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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2002 Commission File Number 0-23382
TRANS GLOBAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1544008
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1393 Veterans Memorial Highway, Hauppauge, NY 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 724-0006
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares of common stock outstanding as of August 13, 2002: 9,480,000
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TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
INDEX
Part 1 - Financial Information:
Item 1. Financial Statements: Page No.
---------
Report of Independent Certified Public Accountants 4
Balance Sheets as of June 30, 2002 (unaudited)
and December 31, 2001. 5-6
Consolidated Statements of Operations-
Three and Six Months Ended June 30, 2002 (unaudited)
and June 30, 2001(unaudited). 7
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 2002 (unaudited)
and June 30, 2001 (unaudited). 8-9
Consolidated Statement of Stockholders' Equity - 10
Six Months Ended June 30, 2002 (unaudited)
Notes to Consolidated Financial Statements 11-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-16
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 17
Independent Accountant's Report
To the Stockholders and Board of Directors of Trans Global Services, Inc.
Hauppauge, New York
We have reviewed the accompanying consolidated balance sheet of Trans Global
Services, Inc. and its subsidiaries as of June 30, 2002, and the related
consolidated statements of operations for the three and six month periods ended
June 30, 2002 and 2001, the related consolidated statement of stockholders'
equity for the six month period ended June 30, 2002 and the related consolidated
statements of cash flows for the six month periods ended June 30, 2002 and 2001.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has suffered a net loss of
approximately $1,349,000 for the six months ended June 30, 2002 and has a
working capital deficiency of approximately $586,000 and an accumulated deficit
of approximately $10,900,000 as of June 30, 2002. Managements plans in regard to
these matters are also described in Notes 3 and 7. The consolidated financial
statements do not include any adjustments which might arise from the outcome of
these uncertainties.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 2001, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended [ not presented herein]; and in our report dated
February 23, 2002, we expressed an unqualified opinion on those consolidated
financial statements.
MOORE STEPHENS, P. C.
Certified Public Accountants.
August 13, 2002
Cranford, New Jersey
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------
June 30, December 31,
2002 2001
(Unaudited)
Assets
Current Assets:
Cash $ 22,971 $ 58,695
Accounts Receivable- Net of allowance
for doubtful accounts of $62,500 1,753,125 2,116,793
Notes Receivable- i-engineering.com, Inc. 0- 22,448
Prepaid Expenses and Other Current Assets 72,949 52,781
-------- ---------
Total Current Assets 1,849,045 2,250,717
Property and Equipment-Net 103,656 92,644
Other Assets:
Customer Lists 1,399,431 1,500,000
Other Assets 49,739 54,922
--------- ---------
Total Other Assets $ 1,449,170 $ 1,554,922
--------- ---------
Total Assets $ 3,401,871 $ 3,898,283
============= ===========
See Notes to Consolidated Financial Statements
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------
June 30, December 31,
2002 2001
(Unaudited)
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable and Accrued Expenses $ 361,729 $ 506,065
Accrued Payroll and Related Taxes and Expenses 687,348 504,318
Loans Payable, Asset-based Lender 1,304,875 1,527,847
Notes Payable- Outside Investors 80,819 77,819
--------- ---------
Total Current Liabilities 2,434,771 2,616,049
Commitments and Contingencies - -
Stockholders' Equity:
Common Stock, $.01 Par Value, 25,000,000
Shares Authorized. 2002: 7,600,000 issued,
6,130,000 outstanding, 2001: 5,854,295
issued, 4,384,295 outstanding. 76,000 58,543
Capital in Excess of Par Value 14,765,125 13,837,173
Accumulated Deficit (10,899,682) ( 9,551,077)
----------- ------------
3,941,443 4,344,639
Less:
Notes Receivable Related Parties ( 3,531) ( 91,593)
Treasury Stock, at cost
- 1,470,000 shares (2,970,812) ( 2,970,812)
----------- ------------
Total Stockholders' Equity 967,100 1,282,234
---------- -----------
Total Liabilities and Stockholders' Equity $ 3,401,871 $ 3,898,283
============ ===========
See Notes to Consolidated Financial Statements
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- -----------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Revenues $ 5,532,220 $7,274,485 $10,738,672 $13,952,678
Cost of Services Provided 5,116,301 6,594,798 9,982,294 12,795,551
---------- ---------- ---------- ----------
Gross Profit 415,919 679,687 756,378 1,157,127
Selling, General and
Administrative Expenses 658,033 737,009 1,201,312 1,505,993
Amortization of Intangibles 50,285 68,382 100,570 136,764
Cost of Issuance of Below
Market Options -0- -0- 725,000 -0-
--------- -------- ---------- ---------
Total Operating Expenses 708,318 805,391 2,026,882 1,642,757
Operating Loss ( 292,399) ( 125,704) ( 1,270,504) ( 485,630)
Other Income (Expenses):
Interest Expense ( 63,302) ( 57,039) ( 127,876) ( 100,239)
Interest Income -0- 2,306 -0- 6,729
Other Income (Expense) 54,344 ( 7,213) 49,775 ( 8,853)
--------- -------- ---------- ----------
Total Other (Expenses)-Net ( 8,958) ( 61,946) ( 78,101) ( 102,363)
---------- --------- ---------- ----------
Net Loss $ ( 301,357) $( 187,650) $(1,348,605) $( 587,993)
=========== ========== =========== ==========
Basic and Diluted
Loss Per Share $ ( .05) $ ( .06) $( .25) $( .20)
--------- -------- ----------- ----------
Weighted Average
Number of Shares 5,722,130 3,300,275 5,370,057 2,961,875
See Notes to Consolidated Financial Statements
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------------------
Six Months Ended
June 30,
2 0 0 2 2 0 0 1
Operating Activities:
Net (Loss) $(1,348,605) $ (587,993)
Adjustments to Reconcile Net (Loss)
to Net Cash (Used in) Provided By
Operations:
Depreciation and Amortization 130,452 170,627
Cost of Issuance of Below Market Options 725,000 -0-
Variable Price Options -0- 3,827
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Assets:
Accounts Receivable-Net 363,668 (797,244)
Prepaid Expenses and Other Current Assets ( 20,168) 2,908
(Decrease) Increase in Liabilities:
Accounts Payable and Accrued Expenses 5,664 ( 33,462)
Accrued Payroll and Related Taxes and Expenses 183,030 518,868
--------- ---------
Total Adjustments 1,387,646 (134,476)
--------- --------
Net Cash - Operating Activities 39,041 (722,469)
--------- ---------
Forward
See Notes to Consolidated Financial Statements
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------------------
Six Months Ended
June 30,
2002 2001
Net Cash -
Operating Activities Forwarded $ 39,041 $ (722,469)
Investing Activities:
Capital Expenditures ( 2,368) ( 39,131)
Repayments from i-engineering.com -0- 193,272
Other, net ( 10,900) ( 2,255)
--------- ----------
Net Cash - Investing Activities ( 13,268) 151,886
Financing Activities:
Net Payments from (to)
Asset-Based Lender ( 222,972) 675,728
Proceeds from Exercise of Options 70,413 -0-
Increase/(Repayment) of Note Payable
-outside investors 3,000 ( 75,389)
Collection of Notes Receivable, Related
Parties Stock Option Plan 88,062 -0-
---------- -----------
Net Cash - Financing Activities (61,497) 600,339
---------- ----------
Net Increase (Decrease) in Cash ( 35,724) 29,756
Cash - Beginning of Year 58,695 58,463
---------- ----------
Cash - June 30 $ 22,971 $ 88,219
=========== ===========
Supplemental Disclosures of Cash
Flow Information:
Interest $ 124,876 $ 95,735
Income Taxes $ -0- $ -0-
Supplementary Disclosure of Non Cash Investing and Financing Activities during
the six months ended June 30, 2002 and 2001.
Six Months Ended June 30, 2002
Reduced exercise price of outstanding warrants
in exchange for existing debt $ 150,000 $ -0-
Received capital assets in exchange for
cancellation of notes and accounts receivable $ 38,527 $ -0-
Six Months Ended June 30, 2001 - None
See Notes to Consolidated Financial Statements
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity (UNAUDITED)
- -----------------------------------------------------------------------------
Shares Amounts
Common Stock $.01 Par Value, Authorized
25,000,000 Shares
Balance - December 31, 2001 5,854,295 $ 58,543
Shares Issued on Exercise of Below Market Options 800,000 8,000
Shares Issued on Exercise of Stock Options 648,705 6,487
Shares Exchanged for Existing Debt 297,000 2,970
--------- ------
Balance June 30, 2002 7,600,000 $ 76,000
========= ======
Capital in Excess of Par Value
Balance - December 31, 2001 $ 13,837,173
Issuance and Exercise of Below Market Options 742,000
Warrants Exercised in Exchange for Existing Debt 147,030
Exercise of Stock Options 38,922
------------
Balance - June 30, 2002 $ 14,765,125
============
Accumulated Deficit
Balance - December 31, 2001 $ (9,551,077)
Net Loss for the Six Months Ended June 30, 2002 (1,348,605)
-----------
Balance - June 30, 2002 $(10,899,682)
==========
Notes Receivable; Related Parties
Balance - December 31, 2001 $ ( 91,593)
Collection of Notes Receivable 88,062
----------
Balance - June 30, 2002 $ ( 3,531)
==========
Treasury Stock
Balance - December 31, 2001 1,470,000 $ (2,970,812)
Balance - June 30, 2002 1,470,000 $ (2,970,812)
Total Stockholders' Equity
Balance - December 31, 2001 $ 1,282,234
Issuance and Exercise of Below Market Options 750,000
Warrants Exercised in Exchange for Existing Debt 150,000
Collection of Notes Receivable, Related Parties
Stock Option Plan 88,062
Exercise of Stock Options 45,409
Net Loss for the Six Months Ended
June 30, 2002 ( 1,348,605)
------------
Balance - June 30, 2002 $ 967,100
============
See Notes to Consolidated Financial Statements
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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 aerospace and aircraft
industries.
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (consisting of normal recurring accruals) necessary to
present fairly the financial position of the Company as of June 30, 2002 and the
results of its operations for the three and six months ended June 30, 2002 and
2001. These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto together with
management's discussion and analysis of financial condition and results of
operations contained in the Company's Form 10-K for the year ending December 31,
2001. The results of operations for the three and six months ended June 30, 2002
are not necessarily indicative of the results for the entire year or any future
interim period.
(2) Summary of Significant Accounting Policies
The accounting policies followed by the Company are set forth in Note 2 to the
Company's consolidated financial statements included in the Company's Form 10-K
for the year ended December 31, 2001.
(3) Going Concern
The accompanying consolidated 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 six months ended June 30, 2002, the Company has a loss from operations, a
working capital deficiency of approximately $586,000, and an accumulated
deficit, that raise substantial doubt about the Companys ability to continue as
a going concern. Management is raising additional financing through equity
issuances and intends to develop additional revenues through the acquisition of
temporary staffing contracts from other staffing companies (See Note 7
Subsequent Event). The consolidated 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) Loan Payable - Asset Based Lender
On October 16, 2001, the Company entered into a one year agreement with an
asset- based lender (factor) which Agreement shall be deemed automatically
renewed for successive periods of one year; subject to the right of either party
to terminate it at any time upon at least 90 days written notice. Based upon the
agreement described in Note 7, on July 12, 2002, the Company advised the
asset-based lender that it would not be renewing the existing agreement.
Pursuant to this Agreement, the Company can borrow up to 85% of its qualified
accounts receivables at an interest rate of prime plus 2.5% plus a fee of .7% of
the receivables factored with a minimum monthly charge of $12,000. The maximum
availability under this credit agreement is $2.5 million, and at June 30, 2002,
the maximum available under the borrowing base formula was $1,490,000.
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(5) 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
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 consolidated
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 the
Companys chief executive officer and chairman of the Board of Directors from
December 2001 until March 2002.
(6) Stock Options and Warrants
In January 2002, the Companys board of directors approved the 2002 Non-Qualified
Stock Option Plan, pursuant to which non-qualified stock options could be
granted up to 3,500,000 shares. Pursuant to this plan, the then 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, which shares remain available for grant under the plan.
As a result of the grant of the options at an exercise price which was below the
then current market price, the Company recognized a non-cash charge to earnings
of $725,000, on the 800,000 shares of the Companys Common Stock issued, in the
first quarter of 2002.
In February 2002, the then chief executive officer reduced the exercise price of
certain warrants, previously issued to an outside consultant, 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 in exchange for debt currently due the holder of $150,000. As a
result, the Company issued 297,000 shares of Common Stock.
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
On April 12, 2002, the board of directors terminated the 1998 and 1999 incentive
stock option plans. At such date, there were outstanding options to purchase
20,000 shares of Common Stock, which remain outstanding. On that date, the board
of directors granted options to purchase 758,705 shares of Common Stock under
the Companys 2002 Non-Qualified Stock Option Plan to employees at $.07 per
share, which was the fair market value on such date. In May and June 2002
options to purchase 648,705 shares of Common Stock were exercised. At June 30,
2002 options to purchase 110,000 shares of common stock remain outstanding under
the Non- Qualified Stock Option Plan.
(7) Subsequent Event. Potential Change In Control
In July 2002, the Company sold 1,000,000 shares of Common Stock to Phoenix
Marketing Services, Inc. (Phoenix) an unaffiliated company, for a purchase price
of $100,000. The agreement was entered into in anticipation of a more
comprehensive agreement between the two parties, and the president of the
Company agreed that if the subsequent transaction was not consummated, he would
purchase the shares for $100,000.
In August 2002, the Company and NAG Financial, LLC (NAG), a Texas limited
liability company associated with Phoenix, entered into an agreement pursuant to
which:
* The Company agreed to sell to NAG 7,000,000 shares of Common Stock for
$740,000, of which NAG purchased 2,350,000 for $250,000 on August 13, 2002, and
agreed to purchase 1,150,000 shares for $120,000 by August 22, 2002 and the
remaining 3,500,000 shares in two equal installments on November 12, 2002 and
February 12, 2003.
* Phoenix and NAG agreed to transfer or cause its affiliates to transfer to
the Company contracts or contract rights for which the Company would pay a 2%
commission, up to a maximum of $1,000,000 on revenue generated from the
contracts or contract rights and a maximum of 2,000,000 shares of a newly
created series of preferred stock, designated the Series A Convertible Preferred
Stock, which would be issued at the rate of one share for each $.21 of gross
profit generated from the contracts and contract rights. Each share of Series A
Preferred Stock is convertible into two (2) shares of Common Stock. The Company
is authorized to issue a maximum of 5,000,000 Preferred Shares.
* Until the earlier of the date NAG makes the third payment or November 12,
2002, Messrs. Joseph G. Sicinski and Joseph E. Link agreed to vote their shares
of Common Stock for the election of the board of directors nominees for director
and on all other matters in accordance with instructions from NAG.
In connection with the August agreement, the Company elected Art Grider, who is
president of Phoenix, as chief executive officer and president, Mr. Grider was
also elected a director. The Company contemplates that additional directors will
be elected to the board. As a result of the issuance of the 3,350,000 shares to
Phoenix and NAG pursuant to the July and August agreements, and NAGs agreement
to purchase an additional 4,650,000 shares of common stock, there may be deemed
to be a change of control of the Company. The 3,350,000 shares of Common Stock
issued to Phoenix and NAG in July and on August 13, 2002, represented 35.3% of
the outstanding Common Stock after giving effect to the issuance of such shares.
Upon the purchase by NAG of the remaining 4,650,000 shares, Phoenix and NAG will
own 56.6% of our Common Stock. As a result of the change of control, certain
available net operating loss carryforwards may be limited in accordance with IRS
Regulations.
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
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, 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 2002, Social Security taxes
are payable on the first $84,900 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.
Three Months Ended June 30, 2002 and 2001
Our revenue, derived principally from the aircraft and aerospace industries,
totaled $5.5 million for the three month period ended June 30, 2002 (the "June
2002 period"), a decrease of 25% from the revenue of $7.3 million for the three
month period ended June 30, 2001 (the "June 2001 period"). This decrease is
attributable to a decline in the requirements from our existing clients.
Our gross margins for the June 2002 period and the June 2001 period were 7.5%
and 9.3%, respectively. The decrease in gross margin during the June 2002 period
is attributed to the increase in lower margin business from our aircraft and
aerospace clients as well as the loss of higher margin business in the
information technology segment of our business.
Selling, general and administrative expenses declined approximately $79,000, or
10.7% from $737,000 in the June 2001 period to $658,000 in the June 2002 period.
The decline in the selling, general and administrative expenses reflects
principally the effect of our continued cost reduction program.
As a result of the continued reduced level of revenue and the increase in
services generating a lower gross margin, our gross profit was not sufficient to
cover our selling, general and administrative expenses in either the June 2002
period or the June 2001 period, resulting in an operating loss of $292,000 for
the June 2002 period, as compared with an operating loss of $126,000 for the
June 2001 period.
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations (continued)
Interest expense during the June 2002 period increased by 11% from the June 2001
period. This increase is primarily attributable to the higher interest expense
associated with the Companys having to utilize the financing services of an
asset- based lender rather than a commercial bank.
As a result of the foregoing, we incurred a net loss of approximately $301,000,
or $.05 per share (basic and diluted), for the June 2002 period, compared to a
loss of approximately $188,000, or $.06 per share (basic and diluted) for the
June 2001 period.
Six Months Ended June 30, 2002 and 2001
We had revenues of $10.7 million for the six months ended June 30, 2002,
reflecting a 23.0% decrease over the revenues of $14.0 million for the same
period one year earlier. During the six months ended June 30, 2002 our four
largest customers, Lockheed-Martin, Bell Helicopter, Boeing and Gulfstream
Aerospace accounted for approximately 72% of our overall revenue. The gross
margin decreased to 7.0% in the six months ended June 30, 2002 form 8.3% for the
six months ended June 30, 2001. This decrease in gross margin is attributed to
the increase in lower margin business for our aircraft and aerospace clients as
well as the loss of high margin business in the Information Technology segment
of our business.
Selling, general and administrative expenses decreased by $305,000, or 20.2%, in
the six months ended June 30, 2002 compared to the six months ended June 30,
2001. The decline reflects principally the effects of our continued cost
reduction program.
Interest expense during the current six month period increased by approximately
$28,000 or 28.0% compared to the six months ended June 30, 2001. This increase
is primarily attributable to the higher interest expense associated with the
Companys having to utilize the financing services of an asset-based lender
rather than a commercial bank.
Liquidity and Capital Resources
As of June 30, 2002, we had a working capital deficiency of approximately
$586,000 compared to a deficiency of $365,000 at December 31, 2001. The most
significant current asset at June 30, 2002 was our accounts receivable, which
were approximately $1.8 million. These receivables were offset by payroll and
related expenses of approximately $1.0 million and $1.3 million due to our
asset-based lender. The payroll and related taxes and expenses relate primarily
to compensation to our contract employees and related taxes, which were paid
during the first week of July 2002. During the six months ended June 30, 2002,
operating activities provided cash flows of approximately $39,000. Our principal
source of cash during the six month period was our credit facility with our
asset-based lender.
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations (continued)
Liquidity and Capital Resources (continued)
On October 16, 2001 we entered into a one year agreement with an asset-based
lender. The agreement continues for successive one-year periods with either
party having the right to terminate it at any time upon at least 90 days written
notice. Under the agreement, we can borrow up to 85% of our qualified accounts
receivables at an interest rate of prime plus 2.5% plus a fee equal to .7% of
the value of the receivables financed with a maximum availability of $2.5
million. The minimum monthly fee on the credit agreement is $12,000 per month.
At June 30, 2002 and December 31, 2001, the maximum available under our
borrowing formula was $1,490,000 and $1,750,000 respectively. On July 12, 2002
the Company advised the asset-based lender that it would not be renewing the
current agreement, based on the agreement with NAG Financial LLC (See Note 7).
The cancellation was based on advice from NAG that it would be able to provide
us with an alternative funding source. However, we are not presently engaged in
any discussions or negotiations with respect to any replacement lender, and, if
we do not find an alternative lender or other source of funds, we may be unable
to continue in business. Because of our poor financial condition, we expect that
it will be difficult for us to find a new lender and we cannot give any
assurance that we will be able to enter into an agreement with another lender.
Our current liabilities include a $81,000 note payable to outside investors. We
intend to pay this balance of the notes when we receive the proceeds from the
sale of equity securities (See Note 7).
We expect that we will continue to incur losses, at least through the third and
fourth quarters of 2002 and losses may continue thereafter. The Company has
raised additional funds through the sale of our equity securities to Phoenix and
NAG, and, as a result of the agreements with Phoenix and NAG and the other
agreements described in Note 7, Phoenix and NAG are the Companys controlling
stockholders. The estimated proceeds from the sale of stock to Phoenix and NAG
will be sufficient to enable us to meet our cash requirements for 2002.
Forward Looking Statements
The statements in this Form 10-Q that are not descriptions of historical facts
may be forward-looking statements that are subject to risks and uncertainties.
In particular, statements in this Form 10-Q that state our intentions, beliefs,
expectations, strategies, predictions or any other statements relating to our
future activities or other future events or conditions are "forward-looking
statements." Forward-looking statements are subject to risks, uncertainties and
other factors, including, but not limited to , those identified under "Risk
Factors", in our Form 10-K for the year ended December 31, 2001 and those
described in Management's Discussion and Analysis of Financial Conditions and
Results of Operations in our Form 10-K and this Form 10-Q, and those described
in any other filings by us with the Securities and Exchange Commission, as well
as general economic conditions, any one or more of which could cause actual
results to differ materially from those stated in such statements.
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Stock Purchase Agreement dated August 12, 2002 between the Registrant and
NAG Financial LLC
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Trans Global Services, Inc.
(Registrant)
/s/ Joseph G. Sicinski
-------------------------
Date: August 13, 2002 Joseph G. Sicinski
(Chief Executive Officer)
/s/ Joseph E. Link
------------------------
Date: August 13, 2002 Joseph E. Link
(Chief Financial Officer)
CERTIFICATION OF CHIEF EXECUTIVE AND FINANCIAL OFFICERS
The undersigned chief executive officer and chief financial officer of the
Registrant do hereby certify that this Quarterly Report on Form 10-Q fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Act
of 1934, as amended, and that the information contained in this report fairly
presents, in all material respects, the financial condition and results of
operations of the Registrant at the dates and for the periods shown in such
report.
/s/ Joseph G. Sicinski
-------------------------
Date: August 13, 2001 Joseph G. Sicinski
(Chief Executive Officer)
/s/ Joseph E. Link
------------------------
Date: August 13, 2001 Joseph E. Link
(Chief Financial Officer)
Date: August 12, 2002
Trans Global Services, Inc.
1393 Veterans Memorial Highway
Hauppauge, NY 11788
Attention of Joseph G. Sicinski, President and CEO
Stock Purchase Agreement
Dear Sirs:
This agreement shall set forth the terms on which NAG Financial LLC, a Texas
Limited Liability Company ("NAG") will purchase from Trans Global Services,
Inc., a Delaware corporation ("Trans Global"), an aggregate of seven million
(7,000,000) shares of Trans Global's common stock, par value $.01 per share
("Common Stock"), and transfer contracts and contract rights to Trans Global or
a wholly-owned subsidiary of Trans Global for which Trans Global will issue to
NAG shares of Series A Convertible Preferred Stock, par value $.01 per share
("Series A Preferred Stock").
1. Purchase of Shares.
(a) NAG hereby agrees to purchase from Trans Global, and Trans Global
agrees to sell to NAG seven million (7,000,000) shares (the "Shares") of Common
Stock for a purchase price (the "Purchase Price") of seven hundred forty
thousand dollars ($740,000).
(b) The Purchase Price shall be paid as follows:
(i) An initial purchase of two million three hundred fifty thousand
(2,350,000) shares of Common Stock shall be made by paying two
hundred fifty thousand dollars ($250,000) by wire transfer not
later than noon, New York City time, on August 13, 2002 to an
account designated by Trans Global.
(ii) A second purchase of one million one hundred fifty thousand
(1,150,000) shares of Common Stock shall be made by paying one
hundred twenty thousand dollars ($120,000) by wire transfer not
later than noon, New York City time, on August 22, 2002 to an
account designated by Trans Global.
(iii)A third purchase of one million seven hundred fifty thousand
(1,750,000) shares of Common Stock shall be made by paying one
hundred eighty five thousand dollars ($185,000) by wire transfer
not later than noon, New York City time on November 12, 2002 to
an account designated by Trans Global.
(iv) A fourth and final purchase of one million seven hundred fifty
thousand (1,750,000) shares of Common Stock shall be made by
paying one hundred eighty five thousand dollars ($185,000) by
wire transfer not later than noon, New York City time on February
12, 2003 to an account designated by Trans Global.
2. Transfer of Contracts and Contract Rights.
(a) During the nine month period commencing on the date of this Agreement, NAG
shall transfer or cause an associate of NAG to transfer to Trans Global or a
wholly-owned subsidiary of Trans Global, as Trans Global shall request,
contracts or contract rights relating to temporary staffing or other similar or
related services. The determination of which contracts or contract rights to
assign shall be made by NAG or an associate, subject to the reasonable approval
by Trans Global. The contracts and contract rights transferred to Trans Global
pursuant to this Section 2(a) are referred to as the "Assigned Contracts."
(b) In consideration for the transfer of the contracts and contract rights
pursuant to Section 2(a) of this Agreement, Trans Global shall issue to NAG a
maximum of two million (2,000,000) shares (the "Preferred Shares") of Trans
Global's Series A Preferred Stock, issuable as hereinafter provided.
(c) Each share of Series A Preferred Stock will be convertible, at any time,
into two (2) shares of Trans Global's Common Stock, and holders of the Series A
Preferred Stock shall have the rights, preferences and privileges, subject to
the limitations, set forth in the certificate of designation (the "Certificate
of Designation") in substantially the form of Exhibit A to this Agreement.
(d) During each Computation Period, Trans Global will issue to NAG one (1) share
of Series A Preferred Stock for each twenty one cents ($.21) of gross profit
generated by the Assigned Contracts during the Computation Period. Gross profit
shall be determined in accordance with generally accepted accounting principles
consistently applied as reflected in the financial statements filed as part of
Trans Global's Form 10-K annual report; provided, however, that the fee payable
pursuant to Section 3 of this Agreement shall be treated as cost of revenue for
purposes of determining gross profit.
(e) "Computation Period" shall mean a six-month period ending on December 31 and
June 30 of each year, commencing with December 31, 2002 and ending with June 30,
2005; provided, however, that the first Computation Period shall be the period
commencing on the Closing Date and ending on December 31, 2002.
(f) The Series A Preferred Stock shall be issued within fifteen (15) business
days after the filing of Trans Global's Form 10-K for the year end and the Form
10-Q for the quarter ending June 30 of the applicable year. Any adjustment
resulting from the audit of Trans Global's financial statements shall be made at
the time of the payment relating to the period ending on the applicable December
31.
3. Payment of Contract Fee.
(a) Trans Global shall pay NAG or its designee a fee (the "Contract Fee")
equal to two percent (2%) of the net collections by Trans Global or its
subsidiary from the Assigned Contracts. The net collections shall mean total
collections less any amounts which Trans Global or its subsidiary is required to
pay to any other parties in respect of such collection for any reason, including
taxes, but excluding taxes measured by the income of Trans Global or its
subsidiary.
(b) The Contract Fee shall be paid within fifteen (15) business days after the
filing of Trans Global's Form 10-K for the year end and the Form 10-Q for the
quarter ending June 30 of the applicable year. Any adjustment resulting from the
audit of Trans Global's financial statements shall be made at the time of the
payment relating to the period ending on the applicable December 31.
(c) In no event shall the total Contract Fee, determined on a cumulative basis,
commencing on the date of this Agreement, exceed one million dollars
($1,000,000). At such time as Trans Global has paid a total of one million
dollars ($1,000,000) in Contract Fees, NAG's right to receive further Contract
Fees shall terminate.
4. Representations and Warranties by Trans Global. Trans Global represents and
warrants to NAG that the Shares have been duly authorized and when issued
pursuant to this Agreement upon payment of the purchase price of the Shares,
will be validly issued, fully paid and non-assessable, and the Preferred Shares,
when issued as provided in this Agreement will be validly issued, fully paid and
non-assessable. The shares of Common Stock issuable upon conversion of the
Preferred Shares will be, upon such issuance, validly issued, fully paid and
non-assessable.
5. Representations and Warranties by NAG. NAG hereby represents, warrants,
covenants and agrees as follows:
(a) NAG understands that the offer and sale of the Shares and the issuance of
the Preferred Shares is being made only by means of this Agreement. NAG
understands that Trans Global has not authorized the use of, and NAG confirms
that he is not relying upon, any other information, written or oral, other than
material contained in this Agreement and the material which Trans Global has
filed with the Securities and Exchange Commission (the "Commission") and Trans
Global's financial statements for the six months period ended June 30, 2002, as
reflected in a draft of Trans Global's Form 10-Q Quarterly Report for the six
months ended June 30, 2002. NAG is aware that the purchase of the Shares and the
acquisition of the Preferred Shares involves a high degree of risk and that NAG
may sustain, and has the financial ability to sustain, the loss of its entire
investment, and that, although NAG has registration rights, it may not be able
to sell any significant number of shares of Common Stock, if any, pursuant to a
registration statement. Furthermore, in subscribing for the Shares, NAG
acknowledges that Trans Global has not made, and NAG is not relying in any
manner upon, any projections or forecasts of future operations.
(b) NAG represents to Trans Global that it is an accredited investor within the
meaning of Rule 501 of the Commission under the Securities Act of 1933, as
amended (the "Securities Act") and he understands the meaning of the term
"accredited investor." NAG further represents that he has such knowledge and
experience in financial and business matters as to enable him to understand the
nature and extent of the risks involved in purchasing the Shares. NAG is fully
aware that such investments can and sometimes do result in the loss of the
entire investment. NAG has engaged his own counsel and accountants to the extent
that he deems it necessary.
(c) NAG is acquiring the Shares pursuant to this Agreement for investment and
not with a view to the sale or distribution thereof, for its own account and not
on behalf of others; has not granted any other person any interest or
participation in or right or option to purchase all or any portion of the
Shares; is aware that the Shares are restricted securities within the meaning of
Rule 144 of the Commission under the Securities Act, and may not be sold or
otherwise transferred other than pursuant to an effective registration statement
or an exemption from registration; and understands and agrees that the
certificates for the Shares shall bear Trans Global's standard investment
legend. NAG understands the meaning of these restrictions.
(d) NAG will not transfer any Shares except in compliance with all applicable
Federal and state securities laws and regulations, and, in such connection,
Trans Global may request an opinion of counsel reasonably acceptable to Trans
Global as to the availability of any exemption.
(e) No broker or finder was involved directly or indirectly in connection with
NAG's purchase of the Shares pursuant to this Agreement. NAG shall indemnify
Trans Global and hold it harmless from and against any manner of loss,
liability, damage or expense, including fees and expenses of counsel, resulting
from a breach of NAG's warranty contained in this Paragraph 5(e).
(f) All of the Assigned Contracts may be assigned to Trans Global or its
subsidiary without the consent or approval of any person other than persons
whose consent has been or will, prior to transfer to Trans Global or its
subsidiary have been, obtained, and the assignment of the Assigned Contracts
will constitute legally valid assignments.
6. Agreement of Joseph G. Sicinski and Joseph E. Link.
(a) Each of Joseph G. Sicinski ("Sicinski") and Joseph E. Link ("Link") agrees
that, until the earlier of (i) November 12, 2002 or (ii) the date on which NAG
shall have made the payment described in Section 1(b)(iii) of this Agreement, he
will vote all shares of Trans Global Common Stock owned by him in favor of the
election of the Board of Director's nominees for director of Trans Global and in
accordance with the instructions of NAG as to any other matters which may be
submitted to stockholders for approval.
(b) Sicinski and Link each agrees that his violation or threatened violation of
the provisions of Section 6(a) of this Agreement shall cause immediate and
irreparable harm to NAG. In the event of any breach or threatened breach of any
of said provisions, each of Sicinski and Link consents to the entry of
preliminary and permanent injunctions by a court of competent jurisdiction
prohibiting them from any violation or threatened violation of such provisions
and compelling him to comply with such provisions.
(c) The obligations under Section 6(a) of this Agreement shall terminate:
(i) If such termination is necessary in order for Trans Global's
Common Stock to be listed on the Bulletin Board Exchange.
(ii) In the event of a termination of the employment of Sicinski or
Link without cause.
7. Termination of Sicinski Obligations. The obligations of Sicinski pursuant to
Section 4 of that agreement dated July 2, 2002 by and between Phoenix Marketing
Services, Inc. and Trans Global is hereby terminated.
8. Registration Rights. NAG shall be entitled to the registration rights set
forth in Exhibit B to this Agreement. Trans Global makes no representation or
warranty as to whether NAG will be able to sell any shares of Common Stock
pursuant to a registration statement, and that if Trans Global is not listed on
the proposed Bulletin Board Exchange, as to which no assurance is given, NAG may
have a difficult time selling any shares of Trans Global Common Stock, whether
pursuant to a registration statement or otherwise.
9. Employment Agreements.
(a) It shall be a condition to the obligation of NAG to make the initial
purchase pursuant to Section 1(b)(i) of this Agreement that Sicinski and Link
shall have entered into amended employment agreements in the form previously
approved by NAG, and neither Sicinski nor Link shall have any other agreement or
understanding, whether written or oral, with respect to their employment or
compensation except for the employment agreements previously approved by NAG,
which approval is indicated by a notation of NAG's consent on the signature page
thereof.
(b) Except for the employment agreements with Sicinski and Link described in
Section 9(a) of this Agreement and an agreement with Deborah Rocklein which was
heretofore approved by NAG, no other persons have employment agreements with
Trans Global.
10. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties and
Sicinski and Link relating to the subject matter hereof, superseding any and all
prior or contemporaneous oral and prior written agreements, understandings and
letters of intent. This Agreement may not be modified or amended nor may any
right be waived except by a writing which expressly refers to this Agreement,
states that it is a modification, amendment or waiver and is signed by all
parties with respect to a modification or amendment or the party granting the
waiver with respect to a waiver. No course of conduct or dealing and no trade
custom or usage shall modify any provisions of this Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
State. This Agreement may not be amended or modified without the approval of a
majority of the directors (other than Art Grider), which approval includes the
approval by the present directors of Trans Global.
(b) All notices provided for in this Agreement shall be in writing 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 as provided in this Section 10(b). Notices shall be deemed to
have been received on the date of delivery or attempted personal delivery if
sent by registered or certified mail, by messenger or by an overnight courier
services which provides evidence of delivery or attempted delivery, of if sent
by telecopier, upon the date of receipt provided that receipt is acknowledge by
the recipient. Notices shall be sent to the attention of the person executing
this Agreement on behalf of such party to NAG at its address set forth on the
signature page of this Agreement or by telecopier, to NAG at (713) 467-5025,
with a copy to Harold ("Hap") May, P.C., 1440 Lyric Centre, 440 Louisiana,
Houston, Texas 77002, telecopier (713) 236-1342, or to Trans Global or Sicinski
or Link at 1393 Veterans Memorial Highway, Hauppauge, NY 11788, telecopier (631)
724-0039, with a copy to Esanu Katsky Korins & Siger, LLP, 605 Third Avenue, New
York, New York 10158, telecopier (212) 716-3338, Attention of Asher S. Levitsky
P.C. Any party may, by like notice, change the address, person or telecopier
number to which notice shall be sent.
(c) NAG may, with the consent of Trans Global, which shall not be unreasonably
withheld, assign its rights under this Agreement to an affiliate provided that
the affiliate is an accredited investor and makes the representations and
warranties set forth in Section 5 of this Agreement, with references to NAG
being treated as references to the assignee.
(d) This Agreement shall be binding upon and inure to the benefit of the parties
hereto, and their respective heirs, executors, successors and permitted assigns.
(e) This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same document.
(f) The various representations, warranties, and covenants set forth in this
Agreement or in any other writing delivered in connection therewith shall
survive the issuance of the Shares.
Please confirm your agreement with the foregoing by signing this Agreement where
indicated.
Very truly yours,
NAG FINANCIAL LLC
By:
Larry Caldwell, Manager
Address: 8707 Katy Freeway, Suite 300, Houston, TX 77024
Taxpayer Identification No.: 75-3037249
Accepted this 12th day of August, 2002
TRANS GLOBAL SERVICES, INC.
By:
Joseph G. Sicinski, President and CEO
Each of Joseph G. Sicinski and Joseph E. Link hereby agrees to be bound by the
provisions of Sections 6, 9(a) and 10 of the foregoing agreement.
Joseph G. Sicinski
Joseph E. Link
August 12, 2002
Mr. Joseph G. Sicinski
1393 Veterans Memorial Highway
Hauppauge, NY 11788
Dear Joe:
Phoenix Marketing Systems, Inc. consents to the provisions of Section 7 of the
foregoing agreement between NAG Financial LLC and Trans Global Services, Inc.
and agrees that your obligations pursuant to Section 4 of that agreement dated
July 2, 2002 by and between Phoenix and Trans Global are hereby terminated.
PHOENIX MARKETING SERVICES, INC.
By:
Art Grider, President and CEO
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 August 7, 2002.
WHEREAS, this Corporation filed a certificate of designation on or about
November 8, 2001, with respect to the creation of a series of Preferred Stock
designated as the Series A Convertible Preferred Stock (the "Old Series A"); and
WHEREAS, no shares of the Old Series A were issued, and the Corporation
desires to terminate and Old Series A such that the shares formerly reserved for
issuance pursuant to the former Series A have retained the status of authorized
but unissued shares of Preferred Stock, without designation as to series;
WHEREFORE, it was
RESOLVED, that 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 two million (2,000,000) 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 12th day of August, 2002.
By:
Joseph G. Sicinski, President
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 two
million (2,000,000) 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.
(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 two (2), 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
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.
(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.
(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 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.
(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.
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.
Exhibit B
REGISTRATION RIGHTS PROVISIONS
These registration rights provisions constitute an integral part of the
Agreement dated August 12, 2002, between Trans Global and NAG, 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 August 12, 2002, between Trans
Global and NAG. 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.
"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 Securities and Exchange Commission.
"Exchange" means the principal stock exchange or market on which the
Registrable 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 Trans Global is a party or expects to be a party if, in the
reasonable judgment of Trans Global, disclosure of the negotiations or other
event would be adverse to the best interests of Trans Global provided that Trans
Global is continuing to treat such negotiations as confidential and provided
further that the period during which Trans Global 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 Trans Global shall not be permitted to avoid filing a registration
statement (or to suspend the use of an effective registration statement) for an
Excusable Reason for more than ninety (90) days in any one-year period.
"Expenses" means all expenses incident to Trans Globals 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 Trans Global 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 Trans
Globals 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 NAG and any Transferee who has rights pursuant to this
Agreement pursuant to Section 13 of these Registration Rights Provisions.
"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, The Nasdaq SmallCap Market, and the Bulletin Board Exchange.
"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 Registrable
Securities pursuant to an effective registration statement under the Securities
Act.
"Registrable Common Stock" means any shares Common Stock issued pursuant to
the Agreement or any shares of Common Stock which are issued upon conversion of
the Series A Preferred Stock. (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 Registrable
Common Stock.
"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 Registrable Common Stock may make a written request
(the "Initiating Request") to Trans Global for the registration with the
Commission under the Securities Act of all or part of such Initiating Holder's
Registrable Common Stock. Upon the receipt of any Initiating Request for
registration pursuant to this section, Trans Global promptly shall notify in
writing all other Holders of the Registrable 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 Trans Global has been so requested
to register by such Initiating Holder, and
(ii) all other Registrable Common Stock which Trans Global has been
requested to register by any other Holders by written request given to Trans
Global within 30 days after the giving of written notice by Trans Global 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 Trans Global, may withdraw such request, and
Trans Global 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.
(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 Trans Global 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 Trans
Global is eligible to use a registration statement on Form S-3 (or any
subsequent similar form), Trans Global 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 Trans
Global 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 Trans Global,
terminate a request for registration made pursuant to this Section 2.
(e) Trans Global 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 Trans
Global 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;
(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 Trans Global; and
(v) not sell or otherwise transfer any Registrable Common Stock
pursuant to a registration statement upon receipt of advice from
Trans Global 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, Trans Global 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, Trans Global shall, subject to Section 6(b) of
these Registration Rights Provisions, effect the registration under the
Securities Act of all Registrable Common Stock which Trans Global 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, Trans Global shall determine for any
reason not to register or to delay registration of such securities, Trans Global
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 Trans Global
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.
(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 Trans
Global of its obligation to effect any registration upon request under Section
2(a) of these Registration Rights Provisions.
4. Expenses. Trans Global 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. The Holders shall pay any expenses which are not included in the
definition of Expenses.
5. Registration Procedures.
(a) If and whenever Trans Global is required to effect any registration
under the Securities Act as provided in Sections 2(a) and 3 of these
Registration Rights Provisions, Trans Global 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 Trans Global 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 Trans Global may delay a registration for an
Excusable Reason, prepare and file with the Commission such
amendments and supplements to such registration 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).
Trans Global 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
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 Trans Global 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) Trans Global may require each seller of Registrable Common Stock
as to which any registration is being effected to furnish Trans Global such
information regarding such seller and the distribution of the securities
covered by such registration statement as Trans Global may from time to
time reasonably request in writing and as is required by applicable laws
and regulations.
(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 Trans Global 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
Trans Global, shall deliver to Trans Global (at Trans Global'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 Trans Global 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, Trans Global shall, if requested by any Requesting Holders,
request that such underwriters include all of the Registrable Common Stock to be
offered and sold by such Requesting Holders among the securities of Trans Global
to be distributed by such underwriters; provided, that, if the managing
underwriter of such underwritten offering shall advise Trans Global 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 Trans Global 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 Trans Global (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
Trans Global shall include in such registration, to the extent of the number and
type of securities which Trans Global is so advised can be sold in such
offering, (i) first, securities that Trans Global 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 Trans Global
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 Trans Global 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.
(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 Trans Global 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, Trans Global 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 Trans Global 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, Trans Global 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 Trans Global 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 Trans Global to such Holder of Registrable Common Stock and
identified in writing by Trans Global as confidential and shall not make any
sales or purchases of Trans Global'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
Trans Global, 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).
8. Indemnification.
(a) In connection with any registration statement filed by Trans Global
pursuant to Section 2(a) or 3 of these Registration Rights Provisions, Trans
Global 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 Trans Global 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 Trans Global specifically for that purpose (or based
upon written information furnished by Trans Global) 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 Trans Global 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 Trans
Global 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 Trans Global may otherwise have.
(b) In connection with any registration statement filed by Trans Global
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 Trans Global and each of its directors, officers, employees and
agents, each other Person, if any, who controls Trans Global 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 Trans Global 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 Trans Global 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
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 Trans Global 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
Trans Global, 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.
(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. Nothing in these registration rights
provisions shall restrict Trans Global from granting registration rights to
others.
10. Rule 144 and Rule 144A. At such time as the Holders become eligible to sell
Registrable Securities pursuant to Rule 144, Trans Global shall use its
commercially reasonable efforts to take such actions required to be taken on the
part of Trans Global 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 Trans Global, 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, Trans Global may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Common Stock.
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 the transfer is to an
affiliate of NAG and that Trans Global 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.
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) Trans Global 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. Trans
Global 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 Trans Global 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 Trans Global 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
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.