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): August 24,
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))
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Item 5.02. Departure of Directors or Principal Officers; Election
of Directors; Appointment of Principal Officers.
Background.
As previously reported, 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 its 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.
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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.
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, and vacancies thereafter would be filled by vote of the
remaining Board members, (2) in the event of a tie or deadlock in
filling any vacancy, the vacancy would be filled by an arbitrator
chosen by the Board, (3) 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, (4) the Registrant would
enter into new employment agreements with Mr. Guido and the
individual defendants, (5) the parties would exchange general
releases and (6) 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.
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 Messrs.
DiGiralomo, Theile and Stratton each released and forever
discharged each and all of the others from any and all causes of
actions, known and unknown, then existing.
Pursuant to the terms of the settlement, on June 6, 2005, the
Registrant and Messrs. 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 the capital stock of the Registrant that each Voter is
entitled to vote, 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 Messrs.
Guido, DiGiralomo, Theile and Barton no longer own, control or
hold any shares of capital stock of the Registrant.
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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. To that
end, the Voters agreed to the placement of an additional
restrictive legend on all of their shares (including subsequently
acquired shares, which restrictive legend shall read:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER, VOTING AND
OTHER RESTRICTIONS PURSUANT TO A VOTING AGREEMENT
ENTERED INTO BY THE COMPANY, THE HOLDER OF THIS
CERTIFICATE AND CERTAIN OTHER STOCKHOLDERS OF THE
COMPANY, A COPY OF WHICH IS AVAILABLE FOR
INSPECTION
AT THE OFFICES OF THE SECRETARY OF THE COMPANY."
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.
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 Messrs. 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). Messrs. 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 the 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 Messrs.
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 Messrs. 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
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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).
Expansion of the Board, and Appointment of Directors.
On July 6, 2005, the Court entered an Order (the "July 6 Order")
that expanded the Registrant's Board of Directors, effective
immediately, from four members to seven. The July 6 Order also
appointed, effective immediately, Messrs. Joseph Buckelew, Alan E.
Meyer, and Charles F. Starkey, to the Board.
On August 24, 2005, upon the Registrant's Motion for
Reconsideration, the Court amended the July 6 Order (the "First
August 24 Order"). Instead of declaring the Board expanded, and
appointing Messrs. Buckelew, Meyer, and Starkey to the Board, the
Order was amended to show that the parties agreed that a Unanimous
Written Consent of the Directors of Allstates WorldCargo, Inc.
(attached to the First August 24 Order, and referred to as the
"Directors' Consent) was consistent with the Settlement Agreement,
and shall be deemed signed by Messrs. DiGiralomo, Theile,
Stratton, and Guido.
The Directors' Consent amended the By-Laws to be consistent with
the agreement that settled the litigation. Section 3.02 of the
Registrant's By-Laws was amended to provide that the Board of
Directors shall consist of seven directors. Sections 3.12(b) and
(c) were amended to provide that future vacancies in the Board
shall be filled by vote of a majority of the remaining Directors.
In the event of a deadlock, or a three-to-three vote with respect
to filling any vacancy, an independent arbitrator appointed by the
Board shall select the person to fill the vacancy.
In order to be consistent with the settlement agreement, it was
necessary to ensure that the Board of Directors could not alter or
repeal the newly-amended Sections 3.12(b) and (c). Accordingly,
the Court entered a second order on August 24, 2005 (the "Second
August 24 Order"). That Order provides that the Written Consent
in Lieu of a Special Meeting of the Stockholders of Allstates
WorldCargo, Inc. (attached thereto, and referred to as the
"Shareholders' Consent") was consistent with the settlement
agreement, and shall be deemed signed by Messrs. DiGiralomo,
Stratton, Theile, and Guido, consisting of the holders of a
majority of the issued and outstanding shares of the Registrant's
common stock.
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The Shareholders' Consent amended Sections 3.12(b) and (c) to add
the following: "This By-Law shall be deemed to have been adopted
by the shareholders, and cannot be altered or repealed by the
Board of Directors."
In order to ensure that Messrs. Buckelew, Meyer, and Starkey (or
their successors duly appointed pursuant to the By-Laws) continue
to serve pursuant to the terms of the settlement agreement, and
not at the pleasure of the majority shareholder, the Court entered
a third order on August 24, 2005 (the "Third August 24 Order"),
which provides that the parties are required by the settlement
agreement to nominate and vote for, as Directors, Messrs.
Buckelew, Starkey, and Meyer (or their duly appointed successors)
at future meetings of the Registrants' shareholders at which
directors are to be chosen.
Item 5.03. Amendments to Articles of Incorporation or Bylaws;
Change in Fiscal Year.
The information presented in Item 5.02 above is incorporated
herein by reference. Except as noted, the amendments described
herein are, by Court Orders entered on August 24, 2005, effective
as of July 9, 2005.
Section 3.02.
Prior to the amendment described herein, Section 3.02 of the By-
Laws provided that the Board of Directors shall consist of not
less than one nor more than ten Directors. The precise number of
Directors within this range was to be fixed by the Board each year
before the annual meeting of shareholders. As amended, Section
3.02 provides for a Board of seven members.
Section 3.12(b).
Prior to the amendment described herein, Section 3.12(b) provided
that vacancies in the Board may be filled by the affirmative vote
of a majority of the remaining Directors then in office, even if
their number is insufficient to constitute a quorum. A director
so elected was to hold office until a successor is elected and
qualified at the next annual meeting of the shareholder. As
amended, Section 3.12(b) provides that any vacancy shall be filled
in the manner provided therein, and that in the event of a
deadlock, or a three-to-three vote, with respect to filling any
vacancy, an independent arbitrator appointed by the Board shall
select the person to fill the vacancy. The amended By-Law also
provides that any director so appointed pursuant to Section
3.12(b) shall also hold office in accordance with the Settlement
Agreement.
Section 3.12(b) was further amended to provide that that provision
shall be deemed to have been adopted by the shareholders, and
cannot be altered or repealed by the Board of Directors. That
further amendment shall not be effective until required notice of
such shareholder action is given, and appropriate filings (which
are being prepared) are made.
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Section 3.12(c).
Prior to the amendment described herein, Section 3.12(c) provided
that if a director resigns from the Board effective at some future
date, the future vacancy may be filled by the affirmative vote of
a majority of the directors then in office, including the director
who has resigned, even if their number is insufficient to
constitute a quorum. The term of the newly elected director would
begin when the resignation becomes effective. A director so
elected was to hold office from the effective date of the
predecessor's resignation until a successor is elected and
qualified at the next annual or special meeting of the
shareholders. As amended, Section 3.12(c) provides that any
future vacancy shall be filled in the manner provided therein, and
that in the event of a deadlock, or a three-to-three vote, with
respect to filling any vacancy, an independent arbitrator
appointed by the Board shall select the person to fill the
vacancy. The amended By-Law also provides that any director so
appointed pursuant to Section 3.12(c) shall also hold office in
accordance with the Settlement Agreement.
Section 3.12(c) was further amended to provide that that provision
shall be deemed to have been adopted by the shareholders, and
cannot be altered or repealed by the Board of Directors. That
further amendment shall not be effective until required notice of
such shareholder action is given, and appropriate filings (which
are being prepared) are made.
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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: August 24, 2005
ALLSTATES WORLDCARGO, INC.
(Registrant)
/s/ Sam DiGiralomo
By: Sam DiGiralomo
Title: President
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