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