SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended June 30, 1999 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _____ to ___________.

                         Commission file number: 0-29754

                             TARGET LOGISTICS, INC.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                          11-3309110
(State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                         Identification No.)

112 East 25th Street, Baltimore, Maryland                     21218
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code         (410) 338-0127


           Securities registered pursuant to Section 12(b) of the Act:

         Title of Class                Name of Each Exchange on Which Registered
               None                                   None

           Securities registered pursuant to Section 12(g) of the Act:

                                 Title of Class
                          Common Stock, $.01 par value
                    Redeemable Common Stock Purchase Warrants

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___


Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive  proxy or information  statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of September 16, 1999 was $2,703,863.

The number of shares of common stock  outstanding  as of September  16, 1999 was
9,296,917.

                       DOCUMENTS INCORPORATED BY REFERENCE

To the extent specified,  Part III of this Form 10-K incorporates information by
reference to the  Registrant's  definitive  proxy  statement for its 1999 Annual
Meeting of Shareholders (to be filed).



<PAGE>



                             TARGET LOGISTICS, INC.
                         1999 ANNUAL REPORT ON FORM 10-K

                                Table of Contents


                                                                         Page
                                                                         ----

                                     PART I



Item 1.   Business                                                          3
Item 2.   Properties                                                        6

Item 3.   Legal Proceedings                                                 6
Item 4.   Submission of Matters to a Vote of Security Holders               7

Executive Officers of the Registrant                                        7


                                     PART II

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters                                               8
Item 6.   Selected Financial Data                                           9
Item 7.   Management's Discussion and Analysis of Financial
          Conditions and Results of Operations                              9
Item 8.   Financial Statements and Supplementary Data                      14
Item 9.   Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosures                          14


                                    PART III

Item 10. Directors and Executive Officers of the Registrant                15
Item 11. Executive Compensation                                            15
Item 12. Security Ownership of Certain Beneficial Owners
         and Management                                                    15
Item 13. Certain Relationships and Related Transactions                    15


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports
         on Form 8-K                                                       16



                                        2

<PAGE>



                                     PART I
                                     ------


ITEM  1.  BUSINESS
          --------

Background
----------

         Target Logistics,  Inc.  (formerly,  Amertranz Worldwide Holding Corp.)
("Company") provides freight forwarding services and logistics services, through
its wholly owned subsidiary,  Target Logistic Services,  Inc. (formerly,  Target
Airfreight,  Inc.) ("Target"). Prior to July 13, 1998, the Company also provided
services  through its  wholly-owned  subsidiary,  Caribbean Air  Services,  Inc.
("CAS"),  and, until June 23, 1997, also provided services through its Amertranz
Worldwide, Inc. ("Amertranz")  subsidiary.  The Company has a network of offices
in 29 cities throughout the United States.

         The  Company  was  incorporated  in  Delaware  in  January  1996 as the
successor to operations commenced in 1970 as the "Wrangler Aviation" division of
Blue Bell,  Inc.,  an  apparel  manufacturer.  The  Wrangler  Aviation  division
transported raw material to Blue Bell facilities in Puerto Rico and returned the
finished  goods to its facilities in Greensboro,  North  Carolina.  In 1988, new
owners of Blue Bell, Inc.  separately  incorporated  the division in Delaware as
Wrangler Aviation, Inc. ("Wrangler"), and then sold Wrangler in October 1990. At
that time,  Caribbean  Freight System,  Inc.  ("CFS") was incorporated in Puerto
Rico to act as the marketing arm of Wrangler.

         In December 1991, the owners of Wrangler  engaged a new management team
following  the  discovery  of  certain  improprieties  performed  under  the old
management.  As a  result  of  investigations  by  the  new  management,  it was
determined  to  reorganize  both Wrangler and CFS under Chapter 11 of the United
States  Bankruptcy  Code.  CFS and Wrangler both  successfully  emerged from the
Chapter 11 proceedings in November 1992 and June 1993, respectively.  In January
1994,  Wrangler changed its name to TIA, Inc. ("TIA").  Thereafter,  TIA and CFS
continued  to  specialize  in  the  movement  of  large  freight  shipments  for
manufacturers,  and maintained sales and/ or full offices in  Philadelphia,  New
York, Chicago, Los Angeles, Hartford, and Greensboro, North Carolina, as well as
a network of sales persons in Puerto Rico.

         Amertranz  and its  predecessor  began  operations  in June  1985 as an
independently  owned exclusive agent of a domestic and international air freight
forwarder.  During the next eight years, Amertranz opened nine offices under its
exclusive agency arrangement.

         In January 1994, Amertranz acquired the domestic air freight forwarding
business (i.e.,  the transport of freight which has both its point of origin and
its point of destination  within the United States) of the freight forwarder for
which Amertranz was acting as an exclusive  agent, as a result of the settlement
of a lawsuit.  Thereafter,  Amertranz  owned and  operated 20 offices  primarily
focusing on the movement of domestic  freight and, in its original nine offices,
international  air  freight.  As an  independent  freight  operation,  Amertranz
established an internal  infrastructure,  including accounting,  data processing
and communications departments, to support its 20 office network.

         In  February  1996,  the  Company   acquired  all  of  the  issued  and
outstanding stock of Amertranz and received the freight  forwarding  business of
TIA and CFS, and contributed the TIA and CFS freight forwarding business to CAS.
As  a  result,  Amertranz  became  a  wholly-owned  subsidiary  of  the  Company
conducting Amertranz's freight forwarding and logistics services businesses, and
the freight  forwarding  business of TIA and CFS was  transferred to the Company
and is conducted by CAS.

         In October 1996, the Company acquired  Consolidated Air Services,  Inc.
("Consolidated"),  a Phoenix based freight forwarder. As a result,  Consolidated
became a  wholly-owned  subsidiary  of the  Company  with  Amertranz  conducting
Consolidated's  freight forwarding  business.  In May 1997, the Company acquired
(by merger into the Company's Target subsidiary) Target Air Freight, Inc., a Los
Angeles-based freight forwarder ("Air Freight").  Under the terms of the merger,
the Company (i) paid $400,000 to Air Freight's  stockholders  at the time of the
merger  and an  additional  $77,000  on June 8,  1999,  and (ii)  issued  to Air
Freight's stockholders 900,000 shares of Common

                                        3

<PAGE>



Stock at the time of the merger  and an  additional  1,077,922  shares of Common
Stock on June 8, 1999, pursuant to Regulation D promulgated under the Securities
Act of 1933.

         Since the  business  of the  Company's  Amertranz  subsidiary  incurred
operating  losses  for  each of its  operating  periods,  on June  23,  1997 the
Company's  Amertranz  subsidiary  ceased operations and transferred its customer
accounts to the Company's Target subsidiary for fair consideration.

         On July 13, 1998, CAS sold substantially all of the operating assets of
CAS to Geologistics  Air Services,  Inc. an indirect wholly owned  subsidiary of
Geologistics  Corporation  ("Geologistics")  for $27  million  in cash (the "CAS
Sale"),  in accordance with the terms of an Asset Purchase  Agreement dated June
15, 1998 (the "Asset Purchase Agreement"). Under the terms of the Asset Purchase
Agreement, CAS retained its accounts receivable.  CAS realized $2.7 million from
these accounts  receivable after payment of liabilities during the twelve months
ended June 30, 1999.

         Following the CAS Sale, the Company  operates  through its wholly-owned
subsidiary,  Target.  On November  30,  1998,  the  Company  changed its name to
"Target Logistics, Inc."

Description of Business
-----------------------

         The Company's  freight  forwarding  services involve  arranging for the
total  transport  of  customers'  freight  from the  shipper's  location  to the
designated  recipients,  including the preparation of shipping documents and the
providing  of  handling,  packing  and  containerization  services.  The Company
concentrates  on cargo  shipments  weighing  more than 50 pounds  and  generally
requiring  second-day  delivery.  The  Company  also  assembles  bulk  cargo and
arranges  for  insurance.  The  Company  has a network  of  offices in 29 cities
throughout the United States,  including  exclusive  agency  relationships in 18
cities. The Company has international  freight forwarding  operations consisting
of strategic relationships in over 20 countries including share ownership in its
exclusive agents in China, Hong Kong, Philippines and Singapore.

Operations
----------

         Movement  of  Freight.  The  Company  does  not  own any  airplanes  or
significant  trucking  equipment and relies on independent  contractors  for the
movement of its cargo. The Company utilizes its expertise to provide  forwarding
services  that are  tailored to meet  customers'  requirements.  It arranges for
transportation  of  customers'  shipments  via  commercial  airlines,  air cargo
carriers,  steamship lines, and, if delivery schedules permit, the Company makes
use of lower cost inter-city truck transportation  services. The Company selects
the carrier for  particular  shipments on the basis of cost,  delivery  time and
available cargo capacity. Through the Company's advanced data processing system,
it can provide, at no additional cost to the customer, value-added services such
as electronic data interchange, computer based shipping and tracking systems and
customized computer generated reports.
Additionally, the Company provides cargo assembly and warehousing services.

         The  rates  charged  by the  Company  to its  customers  are  based  on
destination,  shipments  weight and required  delivery  time. The Company offers
graduated  discounts for shipments with later scheduled delivery times and rates
generally  decrease in inverse proportion to the increasing weight of shipments.
Due to the high  volume of  freight  controlled  by the  Company,  it is able to
obtain favorable  contract rates from carriers and is often able to book freight
space at times when  available  space is  limited.  When  possible,  the Company
consolidates   different   customers'   shipments   to   reduce   its   cost  of
transportation.

         Information  Systems.  An important component of the Company's business
strategy is to provide  accurate and timely  information  to its  management and
customers.  Accordingly,  the Company has invested, and will continue to invest,
substantial  management and financial  resources in developing these information
systems.

         The Company leases an HP 9000 mainframe  computer and has a proprietary
freight forwarding software system which the Company has named "TRACS". TRACS is
an integrated  freight  forwarding  and  financial  management  data  processing
system.  It  provides  the  Company  with the  information  needed to manage its
sourcing

                                        4

<PAGE>



and  distribution  activities  through  either  printed  or  electronic  medium.
Specifically,  the  TRACS  system  permits  the  Company  to track the flow of a
particular shipment from the point of origin through the transportation  process
to the point of delivery.  The Company intends to continuously  upgrade TRACS to
enhance its ability to maintain a competitive advantage.

         International  Operations.  During the fiscal year ended June 30, 1999,
the  Company's  international  freight  forwarding  accounted  for  37.2% of the
Company's  operating revenue. On a pro forma basis (assuming the CAS Sale closed
on July 1, 1998), after elimination of revenue from CAS,  international  freight
forwarding would account for 38.3% of the Company's operating revenue.

Customers and Marketing
-----------------------

         The  Company's  principal  customers  include large  manufacturers  and
distributors of computers and other  electronic and  high-technology  equipment,
computer  software and wearing  apparel.  As of June 30,  1999,  the Company had
approximately 3,200 accounts.

         The  Company   markets  its  services   through  an   organization   of
approximately  20  full-time   salespersons  and  32  independent  sales  agents
supported by the sales efforts of senior management, and the operations staff in
the Company's offices.  The Company strongly promotes team selling,  wherein the
salesperson is able to utilize  expertise from other  departments in the Company
to provide value-added  services to gain a specific account.  The Company staffs
each office with  operational  employees to provide  support for the sales team,
develop frequent contact with the customer's  traffic  department,  and maintain
customer service. The Company believes that it is important to maintain frequent
contact with its customers to assure  satisfaction  and to immediately  react to
resolve any problem as quickly as possible.

         The  Company's   Fashion  Services   Division  targets  customers  from
manufacturers  to retail  establishments  and  provides  specific  expertise  in
handling fashion-related shipments. The Fashion Services Division specializes in
the movement of wearing apparel for manufacturing  customers to their department
store customers located throughout the United States.

         Many of the Company's  customers  utilize more than one  transportation
provider. In soliciting new accounts, the Company uses a strategy of becoming an
approved carrier in order to demonstrate the quality and cost-  effectiveness of
its services.  Using this approach,  the Company has advanced its  relationships
with several of its major customers,  from serving as a back-up freight services
provider to primary freight forwarder.

Competition
-----------

         Although there are no weight  restrictions on the Company's  shipments,
the Company focuses  primarily on cargo  shipments  weighing more than 50 pounds
and requiring  second-day  delivery.  As a result, the Company does not directly
compete for most of its business with overnight couriers and integrated shippers
of principally  small parcels,  such as United Parcel Service of America,  Inc.,
Federal Express  Corporation,  DHL Worldwide  Express,  Inc.,  Airborne  Freight
Corporation  and the United  States Postal  Service.  However,  some  integrated
carriers,  such as Emery Air Freight  Corporation and Pittston BAX Group,  Inc.,
primarily solicit the shipment of heavy cargo in competition with forwarders.

         There is intense  competition within the freight  forwarding  industry.
While the industry is highly fragmented,  the Company most often competes with a
relatively  small  number of  forwarders  who have  nationwide  networks and the
capability  to provide a full range of  service  similar to that  offered by the
Company. These include Eagle USA Air Freight, Inc., Pilot Air Freight, Inc., and
Geologistics  Americas,  Inc. There is also competition from passenger and cargo
air carriers and trucking companies.  On the international side of the business,
the Company  competes with forwarders  that have a  predominantly  international
focus, such as Fritz Companies,  Inc., Air Express International Corporation and
Circle International  Group, Inc. All of these companies,  as well as many other
competitors,  have  substantially  greater  facilities,  resources and financial
capabilities than those of the Company.  The Company also faces competition from
regional and local air freight forwarders, cargo sales agents and brokers,

                                        5

<PAGE>



surface freight  forwarders and carriers and associations of shippers  organized
for the  purpose of  consolidating  their  members'  shipments  to obtain  lower
freight rates from carriers.

Employees
---------

         The  Company  and its  subsidiaries  had  approximately  170  full-time
employees as of June 30, 1999.  None of the  Company's  employees  are currently
covered by a collective  bargaining  agreement.  The Company has  experienced no
work stoppages and considers its relations with its employees to be good.

Regulation
----------

         The  Company's  freight  forwarding  business as an indirect  air cargo
carrier  is  subject  to  regulation   by  the  United   States   Department  of
Transportation  under the Federal Aviation Act. However,  air freight forwarders
(including the Company) are exempted from most of such Act's requirements by the
Economic Aviation Regulations promulgated thereunder.  The Company's foreign air
freight  forwarding  operations  are  subject to  regulation  by the  regulatory
authorities of the respective foreign jurisdictions.  The air freight forwarding
industry is subject to regulatory and  legislative  changes which can affect the
economics  of the  industry  by  requiring  changes in  operating  practices  or
influencing the demand for, and the costs of providing, services to customers.


ITEM 2.  PROPERTIES
         ----------

         As of June 30, 1999, the Company leased terminal facilities  consisting
of office and warehouse  space in 11 cities  located in the United  States,  and
also utilized 18 offices operated by exclusive agents. The Company's  facilities
range in size from  approximately  1,000  square feet to  approximately  100,000
square feet and consist of offices and warehouses with loading bays. All of such
properties are leased from third parties. The Company's headquarters are located
in Baltimore,  Maryland,  and its principal warehouse facility is located in Los
Angeles,  California, and consists of approximately 100,000 square feet of floor
space  leased  pursuant  to the terms of a lease  which  expires  in July  2002.
Management  believes that its current  facilities are underutilized and are more
than sufficient for its planned growth.

The Company has an additional 10 terminal facilities in the following locations:

           Atlanta, Georgia                      Houston, Texas
           Charlotte, North Carolina             Miami, Florida
           Chicago, Illinois                     Newark, New Jersey
           Dallas, Texas                         New York, New York
           Greensboro, North Carolina            Seattle, Washington


ITEM 3.  LEGAL PROCEEDINGS
         -----------------

         The Company had  previously  reported in its Annual Report on Form 10-K
for the fiscal year ended June 30, 1998,  that on June 15, 1998, the Company was
served  with a  complaint  filed in the  United  States  District  Court for the
Eastern District of New York (case number CV 98 3777), by Martin  Hoffenberg,  a
former consultant to the Company.  The Company,  its Amertranz,  Target, and CAS
subsidiaries,  Stuart Hettleman  (president and a director of the Company),  and
Richard A.  Faieta,  (a former  officer and  director of the  Company),  and two
principal  shareholders of the Company, are named defendants in the lawsuit. The
complaint  is  based  on  events  occurring  prior to  February  1996,  when Mr.
Hoffenberg  controlled  the Amertranz  subsidiary as its president and chairman,
and on events occurring  subsequent  thereto,  when Mr.  Hoffenberg  served as a
consultant to the Company. The complaint alleges breach of contract,  violations
of the  federal  anti-racketeering  laws,  fraud,  and  failure to pay wages and
benefits.  The complaint seeks economic  damages in excess of $5.6 million,  and
punitive  damages of $7.5  million.  Upon motion filed on behalf of the Company,
the court dismissed the action,  but permitted Mr. Hoffenberg to file an amended
complaint.  The Company  then served a motion to dismiss the amended  complaint.
The parties

                                        6

<PAGE>



then filed a stipulation  pursuant to which Mr. Hoffenberg  dismissed all claims
against  all  parties  except  claims for breach of contract  and  vacation  pay
totalling  $135,333 in the  aggregate  against  the  Company  and its  Amertranz
subsidiary.  The Company intends to vigorously defend the action, which is now a
claim for $135,333. The Company believes that the complaint is without merit and
that any material recovery by Mr. Hoffenberg is unlikely.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

         None.


EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------

         The following is a listing of the executive  officers of the Company as
of June 30, 1999.  There are no family  relationships  between any Directors and
Officers of the Company.

NAME                                  AGE                  POSITION

Stuart Hettleman .............         49        President and Chief Executive
                                                 Officer

Philip J. Dubato .............         43        Vice President, Chief Financial
                                                 Officer and Secretary

Christopher Coppersmith ......         49        President and Chief Executive
                                                 Officer, Target Logistic
                                                 Services, Inc.

STUART HETTLEMAN has been President,  Chief Executive  Officer and a director of
the Company and a director and Executive Vice President of each of Amertranz and
CAS,  since February 7, 1996, and a director and Chairman of Target since May 8,
1997.  Mr.  Hettleman is also an executive  officer of several of the  Company's
predecessors.  Specifically, he has been Vice President of TIA since 1990 and is
currently the Executive  Vice  President of TIA; and has been Vice  President of
CFS since 1991 and is currently Executive Vice President of CFS.

PHILIP J. DUBATO has been Vice President,  Chief Financial Officer and Secretary
of the  Company  since  February  3, 1997 and a director  of the  Company  since
September  18, 1998.  From 1984  through  1996,  Mr.  Dubato was employed by LEP
Profit  International,  Inc., a domestic and  international  freight  forwarder,
where he held successive  positions as Controller,  Chief Financial  Officer and
Executive Vice President.

CHRISTOPHER COPPERSMITH has been President and Chief Executive Officer of Target
Logistic  Services,  Inc.  (acquired by the Company in May 1997) since  November
1996,  and a director of the Company since May 1997.  From 1974 through  October
1996, Mr.  Coppersmith was Executive Vice President and Chief Operating  Officer
of Target Airfreight, Inc.

                                        7

<PAGE>



                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS
         -------------------------------------------------------------

         Prior to February 25, 1998, the Company's common stock,  $.01 par value
(the  "Common  Stock")  and  Redeemable  Common  Stock  Purchase  Warrants  (the
"Warrants") were listed on the NASDAQ SmallCap Market under the symbols AMTZ and
AMTZW, respectively.  From February 25, 1998 to December 3, 1998 both the Common
Stock and the Warrants  were traded on the  Over-The-Counter  (OTC) market under
the same symbols  (AMTZ and AMTZW).  Since  December 4, 1998, as a result of the
name change,  both the Common Stock and the Warrants have been traded on the OTC
market under the symbols TARG and TARGW, respectively.

         The  following  table shows the high and low sales prices of the Common
Stock and Warrants for each of the quarters  during the fiscal years  indicated,
as reported by NASDAQ and as available  through the OTC market.  The  quotations
represent  prices  between  dealers  and do not reflect  the  retailer  markups,
markdowns or commissions, and may not represent actual transactions.  There have
been no dividends declared.
<TABLE>
<CAPTION>

                                    COMMON STOCK                        WARRANTS

Fiscal Year Ended June 30, 1998
<S>                                 <C>            <C>             <C>          <C>
First Quarter                       High    -      1 3/4           High      -   1/2
                                    Low     -        7/8           Low       -   1/8

Second Quarter                      High    -      2 1/4           High      -  7/16
                                    Low     -      1               Low       -  1/16

Third Quarter                       High    -      2 1/4           High      -   1/4
                                    Low     -       9/16           Low       -  3/16

Fourth Quarter                      High    -     1 9/16           High      -  3/16
                                    Low     -     1 1/16           Low       -  1/16

Fiscal Year Ended June 30, 1999
First Quarter                       High    -      1 7/8           High      -   1/8
                                    Low     -      11/16           Low       - 3/100

Second Quarter                      High    -      1 7/8           High      -  2/25
                                    Low     -        1/2           Low       - 1/100

Third Quarter                       High    -      1 5/8           High      -  1/10
                                    Low     -       9/16           Low       - 1/100

Fourth Quarter                      High    -      1 1/8           High      -  1/16
                                    Low     -      35/50           Low       -  1/50
</TABLE>

         On  September  16,  1999 there were 841  shareholders  of record of the
Company's Common Stock and 718 holders of record of the Company's Warrants.  The
closing price of the Common Stock on that date was $0.75 per share.  The closing
price of the Warrants on that date was $0.0625 per Warrant.

                                        8

<PAGE>



 ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
TARGET LOGISTICS, INC.
(in thousands, except per share data)         (1)
                                           Year Ended      Six Months
                                           December 31, Ended June 30,             Year Ended June 30,
                                          ------------------------------------------------------------------
                                           1995          1996            1997           1998          1999
Statement of Operations Data:
<S>                                      <C>            <C>             <C>            <C>           <C>
   Operating revenue                     $38,211        $27,446         $75,352        $97,784     $51,720
   Cost of transportation                 30,300         20,961          56,884         73,599      34,790
                                         -------         -------        -------        -------      ------
   Gross profit                            7,911          6,485          18,468         24,185      16,930
   Selling, general &
      administrative
      expenses                             4,513          8,772          24,300         23,012      21,304
   Restructuring charge                        -              -          (3,407)             -           -
   Operating income (loss)               $ 3,398        $(2,288)        $(9,239)       $ 1,173     $(4,374)
   Gain on sale of subsidiary                  -              -               -              -      24,832
   Net income (loss)                     $ 2,366        $(6,397)        (10,508)       $ 7,404     $14,016
   Net income (loss) per common share                   $ (1.84)        $ (1.74)       $  0.90     $  1.63

Balance Sheet Data:
   Total assets                                         $22,740         $29,821        $38,547     $34,932
   Working capital (deficit)                            (13,937)        (12,541)        (2,340)      5,717
   Current liabilities                                   22,470          27,158         26,085      15,251
   Long-term indebtedness                                 8,018           4,094          4,138          24
   Shareholders' equity (deficit)                       $(7,749)        $(1,430)       $ 8,324     $19,657

</TABLE>

(1) The amounts for the freight forwarding business of the Company represent the
historical operations associated with the freight forwarding business of TIA and
CFS  contributed  to the Company in the  combination  of these  businesses.  The
freight  forwarding  business of TIA and CFS did not operate as a separate legal
or reporting entity during the period presented. Management believes that if the
operations data were restated to exclude the operation of these aviation assets,
cost of  transportation  would be  higher  but  would be more  than  offset by a
reduction in selling, general and administrative expenses.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS
         ---------------------------------------------------------------

         This  Annual  Report  on Form  10-K  contains  certain  forward-looking
statements  reflecting the Company's  current  expectations  with respect to its
operations,  performance,  financial  condition,  and other  developments.  Such
statements  are  necessarily  estimates  reflecting the Company's best judgement
based upon current  information and involve a number of risks and uncertainties.
While it is impossible  to identify all such factors,  factors which could cause
actual results to differ  materially  from  expectations  are: (i) the Company's
historic losses and ability to achieve operating profitability following the CAS
Sale, (ii) the Company's ability to increase  operating  revenue,  improve gross
profit  margins and reduce  selling,  general and  administrative  costs,  (iii)
competitive practices in the industries in which the Company competes,  (iv) the
Company's dependence on current management, (v) the impact of current and future
laws and  governmental  regulations  affecting  the  transportation  industry in
general and the  Company's  operations  in  particular,  (vi)  general  economic
conditions, and (vii) other factors which may be identified from time to time in
the  Company's  Securities  and  Exchange  Commission  filings and other  public
announcements.  There can be no assurance  that these and other factors will not
affect  the  accuracy  of  such  forward-looking   statements.   Forward-looking
statements are preceded by an asterisk (*).

Overview

         The Company was  incorporated  in January  1996 to continue the freight
forwarding business of TIA and CFS and acquire Amertranz.  The Company generated
operating revenues of $51.7 million,  97.8 million,  and 75.4 million, and had a
net profit of $14.0 million and $7.4 million,  and a net loss of $10.5  million,
for the fiscal years

                                        9

<PAGE>



ended June 30, 1999,  1998 and 1997,  respectively.  The fiscal year 1999 profit
includes  a $16.6  million  gain (net of tax)  arising  from the CAS sale  which
closed on July 13, 1998, the fiscal year 1998 profit includes a $7.6 million net
income tax  benefit  arising  from the CAS Sale,  and the fiscal  year 1997 loss
included  a  charge  of  $3.4  million  attributed  to  restructuring  costs  in
connection with the closing of the Company's Amertranz  subsidiary.  The Company
had  consolidated  earnings  (losses) before interest,  taxes,  depreciation and
amortization  (EBITDA) of approximately $22.0 million,  $2.6 million,  and ($8.3
million), for the fiscal years ended June 30, 1999, 1998 and 1997, respectively.

         * Following the closing of the Amertranz  subsidiary in June 1997,  the
Company determined that it would be in the best interests of the Company and its
shareholders  to  deleverage  the  Company's  balance  sheet and create the cash
resources  needed  to  grow  the  Company's  freight  forwarding  and  logistics
business.  While the Company's CAS subsidiary has been historically  profitable,
management determined that this strategy can best be accomplished by the sale of
the  operations  of its CAS  subsidiary.  On July 13, 1998,  the  Company's  CAS
subsidiary  sold  substantially  all of its operating  assets to a subsidiary of
Geologistics  Corporation  for $27  million in cash  pursuant to the terms of an
Asset Purchase  Agreement  dated June 15, 1998. As a result of the CAS Sale, the
Company  deleveraged its balance sheet by repaying  approximately $15 million in
outstanding  liabilities and obtained required working capital to take advantage
of growth  opportunities  available to the Company's  Target  subsidiary.  These
opportunities  include improved vendor pricing and attracting  quality personnel
and agents on a  world-wide  basis,  which the Company  believes  will drive its
future   profitability.   In  addition,   the  Company  may  consider  strategic
acquisitions.  There  can  be  no  assurance  that  this  strategy  to  increase
profitability will be successful.

         * Management believes that the results of the Company's  operations for
the fiscal year ended June 30, 1999 (all but 12 days of which were following the
CAS Sale) indicate management's concentrated focus on Target's business together
with the Company's  available  resources  following the CAS Sale will enable the
Company to  achieve  the  intended  growth.  For the year  ended June 30,  1999,
Target's revenue increased by 15.7% to $50,156,285,  and its gross profit margin
(i.e.,  gross  operating  revenues  less cost of  transportation  expressed as a
percentage of gross operating  revenue)  improved to 33.3% from 29.3%,  from the
corresponding  period  of  1998,  a 13.7%  improvement.  This  increased  margin
accounts for  approximately  $2,006,000 of Target's  gross profit for the fiscal
year ended June 30, 1999. As a result, Target's actual gross profit increased by
31.9%,  or  $4,043,474,  to  $16,725,039  for the year ended June 30,  1999 from
$12,681,565 for the year June 30, 1998.  Management  intends to continue to work
on  improving  Target's  gross  profit  margins  while  focusing  on  increasing
operating  revenue by adding  quality sales  personnel and exclusive  forwarders
(previously  referred to as  independent  agents) and  reducing  fixed  selling,
general and administrative costs to improve the Company's net income.

Results of Operations
---------------------

Years Ended June 30, 1999 and 1998

         Operating Revenue. Operating revenue decreased to $51.7 million for the
year ended June 30, 1999 from $97.9  million for the year ended June 30, 1998, a
47.1%  decrease.  This decrease  resulted from the inclusion of CAS's  operating
revenue  for the full 1998 period but only for 12 days of the 1999 period due to
the CAS Sale on July 13, 1998.  Within the  operations of the  Company's  Target
subsidiary  operating  revenue  increased by 15.7% to  $50,156,285  for the year
ended  June 30,  1999 from  $43,351,754  for the year  ended  June 30,  1998,  a
$6,804,531 increase, due to increased freight volume.

         Cost of  Transportation.  Cost of transportation was 67.3% of operating
revenue for the year ended June 30, 1999, and 75.3% of operating revenue for the
year ended June 30, 1998.  This decrease is due to (i) a reduction in the Target
subsidiary's cost of transportation as a percentage of sales (66.7% for the 1999
period,  from 70.7% for the 1998 period),  and (ii) the historically higher cost
of  transportation  for the Company's CAS  subsidiary  (the assets of which were
sold on July 13, 1998) than the Company's Target subsidiary.

         Gross  Profit.  As a result of the factors  described  in the  previous
paragraph,  gross profit for the year ended June 30, 1999  increased to 32.7% of
operating  revenue from 24.7% of  operating  revenue for the year ended June 30,
1998.

                                       10

<PAGE>




         Within the Company's Target  subsidiary,  gross profit margin increased
to 33.3% from 29.3% for the years  ended June 30,  1999 and 1998,  respectively.
This increase in gross profit margin  accounts for  approximately  $2,006,000 of
Target's  gross profit for the year ended June 30, 1999.  Target's  actual gross
profit increased by 31.9%, or $4,043,474, to $16,725,039 for the year ended June
30, 1999 from $12,681,565 for the year June 30, 1998.

         Selling,  General  and  Administrative  Expenses.  Selling  general and
administrative  expenses  were  41.2%  of  operating  revenue  (39.7%  excluding
non-recurring  expenses  explained in (iii) and (iv),  below) for the year ended
June 30, 1999, and 23.5% of operating  revenue for the year ended June 30, 1998.
This  increase  was  primarily  due to (i) an  increase in  exclusive  forwarder
commission  expense due to the Company's  addition of new exclusive  forwarders;
(ii) the historically lower selling,  general and  administrative  expenses as a
percentage of sales for the CAS  subsidiary  than the Target  subsidiary;  (iii)
non-recurring  expenses of $244,943 incurred in the 1999 period to wind down the
Company's CAS subsidiary  (primarily,  the collection of accounts receivable and
payment of accounts  payable);  and (iv) the  non-recurring  accrual in the 1999
period  (reflected  within  "Selling,  general  and  administrative  expenses  -
Corporate") of executive bonus compensation of $537,820 primarily as a result of
the CAS Sale.

         Within  the  Company's   Target   subsidiary,   selling,   general  and
administrative  expenses  (excluding  agent  commission  expense)  were 24.8% of
operating  revenue for the year ended June 30, 1999 and 26.4% for the year ended
June 30, 1998, a 6.1% decrease. Exclusive forwarder commission expense was 11.8%
of  operating  revenue  for the year ended  June 30,  1999 and 7.1% for the year
ended June 30,  1998.  This  increase  is due to the  Company's  addition of new
exclusive forwarders.

         Net Income. The Company realized net income of $14,016,436 for the year
ended June 30, 1999,  compared to a net income of $7,403,643  for the year ended
June 30, 1998. This increase was due to the CAS Sale.

Years Ended June 30, 1998 and 1997

         Operating Revenue. Operating revenue increased to $97.8 million for the
year ended June 30, 1998 from $75.4  million for the year ended June 30, 1997, a
29.8% increase. Of this increase,  61% resulted from growth in the Company's CAS
subsidiary  and the balance was due to the  operations of the  Company's  Target
subsidiary which the Company acquired in May 1997.

         Cost of  Transportation.  Cost of transportation was 75.3% of operating
revenue for the year ended June 30, 1998, and 75.5% of operating revenue for the
year ended June 30, 1997. This increase is due to (i) the February 2, 1998 start
up of a new  service  between  Indianapolis  and  Aquadilla,  Puerto Rico by the
Company's CAS subsidiary, and (ii) the Company's Target subsidiary international
freight  forwarding  services,  which  historically  reflect  a  higher  cost of
transportation as a percentage of sales.

         Gross  Profit.  As a result of the factors  described  in the  previous
paragraph,  gross profit for the year ended June 30, 1998  decreased to 24.7% of
operating  revenue from 24.5% of  operating  revenue for the year ended June 30,
1997.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  expenses were 23.5% of operating revenue for the year ended June
30, 1998,  and 32.3%  (excluding  restructuring  charges in connection  with the
closing of the Company's Amertranz subsidiary) of operating revenue for the year
ended June 30, 1997.  This  decrease was primarily due to (i) the closing of the
Amertranz  subsidiary  prior to  beginning  of the 1998  fiscal  year (while the
Amertranz  subsidiary was included for almost all of the 1997 fiscal year);  and
(ii) the historically lower selling,  general and  administrative  expenses as a
percentage of sales of the Company's Target  subsidiary  (acquired in May 1997),
and the  inclusion of those  results in the  Company's  consolidated  results of
operations for the year ended June 30, 1998.

         Net Income (Loss).  The Company realized a net profit of $7,403,643 for
the year ended June 30, 1998,  compared to a net loss of  ($10,508,334)  for the
year ended June 30, 1997. This increase was due to the $7,662,135 net income tax
benefit  realized as the result of the CAS Sale on July 13, 1998,  the increased
operating revenue from

                                       11

<PAGE>



growth in the Company's CAS subsidiary,  the operations of the Company's  Target
subsidiary, the decrease in expenses as a result of the closing of the Company's
Amertranz subsidiary, the decrease in restructuring charges (which were recorded
in their  entirety  in the prior  year) in  connection  with the  closing of the
Amertranz  subsidiary,  and $187,129 of debt cancellation income (see "Liquidity
and Capital Resources", below).

Liquidity and Capital Resources
-------------------------------

         General.  During  the year  ended  June  30,  1999,  net  cash  used in
operating  activities was $2,240,763.  Cash provided by investing activities was
$25,080,305,  which  consisted of net proceeds in  connection  with the CAS Sale
totaling  $25,762,000,  less (i)  capital  expenditures  of  $605,000,  and (ii)
$77,000 of additional costs incurred in connection with the Target  acquisition.
Cash used in financing activities was $15,837,744,  which primarily consisted of
the repayment of long and short term debt and the purchase of subsidiaries' long
and short term debt.

         Following  the  closing  of the  Company's  Amertranz  subsidiary,  the
Company entered into an Extension and Composition Agreement dated as of November
7, 1997 with certain  general  unsecured  creditors of the  Company's  Amertranz
subsidiary,  whereby  $1,581,799 of trade debt of the Amertranz  subsidiary  was
acquired by the Company in exchange  for the  issuance of 158,180  shares of the
Company's Class E Preferred  Stock. On September 24, 1998 the Company  announced
the  redemption  of the Class E  Preferred  Shares.  The  Company  has  reserved
$1,581,799 for this redemption. As of June 30, 1999, approximately $1,142,000 of
this reserve has been paid.

         Currently,  approximately  $1.7  million of the  Company's  outstanding
accounts  payable  represent  unsecured  trade payables of the Company's  closed
Amertranz subsidiary.

         Capital  expenditures.  Capital  expenditures for the fiscal year ended
June 30, 1999 were $605,092.

         GMAC  Facility.  During  the year ended June 30,  1999,  the  Company's
Target  subsidiary  maintained a $10 million  revolving  credit  facility ("GMAC
Facility") with GMAC Commercial Credit LLC (successor by merger to BNY Financial
Corp.)  ("GMAC"),  guaranteed by the Company.  The GMAC Facility was  originally
established  in  1997  with  all of the  Company's  subsidiaries  as  individual
borrowers  thereunder.   In  connection  with  the  CAS  Sale,  the  outstanding
obligations  then  due from  the  Target  and CAS  subsidiaries  under  the GMAC
Facility  were  repaid on July 13,  1998 by CAS with the  proceeds  from the CAS
Sale,  and CAS  acquired the  Amertranz  subsidiary's  portion of the debt.  The
interest rate of the GMAC Facility is prime plus 2%. Under the terms of the GMAC
Facility,  Target  can  borrow  the  lesser of $10  million  or 85% of  eligible
accounts  receivable.  The  borrowings  under the GMAC Facility are secured by a
first lien on all of the Company's and its subsidiaries'  assets. As of June 30,
1999,  there were  outstanding  borrowings of $1,349,978 under the GMAC Facility
which  represented  27% of the  amount  available  thereunder,  and  the  amount
available for borrowing under the GMAC Facility was approximately $5,058,000.

         Revolver Note. As part of the  combination of Amertranz and the freight
forwarding  business of TIA and CFS,  TIA and CFS agreed to advance to CAS, on a
revolving loan basis,  up to an aggregate  maximum of $4,000,000  outstanding at
any time, pursuant to the terms of a Revolving Credit Promissory Note ("Revolver
Note"),  bearing  interest  at  the  greater  of (i) 1%  per  month,  or  (ii) a
fluctuating  rate equal to the prime rate of interest as  published  in The Wall
Street Journal, plus 4%. All obligations under the Revolver Note were guaranteed
by the Company and its Amertranz subsidiary and secured by a first priority lien
on all of the issued and outstanding shares of CAS, a first priority lien on all
of the assets of the Company and CAS, and a lien on the accounts  receivable  of
Amertranz,  subordinate  only to the first  priority  lien granted in connection
with the GMAC Facility and the second position lien granted to TIA in connection
with the TIA Loan (described  below).  All  obligations  under the Revolver Note
were repaid on July 13, 1998 with the proceeds from the CAS Sale.

         Exchange Note. As part of the  combination of Amertranz and the freight
forwarding  business  of TIA  and  CFS,  the  Company  issued  to TIA  and CFS a
promissory  note  in the  original  principal  amount  of  $10,000,000,  bearing
interest  at the rate of 8% per  annum  ("Exchange  Note").  In June  1996,  TIA
exchanged $2,000,000 principal amount of the Exchange Note for 200,000 shares of
the  Company's  Class A Preferred  Stock,  and of the proceeds of the  Company's
initial public offering,  $2,000,000 was used to repay a portion of the Exchange
Note. The

                                       12

<PAGE>



Company's indebtedness under the Exchange Note was subordinated to the Company's
obligations  under the GMAC Facility.  All  obligations  under the Exchange Note
were repaid on July 13, 1998 with the proceeds from the CAS Sale.

         * Working Capital Requirements. Cash needs of the Company are currently
met by funds  generated  from  operations,  the  Company's  accounts  receivable
financing facility,  and funds remaining from the CAS Sale. As of June 30, 1999,
the Company had $3,915,000  available under its $10 million accounts  receivable
financing  facility and  approximately  $7,882,000 from operations and remaining
proceeds  from the CAS Sale.  The Company  believes  that its current  financial
resources will be sufficient to finance its operations and  obligations  for the
long and short term. However, the Company's actual working capital needs for the
long and short terms will depend upon numerous factors,  including the Company's
operating  results,  the cost of increasing  the  Company's  sales and marketing
activities, and, competition, none of which can be predicted with certainty.

Year 2000
---------

         The Company is on schedule with a project that  addresses the Year 2000
(Y2K)  issue of computer  systems and other  equipment  with  embedded  chips or
processors  not being able to properly  recognize  and process  date-  sensitive
information  after  December 31, 1999.  Many systems use only two digits  rather
than four to define the year,  and these systems will not be able to distinguish
between  the year 1900 and the year 2000.  This may lead to  disruptions  in the
operations of business and governmental  entities resulting from miscalculations
or system  failures.  The  Company's  Y2K  project  is  designed  to ensure  the
compliance of all of the Company's  applications,  operating system and hardware
platforms,  and to address the compliance of key business partners. Key business
partners  are those  customers  and vendors  that have a material  impact on the
Company's operations. All phases of the project should be completed by 1999 year
end, thus minimizing the impact of the Y2K problem on the Company's  operations.
The total estimated cost of the required  modifications  to become Y2K compliant
should not be material to the Company's financial position.  Failure to make all
internal business systems Y2K compliant could result in an interruption in, or a
failure  of,  some of the  Company's  business  activities  or  operations.  Y2K
disruptions in the operations of key vendors could impact the Company's  ability
to obtain transportation services necessary for the Company's operations. If one
or  more of  these  situations  occur,  the  Company's  results  of  operations,
liquidity and financial  condition  could be materially and adversely  affected.
The Company is unable to determine the readiness of its key business partners at
this time and is therefore  unable to determine  whether the consequences of Y2K
failures  will have a material  impact on the Company's  results of  operations,
liquidity or financial  condition.  The Y2K project is expected to significantly
reduce the Company's  level of uncertainty  about the Y2K problem and reduce the
possibility of significant interruptions of normal business operations.

Impact of the CAS Sale
----------------------

         On July 13, 1998, in the CAS Sale,  the Company's CAS  subsidiary  sold
substantially  all of its  operating  assets  to a  subsidiary  of  Geologistics
Corporation  for $27 million in cash pursuant to the terms of an Asset  Purchase
Agreement dated June 15, 1998. Under the terms of the Asset Purchase  Agreement,
CAS retained its accounts  receivable,  and CAS realized $2.7 million from these
accounts  receivable after payment of its liabilities during the year ended June
30, 1999.

         * While the Company's CAS subsidiary has been historically  profitable,
the  Company's  strategy in  entering  into and  concluding  the CAS Sale was to
deleverage the Company's balance sheet by repaying  approximately $15 million in
outstanding  liabilities and provide  required working capital to take advantage
of growth  opportunities  available to the Company's  Target  subsidiary.  These
opportunities  include improved vendor pricing and attracting  quality personnel
and agents on a  world-wide  basis,  which the Company  believes  will drive its
future profitability.

Inflation
---------

         The Company  does not believe  that the  relatively  moderate  rates of
inflation in the United States in recent years have had a significant  effect on
its operations.


                                       13

<PAGE>




ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------

         The financial statements and supplementary data required by this Item 8
are included in the Company's Consolidated Financial Statements and set forth in
the pages indicated in Item 14(a) of this Annual Report.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES
         ---------------------------------------------------------------

None

                                       14

<PAGE>



                                    PART III
                                    --------


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
         --------------------------------------------------

The  information  with respect to the identity  and business  experience  of the
directors  of the Company and their  remuneration  in the  Company's  definitive
Proxy Statement to be filed pursuant to Regulation 14A and issued in conjunction
with  the 1999  Annual  Meeting  of  Shareholders,  is  incorporated  herein  by
reference.  The information with respect to the identity and business experience
of executive officers of the Company is set forth in Part I of this Form 10-K.


ITEM 11. EXECUTIVE COMPENSATION
         ----------------------

The  information  required by this item is  incorporated  by reference  from the
Company's  definitive  Proxy Statement to be issued in conjunction with the 1999
Annual Meeting of Shareholders.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------

The  information  required by this item is  incorporated  by reference  from the
Company's  definitive  Proxy Statement to be issued in conjunction with the 1999
Annual Meeting of Shareholders.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

The  information  required by this item is  incorporated  by reference  from the
Company's  definitive  Proxy Statement to be issued in conjunction with the 1999
Annual Meeting of Shareholders.


                                       15

<PAGE>



                                     PART IV
                                     -------


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 - K
         -----------------------------------------------------------------
<TABLE>
<CAPTION>

(a)  1.  Financial Statements

TARGET LOGISTICS, INC.                                                                                    PAGE
                                                                                                          ----
<S>                                                                                                      <C>
Report of Independent Public Accountants                                                                  F-1
Consolidated Balance Sheets as of June 30, 1999 and 1998                                                  F-2
Consolidated Statements of Operations for the Years Ended June 30, 1999, 1998 and 1997                    F-3
Consolidated Statements of Shareholders' Deficit for the Years Ended
June 30, 1999, 1998 and 1997                                                                              F-4
Consolidated Statements of Cash Flows for the Years Ended June 30, 1999, 1998 and 1997                    F-6
Notes to Consolidated Financial Statements                                                                F-8

(a)  2.   Financial Statement Schedules

Schedule II - Schedule of Valuation and Qualifying Accounts                                               S-1

All  other  schedules  are  omitted  because  they are not  applicable,  are not
required,  or because the required  information is included in the  consolidated
financial statements or notes thereto.

(a)  3.   Exhibits required to be filed by Item 601 of Regulation S-K
          -----------------------------------------------------------

Exhibit No.
3.1       Certificate of Incorporation of Registrant, as amended (incorporated by reference to Exhibit 3.1
          to the Registrant's Current Report on Form 8-K dated November 30, 1998, File No. 0-29754)
3.2       By-Laws of Registrant,  as amended  (incorporated  by
          reference   to  Exhibit   3.2  to  the   Registrant's
          Quarterly  Report on Form 10-Q for the Quarter  Ended
          December 31, 1998, File No. 0-29754)
4.1       Warrant Agent Agreement (incorporated by reference to Exhibit 4.3 to the Registrant's Registration
          Statement on Form S-1, Registration No. 333-03613)
4.2       Form of Amendment  No. 1 to Warrant  Agent  Agreement
          dated June 13, 1997  (incorporated  by  reference  to
          Exhibit   4.7   to  the   Registrant's   Registration
          Statement on Form S-1, Registration No.
          333-30351)
4.3       Certificate of Designations with respect to the Registrant's Class A Preferred Stock (contained in
          Exhibit 3.1)
4.4       Certificate of Designations with respect to the Registrant's Class B Preferred Stock (contained in
          Exhibit 3.1)
4.5       Certificate of Designations with respect to the Registrant's Class C Preferred Stock (contained in
          Exhibit 3.1)
4.6       Certificate of Designations with respect to the Registrant's Class D Preferred Stock (contained in
          Exhibit 3.1)
4.7       Certificate of Designations with respect to the Registrant's Class E Preferred Stock (contained in
          Exhibit 3.1)
10.1      1996 Stock Option Plan  (incorporated by reference to Exhibit 10.1 to the Registrant's  Quarterly Report on
          Form 10-Q for the Quarter  Ended  December  31, 1997, File No. 0-29754)
10.2      Restated and Amended Accounts Receivable Management and Security Agreement, dated as of
          July 13, 1998 by and between GMAC Commercial Credit LLC (successor by merger to BNY
          Financial Corp.), as Lender, and Target Logistic Services, Inc., as Borrower, and guaranteed by
          the Registrant ("GMAC Facility Agreement")
10.3      Shadow Warrant entered into in connection with the GMAC Facility Agreement (incorporated by
          reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
          March 31, 1997, File No. 0-29754)
</TABLE>

                                       16

<PAGE>


<TABLE>
<CAPTION>


<S>     <C>
10.4     Loan and Security Agreement dated October 25, 1995 between Amertranz Worldwide, Inc. and
         TIA, Inc., as amended January 24, 1996 (incorporated by reference to Exhibit 10.5 to the
         Registrant's Registration Statement on Form S-1, Registration No. 333-03613)
10.5     Form of Amended and Restated Promissory Note of Amertranz Worldwide, Inc. payable to TIA,
         Inc. in principal amount of $800,000 (incorporated by reference to Exhibit 10.6 to the Registrant's
         Registration Statement on Form S-1, Registration No. 333-03613)
10.6     Revolving Credit Promissory Note dated February 7, 1996 of Caribbean Air Services, Inc. payable
         to TIA, Inc. and Caribbean Freight System, Inc. in the principal amount of $4,000,000
         (incorporated by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-1,
         Registration No. 333-03613)
10.7     Promissory Note dated February 7, 1996 of Amertranz Worldwide Holding Corp. payable to TIA,
         Inc. and Caribbean Freight System, Inc. in the principal amount of $10,000,000 (incorporated by
         reference to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1, Registration No.
         333-03613)
10.8     Employment Agreement dated June 24, 1996 between Amertranz Worldwide Holding Corp. and
         Stuart Hettleman (incorporated by reference to Exhibit 10.13 to the Registrant's Annual Report on
         Form 10-K for the Fiscal Year Ended June 30, 1996, File No. 0-29754)
10.9     Asset Purchase Agreement dated as of June 15, 1998, by and among Amertranz Worldwide
         Holding Corp., Caribbean Air Services, Inc., and Geologistics Corporation (incorporated by
         reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K, dated July 13, 1998, File
         No. 0-29754)
10.10(P) Lease Agreement for Los Angeles Facility (incorporated  by reference to Exhibit 10.17
         to the  Registrant's  Annual  Report on Form 10-K for the Year Ended June 30, 1997,  File
         No. 0-29754)
21       Subsidiaries of Amertranz Worldwide Holding Corp. (incorporated by reference to Exhibit 21 to
         the Registrant's Annual Report on Form 10-K for the Year Ended June 30, 1997, File No. 0-
         29754)
23       Consent of Arthur Andersen LLP
27       Financial Data Schedule


(b)      Reports on Form 8-K

         None.

</TABLE>

                                       17

<PAGE>



                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereto duly authorized.


                                          TARGET LOGISTICS, INC.



Date:  September 28, 1999                 By:     /s/ Stuart Hettleman
                                              ----------------------------------
                                              Stuart Hettleman
                                              President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

Signature                                    Title                   Date
---------                                    -----                   ----

 /s/ Stuart Hettleman            President, Chief Executive   September 28, 1999
---------------------------      Officer and Director
Stuart Hettleman


/s/ Michael Barsa                Director                     September 28, 1999
---------------------------
Michael Barsa


/s/ Brian K. Coventry            Director                     September 28, 1999
---------------------------
Brian K. Coventry


/s/ Christopher Coppersmith      Director                     September 28, 1999
---------------------------
Christopher Coppersmith


/s/ Philip J. Dubato             Vice President, Chief       September 28, 1999
---------------------------      Financial Officer,
Philip J. Dubato                 Principal Accounting Officer
                                 and Director






                                       18

<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Target Logistics, Inc. (formerly Amertranz Worldwide Holding Corp.):

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Target
Logistics,  Inc.  (formerly  Amertranz  Worldwide  Holding  Corp.),  a  Delaware
corporation,  as of  June  30,  1999  and  1998,  and the  related  consolidated
statements  of  operations,  shareholders'  equity  and cash flows for the years
ended  June  30,  1999,  1998  and  1997.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Target Logistics,
Inc. as of June 30, 1999 and 1998,  and the results of its  operations  and cash
flows for the years  ended June 30,  1999,  1998 and 1997,  in  conformity  with
generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
consolidated  financial  statements taken as a whole. The schedule listed in the
index of financial  statements is presented  for purposes of complying  with the
Securities  and  Exchange  Commission's  rules  and  are not  part of the  basic
consolidated  financial  statements.  This  schedule  has been  subjected to the
auditing  procedures  applied in the audit of the basic  consolidated  financial
statements  and, in our  opinion,  fairly  states in all  material  respects the
financial  data  required  to be set  forth  therein  in  relation  to the basic
consolidated financial statements taken as a whole.


                                                ARTHUR ANDERSEN LLP



New York, New York
September 24, 1999


                                       F-1

<PAGE>

<TABLE>
<CAPTION>


                             TARGET LOGISTICS, INC.
                           CONSOLIDATED BALANCE SHEETS

                                                                            June 30, 1999          June 30, 1998
                                                                            -------------          -------------
                                    ASSETS
CURRENT ASSETS:
<S>                                                                         <C>                    <C>
Cash and cash equivalents                                                   $ 7,881,595            $    879,797
Accounts receivable, net of allowance for doubtful
  accounts of $1,318,109 and, $514,542 respectively                          10,853,316              14,555,151
Deferred income taxes (Note 9)                                                2,080,105               7,705,092
Prepaid expenses and other current assets                                       152,940                 604,588
                                                                             ----------              ----------
                  Total current assets                                       20,967,956              23,744,628
PROPERTY AND EQUIPMENT, net (Note 4)                                            473,398                 755,822
OTHER ASSETS                                                                    278,382                 238,904
DEFERRED INCOME TAXES (Note 9)                                                  184,895                 184,895
GOODWILL, net of accumulated amortization of
  $1,927,504 and $1,305,445, respectively (Notes 3 and 5)                    13,027,520              13,622,579
                                                                             ----------              ----------
                  Total assets                                              $34,932,151             $38,546,828
                                                                            ===========             ===========

                                    LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                                            $ 4,413,792             $ 8,542,850
Accrued expenses                                                              2,360,211               1,990,880
Accrued transportation expenses                                               6,745,613               3,880,195
Reserve for restructuring                                                        21,567                 264,143
Note payable to bank (Note 6)                                                 1,349,978               6,745,853
Note payable to affiliate (Note 6)                                                  ---                 905,913
Note payable to creditors                                                           ---                  53,835
Current portion of long-term debt due to affiliate (Note 6)                         ---               3,332,126
Current portion of long-term debt (Note 6)                                       10,500                  50,000
Dividends payable                                                               168,680                 117,524
Taxes payable                                                                    77,245                 110,000
Lease obligation-current portion (Note 8)                                       103,385                  91,735
                                                                             ----------              ----------
                  Total current liabilities                                  15,250,971              26,085,054
LONG-TERM DEBT DUE TO AFFILIATE (Note 6)                                            ---               4,000,000
LONG TERM DEBT (Note 6)                                                             ---                  10,500
LEASE OBLIGATION--LONG-TERM (Note 8)                                             24,116                 127,506
                                                                             ----------              ----------
                  Total liabilities                                         $15,275,087             $30,223,060
                                                                             ----------              ----------
COMMITMENTS AND CONTINGENCIES (Note 8)

SHAREHOLDERS' EQUITY (Note 7):
Preferred Stock, $10 par value; 2,500,000 shares authorized,
  427,207 and 621,387 shares issued and outstanding, respectively             4,272,070               6,213,870
Common Stock, $.01 par value; 15,000,000 shares authorized,
  10,031,868 and 8,419,094 shares issued and 9,192,013 and
  8,312,790 shares outstanding, respectively                                    100,318                  84,190
Paid-in capital                                                              22,877,209              22,546,331
Accumulated deficit                                                         $(6,937,598)            (20,509,373)
Less:  Treasury stock, 839,855 and 106,304 shares held at cost,
       respectively                                                            (654,935)                (11,250)
                                                                             ----------             -----------
                  Total shareholders' equity                                 19,657,064               8,323,768
                                                                             ----------             -----------
                  Total liabilities and shareholders' equity                $34,932,151             $38,546,828
                                                                            ===========             ===========
</TABLE>

The  accompanying  notes  are an  integral  part of these  consolidated  balance
sheets.

                                       F-2

<PAGE>


<TABLE>
<CAPTION>

                              TARGET LOGISTICS INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                Year Ended        Year Ended        Year Ended
                                                               June 30, 1999     June 30, 1998     June 30, 1997
                                                               -------------     -------------     -------------

OPERATING REVENUES:
<S>                                                            <C>               <C>               <C>
         Operating revenues - Target subsidiary                $50,156,285       $43,351,754       $ 4,392,713
         Operating revenues - Caribbean subsidiary               1,563,298        54,432,657        40,690,013
         Operating revenues - Amertranz subsidiary                       -                 -        30,269,339
                                                              ------------       -----------       -----------
           Operating revenues                                   51,719,583        97,784,411        75,352,065

COST OF TRANSPORTATION:
         Cost of transportation - Target subsidiary             33,431,246        30,670,189         3,186,175
         Cost of transportation - Caribbean subsidiary           1,358,031        42,928,749        32,498,656
         Cost of transportation - Amertranz subsidiary                   -                 -        21,199,576
                                                               -----------       -----------       -----------
           Cost of transportation                               34,789,277        73,598,938        56,884,407

GROSS PROFIT:
         Gross profit - Target subsidiary                       16,725,039        12,681,565         1,206,538
         Gross profit - Caribbean subsidiary                       205,267        11,503,908         8,191,357
         Gross profit - Amertranz subsidiary                             -                 -         9,069,763
                                                               -----------       -----------       -----------
           Gross profit                                         16,930,306        24,185,473        18,467,658

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES ("SG&A"):
         SG&A - Target subsidiary                               12,454,287        11,444,841         1,284,996
         SG&A - Target subsidiary
          (Exclusive forwarder commissions)                      5,929,533         3,078,945           314,390
         SG&A - Caribbean subsidiary                               595,338         6,270,882         4,882,073
         SG&A - Amertranz subsidiary                                     -                 -        16,083,199
         SG&A - Corporate                                        1,491,598         1,085,513           864,832
         Restructuring charge                                            -                 -         3,407,482
         Depreciation and amortization                             833,268         1,131,994           870,123
                                                               -----------        ----------       -----------
           Selling, general and administrative expenses         21,304,024        23,012,175        27,707,095


OTHER INCOME (EXPENSE):
         Interest income (expense)                                 291,510        (1,645,902)       (1,335,833)
         Other income                                              119,291           214,112            66,936
         Gain on sale of subsidiary                             24,832,353                 -                 -
                                                               -----------       -----------       -----------

         Income (loss) before income taxes                      20,869,436          (258,492)      (10,508,334)
         Provision (benefit) for income taxes (Note 9)           6,853,000        (7,662,135)
                                                               -----------       -----------        ----------
         Net income (loss)                                     $14,016,436       $ 7,403,643      $(10,508,334)
                                                               ===========       ===========       ===========

         Net income (loss) per share:
           Basic                                                     $1.63             $0.90            ($1.74)
                                                                     =====             =====            ======
           Diluted                                                   $0.99             $0.55                 -
                                                                     =====             =====            ======

         Weighted average shares outstanding:
           Basic                                                 8,351,386         7,949,705         6,048,148
                                                               ===========       ===========       ===========
           Diluted                                              14,121,246        13,468,964                 -
                                                              =============      =============     ===========

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       F-3

<PAGE>



                             TARGET LOGISTICS, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                          Additional
                                    Preferred Stock       Common Stock      Paid-in      Treasury Stock    Accumulated
                                    Shares   Amount     Shares    Amount    Capital      Shares   Amount     Deficit        Total
                                    ------    ------     ------    ------    -------      ------   ------     -------        -----


<S>                                 <C>       <C>        <C>        <C>      <C>        <C>      <C>       <C>         <C>
Balance, July 1, 1996                      -         -   3,626,504  $36,265  $8,567,675 (106,304)($11,250)($16,341,341)($7,748,651)


Common stock issued in
  connection with the IPO                  -         -   2,300,000 $23,000  $11,013,288        -        -            - $11,036,288

Preferred stock issued in
  exchange for a principal
  reduction in the Exchange Note     200,000 2,000,000           -       -            -        -        -            -   2,000,000

Common stock issued in connection
  with the acquisition of Target           -         -     900,000   9,000    1,014,750        -        -            -   1,023,750

Acquisition of Consolidated           20,000   200,000           -       -      371,000        -        -            -     571,000

Stock Options exercised                    -         -           -       -        5,543        -        -            -       5,543

Preferred stock issued in
  connection with the Private
  Placement                          257,500 2,575,000           -       -            -        -        -     (372,145)  2,202,855

Cash dividends associated with the
  Class C Preferred stock                 -          -           -       -            -        -        -      (12,875)    (12,875)

Preferred Stock dividends associated
  with the Class A Preferred stock    20,500   205,000           -       -            -        -        -     (205,000)          -

Net loss                                   -         -           -       -            -        -        -  (10,508,334)(10,508,334)
                                    --------  ---------    -------   -----   ---------- --------  -------  -----------  ----------

Balance June 30, 1997                498,000 $4,980,000  6,826,504 $68,265  $20,972,256 (106,304)($11,250)($27,439,695)($1,430,424)

Additional costs associated with
  the Private Placement                    -          -           -      -            -        -        -      (34,908)    (34,908)

Common stock issued in connection
  with the conversion of Class A
  Preferred Stock                   (110,250)(1,102,500) 1,102,500  11,025    1,091,475        -        -            -           -

Stock options exercised                    -          -     52,590     525         (525)       -        -            -           -

Preferred stock issued for repayment
  of secured long-term debt of
  Amertranz Worldwide, Inc.          100,000  1,000,000          -       -            -        -        -            -   1,000,000

Preferred stock issued for purchase
  of $1,581,800 of trade debt of
  Amertranz Worldwide, Inc.          158,180  1,581,800          -       -            -        -        -            -   1,581,800

Common stock issued in connection
  with the conversion of Class B
  Preferred Stock                    (20,000)  (200,000)   200,000   2,000      198,000        -        -            -           -

Common stock issued in connection
  with the conversion of Class C
  Preferred Stock                    (23,750)  (237,500)   237,500   2,375      235,125        -        -            -           -

Preferred stock dividends associated
  with the Class A Preferred Stock    12,696    126,960          -       -            -        -        -     (126,960)          -

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       F-4

<PAGE>


<TABLE>
<CAPTION>

                                                       TARGET LOGISTICS, INC.
                                           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                   FOR THE YEARS ENDED JUNE 30, 1999, 1998  AND 1997-- (Continued)

                                                                           Additional
                                    Preferred  Stock       Common Stock      Paid-in      Treasury Stock    Accumulated
                                    Shares     Amount     Shares    Amount    Capital      Shares   Amount     Deficit        Total
                                    ------     ------     ------    ------    -------      ------   ------     -------        -----


Preferred stock dividends associated
<S>                                  <C>       <C>        <C>       <C>       <C>         <C>       <C>       <C>          <C>
  with the Class D Preferred Stock   6,511     65,110         -         -           -         -         -      (65,110)           -

Cash dividends associated with the
  Class C Preferred Stock                -          -         -         -           -         -         -     (246,343)    (246,343)

Warrants issued in connection with
  the sale of the assets of CAS          -          -         -         -      50,000         -         -            -       50,000

Net income                               -          -         -         -           -         -         -    7,403,643    7,403,643
                                 ---------    -------    ------  ---------     -------  -------   -------    ---------    ---------

Balance, June 30, 1998             621,387 $6,213,870 8,419,094    $84,190 $22,546,331 (106,304) ($11,250)($20,509,373)  $8,323,768

Common stock issued in connection
 with the conversion of Class C
 Preferred Stock                   (36,000)  (360,000)  360,000      3,600     356,400        -         -            -            -

Stock Options exercised                  -          -   174,852      1,749      62,256        -         -            -       64,005

Cash dividends associated with the
 Class A, C and D Preferred Stock        -          -         -          -           -        -         -     (444,661)    (444,661)

Redemption of Class E
 Preferred Stock                  (158,180)(1,581,800)        -          -           -        -         -            -   (1,581,800)

Purchase of Treasury Stock, at cost      -          -         -          -           -  (733,551)(643,685)           -     (643,685)

Additional Common Stock issued
 in connection with the acquisition
 of Target                               -          - 1,077,922     10,779     (87,778)        -        -            -      (76,999)

Net income                               -          -         -          -           -         -        -   14,016,436   14,016,436
                                 --------- ---------- ---------  ---------  ----------  --------   -------  ----------   ----------

Balance, June 30, 1999             427,207 $4,272,070 10,031,868  $100,318 $22,877,209  (839,855)($654,935)($6,937,598) $19,657,064
                                 ========= ========== ========== ========= ===========  ========  ========  ==========  ===========


</TABLE>









The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       F-5

<PAGE>


<TABLE>
<CAPTION>

                                                           TARGET LOGISTICS, INC.
                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                   Year Ended        Year Ended        Year Ended
                                                                                 June 30, 1999     June 30, 1998     June 30, 1997
                                                                                 -------------     -------------     -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                 <C>               <C>              <C>
  Net income (loss)                                                                 $14,016,436       $7,403,643       $(10,508,334)
  Bad debt expense                                                                      803,567         (268,065)           411,285
  Depreciation and amortization                                                         833,268        1,196,480            870,123
  Gain on sale of CAS                                                               (24,832,353)               -                  -
  Deferred income tax benefit                                                         5,624,987       (7,889,987)                 -
  Write off and write down of fixed assets                                                    -                -            727,938
  Decrease in debt issuance costs                                                             -                -            103,466
  Restructuring charge                                                                        -                -          3,407,482
  Adjustments to reconcile net loss to net cash used in operating activities-
     Decrease (increase) in accounts receivable                                       2,898,268       (1,796,390)          (485,963)
     Decrease (increase) in prepaid expenses and other current assets                   245,395          138,981           (257,630)
     (Increase) decrease in other assets                                               (113,962)         (15,136)            32,913
     (Decrease) increase in accounts payable and accrued expenses                    (1,716,369)         204,052         (2,000,123)
                                                                                     ----------          -------         ----------

                      Net cash used in operating activities                          (2,240,763)      (1,026,422)        (7,698,843)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                                  (605,092)        (556,557)          (468,912)
  Proceeds from sale of CAS, net of closing costs                                    25,762,397                -                  -
  Acquisition of Consolidated                                                                 -                -            105,602
  Acquisition of Target                                                                 (77,000)               -           (452,032)
                                                                                    ------------       ---------         ----------
                      Net cash provided by (used in) investing activities            25,080,305         (556,557)          (815,342)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from initial public offering ("IPO") - net of costs                                -                -         12,190,682
  Proceeds from Private Placement - net of costs                                              -          (34,908)         2,202,855
  Issuance of common stock in connection with the IPO                                         -                -             23,000
  Dividends paid                                                                       (340,660)        (128,819)                 -
  Stock options exercised                                                                64,005                -              5,543
  Purchase of treasury stock                                                           (643,685)               -                  -
  Redemption of Class E Preferred Stock                                              (1,141,750)               -                  -
  Net (repayments) borrowings from note payable to bank                              (5,395,875)         278,295          4,676,355
  (Repayment) proceeds from long-term debt due to affiliates                         (7,332,126)         698,853         (6,104,227)
  Repayment of long-term debt                                                           (50,000)         (50,000)                 -
  (Repayment) proceeds from revolving loan due to affiliate                            (905,913)         116,185         (3,454,235)
  (Payment) proceeds of lease obligations                                               (91,740)         200,927            (21,035)
                                                                                      ---------        ---------         ----------
                      Net cash (used in) provided by financing activities           (15,837,744)       1,080,533          9,518,938

                      Net increase (decrease) in cash and cash equivalents            7,001,798         (502,446)         1,004,753

CASH AND CASH EQUIVALENTS, beginning of year                                            879,797        1,382,243            377,490
                                                                                    -----------        ---------         ----------
CASH AND CASH EQUIVALENTS, end of year                                              $ 7,881,595       $  879,797        $ 1,382,243
                                                                                    ===========       ==========        ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
  Interest                                                                          $   105,157       $  821,336        $   468,588
  Income taxes                                                                      $ 1,243,022       $   82,492        $    46,396

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       F-6

<PAGE>

<TABLE>
<CAPTION>


                                                           TARGET LOGISTICS, INC.
                                             CONSOLIDATED STATEMENTS OF CASH FLOWS -- (Continued)

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

                                                                                    Year Ended          Year Ended       Year Ended
                                                                                   June 30, 1999      June 30, 1998    June 30, 1997
                                                                                   -------------      -------------    -------------
<S>                                                                                <C>                <C>    <C>       <C>
Conversion of 36,000 and 23,750, respectively, Class C Preferred Shares            $  (360,000)       $  (237,500)             -
Issuance of Common Stock for Conversion of 36,000 and 23,750, respectively,
  Class C Preferred Shares                                                         $     3,600        $     2,375              -
Issuance of Common Stock for Stock Options exercised                               $     1,749        $       525              -
Issuance of Common Stock in connection with the acquisition of Target              $    10,779                  -     $    9,000
TIA, Inc. conversion of 110,250 Class A Preferred Shares                                     -        $(1,102,500)             -
Issuance of Common Stock for TIA, Inc. conversion of
  110,250 Class A Preferred Shares                                                           -        $    11,025              -
Issuance of 100,000 Class D Preferred Stock for repayment
  of secured long-term debt of Amertranz Worldwide, Inc.                                     -        $ 1,000,000              -
Issuance of 158,180 Class E Preferred Stock for the purchase
  of $1,581,800 of trade debt of Amertranz Worldwide, Inc.                                   -        $ 1,581,800              -
Conversion of 20,000 Class B Preferred Shares                                                -        $  (200,000)             -
Issuance of Common Stock for conversion of 20,000
  of Class B Preferred Shares                                                                -        $     2,000              -
Issuance of preferred stock as partial repayment of long-term debt due to affiliates         -                  -     $2,000,000
Issuance of preferred stock for the Private Placement                                        -                  -     $2,575,000
Issuance of preferred stock for the acquisition of Consolidated                              -                  -       $200,000
Issuance of preferred stock as dividends for the Class A preferred stock                     -                  -       $205,000
Issuance of note payable to Consolidated stockholders                                        -                  -       $150,000

On October 10, 1996,  Consolidated Air Services,  Inc.  ("Consolidated")  merged
with and into the Company  pursuant to the terms of a merger  agreement dated as
of September  30, 1996.  In  conjunction  with the  acquisition,  the  resulting
goodwill is as follows:

                      Net assets assumed                                                      -       $  (121,539)            -
                      Purchase Price                                                          -           786,428             -
                                                                                                     -------------
                           Goodwill                                                           -      $    664,889             -
                                                                                                     =============

On May 8, 1997, Target merged with and into the Company pursuant to the terms of
a  merger  agreement  dated  as of  April  17,  1997.  In  conjunction  with the
acquisition, the resulting goodwill is as follows:

                      Net liabilities assumed                                                 -       $   709,157             -
                      Purchase Price                                                          -         1,488,782             -
                                                                                                     -------------
                           Goodwill                                                           -       $ 2,197,939             -
                                                                                                     =============

</TABLE>





The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                                      F-7

<PAGE>



                                              TARGET LOGISTICS, INC.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND

In January 1996, Target Logistics,  Inc. (formerly,  Amertranz Worldwide Holding
Corp.)  ("Holding" or the "Company") was  incorporated in the state of Delaware.
Effective  February 7, 1996,  Holding concluded an Asset Exchange Agreement (the
"Agreement")  with TIA, Inc. ("TIA"),  Caribbean  Freight System,  Inc. ("CFS"),
Amertranz  Worldwide,  Inc.  ("Amertranz")  and the stockholders and convertible
note holders of Amertranz. As part of this transaction, Holding received (i) all
of the issued and outstanding stock of Amertranz, (ii) $1,379,110 in convertible
notes of  Amertranz,  and (iii) the air freight  forwarding  business of TIA and
CFS. Holding then contributed the air freight forwarding business of TIA and CFS
to  Caribbean  Air  Services,  Inc.  ("CAS") in return for all of the issued and
outstanding shares of CAS. TIA and CFS received 2,100,000 shares of common stock
of the Company and a  $10,000,000  promissory  note,  as discussed in Note 6, in
addition to stock in the Company.

The transactions between the Company, TIA, CFS and CAS described above have been
accounted for as a recapitalization  of TIA and CFS, whereby the historical data
for their freight forwarding  operations are being presented as that of Holdings
for all periods presented.  The issuance of the $10,000,000  Promissory Note has
been reflected as a charge to retained  earnings and the  distribution of assets
and liabilities to TIA and CFS has been reflected as a net adjustment to equity,
at book value (which  approximates  fair value).  The transaction with Amertranz
has been accounted for as an acquisition under purchase accounting.

On July 3, 1996,  the Company  completed an initial public  offering  ("IPO") of
2,300,000 shares of common stock and redeemable  common stock purchase  warrants
at an initial offering price of $6.10 per share.  Prior to the IPO, there was no
public market for the Company's  capital stock.  The net proceeds to the Company
of $12,213,682 were used to pay down existing debt of $6,503,000 and the balance
was used for working capital purposes.  Additionally, the Company issued 200,000
shares of Class A, non-voting,  cumulative,  convertible  preferred stock with a
par value of $10.00 in exchange for payment of $2,000,000 of its promissory note
with TIA and CFS.

2. DISPOSITION OF ASSETS

On July 13, 1998, the Company's CAS  subsidiary  sold  substantially  all of the
operating  assets  of  CAS to  Geologistics  Air  Services,  Inc.,  an  indirect
wholly-owned  subsidiary  of  Geologistics  Corporation  ("Geologistics"),   for
approximately  $26 million in cash, net of costs (the "CAS Sale"), in accordance
with the terms of the Asset Purchase  Agreement  dated June 15, 1998 (the "Asset
Purchase Agreement").

Under  the terms of the Asset  Purchase  Agreement  CAS  retained  its  accounts
receivable.  CAS  realized  $2.7 million from these  accounts  receivable  after
payment of its liabilities during the fiscal year ended June 30, 1999.

Other  than with  respect to certain  obligations  pursuant  to leases and other
agreements  included in the  assigned  assets,  Geologistics  did not assume any
obligations of the Company or CAS.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant  accounting  policies of the Company,  as summarized  below,  are in
conformity with generally  accepted  accounting  principles.  The preparation of
financial statements in conformity with generally accepted accounting principles
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

Principles of Consolidation

For the fiscal year ended June 30,  1999 and 1998,  the  consolidated  financial
statements include the accounts of Holding, CAS, Target Logistic Services,  Inc.
("Target"), Amertranz and Consolidated Air Services, Inc. ("Consolidated").

                                                      F-8

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)




For the fiscal year ended June 30, 1997, the consolidated  financial  statements
include the accounts of Holding, CAS, Amertranz,  Target (since May 1, 1997) and
Consolidated (since October 1, 1996).

Property and Equipment

Property and equipment are stated at cost.  Depreciation  is computed  under the
straight-line  method over  estimated  useful  lives  ranging from 3 to 8 years.
Assets under capital  leases are  depreciated  over the shorter of the estimated
useful  life of the asset or the lease term.  The  Company  utilizes a half-year
convention for assets in the year of acquisition and disposal.

Goodwill

Goodwill  represents  the  excess of cost over the net  assets  acquired  and is
amortized on a straight-line basis over 25 years.

Accounting for Long-Lived Assets

The Company accounts for long-lived  assets in accordance with the provisions of
Statement of Financial  Accounting  Standards ("SFAS") No. 121,  "Accounting for
the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed
Of." This statement establishes financial accounting and reporting standards for
the  impairment of long-lived  assets,  certain  identifiable  intangibles,  and
goodwill related to those assets to be held and used, and for long-lived  assets
and certain identifiable intangibles to be disposed of. Management has performed
a review of all long-lived  assets and has determined  that no impairment of the
respective carrying value has occurred as of June 30, 1999.

Stock Options

The Company  grants  stock  options to certain  officers  and  related  parties.
Compensation  expense is recognized based upon the aggregate  difference between
the fair  market  value of the  Company's  stock at date of grant and the option
price. Compensation expense is recognized equally over the vesting period.

In October,  1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for  Stock-Based  Compensation".  This statement  establishes a fair
value based method of accounting  for an employee stock option or similar equity
instrument  but allows  companies to continue to measure  compensation  cost for
those plans using the intrinsic  value based method of accounting  prescribed by
APB  Opinion  No. 25,  "Accounting  for Stock  Issued to  Employees".  Companies
electing to continue using the accounting under APB Onion No. 25 must,  however,
make pro forma  disclosures  of net income and earnings per share as if the fair
value based method of accounting  defined in SFAS No. 123 had been applied (Note
7). These disclosure requirements are effective for fiscal years beginning after
December  16,  1995.  The Company has  elected to  continue  accounting  for its
stock-based  compensation awards to employees and directors under the accounting
prescribed by APB Opinion No. 25 and to provide the disclosures required by SFAS
No. 123.

Revenue Recognition

Revenue from freight forwarding is recognized upon delivery of goods, and direct
expenses  associated with the cost of transportation  are accrued  concurrently.
Monthly  provision  is made for  doubtful  receivables,  discounts,  returns and
allowances.


                                                      F-9

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)



Cash and Cash Equivalents

Cash at June 30, 1999 and 1998  includes  $274,000  and  $323,000  of  overnight
repurchase agreements.

Per Share Data

In accordance with the requirements of SFAS No. 128,  "Earnings per Share",  net
earnings per common share  amounts  ("basic  EPS") were computed by dividing net
earnings after deducting preferred stock dividend requirements,  by the weighted
average number of common shares  outstanding  and  contingently  issuable shares
(which satisfy  certain  conditions) and excluding any potential  dilution.  Net
earnings per common share amounts -
 assuming  dilution  ("diluted  EPS")  were  computed  by  reflecting  potential
dilution  from  the  exercise  of  stock  options.  SFAS No.  128  requires  the
presentation  of  both  basic  EPS and  diluted  EPS on the  face of the  income
statement.  Earnings per share amounts for the same prior-year periods have been
restated to conform with the provisions of SFAS No. 128.

A  reconciliation  between  the  numerators  and  denominators  of the basic and
diluted EPS  computations  for net earnings for the year ended June 30, 1999 and
1998 is as follows:
<TABLE>
<CAPTION>

                                          Year Ended June 30, 1999                   Year Ended June 30, 1998
                                     -------------------------------------    --------------------------------------
                                         Income        Shares      Per Share     Income        Shares    Per Share
                                       (Numerator)  (Denominator)   Amounts    (Numerator)  (Denominator) Amounts
<S>                                    <C>          <C>            <C>         <C>          <C>           <C>
Net earnings                          $14,016,436                              $7,403,643
Preferred stock dividends                (444,661)                               (246,343)
                                                                                  --------

BASIC EPS
Net earnings attributable  to
common stock                          $13,571,775   8,351,386      $1.63       $7,157,300   7,949,705     $0.90
                                       ==========   =========       ====        =========   =========      ====
EFFECT OF DILUTIVE SECURITIES
Convertible Preferred Stock                         5,698,663                               5,327,969
Stock Options                                          71,197                                 191,290


DILUTED EPS
Net earnings attributable  to common stock
  and assumed preferred conversions
  and option exercises                $14,016,436   14,121,246     $0.99       $7,403,643  13,468,964     $0.55
                                       ==========   ==========     =====        =========  ==========      ====
</TABLE>

Options to purchase  440,000 and  225,800  shares of common  stock for the years
ended June 30, 1999 and 1998, respectively, were not included in the computation
of diluted EPS because the  exercise  prices of those  options were greater than
the average market price of the common shares, thus they are anti-dilutive.  The
options were still outstanding at the end of the period.

Warrants to purchase  5,183,731  shares of common stock for the years ended June
30, 1999 and 1998 were not  included in the  computation  of diluted EPS because
they were also anti-dilutive.

Adoption of SFAS No. 128 required that the Company's reported loss per share for
fiscal 1997 be restated.  There are no material  differences between the amounts
previously  recorded and the restated amounts.  For the year ended June 30, 1997
no diluted  EPS is  presented,  as the effect of  dilutive  securities  would be
anti-dilutive on loss per common share. A reconciliation  between the numerators
and  denominators  of the basic EPS  computation for net loss for the year ended
June 30, 1997 is as follows:

                                                      F-10

<PAGE>

<TABLE>
<CAPTION>

                                                           TARGET LOGISTICS, INC.
                                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)



                                                                        Year Ended June 30, 1997
                                                     Income                    Shares                  Per Share
                                                   (Numerator)              (Denominator)               Amounts
<S>                                                <C>                      <C>                        <C>
Net loss                                           ($10,508,334)
Preferred stock dividends                               (12,875)
                                                    ------------
BASIC EPS
Net loss attributable to common stock              ($10,521,209)            6,048,148                  ($1.74)
                                                   =============            =========                  =======
</TABLE>

For the year ended June 30,  1997,  2,008,889  shares of  convertible  preferred
stock were not  included in the  computation  of diluted EPS due to their effect
being anti-dilutive.

Fair Value of Financial Instruments

Cash equivalents are reflected at cost which approximate their fair values.  The
fair value of notes and loans payable  outstanding  is estimated by  discounting
the future  cash flows using the  current  rates  offered by lenders for similar
borrowings  with similar credit  ratings.  The carrying  amounts of the accounts
receivable and debt approximate their fair value.

Foreign Currency Transactions

In the normal  course of  business  the  Company  has  accounts  receivable  and
accounts payable that are transacted in foreign currencies. The Company accounts
for  transaction   differences,   in  accordance  with  Statement  of  Financial
Accounting Standard Number 52, "Foreign Currency Translation",  and accounts for
the gains or losses in operations. For all periods presented, these amounts were
immaterial to the Company's operations.

Reclassifications

Certain amounts in the prior years' consolidated  financial statements have been
reclassified to conform with the 1999 presentation.

4. PROPERTY AND EQUIPMENT, NET

<TABLE>
<CAPTION>
                                                                              June 30,       June 30,
                                                                                1999           1998
                                                                              --------       --------
         <S>                                                                  <C>            <C>
         Property and Equipment consists of the following:
                  Furniture and fixtures                                     $ 614,530       $726,888
                  Computer equipment                                           471,683        658,617
                  Leasehold improvements                                       319,565        202,059
                  Vehicles                                                     116,036        116,036
                                                                            ----------      ---------
                                                                             1,521,814      1,703,600
                  Less:  Accumulated depreciation and amortization           1,048,416        947,778
                                                                             ---------       --------
                                                                             $ 473,398      $ 755,822
                                                                            ==========      =========
</TABLE>

5. ACQUISITIONS

(a) On  February 7, 1996,  Holding  acquired  all of the issued and  outstanding
stock of Amertranz and the former  stockholders  of Amertranz  received  870,254
shares (which consist of the investment in Amertranz Worldwide of

                                                      F-11

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)



518,056  shares,  assigned notes of 280,888 shares and 71,310 shares  associated
with the Interim  Financing)  of Holding's  common stock and options to purchase
224,399 shares of Holding's  common stock valued at $4,415,000 or  approximately
$4.25 per share and option. The Amertranz  transaction has been accounted for as
a purchase  and  resulted in  goodwill  of  approximately  $12.1  million  which
represents the excess of the cost over the fair value of the assets acquired.

(b) On October 10, 1996, the Company  acquired all of the issued and outstanding
stock of Consolidated Air Services,  Inc.  ("Consolidated") for 20,000 shares of
Holding's Class B Preferred Stock valued at $571,000 or approximately $28.55 per
share.  The  Consolidated  transaction  has been accounted for as a purchase and
resulted in goodwill of approximately  $665,000 which represents the excess cost
over the fair value of the assets acquired.

(c) On May 8, 1997, the Company acquired all of the issued and outstanding stock
of Target  Airfreight,  Inc. ("Target Air") for $400,000 cash and 900,000 shares
of the Company's  common stock valued at $1,023,750 or  approximately  $1.14 per
share. On June 8, 1999, pursuant to the terms of the Target Air acquisition, the
Company  paid an  additional  $77,000  cash and issued an  additional  1,077,922
shares  of common  stock  valued  at $0.77  per  share to  Target  Air's  former
shareholders.  The transaction has been accounted for as a purchase and resulted
in goodwill of approximately  $2.2 million which represents the excess cost over
the fair value of the assets acquired.

(d) The following unaudited pro forma financial  information for the Company for
the year ended June 30, 1997,  gives effect to the  Consolidated  and Target Air
acquisitions  as if  they  occurred  at  the  beginning  of  the  fiscal  period
presented.  These pro forma results have been prepared for comparative  purposes
only,  and do not purport to be indicative  of the results of  operations  which
actually would have resulted had the acquisitions occurred on the date indicated
or which may result in the future:

<TABLE>
<CAPTION>
                                                           Pro Forma
                                                          Year Ended
                                                         June 30, 1997

         <S>                                            <C>
         Operating revenue                              $  100,026,271
         Net loss                                      ($   10,545,825)
         Net loss per share                            ($         1.55)
</TABLE>

6. DEBT

As of June 30, 1999 and 1998,  long-term and  short-term  debt  consisted of the
following:
<TABLE>
<CAPTION>

                                                                June 30, 1999   June 30, 1998
         <S>                                                    <C>             <C>
         Promissory note to TIA and CFS (a)                     $       --      $7,332,126
         Revolving loan to TIA and CFS (b)                              --         905,913
         Asset-based financing (c)                               1,349,978       6,745,853
         Promissory note to
              Consolidated Shareholders (d)                         10,500          60,500
                                                              ------------       ---------

         Total debt                                              1,360,478      15,044,392
         Less: Current portion                                  (1,360,478     (11,033,892)
                                                               -----------     -----------
         Long-term debt                                         $       --      $4,010,500
                                                           ===============    ============
</TABLE>


                                                      F-12

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)



(a) On February 7, 1996, as part of the Agreement, Holding issued to TIA and CFS
a  $10,000,000  promissory  note which  bears  interest  at the rate of 8.0% per
annum. On July 3, 1996, Holding repaid $2,000,000 of this debt from the proceeds
of the IPO and  converted  $2,000,000  of the note  into  Class  A,  non-voting,
cumulative,  convertible  preferred  stock.  As of  June  30,  1998,  $7,332,126
(includes $1,332,126 of accrued interest),  was outstanding under this note. All
obligations  under this note were repaid on July 13, 1998 with the proceeds from
the CAS Sale.

(b) As part of the  Agreement,  TIA and CFS agreed to lend to CAS on a revolving
loan basis,  an amount up to the net cash  collections of TIA and CFS's accounts
receivable as of February 7, 1996 and  additional  amounts at the  discretion of
TIA and CFS, up to an aggregate  maximum of $4,000,000  outstanding at any time,
pursuant to the terms of a Revolving Credit Promissory Note. Only funds advanced
at the  discretion  of TIA and CFS bear  interest,  at the greater of (i) 1% per
month or (ii) at a rate of 4% over  prime.  The note was  secured  by all of the
assets of CAS and was guaranteed by the Company and Amertranz.  Furthermore, the
note  discussed  here  and in  (a)  above  were  subordinated  to the  Company's
revolving credit obligations under the GMAC Facility (see below). On January 16,
1997,  upon the closing of the GMAC Facility,  the Company repaid  $3,570,768 of
this note. As of June 30, 1998 and 1997,  $905,913 and  $789,728,  respectively,
was outstanding under this facility. All obligations under this note were repaid
on July 13, 1998 with the proceeds from the CAS Sale.

(c) During  the year  ended  June 30,  1999,  the  Company's  Target  subsidiary
("Borrower") maintained an Accounts Receivable Management and Security Agreement
with GMAC  Commercial  Credit LLC  (successor by merger to BNY Financial  Corp.)
("GMAC")  whereby  the  Borrower  can  receive  advances of up to 85% of the net
amounts of eligible accounts receivable outstanding to a maximum of $10,000,000.
The credit line ("GMAC  Facility")  is subject to interest at a rate of 2.0% per
annum over the  prevailing  prime rate as defined by GMAC  (7.75% as of June 30,
1999).  At June 30,  1999,  the  outstanding  balance on the GMAC  Facility  was
$1,349,978  which  represented  27%  of  the  approximate  $5,058,000  available
thereunder.  GMAC has a security  interest in all  present  and future  accounts
receivable,  machinery  and  equipment  and other assets of the Borrower and the
GMAC  Facility is guaranteed  by the Company.  The GMAC Facility was  originally
established  in  1997  with  all of the  Company's  subsidiaries  as  individual
borrowers  thereunder.   In  connection  with  the  CAS  Sale,  the  outstanding
obligations  then  due from  the  Target  and CAS  subsidiaries  under  the GMAC
Facility  were  repaid on July 13,  1998 by CAS with the  proceeds  from the CAS
Sale, and CAS acquired the Amertranz subsidiary's portion of the debt.

(d) In connection  with the  acquisition of  Consolidated,  the Company issued a
promissory  note to the  Consolidated  stockholders  in the aggregate  principal
amount of $150,000. During fiscal year 1998, this note was reduced by $27,000 as
a result of a net worth reconciliation, pursuant to the terms of the acquisition
agreement. At June 30, 1999, the amount outstanding under this note was $10,500.
This note bears interest at the rate of 8% per annum and matured July 1, 1999.

                                                      F-13

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)




7. SHAREHOLDERS' EQUITY

Preferred Stock

As of June 30, 1999, the authorized  preferred stock of the Company is 2,500,000
shares.  As of June 30, 1999,  427,207 shares of preferred stock are outstanding
as follows:
<TABLE>
<CAPTION>

                                                          Number of Shares Outstanding
                                Class A (a)      Class C (b)        Class D (c)         Class E (d)       Total
<S>                             <C>              <C>                <C>                 <C>               <C>
Balance at June 30, 1998        122,946           233,750           106,511             158,180           621,387

     Issuances                       --                --                --                  --                --
     Conversions                     --          (36,000)                --             158,180         (194,180)
                              ---------         ---------           -------           ---------         ---------

Balance at June 30, 1999        122,946           197,750           106,511                  --           427,207
                               ========         =========           =======           =========         =========
</TABLE>

(a) Class A Preferred  Stock. On July 3, 1996, the Company issued 200,000 shares
of Class A, non-voting, cumulative, convertible preferred stock with a par value
of $10.00 in exchange for a paydown of $2,000,000 on the $10,000,000  promissory
note.

The Class A Preferred Stock will pay cumulative cash dividends at an annual rate
of $1.00 per share in cash or, at the option of the Company,  in shares of Class
A Preferred  Stock,  at the rate of $10.00 per share.  The Company is prohibited
from paying any cash  dividends  on common  stock  unless all  required  Class A
Preferred  Stock dividends have been paid. Each share of Class A Preferred Stock
may be converted at any time, at the option of the holder,  into common stock at
a conversion  price (subject to adjustment) of the lower of (i) $6.00 per share,
or (ii) 80% of the  average  of the  closing  bid and  asked  price per share of
Common Stock on the day prior to the conversion  date.  Class A Preferred  Stock
holders are entitled to a  liquidation  preference  of $10.00 per share plus all
accrued and unpaid dividends.

On December 31, 1996,  June 30, 1997,  December 31, 1997 and June 30, 1998,  the
Company issued 10,000, 10,500, 6,887 and 5,809 respectively,  shares of Class A,
non-voting,  cumulative,  convertible preferred stock with a par value of $10.00
representing the semi-annual dividend due the Class A preferred shareholders.

On September 23, 1997,  110,250 shares of Class A Preferred Stock were converted
into 1,102,500 shares of the Company's Common Stock.

(b) Class C Preferred Stock. On June 13, 1997, the Company issued 257,500 shares
of Class C, non-voting, cumulative, convertible preferred stock with a par value
of $10.00 upon completion of a $2,575,000 private placement of equity securities
to individual investors (the "Private Placement").

The Class C Preferred Stock will pay cumulative cash dividends at an annual rate
of $1.00 per share payable the last day of each calendar  quarter in cash or, at
the option of the  Company,  in shares of common stock  provided a  registration
statement with respect to the underling shares of common stock is in effect. The
Company is  prohibited  from  paying any  dividends  on common  stock or Class A
Preferred  Stock unless all required Class C Preferred Stock dividends have been
paid. Each share of Class C Preferred Stock may be converted at any time, at the
option of the holder,  into 10 shares of common  stock.  Prior to June 13, 1998,
resales of shares of Class C Preferred  Stock acquired in the Private  Placement
and all  shares of Common  Stock  underlying  such  securities  were  prohibited
without the approval of GKN Securities  Corp.  ("GKN"),  the placement agent for
the Private Placement.

                                                      F-14

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)




During  fiscal  year ending June 30,  1999,  36,000  shares of Class C Preferred
Stock were converted into 360,000 shares of the Company's common stock.

(c) Class D Preferred  Stock.  On November 28, 1997,  the Company  acquired from
TIA, Inc. $1,000,000 of secured debt of the Amertranz subsidiary in exchange for
the  issuance  of  100,000  shares  of  the  Company's  non-voting,  cumulative,
convertible Class D Preferred Stock, par value $10.00 per share.

The Class D Preferred Stock will pay cumulative cash dividends at an annual rate
of $1.00 per share in cash or, at the option of the Company,  in shares of Class
D Preferred  Stock,  at the rate of $10.00 per share.  The Company is prohibited
from  paying any cash  dividends  on common  stock and other  junior  securities
unless all required Class D Preferred Stock dividends have been paid. Each share
of Class D Preferred  Stock may be converted  at any time,  at the option of the
holder,  into common stock at a conversion  price (subject to adjustment) of the
lower of (i) $6.00 per share,  or (ii) 80% of the average of the closing bid and
asked price per share of Common Stock on the day prior to the  conversion  date.
Class D Preferred  Stock  holders are entitled to a  liquidation  preference  of
$10.00 per share plus all accrued and unpaid dividends.

On December  31, 1997 and June 30,  1998,  the  Company  issued  1,479 and 5,032
respectively, shares of Class D, non-voting,  cumulative,  convertible preferred
stock with a par value of $10.00  representing the semi-annual  dividend due the
Class D Preferred shareholders.

(d)  Class  E  Preferred  Stock.  The  Company  entered  into an  Extension  and
Composition Agreement dated as of November 7, 1997 (the "Composition Agreement")
with  certain  general  unsecured  trade  creditors of the  Company's  Amertranz
subsidiary,  whereby  $1,581,799 of trade debt of the Amertranz  subsidiary  was
acquired by the Company in exchange  for the  issuance of 158,180  shares of the
Company's  non-voting  Class E Preferred  Stock,  par value $10.00 per share. On
September 24, 1998 the Company announced the redemption of the Class E Preferred
Shares. The Company has reserved $1,581,799 for this redemption.  As of June 30,
1999, approximately $1,142,000 of this reserve has been paid.

Warrants

As of June 30, 1999, the Company had 5,074,283 warrants  outstanding to purchase
5,074,283 shares of common stock at $6.00 per share and a warrant outstanding to
purchase 109,448 shares of common stock at $1.56 per share.

In connection with the Company's  February 1996 and May 1996 bridge  financings,
the Company issued warrants to purchase  1,386,783  shares of common stock at an
exercise price and on terms identical to the warrants issued in the IPO.

In connection with the IPO of July 3, 1996, the Company issued  2,300,000 shares
of common stock and 2,300,000 warrants. Each warrant entitles the holder thereof
to purchase  one share of common  stock for $6.00  during the  four-year  period
commencing June 28, 1997.

In connection  with the Private  Placement of June 13, 1997,  the Company issued
257,500 shares of Class C Preferred Stock and 1,387,500  warrants.  Each warrant
entitles  the holder  thereof to  purchase  one share of common  stock for $6.00
during the four-year period commencing June 28, 1997.

The Company  may redeem the  warrants at a price of $.01 per warrant at any time
after they become  exercisable  upon not less than 30 days' prior written notice
if the last sale price of the common  stock has been at least $10.00 for each of
the 20  consecutive  trading  days  ending on the third day prior to the date on
which the notice of redemption is given.

                                                      F-15

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)




In connection with the CAS Sale, the Company engaged an investment  banking firm
to  market  the sale and  issued to the  investment  banking  firm a warrant  to
purchase  109,448 shares of common stock for $1.56 per share,  at any time until
January 21, 2002.

Stock Option Plan

In June 1996,  the Board of  Directors  of the  Company  adopted  the  Amertranz
Worldwide  Holding  Corp.  1996  Stock  Option  Plan  ("1996  Plan"),  which was
subsequently approved by shareholders.  The 1996 Plan authorizes the granting of
awards, the exercise of which would allow up to an aggregate of 1,000,000 shares
of the Company's common stock to be acquired by the holders of said awards.  The
awards can take the form of incentive  stock  options  ("ISOs") or  nonqualified
stock options ("NSOs") and may be granted to key employees,  officers, directors
and  consultants.  Any plan participant who is granted an Incentive Stock Option
and possesses  more than 10% of the voting  rights of the Company's  outstanding
common  stock must be granted an option  price at least 110% of the fair  market
value on the date of grant and the option  must be  exercised  within five years
from the date of grant.  Under the 1996 Plan, stock options have been granted to
employees and directors for terms of up to 10 years at exercise  prices  ranging
from $.10 to $6.00 and are  exercisable in whole or in part at stated times from
the date of grant up to four  years  from the date of grant.  At June 30,  1999,
81,957 stock options  granted to employees and directors were  exercisable.  The
Company  accounts for  equity-based  awards  granted to employees  and directors
under APB Opinion No. 25 under which no  compensation  cost has been  recognized
for stock options  granted at market value (Note 3). Had  compensation  cost for
these stock options been determined  consistent with SFAS No. 123, the Company's
net income (loss) and net income  (loss) per share would have been  increased to
the following pro forma amounts:

<TABLE>
<CAPTION>
                                       Year Ended            Year Ended           Year Ended
                                      June 30, 1999         June 30, 1998        June 30, 1997
                                     -------------         -------------        -------------
<S>            <C>                   <C>                    <C>                  <C>
Net income
(loss):        As Reported           $14,016,436            $7,403,643           ($10,508,334)
               Pro Forma             $13,463,612            $6,978,972           ($10,833,762)

Basic EPS:     As Reported                 $1.63                 $0.90                 ($1.74)
               Pro Forma                   $1.61                 $0.86                 ($1.79)

Diluted EPS:   As Reported                 $0.99                 $0.55                       -
               Pro Forma                   $0.98                 $0.54                       -
</TABLE>


The  effects  of  applying  SFAS No.  123 in the pro  forma  disclosure  are not
indicative  of  future  amounts  as  additional   awards  in  future  years  are
anticipated.

Prior to the adoption of the 1996 Plan,  there were 224,399  options  granted to
purchase  common stock at exercise  prices ranging from $0.048 to $0.408.  These
options were granted to the stockholders of Amertranz and the holders of certain
convertible  promissory  notes of  Amertranz  pursuant to the terms of the Asset
Exchange  Agreement.  At each of June 30,  1999 and 1998,  6,957 and  181,809 of
these  options  were  outstanding  and  6,957  and  181,809  were   exercisable,
respectively.



                                      F-16

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)



The following table reflects  activity under the plan for the three-year  period
ended June 30, 1999:
<TABLE>
<CAPTION>


                                    Year Ended                 Year Ended                  Year Ended
                                  June 30, 1999              June 30, 1998                June 30, 1997
                                  -------------------        -------------------          ------------------
                                             Weighted                   Weighted                    Weighted
                                              Average                    Average                     Average
                                             Exercise                   Exercise                    Exercise
                                    Shares     Price         Shares       Price        Shares         Price
                                    ------     -----         ------       -----        ------         -----
<S>                               <C>           <C>         <C>             <C>        <C>              <C>

Outstanding at beginning of year   407,609      3.16        431,207         3.08       526,399          2.76
Granted                            415,000      1.22           -               -          -                -
Exercised                         (174,852)     0.37        (14,198)        0.16       (38,392)         0.68
Forfeited                         (200,800)     4.16         (7,050)        4.25       (56,800)         2.06
Cancelled                                -         -         (2,850)        4.25          -                -

Outstanding at end of year         446,957     $2.00        407,609        $3.16       431,207         $3.08
Exercisable at end of year          81,957     $5.49        332,209        $2.71       278,109         $2.18
</TABLE>

The weighted  average fair value and  exercise  price for options  granted at an
exercise  price  equal to fair  market is $3.51  and  $5.49,  respectively.  The
weighted  average  fair  value and  exercise  price for  options  granted  at an
exercise price below fair market is $0.94 and $1.22, respectively.

The fair value of each stock  option  grant is estimated as of the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:

                                               1999            1998
                                               ----            ----
Risk-Free Interest Rates                      4.67%           6.05%
Expected Lives                                    5               5
Expected Volatility                          77.60%          64.00%
Expected Dividend Yields                      0.00%           0.00%

The following table summarizes  information  about stock options  outstanding at
June 30, 1999:
<TABLE>
<CAPTION>

                                Options Outstanding                               Options Exercisable
                            ---------------------------                       --------------------------
                            Number            Weighted         Weighted         Number          Weighted
                          Outstanding          Average          Average       Exercisable        Average
                              at              Remaining        Exercise           at            Exercise
Exercise Prices             6/30/99       Contractual Life       Price          6/30/99          Price
---------------             -------       ----------------       -----          -------          -----
<S>                         <C>                <C>              <C>            <C>                <C>

$0.04 - $1.25               371,957            9.35             $1.20            6,957            $0.05
$4.00 - $6.00                75,000            1.93             $6.00           75,000            $6.00
                            -------                                           --------
$0.04 - $6.00               446,957            8.11             $2.00           81,957            $5.49
                            =======                                           ========
</TABLE>

8. COMMITMENTS AND CONTINGENCIES

Leases

As of June 30,  1999,  future  minimum  lease  payments  for capital  leases and
operating leases relating to equipment and rental premises are as follows:


                                      F-17

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)



       YEAR ENDING               CAPITAL LEASES                 OPERATING LEASES
       -----------               --------------                 ----------------

         2000                         113,130                          743,624
         2001                          24,610                          638,705
         2002                          -                               117,573
         2003                          -                                27,000
                                    ---------                        ---------

Total minimum lease payments          137,740                       $1,526,902
                                                                    ==========
Less--Amount representing interest    (10,239)
                                      -------
                                     $127,501
                                     ========
Employment Agreements

The Company has employment agreements with certain employees expiring at various
times through July 2002. Such  agreements  provide for minimum salary levels and
for  incentive  bonuses  which are  payable if  specified  management  goals are
attained.  The  aggregate  commitment  for  future  salaries  at June 30,  1999,
excluding bonuses, was approximately $440,000.

Litigation

On June 15, 1998 the Company was served with a complaint by a former  consultant
to the Company.  The Company,  three  officers of the Company and two  principal
shareholders of the Company are named  defendants in the lawsuit.  The complaint
alleges breach of contract,  violations of the federal  anti-racketeering  laws,
fraud and  failure  to pay wages and  benefits.  The  complaint  seeks  economic
damages in excess of $5.6 million,  and punitive  damages of $7.5 million.  Upon
motion  filed on behalf of the  Company,  the court  dismissed  the action,  but
permitted Mr. Hoffenberg to file an amended complaint. The Company then served a
motion to dismiss the amended  complaint.  The parties then filed a  stipulation
pursuant to which Mr. Hoffenberg dismissed all claims against all parties except
claims for  breach of  contract  and  vacation  pay  totalling  $135,333  in the
aggregate against the Company and its Amertranz subsidiary.  The Company intends
to vigorously defend the action, which is now a claim for $135,333.  The Company
believes that the  complaint is without merit and that any material  recovery by
Mr. Hoffenberg is unlikely.

9. INCOME TAXES

The Company will utilize  approximately  $13,500,000 of net operating  losses to
offset its regular  taxable income for the year ended June 30, 1999. The Company
will be subject to the  alternative  minimum tax  ("AMT") for the year.  Any AMT
paid will generate an AMT credit,  which may be carried forward  indefinitely to
offset the Company's regular tax liability.  The Company has a tax net operating
loss  carryforward  of  approximately  $10,400,000,  available to offset  future
regular  taxable  income,  which  expires  from 2011  through 2013 and which are
limited to annual  maximum  amounts,  due to  ownership  changes,  as defined in
regulations under Section 382 of the Internal Revenue Code. In 1998, the Company
reduced the  recorded  valuation  allowance  by  approximately  $6,309,000.  The
determination  that the net tax asset was  realizable  was based on the CAS Sale
subsequent  to  year-end,  which  resulted  in a taxable  gain of  approximately
$16,443,000.  The Company's reversal of the valuation  allowance against its net
deferred tax assets and realization of net operating loss carryforwards resulted
in a realization of net income tax benefits of  approximately  $7,662,000 in the
fiscal year ended June 30, 1998.



                                      F-18

<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)



The  components  of current and  deferred  income tax expense for the year ended
June 30, 1999 are as follows:

(In thousands)
Current:
State                                                 $    791
Federal                                                    269

Deferred:
State                                                       -
Federal                                                  5,793
                                                        ------
Net income tax expense                                $  6,853
                                                        ======

A  reconciliation  of income taxes between the statutory and effective tax rates
on income before income taxes is as follows:
<TABLE>
<CAPTION>

                                                                       Year Ended               Year Ended
                                                                       June 30, 1999            June 30, 1998
                                                                       -------------            --------------
<S>                                                                   <C>                       <C>

(In thousands)
Income tax expense (benefit) at U.S. statutory rate                    $   7,100                $        (88)

Tax deductible goodwill                                                   (2,730)                      2,158)
Non-deductible goodwill                                                      211                          -

State and local income taxes                                                 522                         228
(net of federal benefit)

Valuation Allowance                                                        1,730                      (5,688)

Non deductible expenses                                                       20                          44
                                                                        --------                   ---------
                                                                        $  6,853                  $   (7,662)
                                                                        ========                   =========


The components of deferred income taxes are as follows:

                                                                     Year Ended                 Year Ended
(In thousands)                                                       June 30, 1999              June 30, 1999
                                                                     -------------              -------------

NOLs                                                                       3,536                        7,328
Tax credits                                                                  269                          -
Accrued amounts and other                                                    759                        1,131
                                                                        --------                    ---------
                                                                           4,564                        8,459

Depreciation and amortization                                                185                          185
                                                                        --------                    ---------
                                                                           4,749                        8,644

Valuation allowance                                                       (2,484)                        (754)
                                                                        --------                    ---------
                                                                           2,265                        7,890
                                                                        ========                    =========
</TABLE>

C79117.198

                                      F-19

<PAGE>



                                   SCHEDULE II

                  SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)
<TABLE>

<CAPTION>

                                                  Balance at   Charged to      Charged to
                                                  Beginning     Costs and        Other                   Balance at
                                                   of Year      Expenses        Accounts     Deductions  End of Year
                                                   -------      --------        --------     ----------  -----------
<S>                                                <C>          <C>             <C>          <C>          <C>

For the fiscal year ended June 30, 1997

  Allowance for doubtful accounts                  $  371       $  783          $   -        $  (367)     $  787
                                                   ======       ======          =======      ========     ======

  Accumulated depreciation and amortization
    of property and equipment                      $  210       $  352          $  469       $  (172)     $  859
                                                   ======       ======          =======      ========     ======

  Accumulated amortization of debt
    issuance cost                                  $3,264       $  104          $   -        $   -        $3,368
                                                   ======       ======          =======      ========     ======

  Accumulated amortization of goodwill             $  191       $  518          $   -        $   -        $  709
                                                   ======       ======          =======      ========     ======

  Reserve for restructuring                        $   -        $3,408          $   -        $  (726)     $2,682
                                                   ======       ======          =======      ========     ======


For the fiscal year ended June 30, 1998

  Allowance for doubtful accounts                  $  787       $  207          $   -        $  (479)     $  515
                                                   ======       ======          =======      ========     ======

  Accumulated depreciation and amortization
    of property and equipment                      $  859       $  536          $ (447)      $   -        $  948
                                                   ======       ======          =======      ========     ======

  Accumulated amortization of debt
    issuance cost                                  $3,368       $  -            $  -         $   -        $3,368
                                                   ======       ======          =======      ========     ======

  Accumulated amortization of goodwill             $  709       $  596          $  -         $   -        $1,305
                                                   ======       ======          =======      ========     ======

  Reserve for restructuring                        $2,682       $  -            $  -         $(2,418)     $  264
                                                   ======       ======          =======      ========     ======


For the fiscal year ended June 30, 1999

  Allowance for doubtful accounts                  $  515       $  957          $  -         $  (154)     $1,318
                                                   ======       ======          =======      ========     ======

  Accumulated depreciation and amortization
    of property and equipment                      $  948       $  238          $  -         $  (138)     $1,048
                                                   ======       ======          =======      ========     ======

  Accumulated amortization of debt
    issuance cost                                  $3,368       $  -            $  -         $   -        $3,368
                                                   ======       ======          =======      ========     ======

  Accumulated amortization of goodwill             $1,305       $  623          $  -         $   -        $1,928
                                                   ======       ======          =======      ========     ======

  Reserve for restructuring                        $  264       $  -            $  -         $  (242)     $   22
                                                   ======       ======          =======      ========     ======

</TABLE>

                                       S-1

<PAGE>



                                  EXHIBIT 10.2

                    RESTATED AND AMENDED ACCOUNTS RECEIVABLE
                        MANAGEMENT AND SECURITY AGREEMENT


          This Accounts Receivable  Management and Security Agreement is made as
of July 13, 1998 by and between BNY  FINANCIAL  CORPORATION  ("Lender"),  having
offices  at 1290  Avenue of the  Americas,  New York,  New York 10104 and Target
Logistic Services,  Inc. f/k/a Target Air Freight,  Inc., 201 West Carob Street,
Compton, CA 90220 (the "Borrower"),  and restates and amends in its entirety the
Accounts Receivable Management and Security Agreement dated January 14, 1997.

          WHEREAS,  the  Borrower  has  requested  that  Lender  make  loans and
advances available to Borrower; and

          WHEREAS,  Lender  has  agreed  to make  such  loans  and  advances  to
Borrower, on the terms and conditions set forth in this Agreement.

          NOW,   THEREFORE,   in  consideration  of  the  mutual  covenants  and
undertakings and the terms and conditions  contained herein,  the parties hereto
agree as follows:

          1. (A) General Definitions. When used in this Agreement, the following
terms shall have the following meanings:

          "Advance Rates" means the Receivables Advance Rate.

          "Affiliate"  of any Person  means (a) any Person  which,  directly  or
indirectly,  is in control of, is controlled by, or is under common control with
such Person,  or (b) any Person who is a director or officer (i) of such Person,
(ii) of any Subsidiary of such Person or (iii) of any Person described in clause
(a) above. For purposes of this  definition,  control of a Person shall mean the
power,  direct  or  indirect,  (i) to vote 5% or more of the  securities  having
ordinary  voting power for the election of directors of such Person,  or (ii) to
direct or cause the  direction  of the  management  and  policies of such Person
whether by contract or otherwise.

          "Alternate  Base Rate"  means,  for any day, a rate per annum equal to
the  higher  of (i) the Prime  Rate in  effect on such day and (ii) the  Federal
Funds Rate in effect on such day plus 1/2 of 1%.

          "Ancillary   Agreements"  means  all  agreements,   instruments,   and
documents including, without limitation, mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, trust agreements
whether  heretofore,  concurrently,  or  hereafter  executed  by or on behalf of
Borrower  or  delivered  to  Lender,  relating  to  this  Agreement  or  to  the
transactions contemplated by this Agreement.

          "Bank" means The Bank of New York.

          "BNYFC  Interest  Coverage  Ratio"  the ratio of (a)  earnings  before
interest,  taxes,  depreciation and amortization of Amertranz  Worldwide Holding
Corp. on a  consolidated  basis,  as  determined  in accordance  with GAAP as in
effect  on the  Closing  Date,  to (b)  interest  expense  with  respect  to the
Obligations.

          "Borrowing  Base  Certificate"  shall  have the  meaning  set forth in
Section 9.

          "Business  Day"  means  any day other  than a day on which  commercial
banks in New York are authorized or required by law to close.

          "Change  of  Ownership"  means any  merger,  consolidation  or sale of
substantially all of the property or assets of Borrower.



<PAGE>



          "Closing Date" means the date set forth in the first  paragraph  above
or such other date as may be agreed upon by the parties hereto.

          "Collateral" means and includes:

               (A) all Inventory;

               (B) all Equipment;

               (C) all General Intangibles;

               (D) all Receivables;

               (E)  all  books,  records,  ledgercards,  files,  correspondence,
computer programs,  tapes, disks and related data processing  software (owned by
Borrower or in which it has an interest)  which at any time  evidence or contain
information  relating to (A), (B), (C) and (D) above or are otherwise  necessary
or helpful in the collection thereof or realization thereupon;

               (F) documents of title,  policies and  certificates of insurance,
securities,   chattel  paper,  other  documents  or  instruments  evidencing  or
pertaining to (A), (B), (C), (D) and (E) above;

               (G) all guaranties,  liens on real or personal property,  leases,
and other agreements and property which in any way secure or relate to (A), (B),
(C),  (D),  (E) and (F) above,  or are  acquired for the purpose of securing and
enforcing any item thereof;

               (H)  (i) all  cash  held as cash  collateral  to the  extent  not
otherwise  constituting  Collateral,  all other cash or  property at any time on
deposit  with  or held by  Lender  for the  account  of  Borrower  (whether  for
safekeeping,  custody, pledge,  transmission or otherwise),  (ii) all present or
future  deposit  accounts  (whether  time or demand or interest or  non-interest
bearing) of Borrower  with Lender or any other Person  including  those to which
any such  cash may at any time and  from  time to time be  credited,  (iii)  all
investments and reinvestments  (however  evidenced) of amounts from time to time
credited to such accounts, and (iv) all interest,  dividends,  distributions and
other  proceeds  payable  on  or  with  respect  to  (x)  such  investments  and
reinvestments and (y) such accounts; and

               (I) all products and proceeds of (A),  (B),  (C),  (D), (E), (F),
(G) and (H) above  (including,  but not limited to, all claims to items referred
to in (A),  (B),  (C),  (D),  (E),  (F),  (G) and (H)  above)  and all claims of
Borrower  against third  parties (x) for (i) loss of, damage to, or  destruction
of, and (ii) payments due or to become due under  leases,  rentals and hires of,
any or all of (A),  (B),  (C), (D), (E), (F), (G) and (H) above and (y) proceeds
payable  under,  or unearned  premiums  with respect to policies of insurance in
whatever form.

          "Contract  Rate"  means  an  interest  rate  per  annum  equal  to (i)
Alternate Base Rate plus (ii) two percent (2%) provided,  however,  the Contract
Rate shall not at any time be less than 6%.

          "Credit Risk" means the risk of loss resulting  solely and exclusively
from a Customer's  financial  inability  to pay at maturity  with respect to any
Receivable purchased hereunder.

          "Customer"  means and includes the account  debtor with respect to any
Receivable  and/or the  prospective  purchaser  of goods,  services or both with
respect to any contract or contract  right,  and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.

          "Default  Rate"  means a rate equal to two (2%)  percent  per annum in
excess  of the  Contract  Rate  or the  Overadvance  Rate,  as the  case  may be
whichever is in effect.


                                      - 2 -

<PAGE>



          "Dispute"  means any cause  asserted for  nonpayment  of  Receivables,
including,  without  limitation,  any  alleged  defense,  counterclaim,  offset,
dispute  or other  claim  (real or  merely  asserted)  whether  arising  from or
relating  to the sale of goods or  rendition  of  services  or  arising  from or
relating to any other transaction or occurrence.

          "Eligible  Receivables"  means  and  includes  each  Receivable  which
conforms to the  following  criteria:  (a)  shipment of the  merchandise  or the
rendition  of  services  has  been  completed;   (b)  no  return,  rejection  or
repossession of the merchandise has occurred;  (c) merchandise or services shall
not have been rejected or disputed by the Customer and there shall not have been
asserted any offset, defense,  counterclaim,  or Dispute; (d) continues to be in
full  conformity  with the  representations  and warranties  made by Borrower to
Lender with respect thereto;  (e) Lender is, and continues to be, satisfied with
the  credit  standing  of the  Customer  in  relation  to the  amount  of credit
extended; (f) is documented by an invoice in a form approved by Lender and shall
not be unpaid more than 90 days from invoice date nor more than 60 days from due
date;  (g) less than 50% of the unpaid amount of invoices due from such Customer
remain  unpaid more than 90 days from invoice date or more than 60 days past due
date;  (h) is not  evidenced by chattel  paper or an instrument of any kind with
respect  to or in payment  of the  Receivable  unless  such  instrument  is duly
endorsed to and in  possession  of Lender or  represents a check in payment of a
Receivable;  (i) if the Customer is located  outside of the United  States,  the
goods which gave rise to such  Receivable were shipped after receipt by Borrower
from or on behalf of the Customer of an irrevocable  letter of credit,  assigned
and delivered to Lender and confirmed by a financial  institution  acceptable to
Lender and is in form and substance  acceptable  to Lender,  payable in the full
amount of the Receivable in United States dollars at a place of payment  located
within the United States;  (j) such Receivable is not subject to any lien, other
than Permitted liens; (k) does not arise out of transactions  with any employee,
officer,  agent, director,  stockholder or Affiliate of Borrower; (l) is payable
to  Borrower;  (m) does not arise out of a bill and hold sale prior to  shipment
and, if the  Receivable  arises out of a sale to any Person to which Borrower is
indebted, the amount of such indebtedness,  and any anticipated indebtedness, is
deducted in determining  the face amount of such  Receivable;  (n) is net of any
returns, discounts, claims, credits and allowances; (o) if the Receivable arises
out of contracts  between  Borrower  and the United  States,  any state,  or any
department,  agency or instrumentality of any of them,  Borrower has so notified
Lender, in writing, prior to the creation of such Receivable,  and, if Lender so
requests,  there has been  compliance with any  governmental  notice or approval
requirements,   including  without  limitation,   compliance  with  the  Federal
Assignment  of Claims  Act;  (p) is a good and  valid  account  representing  an
undisputed bona fide indebtedness  incurred by the Customer therein named, for a
fixed  sum as set forth in the  invoice  relating  thereto  with  respect  to an
unconditional sale and delivery upon the stated terms of goods sold by Borrower,
or work,  labor  and/or  services  rendered by  Borrower;  and (q) is  otherwise
satisfactory  to Lender as determined in good faith by Lender in the  reasonable
exercise of its discretion.

          "Equipment"  means  and  includes  all  of  Borrower's  now  owned  or
hereafter acquired equipment, machinery and goods (excluding Inventory), whether
or not constituting fixtures,  including,  without limitation:  plant and office
equipment,  tools, dies, parts, data processing  equipment,  furniture and trade
fixtures,  trucks, trailers, loaders and other vehicles and all replacements and
substitutions therefore and all accessions thereto.

          "Event of Default" means the occurrence of any of the events set forth
in paragraph 18.

          "Federal Funds Rate" means,  for any day, the weighted  average of the
rates on  overnight  Federal  funds  transactions  with  members of the  Federal
Reserve System arranged by Federal funds brokers,  as published for such day (or
if such day is not a Business Day, for the next  preceding  Business Day) by the
Federal  Reserve Bank of New York,  or if such rate is not so published  for any
day which is a Business  Day,  the  average of  quotations  for such day on such
transactions  received by The Bank of New York from three  Federal funds brokers
of recognized standing selected by The Bank of New York.

          "Formula Amount" shall have the meaning set forth in paragraph 2(d).

          "GAAP" means generally accepted accounting  principles,  practices and
procedures in effect from time to time.

          "General  Intangibles"  means and includes all of Borrower's now owned
or hereafter acquired general intangibles as said term is defined in the Uniform
Commercial    Code    in    effect    in   the    State of   New York including,

                                      - 3 -

<PAGE>



without  limitation,   trademarks,   tradenames,   tradestyles,  trade  secrets,
equipment  formulation,  manufacturing  procedures,  quality control procedures,
product specifications, patents, patent applications, copyrights, registrations,
contract rights, choses in action, causes of action, corporate or other business
records,  inventions,  designs,  goodwill,  claims under  guarantees,  licenses,
franchises,  tax refunds,  tax refund claims,  computer programs,  computer data
bases, computer program flow diagrams,  source codes, object codes and all other
intangible property of every kind and nature.

          "Guarantor" means individually,  Amertranz Worldwide Holding Corp. and
any other Person who may hereafter guarantee payment or performance of the whole
or any part of the  Obligations and  "Guarantors"  means  collectively  all such
Persons.

          "Guarantor  Security  Agreements"  means  collectively,  the  Security
Agreements which are executed by each Guarantor in favor of Lender.

          "Guaranty  Agreements"  means  collectively  the Guaranties  which are
executed by each Guarantor in favor of Lender.

          "Hazardous   Substance"  means,  without  limitation,   any  flammable
explosives,  radon,  radioactive  materials,  asbestos,  urea  formaldehyde foam
insulation,   polychlorinated  byphenyls,   petroleum  and  petroleum  products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous  Materials  Transportation
Act, as amended (49 U.S.C.  Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New  York  State  Environmental  Conservation  Law or any  other  applicable
Environmental Law and in the regulations adopted pursuant thereto.

          "Holding" means Amertranz Worldwide Holding Corp.

          "Incipient  Event of Default"  means any act or event which,  with the
giving  of notice  or  passage  of time or both,  would  constitute  an Event of
Default.

          "Inventory"  means  and  includes  all  of  Borrower's  now  owned  or
hereafter  acquired  goods,  merchandise and other personal  property,  wherever
located,  to be  furnished  under any  contract  of  service or held for sale or
lease,  all raw  materials,  work in process,  finished  goods and materials and
supplies  of any  kind,  nature  or  description  which  are or might be used or
consumed in  Borrower's  business or used in selling or  furnishing  such goods,
merchandise  and other  personal  property,  and all documents of title or other
documents representing them.

          "Loans" means the Revolving  Credit Advances and all other  extensions
of credit hereunder.

          "Matured  Funds Rate" means the rate of interest,  announced by Lender
from time to time,  as the rate  applicable  to matured  funds,  such rate to be
adjusted  automatically  on the  effective  date of any  change  in such rate as
announced by Lender.

          "Maximum Revolving Amount" means $10,000,000.00

          "Net Face Amount" of  Receivables  means the gross face invoice amount
thereof,  less returns,  discounts (the calculation of which shall be determined
by Lender where optional terms are given),  anticipation or any other unilateral
deductions  taken by Customers,  and credits and  allowances to Customers of any
nature.

          "Obligations"  means and  includes  all Loans,  all  advances,  debts,
liabilities,  obligations,  covenants and duties owing by Borrower to Lender (or
any corporation  that directly or indirectly  controls or is controlled by or is
under common control with Lender) of every kind and description  (whether or not
evidenced by any note or other  instrument and whether or not for the payment of
money or the  performance or  non-performance  of any act),  direct or indirect,
absolute  or  contingent,  due  or  to  become  due,  contractual  or  tortious,
liquidated or  unliquidated,  whether  existing by operation of law or otherwise
now existing or  hereafter  arising  including,  without  limitation,  any debt,
liability  or  obligation  owing from  Borrower to others  which Lender may have
obtained by assignment or otherwise

                                      - 4 -

<PAGE>



and further including,  without limitation,  all interest,  charges or any other
payments  Borrower is required to make by law or otherwise arising under or as a
result  of this  Agreement  and the  Ancillary  Agreements,  together  with  all
reasonable  expenses and  reasonable  attorneys'  fees  chargeable to Borrower's
account or incurred by Lender in  connection  with  Borrower's  account  whether
provided for herein or in any Ancillary Agreement.

          "Overadvance  Rate"  means a rate  equal  to  one-half  of one  (1/2%)
percent per annum in excess of the Contract Rate.

          "Permitted Liens" means (i) liens of carriers, warehousemen, mechanics
and materialmen  incurred in the ordinary  course of business  securing sums not
overdue;  (ii) liens  incurred in the ordinary  course of business in connection
with  workmen's   compensation,   unemployment   insurance  or  other  forms  of
governmental insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being  diligently  contested in good faith provided that adequate
reserves  with  respect  thereto  are  maintained  on the books of  Borrower  in
conformity with GAAP,  (iii) liens in favor of Lender,  (iv) liens for taxes (a)
not yet due or (b) being  diligently  contested  in good  faith,  provided  that
adequate  reserves with respect  thereto are maintained on the books of Borrower
in conformity with GAAP and (v) liens specified on Schedule 1(A) hereto.

          "Person"  means  an  individual,  partnership,  corporation,  trust or
unincorporated organization,  or a government or agency or political subdivision
thereof.

          "Prime  Rate" means the prime  commercial  lending rate of The Bank of
New York as publicly  announced in New York,  New York to be in effect from time
to  time,  such  rate  to be  adjusted  automatically,  without  notice,  on the
effective  date of any change in such rate.  This rate of interest is determined
from time to time and is neither tied to any external  rate of interest or index
nor does it necessarily  reflect the lowest rate of interest actually charged to
any particular class or category of customers.

          "Receivables"  means  and  includes  all of  Borrower's  now  owned or
hereafter  acquired  accounts  and  contract  rights,   instruments,   insurance
proceeds,  documents,  chattel paper, letters of credit and Borrower's rights to
receive  payment  thereunder,  any and all  rights to the  payment or receipt of
money or other forms of  consideration  of any kind at any time now or hereafter
owing or to be owing to Borrower,  all  proceeds  thereof and all files in which
Borrower has any  interest  whatsoever  containing  information  identifying  or
pertaining  to any of  Borrower's  Receivables,  together with all of Borrower's
rights to any  merchandise  which is  represented  thereby,  and all  Borrower's
right,  title,   security  and  guaranties  with  respect  to  each  Receivable,
including,  without limitation,  all rights of stoppage in transit, replevin and
reclamation and all rights as an unpaid vendor.

          "Receivables  Advance  Rate"  shall have the  meaning set forth in the
definition of Receivables Availability.

          "Receivables  Availability"  means  the  amount  of  Revolving  Credit
Advances  against Eligible  Receivables  Lender may from time to time during the
term of this  Agreement  make  available  to  Borrower  up to 85%  ("Receivables
Advance Rate") of the net face amount of Borrower's Eligible Receivables.

          "Reports" shall have the meaning set forth in Section 14.

          "Retained Goods" shall have the meaning set forth in Section 8(h).

          "Revolving  Credit  Advances"  shall  have the  meaning  set  forth in
paragraph 2(d).

          "Settlement  Date"  means  two  (2)days  after  the day on  which  the
applicable Receivable is actually collected by Lender.

          "Subordinated  Debt" means any debt  subordinated to Lender upon terms
and conditions satisfactory to Lender in its sole discretion.


                                      - 5 -

<PAGE>



          "Subsidiary"  of any Person  means a  corporation  or other  entity of
whose shares of stock or other ownership  interests having ordinary voting power
(other than stock or other ownership  interests having such power only by reason
of the happening of a contingency)  to elect a majority of the directors of such
corporation,  or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.

          "Term"  means the Closing Date  through  January 14, 2000,  subject to
acceleration  upon the  occurrence  of an Event of  Default  hereunder  or other
termination hereunder.

          "Total  Liabilities"  at a particular  date means all  Indebtedness of
Borrower as at such date.

          "Working  Capital" at a particular  date means the excess,  if any, of
Current Assets over Current Liabilities at such date.

          (B)  Accounting  Terms.  Any  accounting  terms used in this Agreement
which are not  specifically  defined shall have the meanings  customarily  given
them in accordance with GAAP.

          (C) Other Terms. All other terms used in this Agreement and defined in
the Uniform  Commercial Code as adopted in the State of New York, shall have the
meaning given therein unless otherwise defined herein.

     2. Loans.

          (a) Lender shall not assume the Credit Risk on any Receivables.

          (b) Subject to the terms and  conditions  set forth  herein and in the
Ancillary  Agreements,  and provided there does not exist an Event of Default or
an Incipient Event of Default,  Lender shall make revolving credit advances (the
"Revolving  Credit  Advances")  to  Borrower  from time to time  during the Term
which, in the aggregate at any time  outstanding,  will not exceed the lesser of
(x) the  Maximum  Revolving  Amount  or (y) an amount  equal to the  Receivables
Availability,  less such  reserves  as Lender  may  reasonably  deem  proper and
necessary from time to time:

     The result of the  calculation  under  Subsection  2(b)(y)  above  shall be
referred to as the "Formula  Amount".  In this regard,  Borrower  agrees that it
shall submit a Borrowing Base  Certificate to Lender,  in form and substance and
with such frequency, as more fully described in Section 9 below, to include such
calculations,  in each instance  that Lender may deem  necessary or desirable in
order to verify whether Borrower is in compliance with the preceding limitations
pertaining to Revolving Credit Advances.

          (c)  Notwithstanding  the limitations set forth above or below, Lender
retains the right to lend  Borrower  from time to time such amounts in excess of
such limitations as Lender may determine in its sole discretion.

          (d) Borrower acknowledges that the exercise of Lender's  discretionary
rights  hereunder  may result  during the term of this  Agreement in one or more
increases or decreases in the Advance Rates and Borrower  hereby consents to any
such increases or decreases  which may limit or restrict  advances  requested by
Borrower.

          (e) If Borrower does not pay any interest,  fees, costs, or charges to
Lender when due, Borrower shall thereby be deemed to have requested,  and Lender
is hereby authorized at its discretion to make and charge to Borrower's account,
a Revolving  Credit  Advance to  Borrower as of such date in an amount  equal to
such unpaid interest, fees, costs, or charges.

          (f) Any sums expended by Lender due to Borrower's failure to
perform or comply with its obligations  under this Agreement,  including but not
limited to the payment of taxes,  insurance  premiums or leasehold  obligations,
shall be charged to Borrower's  account as a Revolving  Credit Advance and added
to the Obligations.


                                      - 6 -

<PAGE>



          (g) Lender will  account to Borrower  monthly  with a statement of all
Loans and other advances,  charges and payments made pursuant to this Agreement,
and  such  account  rendered  by  Lender  shall be  deemed  final,  binding  and
conclusive  unless  Lender is notified  by  Borrower in writing to the  contrary
within  thirty (30) days of the date each  account was rendered  specifying  the
item or items to which objection is made.

          (h)  During  the  Term,  Borrower  may  borrow,  prepay  and  reborrow
Revolving  Credit  Advances,  all in  accordance  with the terms and  conditions
hereof.

          (i) The aggregate balance of Revolving Credit Advances  outstanding at
any time shall not exceed the Formula Amount.

     3. Repayment of Loans.

          Borrower  shall  be  required  to  (i)  make  a  mandatory  prepayment
hereunder at any time that the aggregate  outstanding  principal  balance of the
Loans made by Lender to Borrower hereunder is in excess of the Formula Amount in
an amount equal to such excess, and (ii) repay on the expiration of the Term (x)
the then aggregate  outstanding  principal  balance of Revolving Credit Advances
made by Lender to Borrower  hereunder together with accrued and unpaid interest,
fees, and charges and (y) all other amounts owed Lender under this Agreement and
the Ancillary Agreements.

     4.  Procedure for Revolving  Credit  Advances.  The Borrower may by written
notice request a borrowing of Revolving  Credit  Advances prior to 1:00 P.M. New
York time on the Business Day of its request to incur,  on that day, a Revolving
Credit Advance.  All Revolving Credit Advances shall be disbursed from whichever
office or other place Lender may designate from time to time and,  together with
any and all other  Obligations  of Borrower  to Lender,  shall be charged to the
Borrower's  account on Lender's  books.  The proceeds of each  Revolving  Credit
Advance made by the Lender shall be made available to the Borrower on the day so
requested by way of credit to the Borrower's  operating account  maintained with
such bank as Borrower  designated  to Lender.  Any and all  Obligations  due and
owing  hereunder  may be  charged to  Borrower's  account  and shall  constitute
Revolving Credit Advances.

     5. Interest; Fees

          (a) Interest.

          (i) Except as  modified  by  paragraph  5(a)(iii)  below,  interest on
Revolving  Credit  Advances  shall be payable in arrears on the last day of each
month.  Interest payments hereunder may, at Lender's option be charged by Lender
to Borrower's account.  Interest charges shall be computed on the unpaid balance
of the Revolving Credit Advances for each day they are outstanding at a rate per
annum equal to with respect to Revolving Credit Advances,  the Contract Rate. In
the event the aggregate  amount of Revolving Credit Advances exceeds the Formula
Amount for five (5) or more days in any month during the Term, the average daily
balance of Revolving  Credit  Advances in that month shall bear  interest at the
Overadvance Rate.

          (ii)  Interest  shall be computed on the basis of actual days  elapsed
over a 360-day year.

          (iii) Upon the  occurrence  and during the  continuance of an Event of
Default, interest shall be payable at the Default Rate.

          (iv) Notwithstanding the foregoing,  in no event shall interest exceed
the maximum rate permitted  under any  applicable law or regulation,  and if any
provision of this Agreement or an Ancillary Agreement is in contravention of any
such law or regulation,  such  provision  shall be deemed amended to provide for
interest at said maximum rate and any excess amount shall either be applied,  at
Lender's  option,  to the  outstanding  Loans  in such  order  as  Lender  shall
determine or refunded by Lender to Borrower.


                                      - 7 -

<PAGE>



          (v)  Borrower  shall pay  principal,  interest  and all other  amounts
payable  hereunder,  or under any  Ancillary  Agreement,  without any  deduction
whatsoever,  including,  but not  limited to, any  deduction  for any set-off or
counterclaim.

          (b) Fees.

          (i) Unused  Line Fee. In the event the average  closing  daily  unpaid
balances of all Revolving Credit Advances hereunder during any calendar month is
less than the Maximum Revolving Amount,  Borrower shall pay to Lender a fee at a
rate per annum  equal to one half of one  percent  (1/2%) on the amount by which
the Maximum Revolving Amount exceeds such average daily unpaid balance. Such fee
shall be  calculated on the basis of a year of 360 days and actual days elapsed,
and shall be charged to  Borrower's  account on the first day of each month with
respect to the prior month.

          (ii)  Collateral  Monitoring  Fee.  Upon Lender's  performance  of any
collateral monitoring namely any field examination, collateral analysis or other
business  analysis,  the need for which is to be  determined by Lender and which
monitoring is undertaken  by Lender or for Lender's  benefit,  a per diem amount
equal to Lender's  then standard  rate per person,  for each person  employed to
perform such  monitoring  together  with all costs,  disbursements  and expenses
incurred  by the Lender and the person  performing  such  collateral  monitoring
shall be charged  to  Borrower's  account.  In  addition  to the  foregoing  the
Borrower shall in addition pay to Lender a monthly Collateral  Monitoring Fee of
$2,000.00 per month,  through the Term of this Agreement and through any renewal
Term (provided however, if there exists an Event of Default under this Agreement
the Collateral Monitoring Fee shall be increased and shall thereupon continue at
$5,000 per month  through the end of the Term and any  renewal  Term) and in the
event  of any  termination  of the  Agreement,  prior  to the end of the Term or
renewal  Term  pursuant to Section 17 of the  Agreement or  otherwise,  the then
remaining  monthly  payments through the balance of the Term or renewal Term (as
the case may be) shall be payable in full.

          (c) Increased  Costs.  In the event that any applicable law, treaty or
governmental  regulation,  or any  change  therein or in the  interpretation  or
application thereof, or compliance by Lender (for purposes of this Section 5(c),
the term "Lender" shall include Lender and any  corporation or bank  controlling
Lender) with any request or  directive  (whether or not having the force of law)
from any central bank or other financial, monetary or other authority, shall:

          (i) subject Lender to any tax of any kind  whatsoever  with respect to
this  Agreement  or  change  the  basis of  taxation  of  payments  to Lender of
principal,  fees,  interest or any other amount  payable  hereunder or under any
Ancillary  Agreements  (except for changes in the rate of tax on the overall net
income  of  Lender  by the  jurisdiction  in which it  maintains  its  principal
office);

          (ii) impose,  modify or hold applicable any reserve,  special deposit,
assessment or similar  requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Lender,  including (without limitation) pursuant to Regulation D of the Board of
Governors of the Federal Reserve System; or

          (iii)  impose  on Lender  any other  condition  with  respect  to this
Agreement or any Ancillary Agreements;

and the  result of any of the  foregoing  is to  increase  the cost to Lender of
making,  renewing or  maintaining  its Loans  hereunder by an amount that Lender
deems to be  material  or to  reduce  the  amount  of any  payment  (whether  of
principal,  interest or  otherwise)  in respect of any of the Loans by an amount
that Lender deems to be material,  then, in any case Borrower shall promptly pay
Lender,  upon its demand,  such additional  amount as will compensate Lender for
such additional cost or such reduction, as the case may be. Lender shall certify
the amount of such  additional  cost or  reduced  amount to  Borrower,  and such
certification shall be conclusive absent manifest error.

          (d) Capital Adequacy.


                                      - 8 -

<PAGE>



          (i) In the event that Lender shall have determined that any applicable
law, rule,  regulation or guideline  regarding capital  adequacy,  or any change
therein,  or any change in the  interpretation or administration  thereof by any
governmental  authority,  central  bank or  comparable  agency  charged with the
interpretation or administration  thereof, or compliance by Lender (for purposes
of this Section 5(d), the term "Lender" shall include Lender and any corporation
or bank  controlling  Lender)  with any request or directive  regarding  capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable  agency, has or would have the effect of reducing the rate of
return on Lender's  capital as a consequence of its  obligations  hereunder to a
level below that which Lender could have achieved but for such adoption,  change
or  compliance  (taking into  consideration  Lender's  policies  with respect to
capital adequacy) by an amount deemed by Lender to be material,  then, from time
to time,  Borrower  shall pay upon  demand to Lender such  additional  amount or
amounts as will compensate Lender for such reduction. In determining such amount
or amounts,  Lender may use any reasonable averaging or attribution methods. The
protection  of this  Section  shall be  available  to Lender  regardless  of any
possible  contention  of  invalidity  or  inapplicability  with  respect  to the
applicable law, regulation or condition.

          (ii) A certificate  of Lender  setting forth such amount or amounts as
shall be necessary to compensate Lender with respect to Section 5(d) hereof when
delivered to Borrower shall be conclusive absent manifest error.

          (e)  Matured  Funds.  On the last day of each  month  during the Term,
Lender shall credit  Borrower's  account with interest at the Matured Funds Rate
in effect during such month on the average  daily  balance  during such month of
any  amounts  payable  by Lender to  Borrower  hereunder  which are not drawn by
Borrower on the Settlement Date.

     6. Security Interest.

          (a) To  secure  the  prompt  payment  to  Lender  of the  Obligations,
Borrower  hereby  assigns,  pledges and grants to Lender a  continuing  security
interest in and to the  Collateral,  whether now owned or existing or  hereafter
acquired or arising and wheresoever  located (whether or not the same is subject
to Article 9 of the  Uniform  Commercial  Code).  All of the  Borrower's  ledger
sheets, files, records, books of account, business papers and documents relating
to the Collateral  shall,  until  delivered to or removed by Lender,  be kept by
Borrower in trust for Lender until all Obligations  have been paid in full. Each
confirmatory  assignment schedule or other form of assignment hereafter executed
by Borrower shall be deemed to include the foregoing  grant,  whether or not the
same appears therein.

          (b)  Lender  may  file  one or more  financing  statements  disclosing
Lender's  security  interest  in the  Collateral  without  Borrower's  signature
appearing  thereon  or  Lender  may sign on  Borrower's  behalf as  provided  in
paragraph  13 hereof.  The parties  agree that a carbon,  photographic  or other
reproduction of this Agreement shall be sufficient as a financing statement.  If
any Receivable  becomes  evidenced by a promissory note or any other  instrument
for the payment of money,  Borrower will immediately  deliver such instrument to
Lender appropriately endorsed.

     7.  Representations  Concerning  the  Collateral.  Borrower  represents and
warrants  (each of which such  representations  and  warranties  shall be deemed
repeated upon the making of each request for a Revolving Credit Advance and made
as of the time of each and every Revolving Credit Advance hereunder):

          (a) all the  Collateral (i) is owned by Borrower free and clear of all
claims, liens, security interests and encumbrances (including without limitation
any claims of infringement) except (A) those in Lender's favor and (B) Permitted
Liens and (ii) is not subject to any  agreement  prohibiting  the  granting of a
security  interest  or  requiring  notice of or  consent  to the  granting  of a
security interest;

          (b) all  Receivables  (i) represent  complete  bona fide  transactions
which require no further act under any  circumstances on Borrower's part to make
such  Receivables  payable by Customers,  (ii) unless they do not exceed $500 in
any one instance or $5,000 in the aggregate to the best of Borrower's knowledge,
are not subject to any present, future or contingent Disputes; (iii) unless they
do not  exceed  $500 in any one  instance  or  $5,000  in the  aggregate  do not
represent bill and hold sales,  consignment  sales,  guaranteed  sales,  sale or
return or other similar

                                      - 9 -

<PAGE>



understandings  or obligations of any Affiliate or Subsidiary of Borrower;  (iv)
included in any Borrowing Base  Certificate as an Eligible  Receivable meets all
criteria  specified in the  definition  of Eligible  Receivables,  except as may
otherwise be  specifically  disclosed in such Borrowing  Base  Certificate or as
otherwise  theretofore  disclosed in writing to Lender;  and (v) Borrower has no
knowledge of any fact or  circumstance  not disclosed to Lender in the pertinent
Borrowing  Base  Certificate  or  otherwise  in writing,  which would impair the
validity or collectibility of any Eligible  Receivable and that all documents in
connection with each Receivable are genuine.

          (c) in the event any amounts due and owing from any account  debtor to
Borrower on any Eligible  Receivable shall become subject to any Dispute,  or to
any other adjustment otherwise permitted to be made in accordance with the terms
and  provisions  hereof  in the  ordinary  course of  business  and prior to the
occurrence of an Event of Default  hereunder,  Borrower agrees that it shall, at
the time of the submission of the next Borrowing Base Certificate required to be
delivered to Lender  immediately  following  the date on which  Borrower  learns
thereof,  provide Lender with notice  thereof.  Borrower  further agrees that it
shall also notify  Lender  promptly of all returns and credits in excess of $500
in any one instance or and which in the  aggregate  do not exceed  $5,000 at any
time outstanding in respect of any Receivables  included within a Borrowing Base
Certificate, which notice shall specify the Receivables affected.

     8. Covenants Concerning the Collateral. During the Term, Borrower
covenants that it shall:

          (a) not  dispose of any of the  Collateral  whether by sale,  lease or
otherwise  except  for (i) the  sale of  Inventory  in the  ordinary  course  of
business, and (ii) the disposition or transfer of obsolete and wornout Equipment
in the  ordinary  course of business  during any fiscal year having an aggregate
fair market value of not more than  $250,000.00  and only to the extent that (x)
the proceeds of any such disposition are used to acquire  replacement  Equipment
which is  subject  to  Lender's  first  priority  security  interest  or (y) the
proceeds of which are remitted to Lender in reduction of the Obligations;

          (b) not  encumber,  mortgage,  pledge,  assign or grant  any  security
interest in any  Collateral  or any of  Borrower's  other assets to anyone other
than Lender except Permitted Liens;

          (c) place notations upon Borrower's books of account and any financial
statement  prepared by Borrower to disclose  Lender's  security  interest in the
Collateral;

          (d) defend the Collateral against the claims and demands of
all parties.

          (e) keep and  maintain  the  Equipment  in good  operating  condition,
except for  ordinary  wear and tear,  and shall make all  necessary  repairs and
replacements  thereof so that the value and  operating  efficiency  shall at all
times be maintained  and  preserved.  Borrower  shall not permit any such items,
other than those which were specifically intended to be leasehold  improvements,
to become a fixture to real estate or accessions to other personal property;

          (f) not extend the  payment  terms of any  Receivable  without  prompt
notice thereof to Lender;

          (g) perform all other steps requested by Lender to create and maintain
in Lender's favor a valid perfected  first security  interest in all Collateral;
and

          (h)  Should  Lender  so  elect,  upon the  occurrence  of any Event of
Default,  Lender  may at any  time in its  discretion  (i)  withdraw  Borrower's
authority to issue  credits to its  Customers  without  Lender's  prior  written
consent;  or (ii) litigate  Disputes or settle them  directly with  Customers on
terms acceptable to Lender.

     9. Collection and Maintenance of Collateral and Records.  Lender may at any
time verify  Borrower's  Receivables  utilizing an audit control  company or any
other agent of Lender. Lender or Lender's designee may notify Customers,  at any
time at Lender's sole discretion,  of Lender's security interest in Receivables,
collect them directly and charge the collection costs and expenses to Borrower's
account,  but,  unless  and  until  Lender  does  so  or  gives  Borrower  other
instructions, Borrower shall instruct

                                     - 10 -

<PAGE>



all of its  Customers to make payments on account of  Receivables  to an account
under  Lender's  dominion and control at such bank as Lender may  designate,  as
provided  by the  terms of  Section  23. To the  extent  Borrower  receives  any
payments on account of  Receivables,  it shall hold such  payments  for Lender's
benefit in trust as Lender's  trustee and immediately  deliver them to Lender in
their original form with all necessary  endorsements  or, as directed by Lender,
deposit  such  payments  as  directed  by Lender  pursuant to Section 22 hereof.
Lender will credit  (conditional  upon final  collection)  all such  payments to
Borrower's  account on the Settlement  Date.  Promptly after the creation of any
Receivables,  Borrower  shall  provide  Lender  with  schedules  describing  all
Receivables  created or  acquired  by  Borrower  and shall  execute  and deliver
confirmatory  written  assignments of such Receivables to Lender, but Borrower's
failure  to  execute  and  deliver  such   schedules  or  written   confirmatory
assignments  of such  Receivables  shall not affect or limit  Lender's  security
interest or other rights in and to the Receivables.  Borrower shall furnish,  at
Lender's  request,  copies of  contracts,  invoices or the  equivalent,  and any
original  shipping and delivery  receipts for all  merchandise  sold or services
rendered and such other documents and information as Lender may require.  All of
Borrower's  invoices  shall  bear the terms  stated on the  applicable  customer
order,  and no change from the original  terms of such  customer  order shall be
made without the prior written consent of Lender.  Borrower shall provide Lender
on a  monthly  (within  ten (10)  days  after  the end of each  month),  or more
frequent basis, as requested by Lender,  a summary report of Borrower's  current
Inventory,  certified  as true and  accurate by  Borrower's  President  or Chief
Financial  Officer,  as well as an aged  trial  balance of  Borrower's  existing
accounts payable.  Borrower shall provide Lender,  as requested by Lender,  such
other schedules, documents and/or information regarding the Collateral as Lender
may require. Without limiting the foregoing,  Borrower shall provide to Lender a
borrowing base certificate at least once daily  ("Borrowing Base  Certificate"),
which must be in form and  substance  acceptable  to Lender and which  Borrowing
Base  Certificate  shall  certify  to  Lender,   and  shall  contain  sufficient
information and calculations as Lender may deem necessary or desirable, in order
to verify  any  Receivables  Availability,  the  applicable  Formula  Amount and
whether or not Receivables  included therein are Eligible  Receivables.  Without
limiting  the  foregoing,  a Borrowing  Base  Certificate  must be executed  and
delivered  by  Borrower  to Lender at the time of or prior to each  request  for
Revolving  Credit  Advances  pursuant  to  Section 4. Each such  Borrowing  Base
Certificate  shall be delivered to Lender at its office  described in Section 25
below, on each relevant Business Day.

     10.  Inspections.  At all times during normal business hours,  Lender shall
have  the  right  to  (a)  visit  and  inspect  Borrower's  properties  and  the
Collateral,  (b) inspect, audit and make extracts from Borrower's relevant books
and  records,  including,  but not limited to,  management  letters  prepared by
independent accountants, and (c) discuss with Borrower's principal officers, and
independent accountants,  Borrower's business,  assets,  liabilities,  financial
condition,  results of operations and business prospects.  Borrower will deliver
to Lender any instrument necessary for Lender to obtain records from any service
bureau maintaining records for Borrower.

     11.  Financial  Information.  Borrower  shall provide Lender (a) as soon as
available,  but in any event  within  ninety  (90) days after the end of each of
Borrower's fiscal years, Borrower's and Holding,  consolidated and consolidating
balance  sheet as at the end of such fiscal year and the related  statements  of
income,  retained  earnings  and  statement  of cash flow for such fiscal  year,
setting  forth  in  comparative  form the  figures  as at the end of and for the
previous fiscal year,  which with respect to Holding shall have been reported on
by independent  certified public accountants who shall be satisfactory to Lender
and  shall  be  accompanied  by an  unqualified  audit  report  issued  by  such
independent  certified public accountants;  (b) as soon as available,  drafts of
Borrower's  balance sheet as at the end of each of  Borrower's  fiscal years and
the related  statements of income,  retained earnings and statement of cash flow
for such fiscal year,  which have been internally  prepared by Borrower;  (c) as
soon as  available,  but in any event within thirty (30) days after the close of
each month and  quarter,  the balance  sheet with  respect to  Borrower  and the
related statements of income, retained earnings and changes in statement of cash
flow for such  month  and  quarter,  which  have  been  internally  prepared  by
Borrower.  All financial  statements required under (a), (b) and (c) above shall
be prepared in accordance with GAAP (except that monthly and quarterly financial
statements need not provide the footnotes customarily required by GAAP but shall
in all other regards be prepared in a manner  consistent with GAAP),  subject to
year end adjustments in the case of monthly and quarterly  statements.  Together
with the financial  statements  furnished pursuant to (a) above,  Borrower shall
deliver a certificate of Borrower's  certified public  accountants  addressed to
Lender  stating  that (i) they have  caused  this  Agreement  and the  Ancillary
Agreements to be reviewed and (ii) in making the  examination  necessary for the
issuance of such financial  statements,  nothing has come to their  attention to
lead them to believe  that any Event of Default  or  Incipient  Event of Default
exists and, in  particular,  they have no  knowledge  of any Event of Default or
Incipient Event of Default or, if such is not the case,

                                     - 11 -

<PAGE>



specifying  such Event of Default or Incipient  Event of Default and its nature,
when it  occurred  and  whether  it is  continuing.  At the times the  financial
statements  are furnished  pursuant to (a), (b) and (c) above,  a certificate of
Borrower's  President or Chief  Financial  Officer  shall be delivered to Lender
stating  that,  based on an  examination  sufficient  to  enable  him to make an
informed  statement,  no Event of Default or Incipient  Event of Default exists,
or, if such is not the case, specifying such Event of Default or Incipient Event
of Default and its nature,  when it occurred,  whether it is continuing  and the
steps being  taken by Borrower  with  respect to such event.  If any  internally
prepared financial information, including that required under this paragraph, is
unsatisfactory  in any manner to  Lender,  Lender may  request  that  Borrower's
independent certified public accountants review same.

     In addition to the foregoing financial  statements,  Borrower shall furnish
Lender no less than thirty (30) days prior to the  beginning of each fiscal year
commencing  with fiscal year 1998, a month by month projected  operating  budget
and cash flow for such fiscal year (including an income statement for each month
and a balance  sheet as at the end of the last  month in each  fiscal  quarter),
such  projections  to be  accompanied  by a  certificate  signed  by  Borrower's
President or Chief Financial  Officer to the effect that such  projections  have
been prepared on the basis of sound financial planning practice  consistent with
past  budgets and  financial  statements  and that such officer has no reason to
question  the   reasonableness  of  any  material   assumptions  on  which  such
projections were prepared.

     12.  Additional   Representations,   Warranties  and  Covenants.   Borrower
represents and warrants (each of which such representations and warranties shall
be deemed  repeated upon the making of a request for a Revolving  Credit Advance
and made as of the time of each Revolving  Credit Advance made  hereunder),  and
covenants that:

          (a) Borrower is a  corporation  duly  organized  and validly  existing
under  the  laws of the  State of  Delaware  and is duly  qualified  and in good
standing  in every  other  state or  jurisdiction  in which  the  nature  of its
business requires such qualification;

          (b) the execution,  delivery and performance of this Agreement and the
Ancillary   Agreements  (i)  have  been  duly   authorized,   (ii)  are  not  in
contravention  of Borrower's  certificate  of  incorporation,  by-laws or of any
indenture,  agreement or  undertaking  to which  Borrower is a party or by which
Borrower is bound and (iii) are within Borrower's corporate powers;

          (c) this Agreement and the Ancillary Agreements executed and delivered
by Borrower are Borrower's legal, valid and binding obligations,  enforceable in
accordance with their terms;

          (d) it keeps and will  continue  to keep all of its books and  records
concerning  the  Collateral  at  Borrowers'  executive  offices  located  at the
respective  addresses set forth in the introductory  paragraph of this Agreement
and will not move such books and records  without  giving Lender at least thirty
(30) days prior written notice;

          (e) (i) the operation of  Borrower's  business is and will continue to
be in compliance in all material respects with all applicable federal, state and
local laws,  including but not limited to all applicable  environmental laws and
regulations.

               (ii) Borrower will  establish and maintain a system to assure and
monitor  continued  compliance  with all applicable  environmental  laws,  which
system shall include periodic reviews of such compliance.

               (iii) in the event the Borrower obtains, gives or receives notice
of any release or threat of release of a  reportable  quantity of any  Hazardous
Substances  on its property (any such event being  hereinafter  referred to as a
"Hazardous  Discharge")  or  receives  any  notice  of  violation,  request  for
information or notification that it is potentially responsible for investigation
or  cleanup  of  environmental  conditions  on its  property,  demand  letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or  violation  of any  environmental  laws  affecting  its property or
Borrower's  interest  therein (any of the  foregoing is referred to herein as an
"Environmental Complaint") from any Person or entity, including any state agency
responsible in whole or in part for environmental  matters in the state in which
such property is located or the United States  Environmental  Protection  Agency
(any such  person or entity  hereinafter  the  "Authority"),  then the  Borrower
shall, within five (5) Business

                                     - 12 -

<PAGE>



Days,   give  written  notice  of  same  to  the  Lender   detailing  facts  and
circumstances  of which  the  Borrower  is aware  giving  rise to the  Hazardous
Discharge or  Environmental  Complaint  and  periodically  inform  Lender of the
status of the matter.  Such information is to be provided to allow the Lender to
protect its security  interest in the  Collateral  and is not intended to create
nor shall it create any obligation upon the Lender with respect thereto.

               (iv) Borrower shall respond  promptly to any Hazardous  Discharge
or  Environmental  Complaint and take all necessary action in order to safeguard
the health of any Person and to avoid  subjecting  the  Collateral  to any lien,
charge, claim or encumbrance.  If Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental  Complaint or Borrower shall fail to comply
with any of the  requirements  of any  environmental  laws,  the Lender may, but
without the obligation to do so, for the sole purpose of protecting the Lender's
interest  in  Collateral:  (A) give such  notices or (B) enter  onto  Borrower's
property (or authorize  third parties to enter onto such property) and take such
actions as the Lender (or such third  parties as directed  by the  Lender)  deem
reasonably  necessary or advisable,  to clean up, remove,  mitigate or otherwise
deal  with  any  such  Hazardous  Discharge  or  Environmental   Complaint.  All
reasonable costs and expenses  incurred by the Lender (or such third parties) in
the exercise of any such rights,  including any sums paid in connection with any
judicial or  administrative  investigation or proceedings,  fines and penalties,
together  with  interest  thereon from the date expended at the Default Rate for
Revolving  Credit Advances shall be paid upon demand by the Borrower,  and until
paid shall be added to and become a part of the Obligations secured by the Liens
created by the terms of this Agreement or any other agreement between Lender and
Borrower. (v) Borrower shall defend and indemnify the Lender and hold the Lender
harmless  from and  against all loss,  liability,  damage and  expense,  claims,
costs, fines and penalties,  including  attorney's fees, suffered or incurred by
the Lender under or on account of any  environmental  laws,  including,  without
limitation, the assertion of any lien thereunder,  with respect to any Hazardous
Discharge,  the  presence  of  any  hazardous  substances  affecting  Borrower's
property, whether or not the same originates or emerges from Borrower's property
or any contiguous real estate,  including any loss of value of the Collateral as
a result of the foregoing except to the extent such loss, liability,  damage and
expense is attributable to any Hazardous Discharge resulting from actions on the
part of the Lender. The Borrower's  obligations under this paragraph 12(e) shall
arise upon the  discovery of the  presence of any  Hazardous  Substances  on the
Borrower's property,  whether or not any federal,  state, or local environmental
agency has taken or threatened any action in connection with the presence of any
hazardous  substances.   The  Borrower's  obligation  and  the  indemnifications
hereunder shall survive the termination of this Agreement.

               (vi) For purposes of paragraph 12(e) all references to Borrower's
property shall be deemed to include all of Borrower's right,  title and interest
in and to all owned and/or leased premises;

          (f) based upon the  Employee  Retirement  Income  Security Act of 1974
("ERISA"),  and the regulations and published  interpretations  thereunder:  (i)
Borrower has not engaged in any Prohibited  Transactions as defined in paragraph
406 of ERISA and paragraph 4975 of the Internal  Revenue Code, as amended;  (ii)
Borrower has met all applicable minimum funding requirements under paragraph 302
of ERISA in respect of its plans;  (iii)  Borrower has no knowledge of any event
or occurrence  which would cause the Pension  Benefit  Guaranty  Corporation  to
institute  proceedings under Title IV of ERISA to terminate any employee benefit
plan(s);  (iv) Borrower has no fiduciary  responsibility  for  investments  with
respect to any plan  existing for the benefit of persons  other than  Borrower's
employees; and (v) Borrower has not withdrawn, completely or partially, from any
multiemployer  pension  plan so as to incur  liability  under the  Multiemployer
Pension Plan Amendments Act of 1980;

          (g) it is solvent,  able to pay its debts as they mature,  has capital
sufficient  to carry on its business and all  businesses in which it is about to
engage and the fair saleable value of its assets  (calculated on a going concern
basis) is in excess of the amount of its liabilities;

          (h)  there  is  no  pending  or  threatened  litigation,   actions  or
proceeding  which involve the possibility of materially and adversely  affecting
the Borrower's business, assets, operations,  condition or prospects,  financial
or  otherwise,  or the  Collateral  or the ability of  Borrower to perform  this
Agreement;

          (i) all balance sheets and income statements which have been delivered
to Lender fairly,  accurately and properly state Borrower's  financial condition
on a basis consistent with that of previous financial

                                     - 13 -

<PAGE>



statements  and except as otherwise  disclosed to Lender in writing prior to the
date hereof with respect to operating  losses during the fiscal  quarter  ending
December  31,  1996,  there has been no material  adverse  change in  Borrower's
financial  condition as reflected in such statements  since the date thereof and
such statements do not fail to disclose any fact or facts which might materially
and adversely affect Borrower's financial condition;

          (j)  (x)  it  possesses  all  of the  licenses,  patents,  copyrights,
trademarks,  tradenames and permits necessary to conduct its business, (y) there
has been no assertion or claim of violation or infringement with respect thereof
and (z) all such  licenses,  patents,  copyrights,  trademarks,  tradenames  and
permits are listed on Schedule 12(j);

          (k) it will pay or  discharge  when  due all  taxes,  assessments  and
governmental charges or levies imposed upon it;

          (l) it will promptly inform Lender in writing of: (i) the commencement
of all  proceedings  and  investigations  by or before and/or the receipt of any
notices  from,  any  governmental  or  nongovernmental  body and all actions and
proceedings  in any  court  or  before  any  arbitrator  against  or in any  way
concerning any of Borrower's properties,  assets or business, which might singly
or in the  aggregate,  have a materially  adverse  effect on Borrower;  (ii) any
amendment of  Borrower's  certificate  of  incorporation  or by-laws;  (iii) any
change in Borrower's  business,  assets,  liabilities,  condition  (financial or
otherwise),  results of operations or business  prospects which has had or might
have a  materially  adverse  effect on  Borrower;  (iv) any Event of  Default or
Incipient Event of Default;  (v) any default or any event which with the passage
of time or  giving  of  notice or both  would  constitute  a  default  under any
agreement  for the  payment  of money to which  Borrower  is a party or by which
Borrower  or any of  Borrower's  properties  may be  bound  which  would  have a
material  adverse  effect  on  Borrower's  business,  operations,   property  or
condition  (financial or otherwise)  or the  Collateral;  (vi) any change in the
location of Borrower's  executive  offices;  (vii) any change in the location of
Borrower's  Inventory or Equipment which in the aggregate have a value in excess
of  $20,000.00  from the locations  listed on Schedule  12(l)  attached  hereto,
(viii) any change in  Borrower's  corporate  name;  (ix) any  material  delay in
Borrower's  performance  of any of its  obligations  to any  Customer and of any
assertion  of any material  claims,  offsets,  counterclaims  or Disputes by any
Customer and of any allowances, credits and/or other monies granted by it to any
Customer;  (x) furnish to and inform Lender of all material adverse  information
relating to the financial condition of any account debtor; and (xi) any material
return of goods;

          (m) it will not without the express  prior  written  consent of Lender
(i) create,  incur,  assume or suffer to exist any  indebtedness  (exclusive  of
trade debt) whether secured or unsecured  other than Borrower's  indebtedness to
Lender  and as set  forth on  Schedule  12(m)  attached  hereto  and made a part
hereof; (ii) declare,  pay or make any dividend or distribution on any shares of
the  common  stock or  preferred  stock of  Borrower  or apply any of its funds,
property or assets to the purchase, redemption or other retirement of any common
or  preferred  stock of  Borrower;  (iii)  directly  or  indirectly,  prepay any
indebtedness (other than to Lender), or repurchase,  redeem, retire or otherwise
acquire any indebtedness of Borrower;  (iv) makes advances,  loans or extensions
of credit to any Person; (v) become either directly or contingently  liable upon
the obligations of any Person by assumption,  endorsement or guaranty thereof or
otherwise;  (vi) enter into any merger,  consolidation  or other  reorganization
with or into any other Person or acquire all or a portion of the assets or stock
of any Person or permit any other Person to  consolidate  with or merge with it;
(vii)  form any  Subsidiary  or enter  into any  partnership,  joint  venture or
similar  arrangement;  (viii)  materially  change the nature of the  business in
which it is presently  engaged;  (ix) change its fiscal year or make any changes
in accounting  treatment and reporting practices without prior written notice to
Lender except as required by GAAP or in the tax reporting treatment or except as
required by law; (x) enter into any  transaction  with any Affiliate,  except in
ordinary  course on arms length terms; or (xi) bill  Receivables  under any name
except the  present  name of the  Borrower;  (xii)  sell,  transfer  or lease or
otherwise  dispose of any of its  properties  or assets,  except in the ordinary
course of its business;

          (n) it shall not permit  consolidated  Net Worth of Target  Logistics,
Inc.,  determined in accordance with GAAP as of the end of any fiscal quarter to
be less than the  amount  set forth  below (in  thousands)  for each  respective
measurement date:

         Quarter Ended                    1998                              1999
         -----------------------------------------------------------------------


                                     - 14 -

<PAGE>



         March 31                                                        $18,750
         June 30                          $18,000
         September 30                     $17,500
         December 31                      $19,800                        $17,000
         and at all time thereafter       $17,000

          To the extent that Target  Logistics,  Inc.  pays any dividends to the
holders of any preferred stock issued in its settlement with trade creditors and
to the extent  Target  Logistics,  Inc. pays any dividends to the holders of any
holders of other classes of preferred stock (which dividends shall not exceed an
aggregate amount of $450,000 during any year to such holders of other classes of
preferred stock), then in such event the dollar amounts set forth above shall be
decreased by an amount equal to the aggregate amount of the dividends paid.

          (o) it shall not permit the  consolidated  net profit (loss) of Target
Logistics, Inc., determined in accordance with GAAP to fall below the amount set
forth below (in thousands) for each respective measurement date:

      Quarter Ended                     1998                               1999
      --------------------------------------------------------------------------
              March 31                                                  ($1,200)
              June 30                 ($1,000)
              September 30            ($  750)
              December 31             ($1,300)                          ($  750)

          (p) At the end of any month  the sum of  Borrower's  (i)  unrestricted
cash plus (ii) the Formula Amount less Revolving Credit  Advances,  shall not be
less than $1,200,000.00.

          (q) it will not make  capital  expenditures  in any fiscal  year in an
amount in excess of $500,000.

          (r) none of the proceeds of the Loans  hereunder will be used directly
or indirectly to "purchase" or "carry"  "margin stock" or to repay  indebtedness
incurred to "purchase" or "carry" "margin stock" within the respective  meanings
of each of the quoted terms under  Regulation G of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect; and

          (s) it will  bear the full  risk of loss  from any loss of any  nature
whatsoever  with  respect  to the  Collateral.  At its own cost and  expense  in
amounts  and with  carriers  acceptable  to  Lender,  it shall  (i) keep all its
insurable  properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to Borrower's  including,
without limitation,  business  interruption  insurance;  (ii) maintain a bond in
such  amounts as is customary  in the case of  companies  engaged in  businesses
similar to Borrower's  insuring against larceny,  embezzlement or other criminal
misappropriation  of insured's  officers and  employees who may either singly or
jointly  with  others at any time have access to the assets or funds of Borrower
either  directly  or  through  authority  to draw upon  such  funds or to direct
generally the  disposition  of such assets;  (iii)  maintain  public and product
liability insurance against claims for personal injury, death or property damage
suffered by others;  (iv) maintain all such  workmen's  compensation  or similar
insurance  as may be  required  under the laws of any state or  jurisdiction  in
which Borrower is engaged in business; (v) furnish Lender with (x) copies of all
policies and evidence of the  maintenance  of such policies at least thirty (30)
days before any expiration date, and (y) appropriate  loss payable  endorsements
in form and substance  satisfactory  to Lender,  naming Lender as loss payee and
providing  that as to Lender the  insurance  coverage  shall not be  impaired or
invalidated  by any act or neglect of  Borrower  and the  insurer  will  provide
Lender with at least  thirty (30) days notice  prior to  cancellation.  Borrower
shall instruct the insurance  carriers that in the event of any loss thereunder,
the carriers  shall make payment for such loss to Lender and not to Borrower and
Lender  jointly.  If any  insurance  losses  are paid by  check,  draft or other
instrument payable to Borrower and Lender jointly, Lender may endorse Borrower's
name thereon and do such

                                     - 15 -

<PAGE>



other things as Lender may deem advisable to reduce the same to cash.  Lender is
hereby authorized to adjust and compromise claims. All loss recoveries  received
by Lender upon any such  insurance  may be applied to the  Obligations,  in such
order as Lender in its sole  discretion  shall  determine.  Any surplus shall be
paid by Lender to Borrower or applied as may be  otherwise  required by law. Any
deficiency thereon shall be paid by Borrower to Lender, on demand.

          (t) it shall not purchase or acquire  obligations  or stock of, or any
other  interest in, or make any  investment  in any entity,  without the express
written consent of Lender,  except (A)  obligations  issued or guaranteed by the
United  States of America  or any  agency  thereof,  (B)  commercial  paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (C) certificates of time deposit and bankers'
acceptances  having  maturities  of  not  more  than  180  days  and  repurchase
agreements backed by United States government securities of a commercial bank if
(x) such bank has a combined  capital and surplus of at least  $500,000,000,  or
(y) its  debt  obligations,  or  those  of a  holding  company  of which it is a
subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized  investment rating agency and (D) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
Agency  thereof,  and (E) Eurodollar  time deposits with financial  institutions
with a published rating of not less than A-1 or P-1 (or the equivalent rating).

     13. Power of Attorney.  Borrower hereby appoints Lender or any other Person
whom Lender may  designate as  Borrower's  attorney,  with power to: (i) endorse
Borrower's name on any checks, notes, acceptances, money orders, drafts or other
forms of payment or security that may come into Lender's  possession;  (ii) sign
Borrower's  name on any invoice or bill of lading  relating to any  Receivables,
drafts against Customers,  schedules and assignments of Receivables,  notices of
assignment,  financing  statements and other public  records,  verifications  of
account and notices to or from Customers;  (iii) verify the validity,  amount or
any other matter  relating to any  Receivable by mail,  telephone,  telegraph or
otherwise  with  Customers;  (iv) execute  customs  declarations  and such other
documents  as may be required to clear  Inventory  through  Customs;  (v) do all
things  necessary to carry out this Agreement,  any Ancillary  Agreement and all
related  documents;  and (vi) on or after the occurrence and  continuation of an
Event of Default,  notify the post office  authorities to change the address for
delivery of Borrower's mail to an address  designated by Lender, and to receive,
open and dispose of all mail addressed to Borrower. Borrower hereby ratifies and
approves  all acts of the  attorney.  Neither  Lender nor the  attorney  will be
liable for any acts or omissions or for any error of judgment or mistake of fact
or law except those arising from their actual  willful  misconduct.  This power,
being coupled with an interest,  is irrevocable so long as any Receivable  which
is assigned to Lender or in which Lender has a security  interest remains unpaid
and until the Obligations have been fully satisfied.

     14. Expenses.  Borrower shall pay all of Lender's  out-of-pocket  costs and
expenses,  including  without  limitation  reasonable fees and  disbursements of
counsel  retained or employed by Lender and  appraisers,  in connection with the
preparation,  execution  and  delivery  of  this  Agreement  and  the  Ancillary
Agreements,  and in connection  with the  prosecution  or defense of any action,
contest,  dispute,  suit or proceeding  concerning any matter in any way arising
out of, related to or connected with this Agreement or any Ancillary  Agreement.
Borrower  shall  also pay all of  Lender's  out-of-pocket  costs  and  expenses,
including  without  limitation  reasonable  fees and  disbursements  of  counsel
retained  or  employed  by  Lender,  in  connection  with  (a) the  preparation,
execution and delivery of any waiver,  any amendment thereto or consent proposed
or executed in connection with the  transactions  contemplated by this Agreement
or  the  Ancillary  Agreements,   (b)  Lender's  obtaining  performance  of  the
Obligations under this Agreement and any Ancillary  Agreements,  including,  but
not  limited to, the  enforcement  or defense of  Lender's  security  interests,
assignments of rights and liens hereunder as valid perfected security interests,
(c) any  attempt to  inspect,  verify,  protect,  collect,  sell,  liquidate  or
otherwise  dispose of any Collateral,  and (d) any  consultations  in connection
with any of the foregoing.  Borrower shall also pay Lender's then standard price
for  furnishing  Borrower or its designees  copies of any  statements,  records,
files or other data  (collectively,  "Reports")  requested  by  Borrower  or its
designees,  other than  reports of the kind  furnished  to Borrower and Lender's
other borrowers on a regular,  periodic basis in the ordinary course of Lender's
business.  Borrower shall also pay Lender's  customary bank charges,  including,
without  limitation,  all wire transfer  fees  incurred by Lender,  for all bank
services  performed  or  caused  to be  performed  by  Lender  for  Borrower  at
Borrower's  request.  All such  costs and  expenses  together  with all  filing,
recording and search fees,

                                     - 16 -

<PAGE>



taxes and interest  payable by Borrower to Lender shall be payable on demand and
shall be secured by the  Collateral.  If any tax (other  than taxes on  Lender's
general income, or gross receipt taxes) by any governmental  authority is or may
be  imposed on or as a result of any  transaction  between  Borrower  and Lender
which  Lender is or may be  required  to  withhold  or pay,  Borrower  agrees to
indemnify and hold Lender  harmless in respect of such taxes,  and Borrower will
repay to  Lender  the  amount  of any such  taxes  which  shall  be  charged  to
Borrower's  account;  and until  Borrower  shall furnish  Lender with  indemnity
therefor (or supply Lender with evidence  satisfactory  to it that due provision
for the payment  thereof has been made),  Lender may hold  without  interest any
balance  standing to  Borrower's  credit and Lender  shall  retain its  security
interests in any and all Collateral.  Borrower hereby  acknowledges  that Lender
shall not be liable in any manner whatsoever for any selling  expenses,  orders,
purchases  or  contracts  of any kind  resulting  from any  transaction  between
Borrower and any other Person and Borrower  hereby  indemnifies and holds Lender
harmless with respect thereto, which indemnity shall survive termination of this
Agreement.

     15.  Assignment.  Lender may assign any or all of the Obligations  together
with any or all of the security therefor and any transferee shall succeed to all
of Lender's  rights with respect thereto  provided that such transferee  accepts
Lenders  duties  hereunder if Lender in such  assignment  divests itself of such
duties. Upon such transfer, Lender shall be released from all responsibility for
the Collateral to the extent same is assigned to any transferee. Lender may from
time to time sell or otherwise  grant  participations  in any of the Obligations
and the  holder of any such  participation  shall,  subject  to the terms of any
agreement  between  Lender and such holder,  be entitled to the same benefits as
Lender with respect to any security for the  Obligations in which such holder is
a  participant.  Borrower  agrees that each such holder may exercise any and all
rights  of  banker's  lien,   set-off  and  counterclaim  with  respect  to  its
participation  in the  Obligations  as fully as though  Borrower  were  directly
indebted to such holder in the amount of such  participation.  Borrower  may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written  consent of Lender,  and no such assignment or transfer of any
such  obligation  shall  relieve  Borrower  thereof  unless  Lender  shall  have
consented to such release in a writing specifically  referring to the obligation
from which Borrower is to be released.

     16. Waivers.  Borrower waives presentment and protest of any instrument and
notice thereof,  notice of default and all other notices to which Borrower might
otherwise be entitled.

     17. Term of  Agreement.  This  Agreement  shall  continue in full force and
effect  until  the  expiration  of the  Term.  The Term  shall be  automatically
extended for  successive  periods of one (1) year each unless either party shall
have provided the other with a written  notice of  termination,  at least ninety
(90) days prior to the  expiration of the initial Term or any renewal Term.  The
Borrower may  terminate  this  Agreement at any time upon sixty (60) days' prior
written  notice  ("Termination  Date") upon  payment in full of the  Obligations
provided,  that, if such termination  takes place more than 90 days prior to the
end of the initial Term or any renewal Term,  Borrower pays an early termination
fee in an amount equal to the the Required  Percentage of the Maximum  Revolving
Advance Amount. For the purposes hereof,  Required  Percentage shall mean (a) 2%
from the Closing Date to the first  anniversary  thereof,  1-1/2% from the first
anniversary of the Closing Date to the second anniversary  thereof,  and 1% from
the second  anniversary of the Closing Date to the third anniversary  thereof or
during any renewal term thereafter

     18. Events of Default. The occurrence of any of the following shall
constitute an Event of Default:

          (a) failure to make payment of any of the  Obligations  when  required
hereunder;

          (b)  failure  to pay any taxes  when due  unless  such taxes are being
contested  in good faith by  appropriate  proceedings  and with respect to which
adequate  reserves have been  provided on Borrower's  books which failure is not
cured  within 10 days of its  occurrence;

          (c)  failure to perform  under  and/or  committing  any breach of this
Agreement or any Ancillary Agreement or any other agreement between Borrower and
Lender  which if not  described in any other  paragraphs  of this Section 18 and
which if subject to cure is not cured with 10 days of its occurrence;


                                     - 17 -

<PAGE>



          (d)  occurrence of a default which failure is not cured within 10 days
of its  occurrence  under any agreement to which  Borrower is a party with third
parties  which  has  a  material   adverse  affect  upon  Borrower's   business,
operations,  property or condition (financial or otherwise) including all leases
for any premises where Inventory or Equipment is located;

          (e)  any  representation,  warranty  or  statement  made  by  Borrower
hereunder,  in any Ancillary Agreement,  any certificate,  statement or document
delivered  pursuant to the terms hereof,  or in connection with the transactions
contemplated by this Agreement  should at any time be false or misleading in any
material  respect and which if subject to cure,  and as to which  Lender has not
relied to its  detriment,  is not cured with 10 days of the delivery of any such
certificate, statement or document to Lender;

          (f) an attachment or levy is made upon any of Borrower's assets having
an  aggregate  value in excess of $10,000,  or a judgment  is  rendered  against
Borrower  or any of  Borrower's  property  involving  a  liability  of more than
$10,000, which shall not have been vacated, discharged, stayed or bonded pending
appeal within thirty (30) days from the entry thereof;

          (g) any  change in  Borrower's  condition  or  affairs  (financial  or
otherwise)  which in Lender's  opinion  impairs the Collateral or the ability of
Borrower to perform its Obligations;

          (h) any lien created  hereunder or under any  Ancillary  Agreement for
any  reason  ceases to be or is not a valid and  perfected  lien  having a first
priority interest;

          (i) if Borrower shall (i) apply for or consent to the  appointment of,
or the taking of possession by, a receiver,  custodian, trustee or liquidator of
itself  or of all or a  substantial  part of its  property,  (ii) make a general
assignment  for the benefit of creditors,  (iii) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated
a bankrupt or insolvent,  (v) file a petition  seeking to take  advantage of any
other law  providing  for the relief of debtors,  (vi)  acquiesce to, or fail to
have  dismissed,  within thirty (30) days,  any petition filed against it in any
involuntary  case under such  bankruptcy  laws, or (vii) take any action for the
purpose of effecting any of the foregoing;

          (j)  Borrower  shall admit in writing its  inability,  or be generally
unable to pay its debts as they  become due or cease  operations  of its present
business;

          (k) any Affiliate or any  Subsidiary or any Guarantor  shall (i) apply
for or consent to the appointment  of, or the taking  possession by, a receiver,
custodian,  trustee or liquidator  of itself or of all or a substantial  part of
its property,  (ii) admit in writing its inability,  or be generally  unable, to
pay its debts as they become due or cease  operations  of its present  business,
(iii) make a general  assignment  for the benefit of creditors,  (iv) commence a
voluntary  case  under  the  federal  bankruptcy  laws (as now or  hereafter  in
effect),  (v) be  adjudicated  a  bankrupt  or  insolvent,  (vi) file a petition
seeking to take  advantage of any other law providing for the relief of debtors,
(vii)  acquiesce to, or fail to have  dismissed,  within  thirty (30) days,  any
petition filed against it in any involuntary  case under such  bankruptcy  laws,
(viii) take any action for the purpose of effecting any of the foregoing;

          (l)  Borrower  directly  or  indirectly  sells,  assigns,   transfers,
conveys,  or  suffers  or permits  to occur any sale,  assignment,  transfer  or
conveyance  of any  assets  of  Borrower  or any  interest  therein,  except  as
permitted herein;

          (m) Borrower fails to operate in the ordinary course of business which
failure is not cured within 10 days of its occurrence;

          (n) Lender shall in good faith deem itself insecure or unsafe or shall
fear diminution in value, removal or waste of the Collateral;


                                     - 18 -

<PAGE>



          (o) a default by Borrower which failure is not cured within 10 days of
its occurrence in the payment,  when due, of any principal of or interest on any
indebtedness for money borrowed in excess of $100,000.00;

          (p) if any Guarantor  attempts to terminate,  challenges  the validity
of,  or its  liability  under  any  Guaranty  Agreement  or  Guarantor  Security
Agreement;

          (q) should any Guarantor default in its obligations under any Guaranty
Agreement or any  Guarantor  Security  Agreement or if any  proceeding  shall be
brought to challenge the validity,  binding effect of any Guaranty  Agreement or
any  Guarantor   Security   Agreement,   or  should  any  Guarantor  breach  any
representation,  warranty or covenant contained in any Guaranty Agreement or any
Guarantor  Security  Agreement  or should any  Guaranty  Agreement  or Guarantor
Security Agreement cease to be a valid, binding and enforceable  obligation;  or
(r) any Change of Ownership.

     19.  Remedies.  (a) Upon the occurrence of an Event of Default  pursuant to
paragraph 18 (i) herein,  all  Obligations  shall be immediately due and payable
and  this  Agreement  shall  be  deemed  terminated;  upon  the  occurrence  and
continuation of any other of the Events of Default,  Lender shall have the right
to demand  repayment in full of all  Obligations,  whether or not  otherwise due
and/or to terminate this Agreement without advance notice. Until all Obligations
have been fully  satisfied,  Lender shall  retain its  security  interest in all
Collateral.  Lender shall have, in addition to all other rights provided herein,
the rights and remedies of a secured  party under the Uniform  Commercial  Code,
and under other  applicable  law, all other legal and equitable  rights to which
Lender  may be  entitled,  including  without  limitation,  the  right  to  take
immediate  possession  of the  Collateral,  to require  Borrower to assemble the
Collateral, at Borrower's expense, and to make it available to Lender at a place
designated by Lender which is reasonably convenient to both parties and to enter
any of the  premises of Borrower or wherever  the  Collateral  shall be located,
with or without  force or process of law, and to keep and store the same on said
premises until sold (and if said premises be the property of Borrower,  Borrower
agrees not to charge  Lender  for  storage  thereof  for a period up to at least
sixty (60) days after sale or disposition of said Collateral).  Further,  Lender
may,  at any time or times  after  default by  Borrower,  sell and  deliver  all
Collateral held by or for Lender at public or private sale for cash, upon credit
or  otherwise,  at such prices and upon such terms as Lender,  in Lender's  sole
discretion,  deems advisable or Lender may otherwise recover upon the Collateral
in any commercially  reasonable manner as Lender, in its sole discretion,  deems
advisable.  Except  as to that part of the  Collateral  which is  perishable  or
threatens to decline  speedily in nature or is of a type  customarily  sold on a
recognized  market,  the  requirement of reasonable  notice shall be met if such
notice is mailed postage  prepaid to Borrower at Borrower's  address as shown in
Lender's  records,  at least ten (10) days before the time of the event of which
notice is being given. Lender may be the purchaser at any sale, if it is public.
In  connection  with the exercise of the foregoing  remedies,  Lender is granted
permission  to  use  all  of  Borrower's  trademarks,  tradenames,  tradestyles,
patents, patent applications,  licenses, franchises and other proprietary rights
which are used in connection  with (a) Inventory for the purpose of disposing of
such Inventory and (b) Equipment for the purpose of completing  the  manufacture
of  unfinished  goods.  The proceeds of sale shall be applied first to all costs
and expenses of sale,  including  attorneys' fees, and second to the payment (in
whatever order Lender elects) of all Obligations.  Lender will return any excess
to Borrower and Borrower shall remain liable to Lender for any deficiency.

     20. Waiver;  Cumulative Remedies.  Failure by Lender to exercise any right,
remedy or option  under this  Agreement  or any  supplement  hereto or any other
agreement between Borrower and Lender or delay by Lender in exercising the same,
will not operate as a waiver; no waiver by Lender will be effective unless it is
in writing and then only to the extent specifically stated.  Lender's rights and
remedies  under this Agreement will be cumulative and not exclusive of any other
right or remedy which Lender may have.

     21.  Application  of  Payments.  Borrower  irrevocably  waives the right to
direct the  application  of any and all payments at any time or times  hereafter
received by Lender from or on Borrower's behalf and Borrower hereby  irrevocably
agrees  that  Lender  shall  have the  continuing  exclusive  right to apply and
reapply any and all  payments  received at any time or times  hereafter  against
Borrower's Obligations hereunder in such

                                     - 19 -

<PAGE>



manner as Lender may deem advisable notwithstanding any entry by Lender upon any
of Lender's books and records.

     22. Depository Accounts. Any payment received by Borrower on account of any
Collateral  shall be held by  Borrower  in trust for Lender and  Borrower  shall
promptly deliver same in kind to Lender or deposit all such payments into a cash
collateral  account  at such bank as Lender may  designate  for  application  to
payment of the Obligations.  Borrower shall also execute such further  documents
as  Lender  may deem  necessary  to  establish  such an  account  and all  funds
deposited in such account shall immediately be deemed Lender's property.

     23. Lock Box Accounts. Borrower shall, at Lender's request, instruct all of
its  Customers  to make such  payments on account of  Receivables  to an account
under  Lender's  dominion  and  control  at such bank as Lender  may  designate.
Borrower shall also execute such further  documents as Lender may deem necessary
to  establish  such an account and all funds  deposited  in such  account  shall
immediately be deemed Lender's property.

     24.  Revival.  Borrower  further agrees that to the extent Borrower makes a
payment or payments to Lender, which payment or payments or any part thereof are
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy  act, state or federal law, common law or equitable  cause,  then, to
the extent of such payment or repayment, the obligation or part thereof intended
to be  satisfied  shall be revived and  continued in full force and effect as if
said payment had not been made.

     25.  Notices.  Any notice or request  hereunder may be given to Borrower or
Lender at the  respective  addresses  set  forth  below or as may  hereafter  be
specified in a notice  designated as a change of address  under this  paragraph.
Any notice or request  hereunder shall be given by registered or certified mail,
return  receipt  requested,  or by overnight  mail or by telecopy  (confirmed by
mail).  Notices and requests shall be, in the case of those by mail or overnight
mail, deemed to have been given when deposited in the mail or with the overnight
mail carrier, and, in the case of a telecopy, when confirmed.


          Notices shall be provided as follows:

If to the Lender:    BNY Financial Corporation
                     1290 Avenue of the Americas
                     New York, New York 10104
                     Attention: Frank Imperato, V.P.
                     Telephone: (212) 408-7026
                     Telecopy:  (212) 408-7162

If to the Borrower:
                     Target Logistic Services, Inc.
                     c/o Target Logistics, Inc.
                     112 East 25th Street
                     Baltimore, MD  21218

                     Attention: Stuart Hettleman
                     Telephone: 410-338-0127
                     Telecopy:  410-330-1105

With a copy to: Hillel Tendler, Esq.

                     Gordon, Feinblatt, Rothman, Hoffberger &
                     Hollander, LLC

                                     - 20 -

<PAGE>



                     233 E. Redwood Street
                     Baltimore, MD  21202
                     Telephone:  410-576-4071
                     Telecopy:   410-576-4246

     26.  Governing  Law and  Waiver  of Jury  Trial.  THIS  AGREEMENT  SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE  WITH THE LAWS OF THE STATE
OF NEW YORK.  LENDER SHALL HAVE THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER
APPLICABLE LAW INCLUDING, BUT NOT LIMITED TO, THE UNIFORM COMMERCIAL CODE OF NEW
YORK.  BORROWER  AGREES THAT ALL ACTIONS AND  PROCEEDINGS  RELATING  DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR ANY OTHER OBLIGATIONS
SHALL BE LITIGATED IN THE FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW
YORK OR, AT LENDER'S  OPTION,  IN ANY OTHER COURTS  LOCATED IN NEW YORK STATE OR
ELSEWHERE  AS LENDER MAY SELECT AND THAT SUCH COURTS ARE  CONVENIENT  FORUMS AND
BORROWER  SUBMITS TO THE PERSONAL  JURISDICTION OF SUCH COURTS.  BORROWER WAIVES
PERSONAL  SERVICE OF PROCESS AND CONSENTS  THAT SERVICE OF PROCESS UPON BORROWER
MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,  DIRECTED
TO BORROWER AT BORROWER'S ADDRESS APPEARING ON LENDER'S RECORDS,  AND SERVICE SO
MADE  SHALL BE DEEMED  COMPLETED  TWO (2) DAYS AFTER THE SAME SHALL HAVE BEEN SO
MAILED.  BOTH PARTIES HERETO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING  BETWEEN  BORROWER AND LENDER AND BORROWER WAIVES THE RIGHT TO ASSERT
IN ANY ACTION OR PROCEEDING  INSTITUTED BY LENDER WITH REGARD TO THIS  AGREEMENT
OR ANY OF THE OBLIGATIONS ANY OFFSETS OR COUNTERCLAIMS WHICH IT MAY HAVE.

     27. Limitation of Liability.  Borrower acknowledges and understands that in
order to assure repayment of the Obligations hereunder Lender may be required to
exercise any and all of Lender's  rights and remedies  hereunder and agrees that
neither  Lender  nor any of  Lender's  agents  shall be liable for acts taken or
omissions made in connection herewith or therewith except for actual bad faith.

     28. Entire  Understanding.  This  Agreement  and the  Ancillary  Agreements
contain the entire  understanding  between Borrower and Lender and any promises,
representations,  warranties or guarantees  not herein  contained  shall have no
force and  effect  unless in  writing,  signed by the  Borrower's  and  Lender's
respective officers.  Neither this Agreement, the Ancillary Agreements,  nor any
portion  or  provisions  thereof  may be  changed,  modified,  amended,  waived,
supplemented,  discharged,  cancelled or  terminated  orally or by any course of
dealing,  or in any manner other than by an agreement in writing,  signed by the
party to be charged.

     29. Modification.  This Agreement and the Ancillary  Agreements  constitute
the complete  agreement  between the parties with respect to the subject  matter
hereof and  thereof  and may not be  modified,  altered or amended  except by an
agreement in writing signed by the parties hereto and thereto.

     30. Severability. Wherever possible each provision of this Agreement or the
Ancillary  Agreements shall be interpreted in such manner as to be effective and
valid under  applicable  law,  but if any  provision  of this  Agreement  or the
Ancillary Agreements shall be prohibited by or invalid under applicable law such
provision shall be ineffective to the extent of such  prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
thereof.

     31. Captions.  All captions are and shall be without substantive meaning or
content of any kind whatsoever.

     32.   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of which taken  together  shall  constitute one and the same
instrument.


                                     - 21 -

<PAGE>



     33.  Construction.  The parties acknowledge that each party and its counsel
have reviewed this  Agreement  and that the normal rule of  construction  to the
effect that any ambiguities are to be resolved  against the drafting party shall
not be employed  in the  interpretation  of this  Agreement  or any  amendments,
schedules or exhibits thereto.

     IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.


                                         TARGET LOGISTIC SERVICES, INC.
ATTEST:                                  f/k/a TARGET AIR FREIGHT, INC.


            /s/                          By:                  /s/
----------------------------             ---------------------------------------
Secretary                                Title: Executive Vice President


                                         BNY FINANCIAL CORPORATION


                                         By:                  /s/
                                         ---------------------------------------
                                         Title: Senior Vice President

                                     - 22 -

<PAGE>



                                    SCHEDULES


Schedule 1(A) - Permitted Liens











Schedule 12(j) - Licenses, Patents, Trademarks and Copyrights











Schedule 12(l) - Inventory Locations











Schedule 12(m) - Permitted Indebtedness

                                     - 23 -

<PAGE>


                                   EXHIBIT 23



                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation of our
report  included  in  this  Form  10-K,  into  the  Company's  previously  filed
Registration Statements on Form S-3, File No. 333-30351 and File No. 333-03613.


                                                             ARTHUR ANDERSEN LLP



New York, New York
September 24, 1999