Assets Exchange Agreement

ASSETS EXCHANGE AGREEMENT


THIS ASSETS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of the 7th day of February, 1996 by and among AMERTRANZ WORLDWIDE, INC., a Delaware corporation ("Amertranz"); AMERTRANZ WORLDWIDE HOLDING CORP., a Delaware corporation ("Holding"); CARIBBEAN AIR SERVICES, INC., a Delaware corporation ("Caribbean"); the individuals listed on the "Schedule of Amertranz Stockholders and Option Holders" attached hereto (collectively, the "Amertranz Stockholders"); CARIBBEAN FREIGHT SYSTEMS, INC., a corporation organized under the laws of Puerto Rico and doing business as Caribbean Air Services ("CAS"); and TIA, INC., a Delaware corporation doing business as Tradewinds International Airlines ("Tradewinds"). CAS and Tradewinds are hereinafter individually or collectively referred to as the "Freight Group".


EXPLANATORY STATEMENT


Amertranz desires to acquire all of the air freight forwarding business of the Freight Group.


In furtherance thereof, Amertranz, Tradewinds and CAS have caused Holding and Caribbean to be formed as Delaware corporations. Upon the Closing (as hereinafter defined), all of the issued and outstanding capital stock of Holding will be owned by Tradewinds, CAS, and the stockholders of Amertranz. Upon the Closing, (i) each of Tradewinds and CAS will contribute to Holding its respective Air Freight Assets, as hereinafter set forth, and (ii) the stockholders of Amertranz will contribute to Holding all of the issued and outstanding shares of stock of Amertranz. Immediately thereafter, Holding will contribute to Caribbean all of the assets contributed to Holding by Tradewinds and CAS, in exchange for all of the issued and outstanding shares of stock of Caribbean. The parties intend that the transactions contemplated by this Agreement be accomplished in a tax-free exchange under Section 351 of the Internal Revenue Code of 1986, as amended.


NOW THEREFORE, for the mutual consideration set out herein, the parties hereto agree as follows:


1. Definitions; Rules of Construction.


1.1. For purposes of this Agreement, the terms set forth below shall have the following meanings:


Air Freight Assets - All of the respective air freight forwarding businesses of CAS and Tradewinds, including the active, prospective, and historical customer lists for the past five years of each of CAS and Tradewinds, related current and historical business records relating to the prospective, active and inactive customers of each of CAS and Tradewinds and their air freight forwarding business for the preceding five years (including pricing information, costing and vendor information as to trucking and air); all associated computerized information relating to CAS's and Tradewinds' air freight forwarding business and customers (including computer disks and tapes);


all information relating to current,



historical, and planned marketing and sale by CAS and Tradewinds of their respective air freight forwarding services; all of Tradewinds' rights under the Freight Handling Agreement; all of CAS's rights under the CAS-D Freight Handling Agreement (including the right to receive commissions thereunder); all of the Freight Group's interest in the name "Caribbean Air Services", and, to the extent Tradewinds has rights thereto (as more particularly described on Schedule 7.1.3), a perpetual, exclusive royalty-free license to use the name "Tradewinds International Airlines", and all variations thereof and all service marks utilized in connection therewith; all local, 800 and international telephone and telefax numbers utilized by CAS and Tradewinds in connection with their respective air freight businesses; the leases for CAS's Puerto Rico and Greensboro, North Carolina, Hartford, Connecticut, business facilities, including all furniture and fixtures owned by Tradewinds or CAS and used in each respective facility or in connection therewith as set forth on Schedule 1.1 (subject to dispositions or replacements prior to Closing in the ordinary course of business); all assignable customer and sales representative contracts of Tradewinds or CAS in connection with their respective air freight businesses; and all other assignable contracts of Tradewinds or CAS in connection with their respective air freight businesses, unless Amertranz notifies Tradewinds in writing five days before the Due Diligence End Date that such other assignable contracts will not be assumed by Holding. "Air Freight Assets" shall not include any other asset of CAS or Tradewinds, including cash on hand, cash in depositories, cash equivalents, accounts receivable, notes receivable, securities, or equipment, aircraft, parts, tools, or assets of Tradewinds Airlines, Inc. not set forth on Schedule 1.1.


Air Freight Assets' Business - The air freight forwarding business(es) heretofore operated by Tradewinds and/or CAS other than the operation of aircraft between Puerto Rico and mainland United States.


Amertranz - As defined in the introductory paragraph of this Agreement.


Amertranz Belgium - Amertranz Worldwide, a private limited company existing under the laws of Belgium, Brussels Trade Register Number 554.547, Value Added tax Number 446.536.134.


Amertranz Brazil - AmerTranz do Brasil LTDA, existing under the laws of Brazil.


Amertranz Options - Options to purchase Amertranz Shares.


Amertranz Shares - Shares of Common Stock of Amertranz, par value $.01 per share.


Amertranz Stockholders - As defined in the introductory paragraph of this Agreement.


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Bridge Financing - The Bridge Financing on the terms described in the Underwriter's Letter of Intent, as such terms may be modified with the consent of the Freight Group.


Bridge Lender - The lender(s) of the Bridge Financing.


Caribbean - As defined in the introductory paragraph of this Agreement.


Caribbean Air Freight Business - Air freight forwarding business that has its point of origin or destination in Puerto Rico or the Dominican Republic.


CAS - As defined in the introductory paragraph of this Agreement.


CAS-D Freight Handling Agreement - The Freight Handling Agreement, dated January 1, 1996, between CAS, Dominica, and the stockholders of Dominica.


Closing - The closing of the transactions contemplated by this Agreement.


Closing Date - The day on which the Closing is held, to be mutually agreed upon among the parties, but in no event later than February 15, 1996.


Dominica - Caribbean Air Services Dominica, Inc., a corporation organized under the laws of Puerto Rico.


Due Diligence End Date - The Closing Date.


ERISA - The Employee Retirement Income Security Act of 1974, as amended, and the regulations issued thereunder.


Executive Management - With respect to each entity for which such term is used, the management of such entity, consisting of the Chairman, Presidents, Executive Vice President, one or more Vice Presidents and the Chief Financial Officer, up to a maximum of nine individuals.


Freight Group - As defined in the introductory paragraph of this Agreement.


Freight Group Holding Shares - The Holding Shares issued to Tradewinds and CAS pursuant to Section 2.2 hereof.


Freight Handling Agreement - The Cargo Aircraft Charter Agreement, dated February 28, 1994, between Florida West Airlines, Inc. and Tradewinds, and assigned by Florida West Airlines, Inc. to Tradewinds Airlines, Inc.


GAAP - Generally accepted accounting principles.


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Guarantee - The Guarantee Agreements attached hereto as Exhibit A.


Holding - As defined in the introductory paragraph of this Agreement.


Holding Board Control Termination Date - The date by which all obligations under the Net Cash Receipts Note have been repaid in full and the first of the following occurs: (i) payments of principal and interest on the Holding Promissory Note total $8,000,000 if such total is paid within 30 months following the Closing Date; and (ii) payments of principal on the Holding Promissory Note total $5,900,000, and all accrued interest and other charges then due under the Holding Promissory Note have been paid.


Holding Board Election Proxy - The Limited Proxy attached hereto as Exhibit C, with respect to the election of Holding Directors.


Holding Board Structure Termination Date - The date by which all obligations under the Net Cash Receipts Note have been repaid in full and both of the following shall have occurred: (i) the Freight Group owns, in the aggregate, less than 15% of the issued and outstanding Holding Shares; and (ii) all amounts then due under the Holding Promissory Note shall have been paid in full.


Holding Directors - Members of Holding's Board of Directors elected by the holders of Holding Shares, including pursuant to the Holding Board Election Proxy.


Holding Freight Group Directors - Members of Holding's Board of Directors designated by the Freight Group.


Holding Options - Options to purchase Holding Shares.


Holding Promissory Note - The Promissory Note in the principal amount of $10,000,000, attached hereto as Exhibit D.


Holding Shares - Shares of Common Stock of Holding, par value $.01 per share.


IPO - The initial public offering of Holding Shares on the terms described in the Underwriter's Letter of Intent, as such terms may be modified with the consent of the Freight Group.


IPO Price - The price per share to be sold in the IPO.


Net Cash Receipts Loan - As defined in Section 5.3 of this Agreement.


Net Cash Receipts Note - The Promissory Note attached hereto as Exhibit B.


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SEC - United States Securities and Exchange Commission.


Securities Act - The Securities Act of 1933, as amended.


Security Agreement - The Security Agreement attached hereto as Exhibit E.


Stock Pledge Agreement - The Stock Pledge Agreement attached hereto as Exhibit F.


Tradewinds - As defined in the introductory paragraph of this Agreement.


Tradewinds Airlines, Inc. - Tradewinds Airlines, Inc., a Delaware corporation and wholly-owned subsidiary of Tradewinds Acquisition Corporation, a Delaware corporation of which Tradewinds owns approximately 30% of the issued and outstanding common stock and of which a principal executive officer of Tradewinds is a director.


Underwriter's Letter of Intent - The Letter of Intent, dated November 20, 1995, as amended January 23, 1996, from GKN Securities Corp. to Amertranz with respect to the IPO and the Bridge Financing, attached hereto as Exhibit G.


1.2. The Explanatory Statement is hereby incorpo- rated into this Agreement and made a part hereof.


1.3. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.


1.4. References in this Agreement to the "knowl- edge" of an entity shall mean the knowledge of the chief executive officer, chief operating officer, and chief financial officer of such entity, to the extent applicable, following due inquiry to all personnel associated with such entity who can be reasonably expected to have knowledge of the subject matter.


1.5. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, to the singular include the plural, to the part include the whole, and to the male gender shall also pertain to the female and neuter genders and vice versa. The term "including" is not limiting, and the term "or" has the inclusive meaning represented by the phrase "and/or". The words "hereof," "herein," "hereby,", "hereto", "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Section, Schedule, Exhibit and clause references are to this Agreement unless otherwise specified.


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2. Closing Transactions.


2.1. At the Closing, the following transactions shall be deemed to simultaneously occur:


(i) All of the Amertranz Stockholders shall contribute their respective Amertranz Shares to Holding, free and clear of all liens and encumbrances of any kind and nature, and shall deliver to Holding the certificates representing such Amertranz Shares duly endorsed in blank, in exchange for Holding Shares in such amounts as set forth on Schedule 2.1(i).


(ii) Tradewinds and CAS will contribute to Holding their respective Air Freight Assets, free and clear of all liens and encumbrances of any kind and nature, except those set forth in Schedules 4 and 7.1.2, in exchange for (i) 1,950,000 Holding Shares, and (ii) the Holding Promissory Note.


(iii) Holding will contribute to Caribbean all of the Air Freight Assets, free and clear of all liens and encumbrances of any kind and nature, except those set forth in Schedules 4 and 7.1.2, in exchange for 100 shares of Caribbean's common stock, par value $.01 per share, which constitutes all of the issued and outstanding stock of Caribbean.


2.2. The Holding Promissory Note shall be allocated between, and the Freight Group Holding Shares shall be issued to, Tradewinds and CAS as follows:


Freight Group Member Holding Promissory Note Holding Shares


Tradewinds $8,000,000 1,560,000 Shares CAS $2,000,000 390,000 Shares


3. Security for Amertranz, Holding, and Caribbean Obligations.


The obligations under the Holding Promissory Note and the Net Cash Receipts Promissory Note shall be guaranteed by Amertranz, Holding, and Caribbean, in accordance with the terms of the respective Guarantees, and shall be secured pursuant to the terms of the Security Agreement and the Stock Pledge Agreement.


4. Assumption of Liabilities and Transfer of Rights.


4.1. As of the Closing, Holding and Caribbean shall assume the obligations of Tradewinds or CAS under the Freight Handling Agreement and the CAS-D Freight Handling Agreement, under leases of property included in the Air Freight Assets, under other assignable contracts assigned to and assumed by Holding as part of the Air Freight Assets, and for obligations for accrued vacation, sick days, personal days or other such benefits for all employees of Tradewinds or CAS as of the Closing Date, all as listed on Schedule 4.


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4.2. To the extent the assignability of any rights under agreements listed on Schedule 4 by the Freight Group to Holding and by Holding to Caribbean, and the respective assumptions by Holding and Caribbean of the obligations thereunder, require the consent of another party thereunder, the Freight Group and Holding will take all reasonable actions to obtain such consent as soon as practicable following the Closing. In the event any such consent is not obtained, the Freight Group agrees to exercise all rights under such agreement for the benefit of Caribbean, and Holding and Caribbean agree to pay all amounts and assume all obligations of the Freight Group thereunder. Prior to or upon the expiration of any such agreement which remains in the name of the Freight Group, Caribbean shall have the exclusive right to buy out the remaining term of such agreement or to determine whether or not to exercise any end-of-term option with respect thereto, and the Freight Group agrees to comply with Caribbean's instructions with respect to such determination.


5. Accounts Receivable.


5.1. All of the Freight Group's trade receivables for services rendered by the Freight Group on or before the Closing Date shall be and remain the property of the Freight Group member which generated such receivable. Provided, however, that if, prior to the Closing Date, the Freight Group has entered into an agreement with a customer to provide freight services but such services have not yet been provided on or before the Closing Date, Caribbean will assume responsibility for providing such service (or the remaining portion thereof) and will be entitled to receive the compensation for such services (or the remaining portion thereof) performed by Caribbean, equal to the direct costs relating thereto (including commissions) paid or incurred by Caribbean following the Closing Date. Caribbean will not be responsible for damages arising from claims for untimely performance with respect to services due to be performed by the Freight Group prior to the Closing Date but not performed by the Freight Group in a timely manner.


5.2. From and after the Closing Date, Holding and Caribbean shall, as agent of Tradewinds and CAS, and without further compensation or remuneration from Tradewinds or CAS, exercise their reasonable best efforts to diligently collect all receivables owned by the Freight Group as of the Closing Date. To the extent so collected, Holding and Caribbean shall pay over and remit daily (or, if less than $5,000 is so collected on any day, at such time(s) as such collections aggregate $5,000) to Tradewinds or CAS, as the case may be, the cash receipts of their respective receivables, as collected, together with an accounting of such amount, showing, for receivable collected, the payor, the services performed to generate such receivable, the amount of the payment, and any balance due. All such cash receipts shall be received by, and held in trust by Holding and Caribbean for the benefit of the Freight Group. Neither Holding nor Caribbean shall resolve any disputed receivables with any account debtor without the consent of


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Tradewinds or CAS, as the case may be. In the event that any such dispute is not resolved, Holding or Caribbean, as agent for the Freight Group, shall, at the discretion of the Freight Group, place such receivable for collection and the cost and the expenses of collection shall be the exclusive responsibility of the entity on whose behalf collection is being made.


5.3. Notwithstanding the foregoing, provided that Amertranz, Holding, and Caribbean are complying with all other material terms and conditions of this Agreement, for a period of 150 days following the Closing Date, the Freight Group shall make available to Caribbean, as an interest-free loan for the exclusive purpose of paying the ordinary, then-current operating expenses of Caribbean, the net cash collections (i.e., the amount of the gross cash collections less all unpaid costs arising out of or resulting from the services which generated such cash collections, including income taxes payable by the beneficiary of such cash collections attributable thereto) from the receivables collected pursuant to Section 5.2, up to a maximum of $4,000,000 outstanding at any time (hereinafter the "Net Cash Receipts Loan"). Draws on the Net Cash Receipts Loan shall be made by written request from Caribbean to the Freight Group specifying the need for, applications of, and amounts of such funds, and disbursements of the Net Cash Receipts Loan shall be made no more than one time per week. The Net Cash Receipts Loan shall be repaid each Monday to the extent of all revenues of Caribbean in excess of the then-current operating expenses of Caribbean, and, in any event, must be repaid in full 150 days following the Closing Date. The obligations of Caribbean to repay the Net Cash Receipts Loan shall be evidenced by the Net Cash Receipts Note, shall be guaranteed by Amertranz and Holding pursuant to the terms of the Guarantee, and shall be secured pursuant to the terms of the Security Agreement and the Stock Pledge Agreement. The proceeds from the Net Cash Receipts Loan shall be used exclusively for ordinary, then-current operating expenses of Caribbean and may not be used for any other purpose, unless otherwise agreed to in writing by the Freight Group.


6. Closing.


The Closing shall take place at the offices of Ferber Greilsheimer Chan & Essner, New York, New York, on the Closing Date at 10:00 a.m., Eastern Time, or at such other time and place as shall be agreed upon by the parties hereto. Time is of the essence of this Agreement.


7. Representations and Warranties of Tradewinds and CAS.


7.1. Representations and Warranties with respect to the Air Freight Assets. Tradewinds and CAS, jointly and severally, represent and warrant to Amertranz as follows:


7.1.1. Approvals Required. Except for the approvals of other parties to agreements listed on Schedule 4, and


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any restriction or requirement to which Amertranz (and, by extension of such restriction on Amertranz, Holding or Caribbean) is subject, no approval, authorization, consent, order or other action of, or filing with, any person, firm or corporation, or any court, administrative agency or other governmental authority, is required in connection with the contribution of the Air Freight Assets by the Freight Group to Holding or by Holding to Caribbean.


7.1.2. Title to Property and Related Matters. At the time of the Closing Holding will have good and marketable title to all of the Air Freight Assets, free and clear of any liens or encumbrance, except those set forth in Schedule 7.1.2. Except as set forth in Schedule 7.1.2 and except for matters that may arise in the ordinary course of business, the Air Freight Assets are in good operating condition and repair, reasonable wear and tear excepted. To the best of the knowledge of the Freight Group, there does not exist any condition or agreement that will materially interfere with the use of the Air Freight Assets in the conduct of Caribbean's business in the ordinary course.


7.1.3. Licenses; Trademarks; Trade Names. Except for any rights in the name "Tradewinds" as described on Schedule 7.1.3, and in the name "Caribbean Air Services", the Air Freight Assets do not include any licenses, registered trademarks, registered trade names, registered service marks, copyrights, patents or applications for any of the foregoing, and, except for licenses to use "off-the-shelf" commercial software included with the equipment that constitute part of the Air Freight Assets (none of which licenses are material), none is required or used in the Air Freight Assets' Business.


7.1.4. Material Adverse Change. Except (A) as set forth in Schedule 7.1.4, or (B) as otherwise reflected herein, since March 31, 1995, the Air Freight Assets' Business has been operated in the ordinary course and there has not been:


(i) To the knowledge of Tradewinds or CAS, any material adverse change in the business, condition (financial or otherwise), results of operations, prospects, properties, assets, liabilities, earnings, net worth, or prospects thereof, except for the general effects of present economic conditions;


(ii) To the knowledge of Tradewinds or CAS, any material damage, destruction or casualty loss (whether or not covered by insurance) affecting the Air Freight Assets;


(iii) To the knowledge of Tradewinds or CAS, any statute, rule, regulation or order adopted (including orders of regulatory authorities with jurisdiction over such entity or its business) that materially and adversely affects such entity or its business;


(iv) Any material increase in the rate of compensation or in bonus or commission payments payable or to


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become payable to any of Tradewinds' or CAS's salaried employees; provided, however, that this paragraph shall not restrict or limit in any way the hiring of additional personnel who are reasonably required for Tradewinds' or CAS's operations; or


(v) To the knowledge of Tradewinds or CAS, any other events or conditions of any character specifically related to the business or operations of the Air Freight Assets' Business that may reasonably be expected to have a material adverse effect on Holding or its business or financial condition, except for the general effects of present or future economic conditions.


7.1.5. Tax Matters. The Freight Group has filed all federal, state and local tax or related returns and reports due or required to be filed, which reports accurately reflect in all material respects the amount of taxes due. The Freight Group has paid all taxes or assessments that have become due, other than taxes or charges being contested in good faith or not yet finally determined. There are no tax liens with respect to the Freight Group or any of the Air Freight Assets.


7.1.6. Agreements. Schedule 7.1.6 contains a true and complete list and brief description of all written or oral contracts, agreements, mortgages, obligations, understandings, arrangements, restrictions, and other instruments to which any of the Freight Group or the Air Freight Assets may be bound involving payments in any consecutive 12-month period or otherwise representing annualized costs of $25,000 or more or representing aggregate payments of $50,000 over the term of any such agreement or arrangement (without regard to the amount of annualized payments or costs). True and correct copies of all items set forth on Schedule 7.1.6 have been or will have been made available to Amertranz five days before the Due Diligence End Date. No event has occurred that (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a material default by Tradewinds or CAS under any of the agreements or arrangements set forth in Schedule 7.1.6. The Freight Group is not aware of any material default by the other parties to such agreements. In addition, no material violations have occurred pursuant to any loan agreements to which Tradewinds or CAS is a party.


7.1.7. Compliance; Governmental Authoriza- tions. To the knowledge of Tradewinds or CAS: (i) the Freight Group has heretofore complied with all federal, state, local or foreign laws, ordinances, regulations and orders applicable to the Air Freight Assets' Business, including federal and state aviation laws that, if not complied with, would materially and adversely affect the Air Freight Assets' Business; (ii) the Freight Group has all federal, state, local and foreign governmental licenses and permits necessary for the conduct of the Air Freight Assets' Business; and (iii) such licenses and permits are in full force and effect. The Freight Group knows of no violations of any such licenses or permits. No proceedings are pending or, to the Freight


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Group's knowledge, threatened to revoke or limit the use of such licenses or permits.


7.1.8. Environmental. The Freight Group has operated the Air Freight Assets in compliance with all applicable environmental laws and regulations in all material respects.


7.1.9. Litigation. Except as set forth in Schedule 7.1.9, to the knowledge of Tradewinds or CAS, there are no actions, suits, claims, investigations or legal, administrative or arbitration ...