UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________
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): June 6, 2005
ALLSTATES WORLDCARGO, INC.
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(Exact name of small business issuer as specified in its charter)
New Jersey 000-24991 22-3487471
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation or
organization)
4 Lakeside Drive South, Forked River, New Jersey, 08731
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(Address of principal executive offices)
609-693-5950
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(Registrant's telephone number, including area code)
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 (see General
Instruction A.2. below):
__ 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 240.13e-4(c))
Item 1.01. Entry into Material Definitive Agreements.
Background.
On October 14, 2004, Joseph M. Guido, the majority shareholder of
the Registrant, who is also employed by the Registrant as its
Chairman, commenced an action against the Registrant and three of
the Registrant's directors, Joseph M. Guido v. Allstates
WorldCargo, Inc., Sam DiGiralomo, Barton C. Theile, and Craig D.
Stratton, in the Superior Court of New Jersey, Chancery Division,
Ocean County. Messrs. DiGiralomo, Theile and Stratton are also
employed by the Registrant as its President and Chief Executive
Officer, Executive Vice President and Chief Operating Officer,
and Chief Financial Officer, respectively.
Mr. Guido alleged that on August 16, 2004, he delivered to the
Registrant's Secretary (1) an executed Written Consent in Lieu of
a Special Meeting of the Stockholders of Allstates WorldCargo,
Inc. dated August 16, 2004, (2) Amended and Restated Bylaws of
the Registrant adopted pursuant to the Written Consent, and (3) a
draft Information Statement pursuant to Section 14(c) of the
Securities Exchange Act of 1934, or the '34 Act. Mr. Guido
alleged that, pursuant to the Written Consent, he had amended the
Registrant's bylaws to (among other things) expand its Board of
Directors from four to seven members, and appointed three persons
(alleged to be independent) to fill the newly created seats. He
alleged that the Registrant was required by law to comply with
his demand to notify its shareholders of his action. He also
alleged that the three individual defendants, both as directors
and officers, owed the Registrant and it shareholders certain
fiduciary duties to direct that appropriate steps be taken by the
Registrant to allegedly comply with applicable law in response to
the Written Consent. Mr. Guido demanded relief enjoining a
scheduled special Board of Directors meeting pending Registrant's
performance of acts allegedly required by New Jersey law and by
the 1934 Act. Mr. Guido also sought a permanent injunction
requiring the Registrant and its Secretary to prepare and
distribute to the Registrant's shareholders all notices allegedly
required by state and federal law in connection with the Written
Consent. Finally, he sought entry of an order requiring the
Registrant to file and serve upon him, within seven days after
entry of a permanent injunction, a written report setting forth
the manner and form in which the Registrant complied with the
injunctions.
The Registrant (and the three individual defendants) opposed the
application for relief upon the grounds that subsequent to his
execution of the Written Consent, Mr. Guido advised one of the
individual defendants that he had decided not to proceed with his
amendment of the Bylaws or his expansion of the Board of
Directors. The Defendants also alleged that Mr. Guido's actions
were not in the best interest of the Registrant, and motivated by
self-interest, that because of such concerns, the Registrant
needed time to determine its obligations under the law, and that
the purpose of the Special Board Meeting (among others) was to
consider issues pertaining to the request by Mr. Guido to file
the Schedule 14C presented to the Secretary of the Corporation.
On October 28, 2004, the parties agreed, subject to the terms of
definitive settlement agreements, that (1) the Registrant's Board
of Directors would not be expanded except by unanimous consent,
(2) Mr. Guido and the individual defendants would enter into a
voting agreement pursuant to which each would agree to vote his
respective shares in the Registrant for the others as directors
of the Registrant, (3) the Registrant would enter into new
employment agreements with the individual defendants (the
existing employment agreements being due to expire on December
31, 2004), (4) the parties would exchange general releases and
(5) the Registrant would, to the extent lawfully required by Mr.
Guido's existing employment agreement, reimburse him for the
attorneys fees he incurred in connection with the action. It was
anticipated that the complete terms of a settlement would be
agreed upon, and that formal settlement documents would be
prepared and executed. Such formal documentation was prepared
and delivered to Mr. Guido's counsel on December 27, 2004.
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Mr. Guido refused to execute formal settlement documentation, and
commenced a second action seeking the same relief. The
Defendants answered, denying the allegations, and asserting
counterclaims against Mr. Guido and his wife, Teresa Guido. On
April 5, 2005, the parties agreed to a full and final settlement,
the terms of which were placed on the record in court, and the
parties acknowledged to the court, under oath, their obligation
to be bound thereby. The material terms of that agreement
were:
(1) the Registrant's Board of Directors will be expanded from
four to seven members, and the Court would appoint the three new
directors, (2) Mr. Guido and the individual defendants would
enter into a voting agreement pursuant to which each would agree
to vote his respective shares of the Registrant for the others as
directors of the Registrant, (3) the Registrant would enter into
new employment agreements with Mr. Guido and the individual
defendants, (4) the parties would exchange general releases and
(5) the Registrant would, to the extent lawfully required by Mr.
Guido's previous employment agreement, reimburse him for the
attorneys fees he incurred in connection with the action.
Final Settlement and Release.
On May 27, 2005, a final judgment was ordered, granted and
entered by the court in accordance with the settlement terms
agreed to by the parties on April 5, 2005. Finally, on June 6,
2005, Court declared the new employment agreements, the voting
agreement, and the mutual general release to be effective,
notwithstanding any lack of signatures. Pursuant to the mutual
general release, the Registrant and each of Mr. Guido, his wife,
and Messers. DiGiralomo, Theile and Stratton each released
and forever discharged each and all of the others from any and
all future causes of actions, known and unknown.
Voting Agreement.
Pursuant to the terms of the settlement, on June 6, 2005, the
Registrant and Messers. Guido, DiGiralomo, Theile and Stratton
(collectively, for purposes of this section, the "Voters")
entered into a Voting Agreement whereby each of the Voters agreed
to vote all of his respective shares of capital stock of the
Registrant for each other as directors of the Registrant.
Further, pursuant to the terms of the Voting Agreement, any
action taken to expand or in any way modify the composition of
the Board of Directors of the Registrant from its present
constitution shall require the unanimous consent of all of the
Voters. Additionally, in the event that shareholder action is
taken to alter or amend the Certificate of Incorporation or
Bylaws of the Registrant, the Voters agree to vote all of their
shares unanimously in the same manner. The Voting Agreement
terminates when each of Messers. Guido, DiGiralomo, Theile and
Barton no longer own, control or hold any shares of capital stock
of the Registrant.
For so long as the Voting Agreement remains in effect, the Voters
also agreed, with a certain agreed to exception, not to transfer
any of the shares of capital stock of the Registrant they hold
without the prior written consent of all of the Voters, unless
the other party to any such transaction agrees in writing to join
and be bound by all of the terms of the Voting Agreement.
Finally, during the term of the Voting Agreement, the Voters
agreed not to enter into any agreements that would be
inconsistent with any of the provisions therein.
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Employment Agreements.
Also pursuant to the terms of the settlement, on June 6, 2005 the
Registrant and Allstates Air Cargo, Inc., its wholly owned
subsidiary, (together, the Employer) entered into individual
employment agreements with each of Messers. DiGiralomo (as
President and Chief Executive Officer), Guido (as Chairman),
Theile (as Executive Vice President and Chief Operating Officer)
and Stratton (as Chief Financial Officer). Messers. DiGiralomo,
Guido, Theile and Stratton are collectively referred to herein as
Executives. Each of the employment agreements is effective as of
April 5, 2005, and expires on December 31, 2009, but
may be extended if agreed to in writing by both parties. Per
each of the employment agreements, Mr. DiGiralomo's annual salary
shall be $250,000; Mr. Guido's annual salary shall be $370,000;
Mr. Theile's annual salary shall be $250,000; and Mr. Stratton's
annual salary shall be $185,000. Each of these salaries is
subject to an annual increase at the discretion of the
Registrant's Board of Directors. Additionally, each of Messers.
DiGiralomo, Guido and Theile shall receive an annual bonus
payment equal to 3% of the increase of the net profits of the
Employer from its prior fiscal year. Each of Messers.
DiGiralomo, Guido, Theile and Stratton remains eligible to
participate in the Employer's stock option plan, 401(k)
retirement plan and insurance plans.
Excluding the above-described salary and bonus information, the
material terms of each of the Executives' employment agreements
are substantially the same. In the event any Executive dies
during the term of his respective employment agreement, then for
the longer of the remaining term of the employment agreement or
three years, the Employer shall continue to pay the Executive's
then current base salary to the Executive's designated
beneficiary or estate and will also pay for insurance for any
Executive's surviving immediate family. If, within twenty-four
months following a "Change of Control" of the Employer, as
defined in each of the employment agreements, the Executive
voluntarily resigns or retires, the Employer shall pay to the
Executive all compensation and benefits due to him up to the date
of his termination, including, but not limited to, base salary
and any expense reimbursement, and within one month of
termination, a lump-sum payment equal to 299% of the Executive's
then current base salary, bonus for the fiscal year end 2004 (if
applicable), and of the amount reimbursed to the Executive for
business-related expenses for the calendar year preceding the
termination. Additionally, any options and/or restricted stock
granted to the Executive shall become fully vested and registered
as of the date of the termination. The Executive shall have the
right to exercise all of his options for a period of five years
from the date of the termination. Additionally, all then-
existing life and health insurance benefits shall continue for
the Executive and his immediate family for a period of five years
from the date of termination. In the event of a "For Cause"
termination, as defined in each of the employment agreements, the
Employer shall pay to the Executive all compensation and benefits
due to him up to the date of his termination, including but not
limited to base salary and expense reimbursement.
At any time after 180 days have elapsed from the date of his
respective employment agreement, each Executive shall have the
right to terminate his employment agreement on 90 days written
notice to the Employer. In the event of such termination, the
Executive shall be entitled to such compensation that is equal to
the "For Cause" termination compensation described above. A
termination that is neither a Change of Control termination, a
For Cause termination, is due to the Executive's death, nor a
termination by the Executive as provided above, is a "Without
Cause" Termination. In the event of a Without Cause termination,
the Executive shall be entitled to such compensation that is
equal to the Change of Control termination compensation described
above. Finally, if the Employer breaches any material term of
each respective employment agreement or reduces the Executive's
respective title or responsibilities, the Executive may, at his
option, elect to leave the Employer, in which case he shall be
entitled to all of the Change of Control termination compensation
described above, except that the lump sum payment to be paid to
the Executive would be limited to 100% of the Executive's base
salary and bonus (if applicable).
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Item 8.01. Other Events.
The information presented in Item 1.01 above is incorporated
herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Dated as of: June 6, 2005
ALLSTATES WORLDCARGO, INC.
(Registrant)
/s/ Sam DiGiralomo
By: Sam DiGiralomo
Title: President