UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 3, 2006
Rand Logistics Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-50908 20-1195343
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
450 Park Avenue, 10th Floor, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 644-3450
Rand Acquisition Corporation
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13a-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On March 3, 2006, in connection with the closing of the acquisition
described in Item 2.01, Lower Lakes Towing Ltd., Lower Lakes Transportation
Company and Grand River Navigation Company, Inc. entered into a Credit Agreement
with General Electric Capital Corporation, as Agent and a lender, and GE Canada
Finance Holding Company, as a lender, and certain of each such party's
affiliates. See Item 2.03 for a description of the material terms of the Credit
Agreement. In this Form 8-K, we refer to Lower Lakes Towing Ltd. as Lower Lakes,
Lower Lakes Transportation Company as Lower Lakes Transportation, and Grand
River Navigation, Inc. as Grand River.
On March 3, 2006, in connection with the closing of the acquisition
described in Item 2.01, Lower Lakes entered into an employment agreement with
each of Scott Bravener and James Siddall, and Rand Logistics Inc., which we
refer to herein as Rand, adopted a management bonus program, the participants of
which are Scott Bravener, James Siddall, Mark Rohn, Jeffrey Botham, Anthony
Walker, Robert Pierson, Frank Bravener, Dave Scruton and John Carlson, each of
whom are employed by Lower Lakes or its affiliates. The material terms of the
employment agreements and management bonus program, as well as descriptions of
any material relationships with any of the foregoing individuals, have been
previously reported in Rand's Definitive Proxy Statement on Schedule 14A filed
with the Securities and Exchange Commission on February 3, 2006, which we refer
to as Rand's Schedule 14A.
ITEM 2.01. COMPLETION OF AN ACQUISITION OR DISPOSITION OF ASSETS.
On March 3, 2006, Rand, through its wholly-owned subsidiary, LL
Acquisition Corp., acquired all of the outstanding shares of capital stock of
Lower Lakes from Royal Bank of Canada, through its operating division RBC
Capital Partners, Canadian Imperial Bank of Commerce, Universal Insulations
Holdings Limited, Norvest Mezzanine Fund Limited Partnership, Scott Bravener,
Judy Kehoe, Mark Rohn, Victor Rosky and Tim Ryan, the shareholders of Lower
Lakes, in accordance with the terms of the Stock Purchase Agreement, dated
September 2, 2005, by and among Rand, LL Acquisition Corp. and the stockholders
of Lower Lakes, as amended. Immediately following completion of the acquisition,
and in conjunction therewith, LL Acquisition Corp. and Lower Lakes were
amalgamated under Canadian law and the shares of capital stock of Grand River
and Lower Lakes Transportation owned by Lower Lakes at the time of the
amalgamation were transferred to Rand's wholly-owned subsidiary, Rand LL
Holdings Corp. Upon completion of such transfer, the outstanding shares of Grand
River not owned by Rand LL Holdings Corp. were redeemed in accordance with the
terms of the Redemption Agreement, dated September 2, 2005, between Grand River
and GR Holdings, Inc. Following completion of the foregoing transactions, as of
March 3, 2006, each of Lower Lakes, Grand River and Lower Lakes Transportation
became indirect, wholly-owned subsidiaries of Rand. In conjunction with the
foregoing transactions, as of March 3, 2006, Rand, formerly known as Rand
Acquisition Corporation, changed its name to Rand Logistics Inc.
In accordance with the terms of the Stock Purchase Agreement and
Redemption Agreement, respectively, Rand paid US$9,843,748 to the selling
shareholders of Lower Lakes and US$750,000 to GR Holdings, Inc., and arranged
for the repayment of the acquisition closing date indebtedness of such entities
of Cdn$43,732,749 and US$5,156,945, respectively, through capital contributions
to Lower Lakes and the securing of the new senior loan facility discussed in
Item 2.03. The amount paid to the Lower Lakes selling shareholders reflects
certain adjustments made on the acquisition closing date in accordance with the
Stock Purchase Agreement and such amount is subject to further adjustment after
the acquisition closing based on Rand's determination of the net working capital
of Lower Lakes and its affiliates as of January 15, 2006. Rand funded the
acquisition closing date payments with the approximately US$24,646,000 of
proceeds of its initial public offering held in trust, US$15,000,000 of proceeds
of the acquisition closing date issuance of Rand's newly created series A
convertible preferred stock, and proceeds of the new senior loan facility
entered into on the acquisition closing date by Lower Lakes, Grand River and
Lower Lakes Transportation.
2
The following is a description of Rand's business after giving effect to
the transactions described in this Item 2.01.
Overview
Rand was formed on June 2, 2004 as a blank check company to effect a
merger, capital stock exchange, asset acquisition or other similar business
combination with an operating business. On November 2, 2004, we closed our
initial public offering of 4,000,000 units with each unit consisting of one
share of our common stock and two warrants, each to purchase one share of our
common stock at an exercise price of $5.00 per share. The units were sold at an
offering price of $6.00 per unit, generating gross proceeds of $24,000,000. On
November 3, 2004, we sold an additional 600,000 units pursuant to the
underwriters' over-allotment option raising additional gross proceeds of
$3,600,000. After deducting the underwriting discounts and commissions and the
offering expenses, the total net proceeds to us from the offering were
approximately $24,626,000.
In connection with our initial public offering, we issued to the
representative of the underwriters, for $100, an option to purchase up to a
total of 300,000 units, with each unit consisting of one share of common stock
and two warrants. The units issuable upon exercise of the option are identical
to those issued in our initial public offering except that the warrants included
in the units underlying the option have an exercise price of $6.25 per share.
The option will be exercisable by the holder at $9.90 per unit commencing upon
our consummation of a business combination and will expire on October 26, 2009.
We accounted for the fair value of the option, inclusive of the receipt of the
$100 cash payment, as an expense of our initial public offering resulting in a
charge directly to stockholders' equity. We estimate that the fair value of this
option is approximately $558,000 ($1.86 per Unit) using a Black-Scholes
option-pricing model. The fair value of the option has been estimated as of the
date of grant using the following assumptions: (1) expected volatility of
47.79%, (2) risk-free interest rate of 3.34% and (3) expected life of 5 years.
The option may be exercised by the holder for cash or on a "cashless" basis, at
the holder's option, such that the holder may use the appreciated value of the
option (the difference between the exercise prices of the option and the
underlying warrants and the market price of the units and underlying securities)
to exercise the option without the payment of any cash.
On March 3, 2006, we acquired all of the outstanding shares of capital
stock of Lower Lakes, a Canadian corporation which, with its subsidiary Lower
Lakes Transportation, provides bulk freight shipping services throughout the
Great Lakes region. As part of the acquisition of Lower Lakes, we also acquired
Lower Lakes' affiliate, Grand River. Prior to the acquisition, we did not
conduct, or have any investment in, any operating business. In this discussion
of Rand's business, unless the context otherwise requires, references to Rand
include Rand and its direct and indirect subsidiaries, and references to Lower
Lakes' business or the business of Lower Lakes mean the combined businesses of
Lower Lakes, Lower Lakes Transportation and Grand River. Additional information
on Lower Lakes, Lower Lakes Transportation and Grand River, and the business of
Lower Lakes, has been previously reported in Rand's Schedule 14A.
Rand's shipping business is operated in Canada by Lower Lakes and in the
United States by Lower Lakes Transportation. Lower Lakes was organized in March
1994 under the laws of Canada to provide marine transportation services to dry
bulk goods suppliers and purchasers operating in ports in the Great Lakes that
were restricted in their ability to receive larger vessels. Lower Lakes has
grown from its origin as a small tug and barge operator to a full service
shipping company with a fleet of eight cargo-carrying vessels. From its
exclusively Canadian beginnings, Lower Lakes has also grown to offer domestic
services to both Canadian and U.S. customers as well as cross-border routes.
Lower Lakes services the construction, electric utility and integrated steel
industries through the transportation of limestone, coal, iron ore, salt, grain
and other dry bulk commodities.
We believe that Lower Lakes is the only company providing significant
domestic port-to-port services to both Canada and the United States in the Great
Lakes region. Lower Lakes maintains this operating flexibility by operating both
U.S. and Canadian flagged vessels in compliance with the Shipping Act, 1916, and
the Merchant Marine Act, 1920, commonly referred to as the Jones Act, in the
U.S. and the Coasting Trade Act (Canada) in Canada.
Lower Lakes' fleet consists of four self-unloading bulk carriers in Canada
and three self-unloading bulk carriers as well as a tug and a self-unloading
barge in the U.S. Lower Lakes owns three of the four Canadian vessels and its
wholly-owned subsidiary, Port Dover Steamship Company Inc., owns the fourth and
3
charters it to Lower Lakes. Lower Lakes Transportation time charters the five
vessels in the U.S. from Grand River, which owns three of the U.S. flagged
vessels and charters the fourth and the barge from a third party under long term
charter arrangements.
Lower Lakes is a leader in the provision of River Class bulk freight
shipping services throughout the Great Lakes, operating more than one-third of
all River Class vessels servicing the Great Lakes and the majority of
boom-forward equipped vessels in this category. Boom forward self-unloading
vessels - those with their booms located in front of the cargo holds - offer
greater accessibility for delivery of cargo to locations where only forward
access is possible. Seven of the vessels used in Lower Lakes' operations are
boom forward self-unloaders and one vessel is a boom aft self-unloader. River
Class vessels - which represent the smaller end of Great Lakes vessels with
maximum dimensions of approximately 650 feet in length and 72 feet in beam and
carrying capacities of 15,000 to 20,000 tons - are ideal for customers seeking
to move significant quantities of dry bulk product to ports which restrict
non-River Class vessels due to size and capacity constraints. Of the 37 Canadian
self-unloading vessels currently in operation, seven are River Class, each of
which is boom forward. Lower Lakes operates three of these vessels. The U.S.
Great Lakes fleet includes 12 River Class vessels, four boom forward, eight boom
aft. Lower Lakes Transportation operates four of the boom forward vessels, one
of which is the barge.
Customers
Lower Lakes services approximately 50 customers in a diverse array of end
markets by shipping dry bulk commodities such as construction aggregates, coal,
grain, iron ore and salt. Lower Lakes' top ten customers accounted for
approximately 71% of its revenue in fiscal 2005. Lower Lakes is the sole-source
shipping provider to several of its customers. Many of Lower Lakes' customers
are under long-term contracts with Lower Lakes, which typically average three to
five years in duration and provide for minimum and maximum tonnage, annual price
escalation features, and fuel surcharges.
Competition
Lower Lakes faces competition from other marine and land-based
transporters of dry bulk commodities in and around the Great Lakes area. In the
River Class market segment, Lower Lakes generally faces two primary competitors:
Seaway Marine Transport and United Shipping Alliance. Seaway Marine Transport is
a Canadian traffic and marketing partnership, which owns 22 self-unloading
vessels, 4 of which are River Class boom forward vessels. United Shipping
Alliance operates in the U.S. and maintains a fleet of 22 vessels, 7 of which
are River Class. We believe that industry participants compete on the basis of
customer relationships, price, and service, and that the ability to meet a
customer's schedule and offer shipping flexibility is a key competitive factor.
Moreover, we believes that customers are generally willing to continue to use
the same carrier assuming such carrier provides satisfactory service with
competitive pricing.
Employees
As of December 31, 2005, Lower Lakes had approximately 230 full-time
employees, 18 of whom were management and 212 were operational. Approximately
42% of Lower Lakes' employees (all U.S. based Grand River Navigation crew) are
unionized with the International Organization of Masters, Mates and Pilots,
AFL-CIO. Lower Lakes has never experienced a work stoppage as a result of labor
issues, and we believe that our employee relations are good. Laurence S. Levy,
our chairman of the board and chief executive officer, is Rand's only executive
officer, and Rand does not at present have any other employees.
4
Description of Property
Rand maintains its executive offices at 450 Park Avenue, 10th Floor, New
York, New York 10022 pursuant to an agreement with ProChannel Management LLC, an
affiliate of Laurence S. Levy, our chairman of the board and chief executive
officer. We pay ProChannel Management a monthly fee of $7,500 which is for
general and administrative services including office space, utilities and
secretarial support. We believe, based on rents and fees for similar services in
the New York City metropolitan area, that the fee charged by ProChannel
Management is at least as favorable as we could have obtained from an
unaffiliated person. ProChannel is not obligated to continue to provide such
office space and services to us, and there can be no assurance as to whether, or
for how long, ProChannel will continue to make such office space available.
Lower Lakes' currently leases the following properties:
o Lower Lakes Towing has leased approximately 4,500 square feet
of warehouse space in 207 Greenock Street, Port Dover, Ontario
under a lease that expires October 2007.
o Lower Lakes Towing has leased approximately 1,000 square feet
of office space in 625 Main Street, Port Dover, Ontario under
a lease that is month to month.
o Lower Lakes Transportation has leased approximately 100 square
feet of office space at 1207 Delaware Avenue, Suite 217,
Buffalo, New under a lease that expires March 31, 2007.
o Grand River Navigation has leased approximately 440 square
feet of office space at 197 West Erie Street, Rogers City,
Michigan under a lease that expires on November 30, 2005.
o Grand River Navigation has leased approximately 1,000 square
feet of space at 515 Moore Road, Suite 2, Avon Lake, Ohio
under a lease that expires July 31, 2008.
We consider our current office space adequate for our current operations.
Legal Proceedings
Rand is not involved in any legal proceedings which may have a significant
effect on its business, financial position, results of operations or liquidity,
nor are we aware of any proceedings that are pending or threatened which may
have a significant effect on our business, financial position, results of
operations or liquidity. From time to time, Lower Lakes may be subject to legal
proceedings and claims in the ordinary course of business, involving principally
commercial charter party disputes. It is expected that these claims would be
covered by insurance if they involve liabilities such as arise from collision,
other marine casualty, damage to cargoes, oil pollution, death or personal
injuries to crew, subject to customary deductibles. Those claims, even if
lacking merit, could result in the expenditure of significant financial and
managerial resources.
Market for Common Equity and Related Stockholder Matters
Market Information
Our units, common stock and warrants are traded on the Over-the-Counter
Bulletin Board under the symbols RAQCU, RAQC and RAQCW, respectively. The
following table sets forth the range of high and low closing bid prices for the
units, common stock and warrants for the periods indicated since the units
commenced public trading on October 28, 2004 and since the common stock and
warrants commenced public trading on November 10, 2004. The over-the-counter
market quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily reflect actual transactions.
5
Common Stock Warrants Units
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Quarter Ended High Low High Low High Low
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December 31, 2004 $5.50 $4.50 $0.85 $0.60 $6.70 $5.95
March 31, 2005 $5.70 $5.07 $1.03 $0.69 $7.36 $6.50
June 30, 2005 $5.43 $5.10 $0.85 $0.68 $6.90 $6.32
September 30, 2005 $5.70 $5.55 $1.10 $1.05 $7.65 $7.65
December 31, 2005 $5.90 $5.39 $1.22 $0.85 $7.90 $7.05
Holders
As of March 8, 2006, there was one holder of record of our units, five
holders of record of our common stock and one holder of record of our warrants.
Dividends
We have not paid any dividends on our common stock to date and do not
intend to pay dividends on our common stock in the near future. The payment of
dividends in the future will be contingent upon our revenues, earnings, capital
requirements and general financial condition. The payment of dividends is within
the discretion of our board of directors. Other than dividends which our board
of directors determine to pay on our preferred stock, it is the present
intention of our board of directors to retain all earnings for future investment
and use in our business operations. Accordingly, our board of directors does not
anticipate declaring any dividends in the foreseeable future on our common
stock. In addition, no dividends may be declared or paid on our common stock
unless all accrued dividends on our preferred stock have been paid.
Plan of Operation.
The following presentation of the plan of operation of Rand has been
prepared by internal management and should be read in conjunction with the
financial statements and notes thereto included in, or referred to, in this
report. Some of the statements below discuss "forward-looking" information.
Those statements include statements regarding the intent, belief or current
expectations of Rand and its management team. You are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties. These risks and uncertainties include but are not
limited to, those risks and uncertainties discussed in Exhibit 99.1 to this Form
8-K which is incorporated herein by reference. In light of the significant risks
and uncertainties inherent in the forward-looking statements included in this
report, the inclusion of such statements should not be regarded as a
representation by us or any other person that our objectives and plans will be
achieved.
Rand was formed on June 2, 2004 to serve as a vehicle to effect an
acquisition, merger, capital stock exchange, asset acquisition or other similar
business combination with an unidentified operating business. Rand consummated
its initial public offering on November 2, 2004.
6
On March 3, 2006, Rand, through its wholly-owned subsidiary, LL
Acquisition Corp., acquired all of the outstanding shares of capital stock of
Lower Lakes Towing in accordance with the terms of the Stock Purchase Agreement,
dated September 2, 2005, by and among Rand, LL Acquisition Corp. and the
stockholders of Lower Lakes, as amended. Immediately following completion of the
acquisition, and in conjunction therewith, LL Acquisition Corp. and Lower Lakes
were amalgamated under Canadian law and the shares of capital stock of Grand
River and Lower Lakes Transportation owned by Lower Lakes at the time of the
amalgamation were transferred to Rand's wholly-owned subsidiary, Rand LL
Holdings Corp. Upon completion of such transfer, the outstanding shares of Grand
River not owned by Rand LL Holdings Corp. were redeemed in accordance with the
terms of the Redemption Agreement, dated September 2, 2006, between Grand River
and GR Holdings, Inc. Following completion of the foregoing transactions, as of
March 3, 2006, each of Lower Lakes, Grand River and Lower Lakes Transportation
became indirect, wholly-owned subsidiaries of Rand. In conjunction with the
foregoing transactions, as of March 3, 2006, Rand changed its name to Rand
Logistics Inc.
In accordance with the terms of the Stock Purchase Agreement and
Redemption Agreement, respectively, Rand paid US$9,843,748 to the selling
shareholders of Lower Lakes and US$750,000 to GR Holdings, Inc., and arranged
for the repayment of the acquisition closing date indebtedness of such entities
of Cdn$43,732,749 and US$5,156,945, respectively. The amount paid to the Lower
Lakes selling shareholders reflects certain adjustments made on the acquisition
closing date in accordance with the Stock Purchase Agreement and such amount is
subject to further adjustment after the acquisition closing based Rand's
determination of the net working capital of Lower Lakes and its affiliates as of
January 15, 2006. Rand funded the acquisition closing date payments with the
approximately US$24,646,000 of proceeds of its initial public offering held in
trust, US$15,000,000 of proceeds of the acquisition closing date issuance of
Rand's newly created series A convertible preferred stock, and proceeds of the
new senior loan facility entered into on the acquisition closing date by Lower
Lakes, Grand River and Lowe Lakes Transportation.
The shares of series A convertible preferred stock were issued pursuant to
the terms of the Preferred Stock Purchase Agreement, dated September 2, 2006, by
and among Rand and Knott Partners LP and certain of its affiliates, and Bay
Resource Partners L.P. and certain of its affiliates. In accordance with the
terms of the Preferred Stock Purchase Agreement, Rand issued 300,000 shares on
the acquisition closing date for an aggregate purchase price of $15,000,000. The
shares of series A convertible preferred stock were not registered under the
Securities Act of 1933, but the series A preferred stockholders have the right
to require the filing of a registration statement with respect to shares of Rand
common stock issuable upon conversion of the shares of series A convertible
preferred stock. The series A preferred stockholders are prohibited from selling
any shares of such common stock under a registration statement prior to the six
month anniversary of the acquisition closing date or more than one half of all
such shares of common stock held by them as a group prior to the twelve month
anniversary of the acquisition closing date. The shares of series A convertible
preferred stock: rank senior to Rand's common stock with respect to liquidation
and dividends; are entitled to receive a cash dividend at the annual rate of
7.75%, payable quarterly (subject to increases of 0.5% for each six month period
in respect of which the dividend is not timely paid, up to a maximum of 12%,
subject to reversion to 7.75% upon payment of all accrued and unpaid dividends);
are convertible into shares of Rand common stock at any time at the option of
the series A preferred stockholder based on a conversion price of $6.20 per
share (subject to adjustment); are convertible into shares of Rand common stock
(based on a conversion price of $6.20 per share, subject to adjustment) at the
option of Rand if, after the third anniversary of the acquisition, the trading
price of Rand's common stock for 20 trading days within any 30 trading day
period equals or exceeds $8.50 per share (subject to adjustment); may be
redeemed by Rand in connection with certain change of control or acquisition
transactions; will vote on an as-converted basis with Rand's common stock; and
have a separate vote over certain material transactions or changes involving
Rand.
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Rand's Certificate of Incorporation was amended and restated on the
acquisition closing date to, among other things, increase the number of shares
of common stock that Rand is authorized to issue from 20,000,000 shares to
50,000,000 shares, and to adopt certain amendments designed to ensure Rand's
compliance with the citizenship requirements of U.S. maritime laws, including
the Shipping Act, 1916, and the Merchant Marine Act, 1920, commonly referred to
as the Jones Act, after completion of the acquisition. The maritime law- related
amendments limit the aggregate percentage ownership of Rand's capital stock,
including common stock, by non-U.S. citizens to 23% of the outstanding shares of
Rand's capital stock and no more than 23% of the voting power of Rand. In
addition, these amendments give Rand's Board of Directors the authority to make
such determinations as may reasonably be necessary to ascertain such ownership
and to implement such limitations, including limiting transfers of shares and
redeeming shares held by anyone whose ownership of such shares would cause Rand
to be in violation of U.S. maritime laws.
Rand intends to continue to pursue acquisition opportunities in an effort
to diversify its investments. Rand's strategy and business model as it relates
to Lower Lakes includes the following:
- Selected acquisitions. Since October 1999, Lower Lakes has added
seven cargo-carrying vessels to its fleet, making Lower Lakes one of
the most acquisitive shipping companies in the Great Lakes region.
Rand's management believes that the acquisition of additional
vessels would provide it with a larger share of the available River
Class capacity, provide additional operating flexibility and extend
the longevity of its fleet. Rand is actively pursuing acquisition
opportunities but is not committed to any acquisitions at the
present time;
- New customer relationships and long-term contracts. Rand believes
that opportunities exists to enter into additional long-term
contracts with new customers. Rand believes that Lower Lakes has
historically built strong relationships with its customers, who Rand
believes view Lower Lakes as a strategic supplier offering lower
costs and greater flexibility than the larger shipping companies;
and
- Expand existing customer relationships. In addition to gaining new
customers, Rand believes opportunities exist for Rand to increase
its business with existing customers.
Lower Lakes' vessels require general maintenance and capital upgrades each
year to ensure the fleet operates efficiently during the shipping season and to
minimize downtime during the operating season. This work is completed during
January, February, and March each year when the vessels are not active. The age
of the vessels, combined with the prohibitive replacement cost of a vessel,
increases the importance of having an appropriate maintenance program.
Historically, the cost of winter work averages approximately $500,000 per
vessel. Between 40% and 60% of the winter work projects have been expensed as
maintenance expenditures, with the balance of winter work expenditures
capitalized. Capitalized winter work expenditures include items such as steel
replacement and engine overhauls.
Every vessel on the Great Lakes must be dry docked, inspected, and
certified every four years in Canada and five years in the U.S., although
one-year extensions are frequently granted. This certification in the U.S. is
known as the five-year survey. Dry docking certification entails the visual
inspection and measurement of all parts of the vessel that are located
underwater. Certification also requires the inspection of the internal structure
of the vessel, all fuel tanks, the main deck, cargo holds, and several other
parts of the vessel. Any required repairs are made at this time. In addition, it
is normal to paint the underwater portion of the vessel's hull and make repairs
as required to any bow or stern thrusters during the certification process. Dry
docking expenses are capitalized when incurred and amortized over the benefit
period, which is either four to five years for Canadian vessels or five to six
years for U.S. vessels. Historically, the cost of the certification process for
each vessel has averaged approximately $625,000. Such costs could be
dramatically higher in the future depending on the nature of repairs required.
8
Rand believes that its current cash on hand together with cash flows from
operations of Lower Lakes will be sufficient to satisfy its cash requirements
for the foreseeable future; provided, however, that there can be no assurance
that Rand will have sufficient cash to pay current dividends on the series A
preferred stock, in which case such dividends would accrue in accordance with
the terms of the series A preferred stock.
Neither Rand nor Lower Lakes has any specific current plans to increase or
decrease the number of its employees or to purchase or sell any significant
equipment. However, implementation of Rand's acquisition strategy could result
in a future increase in the number of its employees or future acquisitions of
equipment.
Off-Balance Sheet Arrangements. As of December 31, 2005, we did not have
any off-balance-sheet arrangements, as defined in Item 303(c)(2) of SEC
Regulation S-B.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
Directors, Executive Officers, Promoters and Control Persons.
Directors and Executive Officers
Our current directors and executive officers are as follows:
Name Age Position
- -----------------------------------------------------------------------------------------
Laurence S. Levy 49 Chairman of the Board and Chief
Executive Officer, Rand; Director
and Vice President, Lower Lakes,
Lower Lakes Transportation and Grand
River
Scott Bravener 41 President, Lower Lakes and Lower
Lakes Transportation; Director, Rand
and Lower Lakes
James Siddall 41 Vice President - Marine Operations,
Lower Lakes and Lower Lakes
Transportation
Jeffrey Botham 39 Chief Financial Officer, Lower Lakes
and Lower Lakes Transportation
Mark Rohn 48 President, Grand River
Isaac Kier 52 Director, Rand
Sandeep D. Alva 44 Director, Rand
9
Laurence S. Levy has been Chairman of our Board of Directors and our Chief
Executive Officer since our inception. Mr. Levy founded the predecessor to Hyde
Park Holdings, LLC in July 1986 and has since served as its Chairman. Hyde Park
Holdings, LLC is an investor in middle market businesses. Mr. Levy serves as an
officer or director of many companies in which Hyde Park Holdings, LLC or its
affiliates invests. Presently, these companies include: Ozburn-Hessey Logistics
LLC, a national logistics services company, of which Mr. Levy is a director;
Derby Industries LLC, a sub-assembly business to the appliance, food and
transportation industries, of which Mr. Levy is Chairman; PFI Resource
Management LP, an investor in the Private Funding Initiative program in the
United Kingdom, of which Mr. Levy is general partner; Parking Company of America
Airports LLC, an owner and operator of airport parking garages, of which Mr.
Levy is a director; Regency Affiliates, Inc., a diversified publicly listed
company, of which Mr. Levy is Chairman, Chief Executive Officer and President;
Warehouse Associates L.P., a provider of warehouse and logistics services, of
which Mr. Levy is Chairman. In addition, from March 1997 to January 2001, Mr.
Levy served as Chairman of Detroit and Canada Tunnel Corporation, a company
which operates the toll tunnel between Detroit, Michigan and Windsor, Ontario,
and from August 1993 until May 1999, Mr. Levy served as Chief Executive Officer
of High Voltage Engineering Corporation, a diversified industrial and
manufacturing company. Mr. Levy received a Bachelor of Commerce degree and a
Bachelor of Accountancy degree from the University of Witwatersrand in
Johannesburg, South Africa. He is qualified as a Chartered Accountant (South
Africa). Mr. Levy received a Master of Business Administration degree from
Harvard University and graduated as a Baker Scholar.
Captain Scott Bravener has served as Lower Lakes' President and Chief
Executive Officer since its inception in 1994, and until 2001 also served as the
captain of the Cuyahoga, a vessel owned by Lower Lakes. Captain Bravener has
worked in the Great Lakes shipping industry since 1982, serving in various
capacities for Canada Steamship Lines Inc. and P & H Shipping prior to the
formation of Lower Lakes. Captain Bravener is a director of the Canadian
Shipowners Mutual Assurance Association, is a certified Ships Master and is a
member of the American Bureau of Shipping. Captain Bravener is a graduate of
Marine Navigation Technology, Georgian College, Owen Sound, Ontario.
Captain James Siddall joined Lower Lakes in 1994 and currently serves as
its Vice President of Marine Operations. Until 2001, Captain Siddall also served
as the relief captain of the Cuyahoga, a vessel owned by Lower Lakes. Captain
Siddall has worked in the Great Lakes Shipping industry since 1981, serving in
various capacities with Algoma Central Marine prior to the formation of Lower
Lakes. Captain Siddall sits on the Georgian College Marine Advisory Council. He
is a certified Ships Master as well as a graduate of Marine Navigation
Technology, Georgian College, Owen Sound, Ontario.
Jeffrey Botham has served as the Chief Financial Officer of Lower Lakes
since 2003. Between 2002 and 2003, Mr. Botham served as Chief Financial Officer
of GolfNorth Properties, Inc., a privately held golf course consolidator. From
2000 to 2002, Mr. Botham served as Chief Financial Officer of EDJ Packaging,
Inc., an international equipment broker, based in Southwestern Ontario. During
2000, Mr. Botham served as Vice President of Finance and Chief Financial Officer
for Hip Interactive Corp., a publicly listed group of companies in the video
game distribution business. From 1995 to 2000, Mr. Botham served in roles of
increasing responsibilities including Vice President, Finance, Chief Financial
Officer and Secretary for Brick Brewing Co. Limited, a publicly listed regional
brewery. From 1989 to 1995, Mr. Botham served as Manager of Accounting and
Controller for privately held Algonquin Brewing Company. Mr. Botham earned his
B.A. at the University of Waterloo and is a Certified Management Accountant
(Canada).
Mark Rohn has served as President of Grand River since 2001. Mr. Rohn has
worked in the Great Lakes shipping industry since 1978, serving in various
capacities with Oglebay Norton, Hanna Mining, Great Lakes Towing and N.M.
Paterson and Sons. Mr. Rohn earned a bachelor's degree in Business Management
from Cleveland State University.
10
Isaac Kier has been a member of our Board of Directors since our
inception. Since February 2000, Mr. Kier has served as a general partner of
Coqui Capital Partners L.P., a venture capital firm which invests primarily in
early stage companies. Since October 1997, he has been a principal and managing
partner of First Americas Partners, LLC, an investment partnership focusing on
investments in North and South America. Since February 2004, he has also been
the secretary and treasurer and a member of the board of directors of Tremisis
Energy Acquisition Corporation, an OTC Bulletin Board-listed company formed for
the purpose of acquiring an operating business in either the energy or
environmental industry and their related infrastructures. Since June 2005, Mr.
Kier has also been a director of Paramount Acquisition Corporation, a company
formed for the purpose of acquiring an operating business in either the
biotechnology or specialty pharmaceuticals industry. Since April 2005, Mr. Kier
has also been Chief Executive Officer and director of MPLC, Inc., a
publicly-traded company which currently does not have any business operations
but is pursuing business combination opportunities. Since October 2004, Mr. Kier
has served as a member of the board of directors of Hana Biosciences Inc., an
OTC Bulletin Board-listed biopharmaceutical company that aims to acquire,
develop and commercialize innovative products for the treatment of important
unmet medical needs in cancer and immunological diseases. From 1987 to 1997, he
served as the managing partner of the Alabama 8 market, a non-wireline cellular
licensee. From 1982 until its sale in 1995, Mr. Kier served as chairman of the
board and chief executive officer of Lida, Inc., a Nasdaq-listed company engaged
in textile production and printing. Mr. Kier received a B.A. in Economics from
Cornell University and a J.D. from George Washington University Law School.
Sandeep D. Alva has been a member of our Board of Directors since our
inception. In July 2000, Mr. Alva founded Falcon Investment Advisors, LLC, a
private equity investment firm providing subordinated debt and equity capital to
middle market companies, and has been its managing director since its formation.
From March 1991 to July 2000, Mr. Alva served as senior managing director and
Mezzanine and Private Equity Team Leader of the John Hancock Bond & Corporate
Finance Group, an affiliate of John Hancock Financial Services, Inc. Prior to
that, he was a principal at Joseph, Littlejohn & Levy, a private equity
investment firm, from December 1989 to March 1991. Mr. Alva received a Bachelor
of Commerce degree from Bombay University, India, and an M.B.A. from Cornell
University.
Our board of directors is divided into three classes with only one class
of directors being elected in each year and each class serving a three-year
term. The term of office of the first class of directors, consisting of Sandeep
D. Alva, will expire at our first annual meeting of stockholders. The term of
office of the second class of directors, consisting of Isaac Kier, will expire
at the second annual meeting. The term of office of the third class of
directors, consisting of Laurence S. Levy and Scott Bravener, will expire at the
third annual meeting.
Special Advisor
Edward Levy was a managing director of CIBC World Markets Corp. from
August 1995 through December 2005, and was co-head of CIBC World Markets Corp.'s
Leveraged Finance Group from June 2001 until December 2004. From February 1990
to August 1995, Mr. Levy was a managing director of Argosy Group L.P., a private
investment banking firm. Since June 1998, Mr. Levy has been a member of the
board of managers of Norcross Safety Products LLC, a reporting company under the
Securities Exchange Act of 1934 engaged in the design, manufacture and marketing
of branded products in the fragmented personal protection equipment industry.
From July 1999 until March 2005, he has was also a director of Booth Creek Ski
Holdings, Inc., a reporting company under the Securities Exchange Act of 1934
that owns and operates six ski resort complexes encompassing nine separate
resorts. Mr. Levy is a member of the board of directors of a number of
privately-held companies. Mr. Levy received a B.A. from Connecticut College. Mr.
Levy is not related to Laurence S. Levy, our Chairman and Chief Executive
Officer.
11
Executive Compensation
During the fiscal year ended December 31, 2005, other than $7,500
per-month paid by Rand to ProChannel Management, an affiliate of Laurence S.
Levy, for providing Rand with office space and certain office and secretarial
services, no compensation of any kind, including finders and consulting fees,
was paid to any of our executive officers or directors, or any of their
respective affiliates, for services rendered to Rand or any of its subsidiaries.
However, our executive officers and directors were entitled during such period
to be reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable business combinations.
Since our formation, we have not granted any stock options or stock
appreciation rights or any awards under long-term incentive plans.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial
ownership of Rand's common stock as of March 8, 2006 by:
o each person known by Rand to be the beneficial owner of more
than 5% of Rand's outstanding shares of common stock;
o each of Rand's officers and directors; and
o all of Rand's officers and directors as a group.
Unless otherwise indicated, Rand believes that all persons named in the
table have sole voting and investment power with respect to all shares of common
stock beneficially owned by them.
All of the shares of our outstanding common stock owned by our founders
prior to our initial public offering have been placed in escrow with Continental
Stock Transfer & Trust Company, as escrow agent, pursuant to an escrow agreement
described below.
12
Amount and
Nature of
Beneficial Percent of
Name and Address of Beneficial Owner (1) Ownership Class
- ---------------------------------------- ------------ ----------
Laurence S. Levy 1,594,286 (2) 24.9%
Rand Management LLC 794,286 (2) 14.2%
Isaac Kier (3) 957,000 (4) 15.4%
David M. Knott (5) 2,354,233 (6) 32.7%
Dorset Management Corporation (5) 1,961,677 (7) 28.8%
Hummingbird Management, LLC (8) 509,100 (9) 9.1%
MHR Capital Partners (500) LP (10) 1,640,652 (11) 24.3%
MHR Advisors LLC
Mark H. Rachesky, M.D.
Sapling, LLC (12) 335,000 (13) 6.0%
Amarath Global Equities Master Fund Limited (14) 300,000 (15) 5.4%
Amarath Advisors L.L.C.
Nicholas M. Maounis
Sandeep D. Alva (16) 200,000 (17) 3.5%
Bay Resources Partners L.P. (18) 1,209,677 (19) 17.7%
Bay II Resources Partners L.P.
Bay Resources Partners Offshore Fund Ltd.
Thomas E. Claugus
Scott Bravener (20) -- --%
All directors and executive officers as a group (3 individuals) 2,751,286 (21) 38.7%
(1) Unless otherwise indicated, the business address of each of the following
is 450 Park Avenue, 10th Floor, New York, New York 10022.
(2) Represents 794,286 shares of common stock held by Rand Management LLC of
which the sole member is the Laurence Levy Irrevocable Trust, a trust
established for the benefit of Mr. Levy's three minor children. Mr. Levy
is the trustee for the trust. Includes 800,000 shares of common stock
issuable upon exercise of warrants held by Mr. Levy.
(3) The business address of Mr. Kier is Coqui Capital Partners, L.P., 1775
Broadway, Suite 604, New York, New York 10019.
(4) In addition to shares held directly, includes 17,000 shares of common
stock held by Mr. Kier's wife and 100,000 shares of common stock held
through a family limited partnership. Also includes 607,000 shares of
common stock issuable upon exercise of warrants.
(5) The business address of Mr. Knott and Dorset Management Corporation is 485
Underhill Boulevard, Suite 205, Syosett, New York 11791.
(6) This information is based on (i) a Schedule 13G/A filed with the
Securities and Exchange Commission on February 11, 2005 reporting 752,000
shares beneficially owned (which shares are held by Dorset Management
Company), (ii) a Form 4/A filed on March 23, 2004 reporting 392,556
warrants owned, which warrants became exercisable on March 3, 2005, and
(iii) 1,209,677 shares underlying the shares of Rand's series A
convertible preferred stock issued to entities affiliated with Mr. Knott
(and Dorset Management Corporation).
(7) This information is based on (i) the Schedule 13G/A filed with the
Securities and Exchange Commission on February 11, 2005 and (ii) 1,209,677
shares underlying the shares of Rand's series A convertible preferred
stock issued to entities affiliated with Dorset Management Corporation
(and David Knott).
13
(8) The business address of Hummingbird Management, LLC is 460 Park Avenue,
12th Floor, New York, New York 10022.
(9) The foregoing information was derived from a Schedule 13D/A filed with the
Securities and Exchange Commission on November 3, 2005. Does not include
9,080 shares of common stock issuable upon exercise of warrants which may
be held by these entities.
(10) The business address of these entities and this individual is 40 West 57th
Street, 24th Floor, New York, New York 10019.
(11) Comprised of 482,400 shares of Common Stock and 1,640,652 shares of common
stock underlying warrants held in the aggregate by such entities and
individual. This information was provided by the reporting person's
representative.
(12) The business address of Sapling, LLC is 535 Fifth Avenue, 31st Floor, New
York, New York 10017.
(13) This information was derived from a Schedule 13G filed with the Securities
and Exchange Commission on March 31, 2005.
(14) The business address of these entities and individuals is c/o Amarath
Advisors L.L.C., One American Lane, Greenwich, Connecticut 06831.
(15) This information was derived from a Schedule 13G filed with the Securities
and Exchange Commission on February 10, 2006.
(16) The business address of Mr. Alva is Falcon Investment Advisors, LLC, 60
Kendrick Street, Needham, Massachusetts 02494.
(17) Includes 100,000 shares of Common Stock and 100,000 shares underlying
warrants, which warrants became exercisable on March 3, 2006. This
information is derived from a Form 3 and a Form 4 filed on October 28,
2004 and August 20, 2005, respectively.
(18) The business address of these entities and this individual is 2100
RiverEdge Pkwy, Suite 840, Atlanta GA 30328. This information is based on
the number of shares of Rand's series A convertible preferred stock issued
to such entities. Information as to the beneficial ownership of these
shares is not available at the time of this report.
(19) Comprised of 1,209,677 shares underlying Rand's series A convertible
preferred stock. This information is based on the number of shares of
Rand's series A convertible preferred stock issued to such entities.
Information as to the beneficial ownership of these shares is not
available at the time of this report.
(20) The business address for Mr. Bravener is 625 Main Street Port Dover,
Ontario Canada NOA 1NO.
(21) Include 1,507,000 shares of common stock issuable upon exercise of
warrants which warrants became exercisable on March 3, 2006.
Laurence S. Levy, Rand Management LLC, Isaac Kier and Falcon Partners
Holdings, LLC may be deemed to be our "parents" and "promoters," as these terms
are defined under the Federal securities laws.
14
Certain Relationships and Related Transactions
In June 2004, we issued 875,000 shares of our common stock to the
following individuals for $25,000 in cash, at an average purchase price of
approximately $0.029 per share as set forth below:
Name Number of Shares Relationship to Us
Laurence S. Levy 395,000 Chairman of the Board and Chief Executive
Officer
Natalie Lynn Levy 100,000 Stockholder
Irrevocable Trust
Michael Benjamin Levy 100,000 Stockholder
Irrevocable Trust
Jessica Rose Levy 100,000 Stockholder
Irrevocable Trust
Isaac Kier 87,500 Director
Falcon Partners Holdings, LLC 87,500 Director
Jane Levy 5,000 Stockholder
Each of Laurence S. Levy, the Natalie Lynn Levy Irrevocable Trust, Michael
Benjamin Levy Irrevocable Trust and Jessica Rose Levy Irrevocable Trust
subsequently transferred their shares to Rand Management LLC, an entity of which
the sole member is the Laurence Levy Irrevocable Trust, a trust established for
the benefit of Laurence Levy's three minor children. In October 2004, Rand's
Board of Directors authorized a stock dividend of 0.1428571 shares of common
stock for each outstanding share of common stock, effectively lowering the
purchase price to approximately $0.025 per share.
Pursuant to an escrow agreement between Rand, Rand's initial stockholders
and Continental Stock Transfer & Trust Company, all of the shares owned by
Rand's initial stockholders were placed in escrow, with Continental acting as
escrow agent, pursuant to an escrow agreement, until the earliest of:
o October 27, 2007;
o Rand's liquidation; or
o the consummation of a liquidation, merger, stock exchange or
other similar transaction which results in all of Rand's
stockholders having the right to exchange their shares of
common stock for cash, securities or other property subsequent
to Rand's consummating a business combination with a target
business.
During the escrow period, these shares cannot be sold, but the initial
stockholders will retain all other rights as stockholders, including, without
limitation, the right to vote their shares of common stock and the right to
receive cash dividends, if declared. If dividends are declared and payable in
shares of common stock, such dividends will also be placed in escrow. If Rand
was unable to effect a business combination and required to liquidate, none of
Rand's initial stockholders would have received any portion of the liquidation
proceeds with respect to common stock owned by them prior to Rand's initial
public offering.
Rand also entered into a registration rights agreement with the initial
stockholders pursuant to which the holders of the majority of the initial
stockholders' shares will be entitled to make up to two demands that Rand
register these shares. The holders of the majority of these shares may elect to
exercise these registration rights at any time after the date on which these
shares of common stock are released from escrow. In addition, these stockholders
have certain "piggy-back" registration rights on registration statements filed
subsequent to the date on which these shares of common stock are released from
escrow. Rand will bear the expenses incurred in connection with the filing of
any such registration statements.
15
Each of Rand's initial stockholders also entered into a letter agreement
with Rand and EarlyBirdCapital pursuant to which, among other things:
o each agreed to vote all of his Shares owned in accordance with
the majority of the shares issued in Rand's initial public
offering if Rand solicits approval of its stockholders for a
business combination;
o if Rand fails to consummate a business combination by April
27, 2006 (or by October 27, 2006 under certain limited
circumstances), each agreed to take all reasonable actions
within his power to cause Rand to liquidate as soon as
reasonably practicable;
o each waived any and all rights he may have to receive any
distribution of cash, property or other assets as a result of
such liquidation with respect to his shares acquired prior to
Rand's initial public offering;
o each agreed to present to Rand for Rand's consideration, prior
to presentation to any other person or entity, any suitable
opportunity to acquire an operating business, until the
earlier of Rand's consummation of a business combination,
Rand's liquidation or until such time as he ceases to be an
officer or director of ours, subject to any pre-existing
fiduciary obligations he might have;
o each agreed that Rand could not consummate any business
combination which involves a company which is affiliated with
any of the initial stockholders unless Rand obtains an opinion
from an independent investment banking firm reasonably
acceptable to EarlyBirdCapital that the business combination
is fair to Rand's stockholders from a financial perspective;
o each agreed that he and his affiliates will not be entitled to
receive and will not accept any compensation for services
rendered to Rand prior to the consummation of Rand's business
combination; and
o each agreed that he and his affiliates will not be entitled to
receive or accept a finder's fee or any other compensation in
the event he or his affiliates originate a business
combination.
ProChannel Management LLC, an affiliate of Laurence S. Levy, Chairman of
Rand's Board and Chief Executive Officer, has agreed that, through the
acquisition of a target business, it will make available to Rand a small amount
of office space and certain office and secretarial services, as Rand may require
from time to time. Rand has agreed to pay ProChannel Management $7,500 per month
for these services. ProChannel is not obligated to continue to provide such
office space and services to us, and there can be no assurance as to whether, or
for how long, ProChannel will continue to make such office space available.
During 2004, Laurence S. Levy advanced $70,000 to Rand to cover expenses
related to Rand's initial public offering. The loan was payable without interest
on the earlier of June 10, 2005 or the consummation of Rand's initial public
offering. This loan was repaid in November 2004.
Rand will reimburse its officers and directors for any reasonable
out-of-pocket business expenses incurred by them in connection with certain
activities on Rand's behalf such as identifying and investigating possible
target businesses and business combinations.
Other than the $7,500 per-month administrative fee and reimbursable
out-of-pocket expenses payable to Rand's officers and directors, no compensation
or fees of any kind, including finders and consulting fees, will be paid to any
of Rand's initial stockholders or to any of their respective affiliates for
services rendered to Rand prior to or with respect to the business combination.
16
All ongoing and future transactions between Rand and any of its officers
and directors or their respective affiliates, will be on terms believed by Rand
to be no less favorable than are available from unaffiliated third parties and
will require prior approval in each instance by a majority of the members of
Rand's Board who do not have an interest in the transaction.
Financial Statements
Rand's audited balance sheet dated December 31, 2004 and audited
statements of operations, stockholders' equity and cash flows for the period
beginning June 2, 2004 (inception) and ending December 31, 2004 have been
previously reported in Rand's Form 10-KSB for its fiscal year ended December 31,
2004. Rand's audited balance sheet dated December 31, 2005 and audited
statements of operations, stockholders' equity and cash flows for the twelve
months then ended are attached as Exhibit 99.2 to this Form 8-K.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
On March 3, 2006, Lower Lakes, Lower Lakes Transportation and Grand River,
as borrowers, entered into the Credit Agreement which provides for a new senior
credit facility with a syndicate of lenders, including General Electric Capital
Corporation, as agent and as a lender. The new senior credit facility provides
for (i) a revolving credit facility under which Lower Lakes may borrow up to Cdn
$2,300,000 and an additional seasonal facility of US $2,000,000, subject to
limitations, (ii) a revolving credit facility under which Lower Lakes
Transportation may borrow up to US $3,500,000 and an additional seasonal
facility of US $2,000,000, subject to limitations, (iii) a Canadian dollar
denominated term loan facility under which Lower Lakes may borrow Cdn
$21,200,000, and (iv) a US dollar denominated term loan facility under which
Grand River may borrow US $4,000,000. Borrowings under the new senior credit
facility are required to be used to refinance the borrowers' existing senior
credit facility, to finance working capital and for the acquisition of the stock
of the borrowers and other general corporate purposes. The full amount of both
term loans was extended to the borrowers on March 3, 2006. Rand is neither a
party to the Credit Agreement nor a guarantor of any obligations under the
Credit Agreement.
Under the new senior credit facility, the revolving credit facility
expires on March 3, 2011. The outstanding principal amount of the Canadian term
loan borrowings will be repayable as follows: (i) an aggregate of Cdn $2,120,000
per annum shall be payable in four equal quarterly installments during the first
year, (ii) an aggregate of Cdn $2,544,000 shall be payable in four equal
quarterly installments in each of the next four years, and (iii) a final payment
in the outstanding principal amount of the Canadian term loan shall be payable
upon the Canadian term loan facility's maturity on March 3, 2011. The
outstanding principal amount of the US term loan borrowings will be repayable as
follows: (i) an aggregate of US $400,000 per annum shall be payable in four
equal quarterly installments during the first year, (ii) an aggregate of US
$480,000 per annum shall be payable in four equal quarterly installments in each
of the next four years, and (iii) a final payment in the outstanding principal
amount of the US term loan shall be payable upon the US term loan facility's
maturity on March 3, 2011.
Borrowings under the Canadian revolving credit facility and Canadian term
loan will bear an interest rate per annum, at the borrowers' option, equal to
(i) the Canadian Prime Rate (as defined in the new senior credit facility), plus
2% per annum or (ii) the BA Rate (as defined in the new senior credit facility)
plus 3% per annum. The US revolving credit facility and the US term loan will
bear interest, at the borrowers' option equal to (i) LIBOR (as defined in the
new senior credit facility) plus 3.00% per annum, or (ii) the US Base Rate(as
defined in the new senior credit facility), plus 2% per annum.
Obligations under the new senior credit facility are secured by a first
priority lien and security interest on all of the borrowers' assets, tangible or
intangible, real, personal or mixed, existing and newly acquired, and a pledge
by Rand LL Holdings Corp of all of the outstanding capital stock of the
borrowers. In addition, all obligations under the new senior credit facility
will also be secured by a pledge, with limited exception, of all the outstanding
capital stock of the borrowers' subsidiaries. The indebtedness of each borrower
under the new credit facility is unconditionally guarantied by each other
borrower and by Rand LL Holdings Corp. and such guaranty is secured by a lien on
substantially all of the assets of each borrower and Rand LL Holdings Corp.
17
Under the new senior credit facility, the borrowers will be required to
make mandatory prepayments of principal on term loan borrowings (i) if the
outstanding balance of the term loans plus the outstanding balance of the
seasonal facilities exceeds the sum of 75% of the fair market value of the
vessels owned by the borrowers, less the amount of outstanding liens against the
vessels with priority over the Lenders' liens, in an amount equal to such
excess, (ii) in the event of certain dispositions of assets and insurance
proceeds (all subject to certain exceptions), in an amount equal to 100% of the
net proceeds received by the borrowers therefrom, and (iii) in an amount equal
to 100% of the net proceeds to a borrower from any issuance of a borrower's debt
or equity securities.
The new senior credit facility contains certain covenants, including those
limiting borrowers' and their subsidiaries' ability to incur indebtedness, incur
liens, sell or acquire assets or businesses, change the nature or its business,
engage in transactions with related parties, make certain investments or pay
dividends. In addition, the new senior credit facility requires the borrowers to
maintain certain financial ratios. Failure of the borrowers to comply with any
of these covenants or financial ratios could result in the loans under the new
senior credit facility being accelerated.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
On March 3, 2006, pursuant to the terms of the Preferred Stock Purchase
Agreement, dated September 2, 2005, by and among Rand and Knott Partners LP,
Matterhorn Offshore Fund Ltd., Anno LP and Good Steward Fund Ltd., Bay II
Resources Partners, Bay Resources Partners L.P., Bay Resources Partners Offshore
Fund Ltd. and Thomas E. Claugus, Rand issued 300,000 shares of its newly-created
series A convertible preferred stock for an aggregate purchase price of
$15,000,000. The shares of series A convertible preferred stock issued under the
Preferred Stock Purchase Agreement were not registered under the Securities Act
of 1933, as amended, and bear restrictive legends that reflect this status. The
securities were issued in a private placement in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
Rand did not engage in any general solicitation or advertisement for the
issuance of these securities. These securities were purchased by a total of
eight investors, which are comprised of two groups of affiliated entities. The
investors received copies of the documents related to Rand's acquisition of
Lower Lakes and had access to additional related due diligence materials. In
connection with this issuance, each of the investors represented that (i) it is
an accredited investor as this term is defined in Regulation D under the
Securities Act, (ii) the securities it is acquiring cannot be resold except
pursuant to a effective registration under the Securities Act or in reliance on
an exemption from the registration requirements of the Securities Act, and that
the certificates representing such securities bear a restrictive legend to that
effect and (iii) it intends to acquire the securities for investment only and
not with a view to the resale thereof.
The shares of series A convertible preferred stock: rank senior to Rand's
common stock with respect to liquidation and dividends; are entitled to receive
a cash dividend at the annual rate of 7.75%, payable quarterly (subject to
increases of 0.5% for each six month period in respect of which the dividend is
not timely paid, up to a maximum of 12%, subject to reversion to 7.75% upon
payment of all accrued and unpaid dividends); are convertible into shares of
Rand common stock at any time at the option of the series A preferred
stockholder based on a conversion price of $6.20 per share (subject to
adjustment); are convertible into shares of Rand common stock (based on a
conversion price of $6.20 per share, subject to adjustment) at the option of
Rand if, after the third anniversary of the acquisition, the trading price of
Rand's common stock for 20 trading days within any 30 trading day period equals
or exceeds $8.50 per share (subject to adjustment); may be redeemed by Rand in
connection with certain change of control or acquisition transactions; will vote
on an as-converted basis with Rand's common stock; and have a separate vote over
certain material transactions or changes involving Rand.
18
ITEM 3.03. MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS.
On March 3, 2006, Rand filed (i) an Amended and Restated Certificate of
Incorporation (the "Restated Certificate") and (ii) a Certificate of
Designations with respect to the series A convertible preferred stock discussed
in Item 3.02, in each case with the Secretary of State of the State of Delaware.
The material terms of the Restated Certificate and Certificate of Designations
and the general effect upon the rights of holders of Rand's Common Stock have
been previously reported in Rand's Schedule 14A. In addition, the Credit
Agreement discussed in Items 1.01 and 2.03 also contains limitation on the
payment of dividends by Lower Lakes which in turn could impact the ability of
Rand to pay dividends to its shareholders.
Copies of the Restated Certificate and Certificate of Designation are
filed as Exhibits 3.02 and 3.03 to this Current Report on Form 8-K and are
incorporated herein by reference.
ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.
On March 3, 2006, Scott Bravener was elected to Rand's Board of Directors
by the existing members of Rand's Board of Directors. Mr. Bravener is not
expected to be on any committees of the Board of Directors. Additional
information with respect to Mr. Bravener has been previously reported in Rand's
Schedule 14A.
ITEM 5.03. AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGES IN FISCAL
YEAR.
On March 3, 2006, Rand filed the Restated Certificate and Certificate of
Designations discussed in Item 3.03.
On March 3, 2006, Rand's board of directors determined to change Rand's
fiscal year to March 31 in order to coincide with the fiscal year of Lower
Lakes, Lower Lakes Transportation and Grand River. The transition period
relating to the change in fiscal year to March 31 will be filed on Form 10-QSB.
ITEM 5.06. CHANGE IN SHELL COMPANY STATUS.
As described in Item 2.01, on March 3, 2006, Rand completed the
acquisition of Lower Lakes. As a result of this transaction, Rand is no longer a
shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934,
as amended.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The financial statements required to be filed pursuant to Instruction C.3 of
Form 8-K and Item 310(c) of Regulation S-B have been previously reported in
Rand's Schedule 14A, except for Lower Lakes' unaudited interim consolidated
balance sheet dated December 31, 2005 and unaudited interim consolidated
statements of operations and cash flows for the nine month period then ended,
which are attached hereto as Exhibit 99.3.
(b) The unaudited pro forma condensed consolidated balance sheet dated December
31, 2005 and the unaudited pro forma condensed consolidated statement of
operations for the twelve months ended December 31, 2005 required to be filed
pursuant to Instruction C.3 of Form 8-K and Item 310(d) of Regulation S-B are
attached hereto as Exhibit 99.4.
(d) Exhibits
3.1 Amended and Restated Certificate of Incorporation, filed with
the Secretary of State of the State of Delaware on March 3,
2006.
3.2 Certificate of Designations, filed with the Secretary of State
of the State of Delaware on March 3, 2006.
10.1 Credit Agreement, dated as of March 3, 2006, among Lower Lakes
Towing Ltd., Lower Lakes Transportation Company, Grand River
Navigation Company, Inc, the other Credit Parties signatory
thereto, General Electric Capital Corporation as a US Lender
and as Agent for the Secured Parties and the other Lenders
signatory thereto from time to time, and GE Canada Finance
Holding Company, as a Canadian Lender and the other Lenders
signatory thereto from time to time
10.2 Employment Agreement, dated March 3, 2006, between Scott
Bravener and Rand Logistics Inc.
10.3 Employment Agreement, dated March 3, 2006, between James
Siddall and Rand Logistics Inc.
10.4 Rand Logistics Inc. Management Bonus Program, dated March 3,
2006.
99.1 Risk Factors.
99.2 Rand Logistics Inc. audited balance sheet dated December 31,
2005 and audited statements of operations, stockholders' equity
and cash flows for the twelve months then ended.
99.3 Lower Lakes unaudited interim consolidated statements of
operations and cash flows for the nine month period then ended.
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99.4 Unaudited pro forma condensed consolidated balance sheet dated
December 31, 2005 and the unaudited pro forma condensed
consolidated statement of operations for the twelve months
ended December 31, 2005.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
RAND ACQUISITION CORPORATION
Date: March 9, 2006 By: /s/ Laurence S. Levy
-------------------------------------
Name: Laurence S. Levy
Title: Chairman of the Board and Chief
Executive Officer,
(Principal Executive and Financial
and Accounting Officer)
20