. Finx shall take all action necessary to insure that
the persons holding the Retained Shares comply with the provisions of this
Section 3(e).
15. Representations and Warranties of Trans Global. Trans Global represents and
warrants to Finx as follows:
(a) All corporate action necessary for the execution and delivery of this
Agreement by Trans Global and the performance by Trans Global of its terms has
been taken, and this Agreement constitutes the valid, binding and enforceable
obligation of Trans Global.
(b) The Retained Shares are duly and validly authorized and issued, fully paid
and non-assessable.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.9 Termination Agreement
16. Mutual Release.
(a) Trans Global does hereby unconditionally and irrevocably release and
discharge Finx, its officers, directors and counsel and their respective heirs,
executors, successors and assigns (the "Finx Releasees") from any and all
actions, causes of action, suits, debts, sums of money, accounts, reckonings,
notes, bonds, warrants, bills, specialties, covenants, contracts, controversies,
agreements, liabilities, obligations, undertakings, promises, damages, claims
and demands whatsoever, in law, admiralty or equity, whether known or unknown,
foreseen or unforeseen, liquidated or unliquidated, whether asserted personally,
derivatively, or in any other capacity, which Trans Global or its successors and
assigns had, now have or may in the future can, shall or may have against the
Finx Releasees, for, upon or by reason of any matter, cause or thing whatsoever
from the beginning of the world to the date of this Agreement, except that Trans
Global does not release any Finx Releasee from any of his, her or its
obligations under the this Agreement or for any breaches of the representations
and warranties contained in this Agreement.
(b) Finx does hereby unconditionally and irrevocably release and discharge Trans
Global, its officers, directors and counsel and their respective heirs,
executors, successors and assigns (the "TGSI Releasees") from any and all
actions, causes of action, suits, debts, sums of money, accounts, reckonings,
notes, bonds, warrants, bills, specialties, covenants, contracts, controversies,
agreements, liabilities, obligations, undertakings, promises, damages, claims
and demands whatsoever, in law, admiralty or equity, whether known or unknown,
foreseen or unforeseen, liquidated or unliquidated, which Finx or its successors
and assigns ever had, now have or may in the future can, shall or may have
against any TGSI Releasee, for, upon or by reason or any matter, cause or thing
whatsoever from the beginning of the world to the date of this Agreement;
provided, however, that Finx does not release any TGSI Releasee from any of his,
her or its obligations under the this Agreement or for any breaches of the
representations and warranties contained in this Agreement.
17. Resignation. The parties acknowledge that Lewis S. Schiller has resigned as
a director and officer of Trans Global effective on March 4, 2002.
18. Miscellaneous.
(a) Any notice, request, demand, statement, authorization, approval or consent
made hereunder shall be in writing and signed by the party giving such notice,
and delivered personally or sent by overnight courier, mail or messenger against
receipt thereof or sent by registered or certified mail, return receipt
requested, or by facsimile transmission or similar means of communication if
receipt is confirmed or if transmission of such notice is confirmed by mail or
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.9 Termination Agreement
overnight courier service as provided in this Section 7 (a). Notices shall be
deemed to have been received on the date of receipt or the date delivery is
refused. Notices shall be sent to the parties at the addresses set forth in the
beginning of this Agreement, to the attention of the person signing this
Agreement. Notice by facsimile transmission shall be sent to Trans Global at
(631) 724-0039, and to Finx at (561) 447-9896. Either party may, by like notice,
change the address, person or fax number to which notice shall be sent.
(b) This Agreement shall be binding upon the parties hereto and their respective
successors and assigns.
(c) This Agreement shall be construed in accordance with and governed by the
laws of the State of New York applicable to agreements executed and to be
performed wholly within such State, without regard to principles of conflicts of
laws. Each party hereby (i) irrevocably consents and agrees that any legal or
equitable action or proceeding arising under or in connection with this
Agreement may be brought in any federal or state court situated in New York or
Suffolk County, New York, (ii) irrevocably submits to and accepts, with respect
to its properties and assets, generally and unconditionally, the in personam
jurisdiction of the aforesaid courts and waives the defense of an inconvenient
forum to the maintenance of such action or proceeding, and (iii) agrees that
service in any such action may be made either (A) by mailing or delivering a
copy of such process to such party in the manner set forth in Section 7(a) of
this Agreement, other than by facsimile transmission, or (B) by any other manner
permitted by law.
(d) Neither any failure nor any delay on the part of either party in exercising
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise of any other right, power or privilege.
(e) No modification, amendment or waiver of any provision of this Agreement,
shall be effective unless the same shall be in writing and signed by both
parties, in the case of a modification or amendment, or by the party granting
the waiver, in the case of a waiver, expressly refers to this Agreement and
states that it is a modification, amendment or waiver, as the case may be. Any
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.
(f) In case any one or more of the provisions contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
(g) This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one instrument.
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT 10.9 Termination Agreement
(h) Section headings used herein are for convenience of reference only and are
not to affect the construction of or be taken into consideration in interpreting
this Agreement.
(i) All references to any gender shall be deemed to include the masculine,
feminine or neuter gender, the singular shall include the plural, and the plural
shall include the singular.
IN WITNESS WHEREOF, the parties have executed this Agreement or has caused
this Agreement to be duly executed by its duly authorized officer, all as of the
day and year first above written.
THE FINX GROUP, INC.
By:_____________________________
Lewis S. Schiller, President and CEO
TRANS GLOBAL SERVICES, INC.
By:_____________________________
Joseph G. Sicinski, President