U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-QSB
(Mark One)
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1999
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______ .
Commission File No. 0-27780
UNITED SHIPPING & TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0355929
- ---------------------------- ---------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
9850 51st Avenue North, Suite 110, Minneapolis, MN 55442
--------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (612) 941-4080
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 ( )
As of November 1, 1999, there were 13,168,440 shares of common stock of the
registrant issued and outstanding.
Transitional Small Business Disclosure.
YES ( ) NO (X)
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UNITED SHIPPING & TECHNOLOGY, INC.
FORM 10-QSB
FOR THE QUARTER ENDED OCTOBER 2, 1999
INDEX
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Page
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PART I. FINANCIAL INFORMATION.................................................3
ITEM 1.
Condensed Consolidated Financial Statements (UNAUDITED) .....3
a) Condensed Consolidated Balance Sheets -
October 2, 1999 and June 30, 1998............................3
b) Condensed Consolidated Statements of
Operations - Quarters ended
October 2, 1999 and September 30, 1998.......................4
c) Condensed Consolidated Statements of
Cash Flows - Quarters ended
October 2, 1999 and September 30, 1998.......................5
d) Notes to Condensed Consolidated Financial
Statements...................................................6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................9
PART II. OTHER INFORMATION....................................................14
ITEM 1. Legal Proceedings...........................................14
ITEM 2. Changes in Securities and Use of Proceeds...................16
ITEM 3. Defaults upon Senior Securities.............................18
ITEM 4. Submission of Matters to a Vote of Securities Holders.......18
ITEM 5. Other Information...........................................18
ITEM 6. Exhibits ...................................................18
SIGNATURES..................................................20
EXHIBIT INDEX.................................................................21
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
October 2, 1999 June 30, 1999
--------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash ................................................. 4,084 252
Accounts receivable, net of an allowance for ......... 66,642 275
doubtful accounts ................................ -- --
Other current assets ................................. 5,251 1,449
-------- -------
Total current assets .................... 75,977 1,976
Property and equipment:
Land ................................................. 779 --
Building and leasehold improvements .................. 4,054 --
Furniture, equipment and vehicles .................... 15,036 1,811
-------- -------
19,869 1,811
Less: accumulated depreciation ...................... (1,479) (953)
-------- -------
18,390 858
Goodwill ........................................................... 35,487 1,426
Other assets ....................................................... 2,834 128
-------- -------
Total assets ............................. 132,688 4,388
======== =======
Current liabilities:
Trade accounts payables .............................. 21,229 557
Accrued auto and workers' compensation claims ........ 23,011 --
Other accrued liabilities ............................ 24,257 228
Current portion of long-term debt and capital leases . 9,802 40
-------- -------
Total current liabilities ................ 78,299 825
Long-term debt and capital leases .................................. 49,287 617
-------- -------
Total liabilities ........................ 127,586 1,442
Shareholder's equity:
Common stock, $.004 par value, 11,451,892 shares
issued and outstanding ........................... 46 42
Additional paid-in capital ........................... 19,324 15,571
Retained earnings .................................... (14,282) (12,667)
Other comprehensive income ........................... 14 --
-------- -------
Total shareholder's equity ............... 5,102 2,946
-------- -------
Total liabilities and shareholder's equity 132,688 4,388
======== =======
</TABLE>
The accompanying notes are an integral part of the condensed and consolidated
financial statements.
3
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U-SHIP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(UNAUDITED)
(Dollar amounts in thousands, except per share amounts)
Quarter Ended Quarter Ended
October 2, September 30,
1999 1998
------------- -------------
Revenue .................................... $ 53,724 $ 124
Cost of Service ............................ 42,439 127
------------ -----------
Gross Profit (loss) ..................... 11,285 (3)
Selling, general and administrative expenses 12,764 623
------------ -----------
Loss from operations ....................... (1,479) (626)
Interest expense ........................... 188 3
Interest income ............................ (51) (24)
------------ -----------
Net loss ................................... $ (1,616) $ (605)
============ ===========
Basic & diluted
net loss per share ....................... $ (0.15) $ (0.12)
------------ -----------
Basic & diluted weighted
average number of common
shares outstanding ....................... 11,027,010 4,979,709
============ ===========
The accompanying notes are an integral part of the condensed and consolidated
financial statements.
4
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UNITED SHIPPING & TECHNOLOGY, INC.
Condensed and Consolidated Statements of Cash Flows
(UNAUDITED)
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
October 2, September 30,
1999 1998
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss .............................................. $ (1,615) $(605)
Adjustments to reconcile net loss to net cash flows
used for operating activities-
Depreciation and amortization ................. 737 121
(Gain)/Loss on retirement of equipment ........ (118) --
Change in operating assets and liabilities:
Accounts receivable ........................... (4,591) 4
Other current assets .......................... 1,299 (7)
Other assets .................................. (304) --
Accounts payable .............................. 3,111 98
Accrued liabilities and deferred revenue ...... 1,193 (82)
-------- -----
Cash used by operating activities .......... (288) (471)
-------- -----
INVESTING ACTIVITIES
Proceeds from sale of equipment ....................... 172 --
Purchases of property and equipment ................... (373) (16)
Acquisition of business, net of cash received ......... (55,065) --
Redemption of short-term investments .................. -- 400
-------- -----
Cash provided by investing activities ...... (55,266) 384
-------- -----
FINANCING ACTIVITIES
Payments on notes payable and long-term debt .......... (13,671) (33)
Proceeds from notes payable and long-term debt ........ 71,610 --
Proceeds from sale of common stock .................... 1,433 --
-------- -----
Cash provided (used) by financing activities 59,372 (33)
-------- -----
Effect of currency exchange rat changes on cash ............ 14 --
-------- -----
Net increase (decrease) in cash and cash equivalents ....... 3,832 (120)
Cash and cash equivalents, beginning of period ............. 252 154
-------- -----
Cash and cash equivalents, end of period ................... $ 4,084 $ 34
======== =====
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest ................................ $ 84 $ 3
======== =====
</TABLE>
The accompanying notes are an integral part of the condensed and consolidated
financial statements.
5
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UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The condensed consolidated financial statements included herein have been
prepared by United Shipping & Technology, Inc. which, together with its
wholly-owned subsidiaries, shall be referred to herein as the "Company," without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of the Company, all adjustments consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of October 2, 1999, and the results of its operations for the
quarters ended October 2, 1999 and September 30, 1998, and its cash flows for
the quarters ended October 2, 1999 and September 30, 1998 have been included.
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the financial statements for the year ended June 30, 1999,
and the footnotes thereto, included in the Company's Report on Form 10-KSB,
filed with the Securities and Exchange Commission.
1. Basis of Presentation:
Principles of consolidation - The consolidated financial statements include the
accounts of United Shipping & Technology, Inc. and its wholly owned
subsidiaries. All inter-Company balances and transactions have been eliminated
in the consolidation.
Change in Fiscal Year - On November 10, 1999, the Company approved a change in
its fiscal year from a June 30th year end to a 52-53 week fiscal year ending on
the Saturday closest to June 30th, beginning in fiscal year 2000. Each quarter
will consist of a 13-week period ending on a Saturday. In fiscal years
consisting of 53 weeks, the final quarter will consist of 14 weeks. For fiscal
2000, the quarter end dates are October 2, 1999, January 1, 2000, April 1, 2000
and July 1, 2000.
2. Revenue Recognition:
The Company has historically generated revenue from: Same-day delivery
operations conducted through the Company's Advanced Courier Services, Inc.
subsidiary, and to a lesser extent, the per-package shipping revenue generated
from ongoing shipping volume at its intelligent shipping kiosks (ISKs), and the
sale of ISKs and custom built intelligent kiosks. Revenues for the quarter ended
October 2, 1999 also include for the first time, revenues from the Company's
newly-acquired same-day delivery business subsidiary, UST Delivery Services,
Inc. ("Delivery Services").
Revenue from the same-day delivery services is recognized when services are
rendered to customers. Package shipping revenue is recognized when the package
is shipped.
3. Basic and Diluted Net Loss Per Share:
In the second quarter of fiscal 1998, the Company adopted SFAS No. 128,
"Earnings per Share" which is effective for interim periods ending after
December 15, 1997. As a result, all prior period earnings per share data has
been restated. The adoption of SFAS No. 128 did not have a significant impact on
previously reported earnings per share. Basic earnings per common share was
computed by dividing net income by the weighted average number of shares of
common stock outstanding during the period. Dilutive earnings per common share
were computed similar to the computation of basic earnings per share, as the
inclusion of options and warrants would be antidilutive. Total options and
warrants outstanding for the quarters ended October 2, 1999 and September 30,
1998 were 6,011,285 and 4,418,576, respectively.
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4. Comprehensive Income:
As of July 1, 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, REPORTING COMPREHENSIVE INCOME. Statement 130 established new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's net loss
or stockholders' equity. Statement 130 requires the foreign currency translation
adjustments to be included in other comprehensive income.
5. Use of Estimates:
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.
6. Acquisitions:
On September 24, 1999 (with an effective date of August 28, 1999), the Company
acquired from CEX Holdings, Inc. ("CEX") all the outstanding shares of common
stock of Corporate Express Delivery Systems, Inc. ("CEDS"), a provider of same
day delivery solutions. The purchase price was approximately $62,500, subject to
adjustment as defined in the merger agreement. The adjustment is expected to be
finalized in the second quarter. The purchase price consisted of $43,000 in cash
provided by institutional debt financing from General Electric Capital
Corporation ("GE") and Bayview Capital Partners, LP ("Bayview"), and the
remainder in a combination of short and long-term notes issued to CEX (see Debt
Footnote). The acquisition has been accounted for under the purchase method of
accounting. The excess purchase price over the estimated fair value of the net
tangible assets acquired has been allocated to goodwill and is being amortized
on a straight-line basis over 20 years.
The purchase price allocation is preliminary, as the Company has not had a
sufficient amount of time to adequately value the assets and liabilities
acquired or evaluate the effects of restructuring activities and deferred taxes.
The Company expects to make adjustments to the allocation of the purchase price
during the second quarter.
The following unaudited pro forma financial information for the first fiscal
quarter gives effect to the CEDS acquisition as if it had occurred at the
beginning of fiscal years 2000 and 1999. The pro forma results were prepared for
comparative purposes only and are not indicative of the results of operations
which actually would result had the acquisition occurred on the date indicated,
or which may result in the future.
2000 1999
Revenues $ 140,319 $ 160,843
Operating income (loss) (8,078) (261)
Net loss (9,225) (1,243)
Net loss per common share (0.84) (0.25)
Weighted average common shares
outstanding 11,027,010 4,979,709
7. Long-term Debt:
Long-term debt consists of the following:
GE Revolving Note $ 35,419
Bayview Senior Subordinated Note and Warrant 3,292
Long-term Subordinated Note to CEX 6,519
Short-term Subordinated Note to CEX 7,500
Convertible Subordinated Note to CEX 3,600
6% Convertible Subordinated Note 2,190
7
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Various Other Notes 569
------
59,089
Less current maturities 9,802
------
Total 49,287
======
Borrowings under the GE Revolving Note are limited to the lesser of $55,000 or
an amount based on a defined portion of receivables less the amount outstanding
on the $5,000 Swing Line Note issued to GE. Interest is payable monthly at rate
of Prime plus 0.6% (8.85% at October 2, 1999). The Company may elect the rate of
LIBOR plus 3% at its discretion from time to time. All amounts advanced are due
September 23, 2004. In addition, the Company is required to pay a commitment fee
of .375% on unused amounts of the total commitment, as defined in the agreement.
The Bayview Senior Subordinated Note has interest payable quarterly at 12% and
is due September 30, 2004. The note is subordinate to the GE Revolving Note. The
initial carrying value of the Senior Subordinated Note was reduced by $1,708 for
the estimated fair value of the common stock warrant issued to Bayview, recorded
as Additional Paid in Capital on the financial statements. The unamortized
discount aggregated $1,680 at October 2, 1999. The discount is amortized over
the life of the note. The warrant has an exercise price of $3.3125 per share and
entitles Bayview to acquire, in whole or in part, 1,366,200 shares of the
Company's common stock, subject to adjustment for certain anti-dilution rights
as defined in the warrant purchase agreement. The Company is required to redeem
the warrants or repurchase the stock issued upon exercise at the request of the
holder or upon the happening of certain events, such as default, the sale of 50%
of the Company's stock or assets, or after the fifth anniversary of the date of
the warrant. The purchase price for the common stock upon exercise of the
warrant is at the market value (as defined in the warrant purchase agreement) of
the Company's common stock. The future carrying value of the warrant will be
adjusted periodically to its then estimated redemption value. No adjustment was
required for the period ended October 2, 1999.
The Long-term Subordinated Note issued to CEX has interest payable quarterly at
12% and is due September 24, 2004. The note is subordinate to the GE Revolving
Note and the Bayview Senior Subordinated Note.
The Short-term Subordinated Note issued to CEX has interest payable quarterly at
9% and is due September 24, 2000 and requires a mandatory prepayment upon the
exercise of the Company's warrants issued in connection with the purchase of its
Series A Preferred Stock in April and June of 1998. The note is subordinate to
the GE Revolving Note and the Bayview Senior Subordinated Note.
The Convertible Subordinated Note issued to CEX has interest payable quarterly
at 6% and is due September 24, 2004. The note is subordinate to the Revolving
Note and the Senior Subordinated note. The note is convertible in whole or in
part into shares of the Company's common stock at an exchange rate of $4.59 per
share to a maximum of 784,314 shares, subject to certain anti-dilution rights
under an exchange agreement entered into in connection with the Convertible
Subordinated Note.
Substantially all of the assets and operations of the Company's Delivery Systems
subsidiary have been pledged to secure borrowing under the GE Revolving Note,
the Bayview Senior Subordinated Note and the CEX subordinated notes. The Company
is subject to certain restrictive covenants, the more significant of which
include limitations on dividends, loans and investments, capital expenditures,
new indebtedness and changes in capital structure. The Company is also required
to maintain certain financial covenants related to minimum EBITDA and minimum
fixed charge coverage ratio. The agreements with the lenders also require the
Company to obtain the consent of the lenders for additional acquisitions.
As a result of the acquisition of CEDS, the Company is also liable on a 6%
Convertible Subordinated Note. This Note is due January 31, 2000. Interest is
payable quarterly. After December 7, 1996, the note can be converted in whole or
in part into 283,800 shares of CEX common stock at the option of the holder. If
converted, the Company will pay CEX for the principal and interest due on the
note.
8
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8. Commitments and Contingencies:
The Company leases equipment, vehicles and buildings under various
non-cancelable operating and capital lease agreements with terms generally
ranging from three to ten years. Future minimum lease commitments under
non-cancelable leases at October 2, 1999 range from $50,000 to $60,000. As a
result of the acquisition, the Company has not completed the valuation of these
commitments.
The Company is self-insured for automobile and workers' compensation claims.
However, the Company has elected to retain a portion of expected losses through
the use of deductibles. Provisions for losses expected under these programs are
recorded based upon the Company's estimates of the aggregate liability for
claims incurred. These estimates include the Company's actual experience based
on information received from the Company's insurance carriers and historical
assumptions of development of unpaid liabilities over time.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
IN ACCORDANCE WITH THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, THE COMPANY NOTES THAT CERTAIN
STATEMENTS IN THIS FORM 10-QSB AND ELSEWHERE WHICH ARE FORWARD-LOOKING AND WHICH
PROVIDE OTHER THAN HISTORICAL INFORMATION, INVOLVE RISKS AND UNCERTAINTIES THAT
MAY IMPACT THE COMPANY'S RESULTS OF OPERATIONS. THESE FORWARD-LOOKING STATEMENTS
INCLUDE, AMONG OTHERS, STATEMENTS CONCERNING THE COMPANY'S GENERAL BUSINESS
STRATEGIES, FINANCING DECISIONS, AND EXPECTATIONS FOR FUNDING CAPITAL
EXPENDITURES AND OPERATIONS IN THE FUTURE. WHEN USED HEREIN, THE WORDS
"BELIEVE," "PLAN," "CONTINUE," "HOPE," "ESTIMATE," "PROJECT," "INTEND,"
"EXPECT," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THE EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, NO STATEMENTS
CONTAINED IN THIS FORM 10-QSB SHOULD BE RELIED UPON AS PREDICTIONS OF FUTURE
EVENTS. SUCH STATEMENTS ARE NECESSARILY DEPENDENT ON ASSUMPTIONS, DATA OR
METHODS THAT MAY BE INCORRECT OR IMPRECISE AND MAY BE INCAPABLE OF BEING
REALIZED. THE RISKS AND UNCERTAINTIES INHERENT IN THESE FORWARD-LOOKING
STATEMENTS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED
IN OR IMPLIED BY THESE STATEMENTS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE INFORMATION CONTAINED IN THIS FORM 10-QSB IS BELIEVED BY THE COMPANY
TO BE ACCURATE AS OF THE DATE HEREOF. CHANGES MAY OCCUR AFTER THAT DATE, AND THE
COMPANY WILL NOT UPDATE THAT INFORMATION EXCEPT AS REQUIRED BY LAW IN THE NORMAL
COURSE OF ITS PUBLIC DISCLOSURE PRACTICES.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THE EXPECTATIONS REFLECTED IN ANY FORWARD-LOOKING STATEMENT HEREIN
INCLUDED, AMONG OTHER THINGS (1) THE ABILITY OF THE COMPANY TO SUCCESSFULLY AND
PROFITABLY OPERATE ITS RECENTLY-ACQUIRED SAME-DAY DELIVERY BUSINESS, CORPORATE
EXPRESS DELIVERY SYSTEMS, INC. ("CEDS"), AND TO INTEGRATE ITS OPERATIONS WITH
THE COMPANY'S EXISTING OPERATIONS; (2) THE ABILITY OF THE
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COMPANY TO MEET DEBT SERVICE OBLIGATIONS AND COMPLY WITH DEBT COVENANTS WITH
RESPECT TO THE DEBT INCURRED IN CONNECTION WITH THE FINANCING FOR THE
ACQUISITION OF CEDS; (3) THE ABILITY OF THE COMPANY TO DEVELOP AN E-COMMERCE
FULFILLMENT BUSINESS AND INTEGRATE THIS WITH ITS SAME-DAY DELIVERY OPERATIONS;
(4) THE ABILITY OF THE COMPANY TO MANAGE UNCERTAINTIES SURROUNDING TECHNOLOGICAL
CHANGES IN THE SAME-DAY DELIVERY AND TRANSPORTATION INDUSTRIES, AND THE
COMPANY'S DEPENDENCE UPON COMPUTER AND COMMUNICATIONS SYSTEMS AND THIRD PARTIES
WHO MANUFACTURE, MAINTAIN AND MARKET THE SAME; (5) THE ABILITY OF THE COMPANY TO
DEVELOP AND IMPLEMENT A NATIONAL BRAND IDENTITY STRATEGY FOR ITS PRODUCTS AND
SERVICES; (6) THE ABILITY OF THE COMPANY TO ACCESS PUBLIC AND PRIVATE EQUITY
MARKETS; AND (7) THE ABILITY OF THE COMPANY TO STEM OPERATING LOSSES AND
POSITION THE COMPANY TO ACHIEVE POSITIVE CASH FLOW.
GENERAL
Beginning in 1991, the primary business of the Company was the
development, manufacturing, marketing and operation of self-service, automated
shipping systems for use by consumers and small businesses who ship packages and
priority letters through major carriers in the air express and package delivery
market. The Company's intelligent shipping kiosks ("ISKs") were designed to be
installed at the shipping hubs of major package carriers such as United Parcel
Service, and to be placed in office services and copy centers, such as Kinko's
Copy Centers, and in other retail locations such as grocery and general
merchandise stores. The Company holds nine patents related to hardware and
software utilized in its ISKs. Each ISK location is centrally controlled and
serviced through an electronic connection to the Company's computer network
system.
In late 1997, the Company began an extensive evaluation of its
strategies and results from its placement sites. Ultimately, in 1998, the
Company's new management concluded that its historical ISK placement strategy
was not generating the business volume the Company required. In the course of
reviewing alternative directions for its business, the Company's management
determined that the same-day delivery, or "courier" business presented an
opportunity for the Company to employ its advanced technology in a large but
fragmented market and obtain an independent revenue stream in a growing
industry. Based on this determination, the Company adopted a revised business
strategy with the goal of becoming the national leader in same-day delivery and
related services through a series of acquisitions of courier businesses. The
Company's plan was to utilize its kiosks and other technology both for
self-service shipping and hub-automation purposes and in conjunction with a
planned consolidation within the same-day delivery market. The Company believes
that the rapid growth in Internet-based business, or "e-commerce," has also
presented an opportunity to leverage the Company's same-day delivery business
acquisition strategy by offering an array of integrated distribution, product
fulfillment and logistics services to corporate clients and companies engaged in
e-commerce.
The Company began its courier acquisition strategy in late 1998,
through the acquisition of JEL Trucking, Inc., which enabled it to offer
same-day delivery and package delivery services in the Minneapolis/St. Paul
metropolitan area. In January 1999, the Company acquired Twin City
Transportation, Inc., expanding its same-day delivery service in the
Minneapolis/St. Paul metropolitan area.
On September 24, 1999 (with an effective date of August 28, 1999), the
Company acquired CEDS from CEX Holdings, Inc. ("CEX") pursuant to a merger of
CEDS with the Company's wholly-owned subsidiary, United Shipping & Technology
Acquisition Corp. The purchase price was approximately $62,500, consisting of
$43,000 in cash provided by institutional debt financing, and the remainder in a
combination of short and long-term notes issued to CEX. CEDS was the surviving
corporation in the merger, and changed its name to UST Delivery Systems, Inc.
("Delivery Systems"). Delivery Systems is incorporated in Delaware.
With the acquisition of CEDS, the Company believes that it has become a
leading supplier of customized delivery solutions for same-day, time-critical
shipping and distribution in the United States. The Company provides an array of
same-day ground and air delivery services, including scheduled delivery,
on-demand delivery, distribution services and air courier services, from a
network of approximately 200 locations spread among 83 of the top 100
metropolitan areas in the United States. The Company's operations are supported
by a fleet of approximately 9,800 vehicles, including 4,700 Company-leased and
owned vehicles and 5,100 vehicles utilized by
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independent contractors. The Company has approximately 15,000 employees and
independent contractors. The Company's Delivery Systems subsidiary has offices
in Australia, Canada, France, Hong Kong and the United Kingdom, to facilitate
its same-day international air delivery business. Although the acquisition of
CEDS has resulted in the Company becoming one of the largest same-day delivery
services in the United States, the same-day delivery market remains highly
fragmented and is dominated by the over 6,000 independently-owned couriers
operating in local markets nationwide.
The purchase of CEDS is a major step toward the fulfillment of the
Company's goal of becoming one of the premier same-day express delivery and
e-commerce fulfillment services in the United States. While there can be no
assurance that the Company can successfully integrate its technology into its
same-day delivery operations or that the Company's same-day delivery or other
operations will be profitable, the Company believes that its acquisition of CEDS
gives it the revenue, customer base and market penetration needed to pursue its
vision of becoming the branded leader in same-day delivery solutions.
The Company derives revenues primarily from its same-day ground and air
delivery operations, and to a lesser extent, from package shipping transactions
and selling shipping kiosks and customized interactive kiosks. The Company's
revenues for the fiscal year ended June 30, 1999 were approximately $1,500. For
the fiscal year ended January 30, 1999, CEDS' revenue from operations was
approximately $648,300. As a result of the CEDS acquisition, one month of CEDS'
operations is included in the October 2, 1999 results. The impact of this on the
Management's Discussion and Analysis of the first quarter results has been
identified separately.
RESULTS OF OPERATIONS
Revenue for the quarter ended October 2, 1999 increased $53,600 to
$53,724 from $124 for the quarter ended September 30, 1998. Revenues for the
Company increased $391 due to acquisitions by its Advanced Courier Systems, Inc.
("ACS") subsidiary. The remaining increase of $53,209 is the result of the
acquisition of CEDS.
Cost of service expense increased $42,312 to $42,439 from $127 for the
quarter ended September 30, 1998. Cost of service expense for the Company
increased $261 due to acquisitions made by ACS. The remaining increase of
$42,051 is due to the CEDS acquisition.
Selling, general and administrative expenses for the quarter ended
October 2, 1999, increased $12,141 to $12,764 from $623 for the quarter ended
September 30, 1998. Selling, general and administrative expenses for the Company
contributed $178 to the increase. The remaining increase of $11,963 is the
result of the acquisition of CEDS.
Interest income increased to $51 for the quarter ended October 2, 1999
compared to $24 for the quarter ended September 30, 1998. The increase primarily
results from the investment of cash surpluses generated from the Company's
issuance of debt associated with the CEDS acquisition. Interest expense
increased from $3 for the quarter ended September 30, 1998, to $188 for the
quarter ended October 2, 1999. The increase is primarily due to the increase in
debt associated with the CEDS acquisition.
Net loss for the quarter ended October 2, 1999, increased $1,011 to
$1,616 from $605 for the quarter ended September 30, 1998. The Company expects
to incur additional losses while it integrates the acquisition of CEDS into its
current business strategy.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has operated at a loss and has funded its
operations from the proceeds of public and private equity offerings. Throughout
fiscal 1999 and continuing through the first quarter of fiscal 2000, the Company
has financed the implementation of its revised business strategy through various
private placements of debt and equity, including but not limited to sales of
common stock, sales of preferred stock (subsequently converted into common
stock), issuances of debt (some of which was subsequently converted into common
stock), warrant exercises and the sale of warrants. From April 1998 through
August 12, 1999, the Company raised over $4,400 in connection with these
transactions, and issued an aggregate of 5,103,498 shares of common stock
11
<PAGE>
(taking into account conversions of preferred stock and debt) at prices ranging
from $0.60 to $3.125 per share, and warrants to purchase an aggregate of
2,591,750 shares of common stock at exercise prices ranging from $1.75 to $3.75
per share for periods ranging from one to five years.
The Company continues its efforts to reduce debt and raise additional
cash for acquisitions and working capital needs. In September 1999, four
investors converted their 1998 Notes in the aggregate principal amount of $600
plus accrued interest to 135,044 shares of the Company's common stock at a
purchase price of $4.57 per share, and one-year warrants to purchase an
aggregate of 33,758 shares of the Company's common stock at an exercise price of
$4.57 per share. Also in September 1999, in connection with the CEDS purchase,
the Company called the warrants issued in connection with its sale in April and
June of 1998 of its Series A Preferred stock, and raised an additional $3,461.
The proceeds from these warrant exercises were received after October 2, 1999,
and therefore were not reflected in the accompanying financial statements. In
October 1999, the Company sold to five accredited investors 124,000 shares of
common stock at a purchase price of $4.50 per share, together with warrants to
purchase an aggregate of 12,400 shares of common stock at an exercise price of
$4.50 per share for a period of one year.
The Company financed its acquisition of CEDS through a combination of
institutional debt financing the notes to CEX. The Company entered into a
Revolving Note agreement which allows the Company to borrow from GE, in the
aggregate under the Revolving Note, $55,000. The note agreement required, among
other things, that there be unused availability of at least $14,000 at the time
of acquisition. As of October 2, 1999, the loan had an outstanding balance of
$35,419, and the unused portion was $19,581. The proceeds from this loan were
used to fund a portion of the acquisition purchase price and are being used to
fund the Company's present and future working capital needs. The Company
anticipates that this loan will be sufficient to fund its working capital needs
for the foreseeable future.
In fiscal 2000 and beyond, the Company plans to focus on the various
aspects of its acquisition strategy, making acquisitions in the same-day
delivery market and supporting technology, and the acquisition or building of a
nationally recognized brand name to be used in conjunction with such services.
The Company believes that these efforts will require the Company to expend
significant capital. While the Company will seek to acquire companies that have
profits or positive cash flow, or that have the potential to generate positive
cash flow in the future, it is likely that any positive cashflow that would
otherwise result will be utilized in connection with the Company's ongoing
consolidation strategy. The Company believes that these revised strategies,
while initially requiring additional cash outlays, will result in greater
revenues from same-day delivery operations, and sales and licensure of ISK
technology, although no assurance can be given that such revenues will increase
appreciably as a result of these initiatives in the near future, if at all.
There can be no assurance that the Company will be able to generate
sufficient revenues to meet its operating cash and growth needs or that any
additional equity or debt funding will be available or at terms acceptable to
the Company in the future to continue operating in its current form. The
Company's loss for the fiscal year ended June 30, 1999 was $2,894. The Company's
loss for the quarter ended October 2, 1999 was $1,616. The Company expects to
incur losses for the foreseeable future due to the ongoing activities of the
Company, and in pursuing other aspects of its revised business strategy. The
Company will continue to require substantial additional debt or equity funding
to continue to implement its revised business strategy, which may include
additional future acquisitions. The Company's cash needs and usage may vary
based on the outcome of these initiatives. At the present time, the Company has
no commitments from any person to provide additional financing to the Company.
There can be no assurance that the necessary financing will be available to the
Company or, if available, that the same will be on terms satisfactory or
favorable to it. While the Company is not now in a position to determine the
price at which its securities may be issued in any subsequent equity or debt
financing, it is likely that additional equity or debt financing will be highly
dilutive to existing shareholders.
THE COMPANY'S YEAR 2000 READINESS
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
12
<PAGE>
from 20th century dates. As a result, in less than a year, computer systems and
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements.
The Company is presently in the final stages of its efforts to achieve
compliance with Year 2000 requirements for its operations, focusing on critical
operating and applications systems, particularly the Year 2000 compliance of:
(i) voice and data communications systems; (ii) servers, personal computers and
other hardware and software; (iii) infrastructure and facilities; (iv) vendors
and suppliers; (v) the key software/hardware components vendors; and (vi) the
Company's operational systems, including financial accounting systems. The
Company believes that the following areas have been addressed:
<TABLE>
- ----------------------- -----------------------------------------------------------------------------------------------
<S> <C>
VOICE COMMUNICATIONS All non-compliant voice communications components have been upgraded or replaced.
- ----------------------- -----------------------------------------------------------------------------------------------
DATA COMMUNICATIONS All non-compliant data communications components have been upgraded or replaced.
- ----------------------- -----------------------------------------------------------------------------------------------
SERVERS Several operational system servers and file and print servers have been identified as
non-compliant and are in the final stages of being upgraded, replaced, or phased out of
service.
- ----------------------- -----------------------------------------------------------------------------------------------
OPERATIONAL Some operational systems have been identified as non-compliant and are in the final stages
SYSTEMS of being upgraded, replaced, or phased out of service.
- ----------------------- -----------------------------------------------------------------------------------------------
PC HARDWARE Several PCs in various cities have been identified as non-compliant and are in the final stages
of being upgraded or replaced.
- ----------------------- -----------------------------------------------------------------------------------------------
PC SOFTWARE All non-compliant PC software is in the final stages of being upgraded, replaced, or phased
out of use.
- ----------------------- -----------------------------------------------------------------------------------------------
INFRASTRUCTURE All non-compliant Infrastructure and Facilities components have been upgraded, replaced or
AND FACILITIES phased out of use.
- ----------------------- -----------------------------------------------------------------------------------------------
</TABLE>
The Company plans to have a full support capability at and around the
time of the rollover into Year 2000. Its staff will be on-site at corporate
headquarters and all divisions to verify all major utilities, hardware,
software, and other systems and to identify and address any areas of failure.
The Company is prepared to implement its contingency plans immediately upon any
significant failure.
The Company recognizes the need for Year 2000 contingency plans in the
event that remediation is not fully successful or that the remediation efforts
of its vendors, suppliers and governmental/regulatory agencies are not timely
completed. Each of the Company's operational functions is being assessed for
potential failures, including systems failures, infrastructure failures,
supplier problems, etc. Based upon the risk assessment, the Company will take
all or some of its contingency plans where appropriate. Contingency plans for
all critical business processes will be complete by November 30, 1999.
The Company is confirming Year 2000 readiness with all significant
suppliers, and is focusing on those suppliers that provide its most critical
products. The Company's contingency plans with critical suppliers includes the
following steps:
o Determine additional inventory levels required to meet expected demand
prior to and immediately after January 1, 2000.
o Communicate expected increased orders leading up to the Year 2000 and
get written confirmation from the supplier that those quantities will
be available to the Company.
o Identify alternate suppliers for all critical products and confirm
their Year 2000 readiness.
o Require additional inventory levels for critical products at other
sources (e.g. trade wholesalers).
There can be no assurance that the processes can be completed on the
timetable described above or that remediation will be fully effective. The
failure to identify and remediate Year 2000 issues, or the failure of users of
the Company's ISKs, key vendors or other critical third parties who do business
with the Company to timely remediate their Year 2000 issues could cause system
failures or errors, business interruptions and, in a worst case
13
<PAGE>
scenario, the inability to engage in normal business practices for an unknown
length of time. The effect on the Company's operations, income and financial
condition could be materially adverse.
If the Company's suppliers or customers fail to complete any required
Year 2000 remediation of their computer systems or product offering, the Company
could suffer delays in product delivery or in processing payments owed to the
Company. In addition, if any products or services sold by the Company to its
customers were to fail, the Company could be liable to its customers for damages
and costs to the extent that the Company's suppliers do not cover such
liability. Any such Year 2000 failures could have a material adverse effect on
the Company's business, operating results, or financial condition.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
On September 24, 1999, the Company acquired Corporate Express Delivery
Systems, Inc. ("CEDS") from CEX Holdings, Inc. ("CEX") pursuant to a transaction
involving a merger of CEDS with a wholly-owned subsidiary of the Company. CEDS
and its subsidiaries had active, pending litigation at the time of its
acquisition by the Company.
CEDS is a party to litigation and has claims asserted against it incidental to
its business. Most of such claims are routine litigation that involves workers
compensation claims, claims arising out of vehicle accidents and other claims by
customers arising out of the provision of same-day delivery services. CEDS
self-insurers for workers compensation claims, but has excess insurance coverage
for most claims which are in excess of $250,000. CEDS and its subsidiaries have
insurance coverage for most of its vehicle claims, subject to a $250,000
deductible. As of October 2, 1999, based on actual and anticipated workers
compensation claims, claims and litigation arising out of automobile accidents
and other claims, the Company believes that the aggregate of these claims will
not exceed 10% of its current assets. CEDS and its subsidiaries are named as
defendants in various lawsuits arising out of employment-related matters arising
in the ordinary course of the business of CEDS. The Company vigorously defends
these claims.
On May 19, 1998 William F. Addvensky and other similarly situated individuals
filed a complaint in the Superior Court of the State of California for the
County of San Diego against CEDS and one of its subsidiaries. This involves a
suit brought on behalf of drivers (the "Plaintiffs") who provided services with
their own vehicles and who were paid on a commission basis. The Plaintiffs
allege that they were paid for their services half in the form of wages and half
in the form of expense reimbursement. Based on the amounts that the Plaintiffs
claim were paid as wages, the Plaintiffs seek damages for alleged underpayment
based on California law governing minimum wages and overtime pay. The Plaintiffs
also allege that the amounts paid in reimbursement were insufficient to cover
their expenses. Plaintiffs seek back pay and reimbursement for any underpayment
of wages that may have been paid at a rate less than the minimum wages for all
hours worked and overtime wages for any overtime hours worked from May 19, 1995
through trial. Plaintiffs also request that the Court order the disgorgement of
any profits that were realized from any alleged unlawful conduct. Plaintiffs
further seek punitive damages, waiting time penalties, interest, costs and
attorneys' fees. The case has been certified as a class. Plaintiffs have
indicated they may seek damages in excess of $20 million. CEDS has denied the
Plaintiffs' allegations and is vigorously defending this lawsuit. CEDS has filed
a declaratory judgment case against its insurance carrier who has denied
coverage. The lawsuit is in the early discovery stage.
Cautionary Statements Regarding Pending Litigation and Claims
The Company's statements above concerning pending litigation constitute
forward-looking statements. Investors should consider that there are many
important factors which could adversely affect the Company's assumptions and the
outcome of claims, and cause actual results to differ materially from those
projected in forward-looking statements. These factors include:
14
<PAGE>
o The Company has made estimates of its exposure in connection
with the lawsuits and claims that have been made. As a result
of litigation or settlement of cases, the actual amount of
exposure in a given case could differ materially from that
projected. In addition, in some instances, the Company's
liability under worker compensation claims may increase or
decrease depending upon the ultimate development of those
claims.
o In estimating the Company's exposure to claims, the Company is
relying upon its assessment of insurance coverages and the
availability of insurance. In some instances insurers could
contest their obligation to indemnify the Company for certain
claims, based upon insurance policy exclusions or limitations.
In addition, from time to time in connection with routine
litigation incidental to the Company's business, plaintiffs
may bring claims against the Company which may include
undetermined amounts of punitive damages. The Company is
currently not aware of any such punitive damages claim or
claims in the aggregate which would exceed 10% of its current
assets. Such punitive damages are not normally covered by
insurance.
o Although the Company has numerous claims, few, if any, are
believed to have the potential to have a material adverse
impact on the Company on a consolidated basis, and only one
pending lawsuit or claim, the above described Addvensky case,
involves a claim for damages in excess of 10% of the current
assets of the Company on a consolidated basis as of October 2,
1999, after application of insurance coverages. An award
against the Company or a subsidiary, or a settlement paid by
it, in connection with currently pending claims could,
however, have a material adverse effect upon the Company's
cash flow in a given period in which an award or settlement
occurs. Further, multiple awards against, or settlements by,
the Company or its subsidiaries in a particular period could
have a material adverse effect upon the Company's financial
condition, cash flow and results of operations.
15
<PAGE>
ITEM 2 - Changes in Securities and Use of Proceeds
Between December 31, 1998 and February 25, 1999, the Company sold to a
limited number of accredited investors, in two private placement transactions,
an aggregate of $1,350,000 principal amount of unsecured, 12% notes (the
"Notes"). Pursuant to Note Conversion Agreements dated September 25, 1999,
$600,000 in principal amount of the Notes plus accrued interest were converted
by four Note holders into an aggregate of 135,044 shares of common stock at a
purchase price of $4.57 per share and warrants to purchase an aggregate of
33,758 shares of common stock at an exercise price of $4.57 per share for a
period of one year.
On September 10, 1999, in connection with the acquisition of Corporate
Express Delivery Systems, Inc. ("CEDS"), the Company called the warrants issued
in connection with its sale of Series A Convertible Preferred Stock in April and
June of 1998. In connection with the call of the warrants, the Company issued
1,977,748 shares of common stock and raised total equity of $3,461,059. The
proceeds from these warrant exercises were received after October 2, 1999, and
therefore were not reflected in the accompanying financial statements.
In October 1999, the Company sold to five accredited investors 124,000
shares of common stock at a purchase price of $4.50 per share, together with
warrants to purchase an aggregate of 12,400 shares of common stock at an
exercise price of $4.50 per share for a period of one year.
In connection with the purchase of CEDS, the Company's primary source
of financing was through a Credit Agreement (the "Credit Agreement") among the
Company, the Company's UST Delivery Systems, Inc. ("Delivery Systems")
subsidiary, each subsidiary of Delivery Systems, and General Electric Capital
Corporation ("GE"). Pursuant to the Credit Agreement, Delivery Systems issued to
GE a Revolving Note in the amount of $55,000,000 (the "Revolving Note") and a
Swing Line Note in the amount of $5,000,000 (the "Swing Line Note"). All amounts
advanced are due September 23, 2004. The Revolving Note and Swing Line Note are
secured by, among other things, the receivables and other personal property of
Delivery Systems and its subsidiaries. Pursuant to a Guaranty Agreement between
the Company and GE, the Company guaranteed the obligations of Delivery Systems
under the Credit Agreement, the Swing Line Note, the Revolving Note and the
related loan documentation and pledged Delivery Systems' stock to secure the
guaranty.
The Company, Delivery Systems and each of its subsidiaries also entered
into a Note and Warrant Purchase Agreement (the "Bayview Agreement") with
Bayview Capital Partners LP ("Bayview"). Pursuant to the Bayview Agreement, the
Company and Delivery Systems issued to Bayview a $5,000,000 Senior Subordinated
Note. The Senior Subordinated Note calls for the quarterly payment of interest
at the rate of 12% per annum, subject to increase upon default, and the payment
in full of all unpaid principal and interest on September 30, 2004. The Senior
Subordinated Note is subordinate to certain obligations of the Company pursuant
to an Intercreditor and Subordination Agreement among GE, Bayview, the Company,
and Delivery Systems and its subsidiaries. As additional consideration for
providing the funding, the Company issued to Bayview a ten-year Common Stock
Purchase Warrant (the "Bayview Warrant"). Pursuant to the terms of the Bayview
Warrant, Bayview has the right to purchase up to 1,366,220 shares of the
Company's common stock at an exercise price equal to $3.3125 per share, subject
to adjustment. Also pursuant to the Bayview Warrant, the Company granted to
Bayview certain anti-dilution rights, which provide that the exercise price and
number of shares purchasable under the Bayview Warrant will be adjusted upon the
happening of certain events, such as stock splits or combinations, stock
dividends, mergers or other consolidations, recapitalizations, and the sale by
the Company of common stock or securities convertible or exercisable into common
stock at a price less than the 20-day average of the closing sales price of the
Company's common stock through the date prior to the date the Company fixes the
purchase price for such sale (the "Market Value"). In addition, Bayview has the
right to require the Company to purchase the Bayview Warrant or the stock
issuable upon exercise of the Bayview Warrant (the "Warrant Stock") upon the
happening of certain events, such as default, the sale of 50% of the
16
<PAGE>
Company's stock or assets, or after the fifth anniversary of the date of the
Bayview Warrant. The purchase price (the "Put Exercise Price") for the Warrant
Stock would be the higher of (i) the Market Value of the Company's common stock,
and (ii) six times the Company's EBITDA, plus cash and minus debt, in both cases
divided by the number of outstanding shares of common stock on the date of
notice of exercise of the redemption right, and the purchase price of the
Bayview Warrant would be the same price reduced by the Warrant exercise price in
effect on the date of such notice. After the sixth anniversary of the date of
the Bayview Warrant, the Company has the right to repurchase the Bayview Warrant
or Warrant Stock at the Put Exercise Price. Also pursuant to the Bayview
Warrant, Bayview has certain preemptive rights allowing it the right of first
refusal to purchase its pro rata portion of common stock or securities
convertible into or exercisable for common stock, and demand and incidental
registration rights with respect to the warrant stock.
Pursuant to a Merger Agreement between CEX, CEDS, the Company and the
Company's acquisition subsidiary, Delivery Systems issued to CEX a Convertible
Subordinated Promissory Note (the "Convertible Note") in the amount of
$3,600,000, a Long-Term Subordinated Promissory Note (the "Long Term Note") in
the amount of $6,519,000, and a Short-Term Subordinated Promissory Note (the
"Short Term Note") in the amount of $7,500,000. The Long Term Note calls for the
quarterly payment of interest at the rate of 12% per annum, subject to increase
upon default, and the payment in full of all unpaid principal and interest on
September 24, 2004. The Short Term Note calls for the quarterly payment of
interest at the rate of 9% per annum, subject to increase upon default, and the
payment in full of all unpaid principal and interest on September 24, 2000, and
requires a mandatory prepayment upon the exercise of the Company's warrants
issued in connection with the purchase of its Series A Preferred Stock in April
and June of 1998, and upon certain debt financings or sales of assets. The
Convertible Note calls for the quarterly payment of interest at the rate of 6%
per annum, subject to increase upon default, and the payment in full of all
unpaid principal and interest on September 24, 2004. Pursuant to the Convertible
Note, and an Exchange Agreement between CEX, Delivery Systems and the Company,
CEX has the right to purchase, by exchanging all or any portion of the principal
balance of the Convertible Note, shares of the Company's common stock at an
exchange rate of $4.59 per share. The maximum number of shares of common stock
that the Company would be required to issue to CEX in connection with the Note
would be 784,314 shares, subject to adjustment. The Convertible Note is
subordinate to the obligations of the Company owing to both GE and Bayview. Also
pursuant to the Exchange Agreement, the Company granted to CEX certain
anti-dilution rights, which provide that the conversion price under the Exchange
Agreement will be adjusted upon the happening of certain events, such as stock
splits or combinations, stock dividends, mergers or other consolidations,
recapitalizations, and the sale by the Company of common stock or securities
convertible or exercisable into common stock at a price less than the 20-day
average of the closing sales price of the Company's common stock through the
date prior to the date the Company fixes the purchase price for such sale. Any
reduction of the conversion price will result in an increase in the number of
shares into which the Convertible Note may be converted. CEX has both demand and
incidental registration rights with respect to the shares issuable upon
conversion of the Convertible Note.
Pursuant to the terms of the Convertible Note and the Bayview Warrant,
the Company may be required to issue up to a maximum of 2,150,534 shares of
common stock (prior to adjustment), which amount will not be in excess of 20% of
the Company's current outstanding shares of common stock.
No underwriter or placement agent was used in connection with any of
the above-referenced securities transactions, and no underwriting commissions
were paid. No means of general solicitation was used in offering the securities.
The securities in each transaction were sold to a limited group of accredited
investors in a private placement transactions, exempt from registration under
Section 4(2) of the Securities Act. All purchasers of the Company's securities
were sophisticated investors who qualified as accredited investors within the
meaning of Rule 501(a) of Regulation D under the Securities Act. Except where
otherwise indicated, the Company intends to use the net proceeds from the sale
of these securities for working capital and to fund acquisitions.
17
<PAGE>
ITEM 3 - Defaults upon Senior Securities
Not Applicable
ITEM 4 - Submission of Matters to a Vote of Securities Holders
There were no matters submitted to a vote of security holders during
the fiscal quarter ended October 2, 1999.
ITEM 5 - Other Information
Not Applicable
ITEM 6 - Exhibits and Reports on Form 8-K
a. Exhibits required by Item 601 of Regulation S-B
Exhibit 2.1 Merger Agreement by and among CEX Holdings, Inc.,
Corporate Express Delivery Systems, Inc., United Shipping &
Technology, Inc. and United Shipping & Technology Acquisition
Corp., dated as of September 8, 1999 (incorporated by reference to
the Company's Form 8-K, File Number 99725409, filed October 8,
1999).
Exhibit 2.2 Amendment No. 1 to Merger Agreement by and among CEX
Holdings, Inc., Corporate Express Delivery Systems, Inc., United
Shipping & Technology, Inc. and United Shipping & Technology
Acquisition Corp., dated as of September 22, 1999 (incorporated by
reference to the Company's Form 8-K, File Number 99725409, filed
October 8, 1999).
Exhibit 10.1 Form of Note Conversion Agreement used in connection
with the Company's conversion of its 12% Medium Term Unsecured
Notes to common stock in March of 1999 (incorporated by reference
to the Company's Annual Report on Form 10-KSB for the year ended
June 30, 1999).
Exhibit 10.2 Form of Warrant used in connection with the Company's
conversion of its 12% Medium Term Unsecured Notes to common stock
in March of 1999 (incorporated by reference to the Company's
Annual Report on Form 10-KSB for the year ended June 30, 1999).
Exhibit 10.3 Form of Note Conversion Agreement used in connection
with the Company's conversion of its 12% Short Term Unsecured
Notes to common stock in May of 1999 (incorporated by reference to
the Company's Annual Report on Form 10-KSB for the year ended June
30, 1999).
Exhibit 10.4 Form of Subscription Agreement and Investment Letter
between Company and investors in private placements of common
stock and warrants in October 1999.
Exhibit 10.5 Form of Warrant issued to purchasers in October 1999
sales of common stock and Warrants.
Exhibit 10.6 Long-Term Subordinated Promissory Note by and among
UST Delivery Systems, Inc. and CEX Holdings, Inc., dated September
24, 1999 (incorporated by reference to the Company's Form 8-K,
File Number 99725409, filed October 8, 1999).
Exhibit 10.7 Short-Term Subordinated Promissory Note by and among
UST Delivery Systems, Inc. and CEX Holdings, Inc., dated September
24, 1999 (incorporated by reference to the Company's Form 8-K,
File Number 99725409, filed October 8, 1999).
18
<PAGE>
Exhibit 10.8 Convertible Subordinated Promissory Note by and among
UST Delivery Systems, Inc. and CEX Holdings, Inc., dated September
24, 1999 (incorporated by reference to the Company's Form 8-K,
File Number 99725409, filed October 8, 1999).
Exhibit 10.9 Exchange Agreement by and among United Shipping &
Technology, Inc., UST Delivery Systems, Inc. and CEX Holdings,
Inc., dated as of September 24, 1999 (incorporated by reference to
the Company's Form 8-K, File Number 99725409, filed October 8,
1999).
Exhibit 10.10 Credit Agreement by and among UST Delivery Systems,
Inc. and General Electric Capital Corporation, dated as of
September 24, 1999 (incorporated by reference to the Company's
Form 8-K, File Number 99725409, filed October 8, 1999).
Exhibit 10.11 Revolving Note by and among UST Delivery Systems,
Inc. and General Electric Capital Corporation, dated September 24,
1999 (incorporated by reference to the Company's Form 8-K, File
Number 99725409, filed October 8, 1999).
Exhibit 10.12 Swing Line Note by and among UST Delivery Systems,
Inc. and General Electric Corporation, dated September 24, 1999
(incorporated by reference to the Company's Form 8-K, File Number
99725409, filed October 8, 1999).
Exhibit 10.13 Note and Warrant Purchase Agreement by and among
United Shipping & Technology, Inc., UST Delivery Systems, Inc. and
Bayview Capital Partners LP, dated as of September 24, 1999
(incorporated by reference to the Company's Form 8-K, File Number
99725409, filed October 8, 1999).
Exhibit 10.14 Senior Subordinated Note by and among United
Shipping & Technology, Inc., UST Delivery Systems, Inc. and
Bayview Capital Partners LP, dated September 24, 1999
(incorporated by reference to the Company's Form 8-K, File Number
99725409, filed October 8, 1999).
Exhibit 10.15 Warrant to Purchase Common Stock of United Shipping
& Technology, Inc. issued to Bayview Capital Partners LP, dated
September 24, 1999 (incorporated by reference to the Company's
Form 8-K, File Number 99725409, filed October 8, 1999).
Exhibit 10.16 Intercreditor and Subordination Agreement by and
among Bayview Capital Partners LP, UST Delivery Systems, Inc.,
United Shipping & Technology, Inc. and General Electric Capital
Corporation, dated as of September 24, 1999 (incorporated by
reference to the Company's Form 8-K, File Number 99725409, filed
October 8, 1999).
Exhibit 10.17 Guaranty by and between United Shipping &
Technology, Inc. and General Electric Capital Corporation, dated
as of September 24, 1999.
Exhibit 27 Financial Data Schedule
b. Current Reports on Form 8-K for the second quarter ended October 2,
1999.
The Company filed a Current Report on form 8-K on September 13,
1999 in connection with the announcement of a definitive merger
agreement in connection with the CEDS purchase.
19
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned; thereunto duly
authorized, in the City of Plymouth, State of Minnesota on November 16, 1999.
UNITED SHIPPING & TECHNOLOGY, INC.
By: /S/ Peter C. Lytle
--------------------------------------
Peter C. Lytle
President and Chief Executive Officer
20
<PAGE>
EXHIBIT INDEX
Exhibit 2.1 Merger Agreement by and among CEX Holdings, Inc., Corporate
Express Delivery Systems, Inc., United Shipping & Technology,
Inc. and United Shipping & Technology Acquisition Corp., dated as
of September 8, 1999 (incorporated by reference to the Company's
Form 8-K, File Number 99725409, filed October 8, 1999).
Exhibit 2.2 Amendment No. 1 to Merger Agreement by and among CEX Holdings,
Inc., Corporate Express Delivery Systems, Inc., United Shipping &
Technology, Inc. and United Shipping & Technology Acquisition
Corp., dated as of September 22, 1999 (incorporated by reference
to the Company's Form 8-K, File Number 99725409, filed October 8,
1999).
Exhibit 10.1 Form of Note Conversion Agreement used in connection with the
Company's conversion of its 12% Medium Term Unsecured Notes to
common stock in March of 1999 (incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1999).
Exhibit 10.2 Form of Warrant used in connection with the Company's conversion
of its 12% Medium Term Unsecured Notes to common stock in March
of 1999 (incorporated by reference to the Company's Annual Report
on Form 10-KSB for the year ended June 30, 1999).
Exhibit 10.3 Form of Note Conversion Agreement used in connection with the
Company's conversion of its 12% Short Term Unsecured Notes to
common stock in May of 1999 (incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1999).
Exhibit 10.4 Form of Subscription Agreement and Investment Letter between
Company and investors in private placements of common stock and
warrants in October 1999.
Exhibit 10.5 Form of Warrant issued to purchasers in October 1999 sales of
common stock and Warrants.
Exhibit 10.6 Long-Term Subordinated Promissory Note by and among UST Delivery
Systems, Inc. and CEX Holdings, Inc., dated September 24, 1999
(incorporated by reference to the Company's Form 8-K, File Number
99725409, filed October 8, 1999).
Exhibit 10.7 Short-Term Subordinated Promissory Note by and among UST Delivery
Systems, Inc. and CEX Holdings, Inc., dated September 24, 1999
(incorporated by reference to the Company's Form 8-K, File Number
99725409, filed October 8, 1999).
Exhibit 10.8 Convertible Subordinated Promissory Note by and among UST
Delivery Systems, Inc. and CEX Holdings, Inc., dated September
24, 1999 (incorporated by reference to the Company's Form 8-K,
File Number 99725409, filed October 8, 1999).
Exhibit 10.9 Exchange Agreement by and among United Shipping & Technology,
Inc., UST Delivery Systems, Inc. and CEX Holdings, Inc., dated as
of September 24, 1999
21
<PAGE>
(incorporated by reference to the Company's Form 8-K, File Number
99725409, filed October 8, 1999).
Exhibit 10.10 Credit Agreement by and among UST Delivery Systems, Inc. and
General Electric Capital Corporation, dated as of September 24,
1999 (incorporated by reference to the Company's Form 8-K, File
Number 99725409, filed October 8, 1999).
Exhibit 10.11 Revolving Note by and among UST Delivery Systems, Inc. and
General Electric Capital Corporation, dated September 24, 1999
(incorporated by reference to the Company's Form 8-K, File Number
99725409, filed October 8, 1999).
Exhibit 10.12 Swing Line Note by and among UST Delivery Systems, Inc. and
General Electric Corporation, dated September 24, 1999
(incorporated by reference to the Company's Form 8-K, File Number
99725409, filed October 8, 1999).
Exhibit 10.13 Note and Warrant Purchase Agreement by and among United Shipping
& Technology, Inc., UST Delivery Systems, Inc. and Bayview
Capital Partners LP, dated as of September 24, 1999 (incorporated
by reference to the Company's Form 8-K, File Number 99725409,
filed October 8, 1999).
Exhibit 10.14 Senior Subordinated Note by and among United Shipping &
Technology, Inc., UST Delivery Systems, Inc. and Bayview Capital
Partners LP, dated September 24, 1999 (incorporated by reference
to the Company's Form 8-K, File Number 99725409, filed October 8,
1999).
Exhibit 10.15 Warrant to Purchase Common Stock of United Shipping & Technology,
Inc. issued to Bayview Capital Partners LP, dated September 24,
1999 (incorporated by reference to the Company's Form 8-K, File
Number 99725409, filed October 8, 1999).
Exhibit 10.16 Intercreditor and Subordination Agreement by and among Bayview
Capital Partners LP, UST Delivery Systems, Inc., United Shipping
& Technology, Inc. and General Electric Capital Corporation,
dated as of September 24, 1999 (incorporated by reference to the
Company's Form 8-K, File Number 99725409, filed October 8, 1999).
Exhibit 10.17 Guaranty by and between United Shipping & Technology, Inc. and
General Electric Capital Corporation, dated as of September 24,
1999.
Exhibit 27 Financial Data Schedule
22
EXHIBIT 10.4
SUBSCRIPTION AGREEMENT
AND
LETTER OF INVESTMENT INTENT
United Shipping & Technology, Inc.
9850 51st Avenue North, Suite 110
Plymouth, MN 55442
Attention: Peter C. Lytle
Chief Executive Officer
Gentlemen:
The undersigned, ______________, desires to become a shareholder of
United Shipping & Technology, Inc. a Utah corporation (the "Company"), and
hereby subscribes for _____________ shares (the "Shares") of the Company's
common stock, $0.004 par value (the "Common Stock") at a purchase price of $4.50
per share, for the aggregate sum of $____________, and a warrant (the "Warrant")
to purchase ____________ shares of the Company's Common Stock at an exercise
price of $4.50 per share for a period of 1 year, said Warrant to have both
demand and incidental registration rights. As used herein, the term "Shares"
shall also, where applicable, refer to the Warrant and the shares of Common
Stock issued or issuable upon exercise of the Warrant.
1. The undersigned hereby acknowledges that this subscription is
contingent upon acceptance in whole or in part by the Company.
2. The undersigned acknowledges, represents and warrants that the
undersigned:
(a) is able to bear the economic risk of the investment in the
Shares;
(b) has knowledge and experience in financial and business
matters, is capable of evaluating the merits and risks of the
prospective investment in the Shares and is able to bear such risks;
(c) understands an investment in the Shares is highly
speculative but believes that the investment is suitable for it based
upon the undersigned's investment objectives and financial needs, and
has adequate means for providing for current financial needs and
personal contingencies and has no need for liquidity of investment with
respect to the Shares;
(d) has reviewed (i) copies of the Company's recent reports
filed under the Securities Exchange Act of 1934, including, the
Company's Form 10-KSB Report for the fiscal year ended June 30, 1999,
(ii) the Company's Form 10-QSB for the period ended March 31, 1999, and
(iii) the Company's proxy statement in connection with its 1998 annual
meeting of shareholders held on May 3, 1999;
(e) has been given access to full and complete information
regarding the Company (including the opportunity to meet with Company
officers and review all documents as it may have requested in writing)
and has utilized such access to its satisfaction for the purpose of
obtaining
<PAGE>
information about the Company;
(f) recognizes that the Shares, as an investment, involve a
high degree of risk; and
(g) realizes that (i) the purchase of Shares is a long-term
investment; (ii) purchasers of Shares must bear the economic risk of
investment for an indefinite period of time because the Shares have not
been registered under the Securities Act of 1933, as amended (the
"Act") and, therefore, cannot be sold unless they are subsequently
registered under the Act or an exemption from such registration is
available; and (iii) the transferability of the Shares is restricted,
and (A) requires the written consent of the Company, (B) requires
conformity with the restrictions contained in paragraph 3 below, and
(C) will be further restricted by a legend placed on the certificate(s)
representing the Shares stating that the Shares have not been
registered under the Act and referring to the restrictions on
transferability of the Shares, and by stop transfer orders or notations
on the Company's records referring to the restrictions on
transferability.
3. The undersigned has been advised that the Shares are not being
registered under the Act or the relevant state securities laws pursuant to
exemptions from the Act and laws, and that the Company's reliance upon such
exemptions is predicated in part on the undersigned's representations to the
Company as contained herein. The undersigned represents and warrants that the
Shares are being purchased for its own account and for investment and without
the intention of reselling or redistributing the same, that the undersigned has
made no agreement with others regarding any of such Shares and that its
financial condition is such that it is not likely that it will be necessary to
dispose of any of such Shares in the foreseeable future. The undersigned is
aware that, in the view of the Securities and Exchange Commission and applicable
state bodies that administer state securities laws, a purchase of Shares with an
intent to resell by reason of any foreseeable specific contingency or
anticipated change in market values, or any change in the condition of the
Company or its business, or in connection with a contemplated liquidation or
settlement of any loan obtained for the acquisition of the Shares and for which
the Shares were pledged as security, would represent an intent inconsistent with
the representations set forth above. The undersigned further represents and
agrees that if, contrary to its foregoing intentions, it should later desire to
dispose of or transfer any of such Shares in any manner, it shall not do so
without first obtaining (a) the opinion of counsel designated by the Company
that such proposed disposition or transfer lawfully may be made without the
registration of such Shares for such purpose pursuant to the Act, as then in
effect, and applicable state securities laws, or (b) such registrations (it
being expressly understood that the Company shall not have any obligation to
register the Shares for such purpose, except insofar as paragraph 4 hereof
requires the Company, in certain instances, to register Registrable Securities).
The undersigned agrees that the Company may place the following
restrictive legend on the certificate(s) representing the Shares, containing
substantially the following language:
"The shares represented by this Certificate were issued without
registration under the Securities Act of 1933, as amended (the "Act")
and without registration under Minnesota or any other state's
securities laws, in reliance upon exemptions contained in the Act and
such laws. No transfer of these shares or any interest therein may be
made except pursuant to effective registration statements under said
laws unless this Corporation has received an opinion of counsel
satisfactory to it that such transfer or disposition does not require
2
<PAGE>
registration under said laws and, for any sales under Rule 144 of the
Act, such evidence as it shall request for compliance with that rule."
The undersigned agrees and consents that the Company may place a stop transfer
order on the Certificate(s) representing the Shares to assure the undersigned's
compliance with this Agreement and the matters referenced above.
The undersigned agrees to save and hold harmless, defend and indemnify
the Company and its directors, officers and agents from any claims, liabilities,
damages, losses, expenses or penalties arising out of any misrepresentation of
information furnished by the undersigned to the Company in this Subscription
Agreement.
4. The Company agrees to the following terms and conditions relative to
registration of the Shares under the Act:
(a) Definitions. As used in this Agreement, the following
terms shall have the meanings set forth respectively:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the Act.
"Common Stock" shall mean the shares of Common Stock of the
Company, $0.004 par value.
"Holder" or, collectively, "Holders, means (i) the undersigned
purchaser of the Shares or Registrable Securities and (ii) each person
to whom Holder transfers the Shares or Registrable Securities as
provided herein.
"Other Securities" shall mean any stock (other than Common
Stock) or other securities of the Company which the Holder at any time
shall be entitled to receive, or shall have received, upon exercise of
the Warrants, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities.
"Registrable Securities" means the Shares, any shares of
Common Stock issued or which may be issued upon exercise of the
Warrants, and any Other Securities received with respect thereto or
with respect to the Shares; provided, however, that any such Common
Stock and Other Securities shall cease to be Registrable Securities
when (i) a Resale Registration Statement covering such Registrable
Securities has been declared effective and such Registrable Securities
have been disposed of pursuant to such effective Resale Registration
Statement, (ii) such Registrable Securities become eligible for sale
pursuant to Rule 144 (or any similar provision then in force) ("Rule
144") under the Act or (iii) such shares of Common Stock cease to be
outstanding. Registrable Securities may, for purposes of a registration
statement filed by the Company under the Act, include other securities
of the Company which it has a contractual obligation to register under
federal or state securities laws.
3
<PAGE>
"Transfer" shall mean any sale, assignment, pledge, or other
disposition of any Shares or Registrable Securities, or of any interest
in either thereof, which would constitute a sale thereof within the
meaning of Section 2(3) of the Act.
All terms used in this Agreement which are not defined in Section 1
hereof have the meanings respectively set forth elsewhere in this Agreement.
(b) Resale Registration. Despite anything in this Agreement to
the contrary, the Holder shall have the following rights regarding registration
of Registrable Securities.
(1) Required Registration. Upon request of a Holder owning at
least 5,000 Shares or Registrable Securities not theretofore
registered under the Act, the Company shall prepare and if it
is then eligible file a registration statement on Form S-3
under the Act covering the resale of the Registrable
Securities which are the subject of such requests and shall
use its best efforts to cause such registration statement to
become effective and to remain effective for at least 24
months. In addition, upon the receipt of the aforementioned
request, the Company shall promptly give written notice to all
other record Holders of Shares or Registrable Securities that
such registration is to be effected. The Company shall include
in such registration statement such Registrable Securities for
which it has received written requests to register by such
other Holders within fifteen (15) days after the Company's
written notice to such other Holders. The Company shall be
obligated to prepare, file and cause to become effective only
two (2) registration statements pursuant to this Section 4(b).
In the event that the holders of a majority of the Registrable
Securities for which registration has been requested pursuant
to this Section determine for any reason not to proceed with a
registration at any time before the registration statement has
been declared effective by the Commission, and such Holders
thereafter request the Company to withdraw such registration
statement, the Holders of such Registrable Securities agree to
bear their own expenses incurred in connection therewith and
to reimburse the Company for the expenses incurred by it
attributable to such registration statement, then, and in such
event, the Holders of such Registrable Securities shall not be
deemed to have exercised their right to require the Company to
register Registrable Securities pursuant to this Section 4(b).
(2) Incidental Registration. Each time the Company shall
determine to proceed with the actual preparation and filing of
a registration statement under the Act in connection with the
proposed offer and sale for money of any of its Common Stock
by it or any of its security holders (other than a
registration statement on From S-4 or S-8) or any other
successor forms prescribed by the commission, the Company will
give written notice of its determination to all Holders of
Shares and Registrable Securities. Upon the written request of
a Holder of any Shares and Registrable Securities given within
fifteen (15) days after receipt of any such notice from the
Company, the Company will, except as herein provided, cause
all such Registrable Securities, the Holders of which have so
requested registration thereof, to be included in such
registration statement, all to the extent requisite to permit
the sale or other disposition by the prospective seller or
sellers
4
<PAGE>
of the Registrable Securities to be so registered; provided,
however, that (a) nothing herein shall prevent the Company
from, at any time, abandoning or delaying any such
registration initiated by it; and (b) if the Company
determines not to proceed with a registration after the
registration statement has been filed with the Commission and
the Company's decision not to proceed is primarily based upon
the anticipated public offering price of the securities to be
sold by the Company, the Company shall promptly complete the
registration for the benefit of those selling security holders
who wish to proceed with a public offering of their securities
and who bear all expenses in excess of $25,000 incurred by the
Company as the result of such registration after the Company
has decided not to proceed. If any registration pursuant to
this Section shall be underwritten in whole or in part, the
Company may require that the Registrable Securities requested
for inclusion pursuant to this Section be included in the
underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. If
in the good faith judgment of the managing underwriter of such
public offering the inclusion of all of the Registrable
Securities originally covered by a request for registration
would reduce the number of shares to be offered by the Company
or interfere with the successful marketing of the shares of
stock offered by the Company, the number of Registrable
Securities otherwise to be included in the underwritten public
offering may be reduced pro rata among the Holders thereof
requesting such registration to a number that the managing
underwriter believes will not adversely affect the sale of
shares by the Company. Those securities which are thus
excluded from the underwritten public offering, and any other
Common Stock owned by such Holders, shall be withheld from the
market by the Holders thereof for a period, not to exceed one
hundred eighty (180) days, which the managing underwriter
reasonably determines is necessary in order to effect the
underwritten public offering.
(3) Registration Procedures. If and whenever the Company is
required by the provisions of Section 4(b)(1) or 4(b)(2) to
effect the registration of any Registrable Securities under
the Act, the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such Registrable
Securities, and use its best efforts to cause such
registration statement to become and remain effective
for such period as may be reasonably necessary to
effect the sale of such Registrable Securities;
(ii) prepare and file with the Commission such amendments
to such registration statement and supplements to the
prospectus contained therein as may be necessary to
keep such registration statement effective for such
period as may be reasonably necessary to effect the
sale of such Registrable Securities;
(iii) furnish to the Holders participating in such
registration and to the underwriters of the
Registrable Securities being registered such
reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus
and such other documents as such Holders and
underwriters may reasonably request in order to
facilitate the public offering of such Registrable
Securities;
5
<PAGE>
(iv) use its best efforts to register or qualify the
Registrable Securities covered by such registration
statement under such state securities or blue sky
laws of such jurisdictions as such participating
Holders may reasonably request within ten (10) days
following the original filing of such registration
statement, except that the Company shall not for any
purpose be required to execute a general consent to
service of process or to qualify to do business as a
foreign corporation in any jurisdiction wherein it is
not so qualified;
(v) notify the Holders participating in such
registration, promptly after it shall receive notice
thereof, of the time when such registration statement
has become effective or a supplement to any
prospectus forming a part of such registration
statement has been filed;
(vi) prepare and file with the Commission, promptly upon
the request of any such Holders, any amendments or
supplements to such registration statement or
prospectus which, in the reasonable opinion of
counsel for such Holders (and concurred in by counsel
for the Company), is required under the Act or the
rules and regulations thereunder in connection with
the distribution of the Registrable Securities by
such Holder;
(vii) prepare and promptly file with the Commission such
amendment or supplement to such registration
statement or prospectus as may be necessary to
correct any statements or omissions if, at the time
when a prospectus relating to such securities is
required to be delivered under the Act, any event
shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact
or omit to state any material fact necessary to make
the statements therein, in the light of the
circumstances in which they were made, not
misleading; and
(viii) advise such Holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance
of any stop order by the Commission suspending the
effectiveness of such registration statement or the
initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent
the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
(4) Expenses. With respect to any registration, requested
pursuant to Section 4(b)(1) (except as otherwise provided in
such section with respect to registrations voluntarily
terminated at the request of the requesting security holders)
and with respect to each inclusion of securities in a
registration statement pursuant to Section 4(b)(2) (except as
otherwise provided in Section 4(b)(2) with respect to
registrations terminated by the Company), the Company shall
bear the following fees, costs and expenses: all registration,
filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees
and disbursements of counsel for the underwriter
6
<PAGE>
or underwriters of such securities (if the Company and/or
selling Holders are required to bear such fees and
disbursements), all internal Company expenses, the premiums
and other costs of policies of insurance against liability
arising out of the public offering, and all legal fees and
disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified.
Fees and disbursements of counsel and accountants for such
Holders, underwriting discounts and commissions and transfer
taxes for such Holders and any other expenses incurred by such
Holders not expressly included above shall be borne by such
Holders.
(5) Copies of Prospectus; Amendments of Prospectus. The
Company will furnish the Holder with a reasonable number of
copies of any prospectus or offering circular and one copy of
the registration statement included in such filings and will
amend or supplement the same as required during the nine (9)
month period following the effective date of the registration
statement, provided, that the expenses of any amendment or
supplement made or filed more than three (3) months after the
effective date of the registration statement, at the request
of the Holder, shall be borne by the Holder.
(6) Conditions of the Company's Obligations. It shall be a
condition of the Company's obligation to register the
Registrable Securities hereunder that the Holder agrees to
cooperate with the Company in the preparation and filing of
any such registration statement, or in its efforts to
establish that the proposed sale is exempt under the Act, as
to any proposed distribution. It shall also be a condition of
the Company's obligations under this Agreement that, in the
case of the filing of any registration statement, and to the
extent permissible under the Act, and controlling precedent
thereunder, the Company and the Holder provide
cross-indemnification agreements to each other in customary
scope covering the accuracy and completeness of the
information furnished by each.
(c) Restrictions on Sale. In the event of an underwritten
public offering for the account of the Company, upon the written request (the
"Lock-up Request") of the managing underwriter (or underwriters) of such
offering, each Holder agrees not to effect any public sale or distribution of
any securities similar to those being registered in such offering (other than
pursuant to such offering), including, without limitation, through sales of
Registrable Securities pursuant to a registration statement, during the 14 days
prior to, and during the 180-day period beginning on the effective date of the
registration statement relating to such offering (the "Lock-up Period");
provided, however, that the Holders shall not be required to comply with such
Lock-up Request unless the Company simultaneously demands analogous restrictions
on sale and uses all reasonable efforts to obtain from all other persons who are
contractually bound with the Company to comply with such Lock-up Requests and
from the Company's directors. In the event of the delivery of a Lock-up Request,
the time periods for which a registration statement is required to be kept
effective pursuant to Section 4(b) hereof shall be extended by the number of
days during the Lock-up Period.
(g) Transfer of Registration Rights. The registration rights
of Holder and any Holders
7
<PAGE>
under this Section 4 may be transferred to any transferee of Registrable
Securities that acquires at least 5,000 shares of the Common Stock
(appropriately adjusted for stock splits, stock dividends and the like). Each
such transferee shall be deemed to be a "Holder" for purposes of this Section 4.
5. The undersigned represents and warrants that the undersigned is a
bona fide resident of, and is domiciled in, the State of ______________ and that
the Shares are being purchased solely for the beneficial interest of the
undersigned and not as nominee, for, or on behalf of, or for the beneficial
interest of, or with the intention to transfer to, any other person, trust or
organization, except as specifically set forth in paragraph 8 of this Agreement.
THE FOLLOWING PARAGRAPH 6 IS REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE
ACT AND STATE LAWS BEING RELIED ON BY THE COMPANY WITH RESPECT TO THE OFFER AND
SALE OF THE SHARES. ALL OF SUCH INFORMATION WILL BE KEPT CONFIDENTIAL AND WILL
BE REVIEWED ONLY BY THE COMPANY, THE AGENT, IF ANY, AND THEIR RESPECTIVE
COUNSEL. The undersigned agrees to furnish any additional information which the
Company, the Agent, if any, or their respective legal counsel deem necessary in
order to verify the responses set forth below.
6. Accredited Status. The undersigned represents and warrants
as follows:
(CHECK IF APPLICABLE):
_______ (a) The undersigned is an individual with a net worth, or a
joint net worth together with his or her spouse, in excess of
$1,000,000. (In calculating net worth, you may include equity
in personal property and real estate, including your principal
residence, cash, short-term investments, stock and securities.
Equity in personal property and real estate should be based on
the fair market value of such property minus debt secured by
such property.)
_______ (b) The undersigned is an individual with income in excess of
$200,000 in each of the prior two years and reasonably expects
an income in excess of $200,000 in the current year.
_______ (c) The undersigned is an individual who, with his or her
spouse, had joint income in excess of $300,000 in each of the
prior two years and reasonably expects joint income in excess
of $300,000 in the current year.
_______ (d) The undersigned is a director or executive officer of
United Shipping & Technology, Inc.
8
<PAGE>
7. NASD Affiliation. The undersigned is affiliated or associated,
directly or indirectly, with a National Association of Securities Dealers, Inc.
("NASD") member firm or person.
Yes ________ No ________
If yes, list the affiliated member firm or person:
__________________________________________________
__________________________________________________
__________________________________________________
Your relationship to such member firm or person:
__________________________________________________
__________________________________________________
__________________________________________________
8. Entities. If the undersigned is not an individual but an entity, the
individual signing on behalf of such entity and the entity jointly and severally
agree and certify that:
(a) The undersigned was not organized for the specific purpose of
acquiring the Shares; and
(b) This Agreement has been duly authorized by all necessary action on
the part of the undersigned, has been duly executed by an authorized
officer or representative of the undersigned, and is a legal, valid and
binding obligation of the undersigned enforceable in accordance with
its terms.
9. Miscellaneous.
(a) Manner in which title is to be held: (check one)
_____ Individual Ownership
_____ Joint Tenants with Right of Survivorship*
(b) The undersigned agrees that the undersigned understands the meaning
and legal consequences of the agreements, representations and
warranties contained herein, agrees that such agreements,
representations and warranties shall survive and remain in full force
and effect after the execution hereof and payment for the Shares, and
further agrees to indemnify and hold harmless the Company, each current
and future officer, director, employee, agent and shareholder from and
against any and all loss, damage or liability due to, or arising out
of, a breach of any agreement, representation or warranty of the
undersigned contained herein.
(c) This Agreement shall be construed and interpreted in accordance
with Minnesota law
- ------------------------------
* Multiple signatures required.
9
<PAGE>
without regard to conflict of law provisions.
(d) The undersigned agrees to furnish to the Company or the Agent, if
applicable, upon request, such additional information as may be deemed
necessary to determine the undersigned's suitability as an investor.
[NOTE: SIGNATURE PAGE FOLLOWS]
10
<PAGE>
INDIVIDUAL SUBSCRIBER
Dated: October _____, 1999.
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
Signature Signature
- ----------------------------------- ------------------------------------
Name Typed or Printed Name Typed or Printed
- ------------------------------------ ------------------------------------
Residence Address Residence Address
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
City, State and Zip Code City, State and Zip Code
- ------------------------------------ ------------------------------------
Mailing Address Mailing Address
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
City, State and Zip Code City, State and Zip Code
- ------------------------------------ ------------------------------------
Tax Identification or Social Tax Identification or Social
Security Number Security Number
11
<PAGE>
ACCEPTANCE BY THE COMPANY
United Shipping & Technology, Inc. hereby agrees to and accepts the foregoing
Subscription Agreement to the extent of __________ Shares and the Warrant.
UNITED SHIPPING & TECHNOLOGY, INC.
By _________________________
Peter C. Lytle
Its: Chief Executive Officer
12
EXHIBIT 10.5
WARRANT
TO PURCHASE SHARES OF
COMMON STOCK OF
UNITED SHIPPING & TECHNOLOGY, INC.
OCTOBER __, 1999
This Certifies that, in consideration of having purchased _________
shares of the Company's Common Stock, and for other good and valuable
consideration, ____________(the "Warrantholder"), is entitled to subscribe for
and purchase from the Company, at any time after the date hereof, and prior to
October ____, 2000 (the "Expiration Date") up to _________ shares of the
Company's Common Stock at a purchase price of $4.50 per share (the "Purchase
Price"), subject to adjustment as hereinafter set forth.
1. Definitions. For the purposes of this Warrant the following terms
shall have the following meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the
Securities Act.
"Company" shall mean United Shipping & Technology, Inc., a
Utah corporation, and any corporation which shall succeed to, or
assume, the obligations of said corporation hereunder.
"Common Stock" shall mean the shares of Common Stock of the
Company, $0.004 par value.
"Other Securities" shall mean any stock (other than Common
Stock) or other securities of the Company which the Warrantholder at
any time shall be entitled to receive, or shall have received, upon the
exercise of the Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, as
in effect at the time.
"Subscription Form" shall mean the subscription forms attached
hereto.
"Transfer" shall mean any sale, assignment, pledge, or other
disposition of any Warrants and/or Warrant Shares, or of any interest
in either thereof, which would constitute a sale thereof within the
meaning of Section 2(3) of the Securities Act.
"Warrant Shares" shall mean the shares of Common Stock
purchased or purchasable by the Warrantholder upon the exercise of the
Warrants pursuant to Section 2 hereof.
1
<PAGE>
"Warrantholder" shall mean the holder or holders of the
Warrants or any related Warrant Shares.
"Warrants" shall mean the Warrants (including this Warrant),
identical as to terms and conditions and date, and all Warrants issued
in exchange, transfer or replacement thereof.
All terms used in this Warrant which are not defined in Section 1
hereof have the meanings respectively set forth elsewhere in this Warrant.
2. Exercise of Warrant, Issuance of Certificate, and Payment for
Warrant Shares. The rights represented by this Warrant may be exercised at any
time after October ______, 1999, and prior to the Expiration Date, by the
Warrantholder, in whole or in part (but not as to any fractional share of Common
Stock), by: (a) delivery to the Company of a completed Subscription Form, (b)
surrender to the Company of this Warrant properly endorsed and signature
guaranteed, and (c) delivery to the Company of a certified or cashier's check
made payable to the Company in an amount equal to the aggregate Purchase Price
of the shares of Common Stock being purchased, at its principal office or agency
in Minnesota (or such other office or agency of the Company as the Company may
designate by notice in writing to the holder hereof). The Company agrees and
acknowledges that the shares of Common Stock so purchased shall be deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant, properly endorsed, and the
Subscription Form shall have been surrendered and payment made for such shares
as aforesaid. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute or
cause to be executed and deliver to the Warrantholder a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in said Subscription Form. Each stock certificate so delivered shall
be in such denomination as may be requested by the Warrantholder and shall be
registered in the name of the Warrantholder or such other name as shall be
designated by the Warrantholder. If this Warrant shall have been exercised only
in part, the Company shall, at the time of delivery of said stock certificate or
certificates, deliver to the Warrantholder a new Warrant evidencing the rights
of such holder to purchase the remaining shares of Common Stock covered by this
Warrant. The Company shall pay all expenses, taxes, and other charges payable in
connection with the preparation, execution, and delivery of stock certificates
pursuant to this Section 2, except that, in case any such stock certificate or
certificates shall be registered in a name or names other than the name of the
Warrantholder, funds sufficient to pay all stock transfer taxes which shall be
payable upon the execution and delivery of such stock certificate or
certificates shall be paid by the Warrantholder to the Company at the time of
delivering this Warrant to the Company as mentioned above.
3. Ownership of this Warrant. The Company may deem and treat the
registered Warrantholder as the holder and owner hereof (notwithstanding any
notations of ownership or writing made hereon by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for transfer as provided herein and then only if
such transfer meets the requirements of Section 5.
4. Exchange, Transfer, and Replacement. Subject to Section 5 hereof,
this Warrant is exchangeable upon the surrender hereof by the Warrantholder to
the Company at its office or
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agency described in Section 2 hereof for new Warrants of like tenor and date
representing in the aggregate the right to purchase the number of shares
purchasable hereunder, each of such new Warrants to represent the right to
purchase such number of shares (not to exceed the aggregate total number
purchasable hereunder) as shall be designated by the Warrantholder at the time
of such surrender. Subject to Section 5 hereof, this Warrant and all rights
hereunder are transferable, in whole or in part, upon the books of the Company
by the Warrantholder in person or by duly authorized attorney, and a new Warrant
of the same tenor and date as this Warrant, but registered in the name of the
transferee, shall be executed and delivered by the Company upon surrender of
this Warrant, duly endorsed, at such office or agency of the Company. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction, or mutilation of this Warrant, and, in the case of loss,
theft, or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant. This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange, transfer, or replacement. The Company shall pay
all expenses, taxes (other than stock transfer taxes), and other charges payable
in connection with the preparation, execution, and delivery of Warrants pursuant
to this Section 4.
5. Restrictions on Transfer. Notwithstanding any provisions contained
in this Warrant to the contrary, neither this Warrant nor the Warrant Shares
shall be transferable except upon the conditions specified in this Section 5,
which conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act in respect of the transfer of this Warrant or
such Warrant Shares. The holder of this Warrant agrees that such holder will not
transfer this Warrant or the related Warrant Shares (a) prior to delivery to the
Company of an opinion of counsel selected by the Warrantholder and reasonably
satisfactory to the Company, stating that such transfer is exempt from
registration under the Securities Act, or (b) until registration of such
Warrants and/or Warrant Shares under the Securities Act has become effective and
continues to be effective at the time of such transfer. An appropriate legend
may be endorsed on the Warrants and the certificates of the Warrant Shares
evidencing these restrictions. The holder of this Warrant further agrees that
such holder will not, for a period of 180 days from the date that a registration
statement covering securities offered by the Company is declared effective by
the Commission, offer to sell, contract to sell, or otherwise sell, dispose of,
loan, pledge or grant any rights with respect to the Warrant or the Warrant
Shares owned by the holder, otherwise than with the prior written consent of the
Company.
6. Antidilution Provisions. The rights granted hereunder are subject to
the following:
(a) Stock Splits. In case at any time the Company shall
subdivide its outstanding shares of Common Stock into a greater number
of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in case
at any time the Company shall combine its outstanding shares of Common
Stock into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall be proportionately
increased and the number of Warrant Shares purchasable upon the
exercise of this Warrant immediately prior to such combination shall be
proportionately reduced. Except as provided in this paragraph (a), no
adjustment in the
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Purchase Price and no change in the number of Warrant Shares so
purchasable shall be made pursuant to this Section 6 as a result of or
by reason of any such subdivision or combination.
(b) Reorganization, Reclassification, Consolidation, Merger,
or Sale. If any capital reorganization or reclassification or merger of
the Company with another corporation, or the sale of all or
substantially all of its assets to another corporation, shall be
effected in such a way that holders of shares of Common Stock shall be
entitled to receive Common Stock, Other Securities or assets with
respect to or in exchange for shares of Common Stock, then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby the
Warrantholder shall thereafter have the right to purchase and receive
upon the basis and upon the terms and conditions specified in the
Warrants and in lieu of the shares of Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of
the Warrants such shares of Common Stock, Other Securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of shares of
Common Stock immediately theretofore purchasable and receivable upon
the exercise of the Warrants had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of the Warrantholder so that the provisions of the Warrants
(including, without limitation, provisions for adjustment of the
Purchase Price and the number of shares purchasable upon the exercise
of the Warrants) shall thereafter be applicable, as nearly as may be,
in relation to any shares of Common Stock, Other Securities or assets
thereafter deliverable upon the exercise of the Warrants.
7. Special Agreements of the Company.
(a) Will Reserve Shares. The Company will reserve and set
apart and have at all times the number of shares of authorized but
unissued Common Stock deliverable upon the exercise of the Warrants,
and it will have at all times any other rights or privileges provided
for herein sufficient to enable it at any time to fulfill all of its
obligations hereunder.
(b) Will Avoid Certain Actions. The Company will not, by
amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, issue or
sale of securities or otherwise, avoid or take any action which would
have the effect of avoiding the observance or performance hereunder by
the Company, but will at all times in good faith assist in carrying out
of all the provisions of the Warrants and in taking all such actions as
may be necessary or appropriate in order to protect the rights of the
Warrantholder against dilution or other impairment.
8. Provisions for Registration. Despite anything in this Warrant to the
contrary, the Warrantholder shall have the following rights regarding
registration of Warrant Shares which may be hereafter acquired upon exercise of
this Warrant.
(a) Required Registration. If at any time the Company receives
the written request from the Holder of this Warrant, the Company shall
prepare and file a registration
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statement under the Securities Act covering the Warrant Shares which
are the subject of such requests and shall use its best efforts to
cause such registration statement to become effective; provided,
however, that all Warrant Shares covered by such registration statement
shall be converted into Common Stock prior to inclusion in such
registration statement. In addition, upon the receipt of the
aforementioned request, the Company shall promptly give written notice
to all other record holders of Warrant Shares that such registration is
to be effected. The Company shall include in such registration
statement such Warrant Shares for which it has received written
requests to register by such other record holders within fifteen (15)
days after the Company's written notice to such other record holders.
The Company shall be obligated to prepare, file and cause to become
effective only two (2) registration statements pursuant to this Section
8(a). In the event that the holders of a majority of the Warrant Shares
for which registration has been requested pursuant to this Section
determine for any reason not to proceed with a registration at any time
before the registration statement has been declared effective by the
Commission, and such holders thereafter request the Company to withdraw
such registration statement, the holders of such Warrant Shares agree
to bear their own expenses incurred in connection therewith and to
reimburse the Company for the expenses incurred by it attributable to
such registration statement, then, and in such event, the holders of
such Warrant Shares shall not be deemed to have exercised their right
to require the Company to register Warrant Shares pursuant to this
Section 8(a).
(b) Incidental Registration. Each time the Company shall
determine to proceed with the actual preparation and filing of a
registration statement under the Securities Act in connection with the
proposed offer and sale for money of any of its Common Stock by it or
any of its security holders, the Company will give written notice of
its determination to all record holders of Warrant Shares. Upon the
written request of a record holder of any Warrant Shares given within
fifteen (15) days after receipt of any such notice from the Company,
the Company will, except as herein provided, cause all such Warrant
Shares, the record holders of which have so requested registration
thereof, to be included in such registration statement, all to the
extent requisite to permit the sale or other disposition by the
prospective seller or sellers of the Warrant Shares to be so
registered; provided, however, that (a) all such Warrant Shares to be
so registered shall be converted into Common Stock prior to sale
pursuant to such registration statement; (b) nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it; and (c) if the Company determines not to
proceed with a registration after the registration statement has been
filed with the Commission and the Company's decision not to proceed is
primarily based upon the anticipated public offering price of the
securities to be sold by the Company, the Company shall promptly
complete the registration for the benefit of those selling security
holders who wish to proceed with a public offering of their securities
and who bear all expenses in excess of $25,000 incurred by the Company
as the result of such registration after the Company has decided not to
proceed. If any registration pursuant to this Section shall be
underwritten in whole or in part, the Company may require that the
Warrant Shares requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. If in the
good faith judgment of the managing underwriter of such public offering
the inclusion of all of the Warrant Shares originally covered by a
request for registration would reduce the number of shares to be
offered by the Company or interfere with the successful marketing
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of the shares of stock offered by the Company, the number of Warrant
Shares otherwise to be included in the underwritten public offering may
be reduced pro rata among the holders thereof requesting such
registration to a number that the managing underwriter believes will
not adversely affect the sale of shares by the Company. Those
securities which are thus excluded from the underwritten public
offering, and any other Common Stock owned by such holders, shall be
withheld from the market by the holders thereof for a period, not to
exceed one hundred eighty (180) days, which the managing underwriter
reasonably determines is necessary in order to effect the underwritten
public offering.
(c) Registration Procedures. If and whenever the Company is
required by the provisions of Sections 8(a) or 8(b) to effect the
registration of any Warrant Shares under the Securities Act, the
Company will:
(1) prepare and file with the Commission a
registration statement with respect to such Warrant Shares,
and use its best efforts to cause such registration statement
to become and remain effective for such period as may be
reasonably necessary to effect the sale of such Warrant
Shares, not to exceed three (3) months;
(2) prepare and file with the Commission such
amendments to such registration statement and supplements to
the prospectus contained therein as may be necessary to keep
such registration statement effective for such period as may
be reasonably necessary to effect the sale of such Warrant
Shares, not to exceed three (3) months;
(3) furnish to the security holders participating in
such registration and to the underwriters of the Warrant
Shares being registered such reasonable number of copies of
the registration statement, preliminary prospectus, final
prospectus and such other documents as such security holders
and underwriters may reasonably request in order to facilitate
the public offering of such Warrant Shares;
(4) use its best efforts to register or qualify the
Warrant Shares covered by such registration statement under
such state securities or blue sky laws of such jurisdictions
as such participating holders may reasonably request within
ten (10) days following the original filing of such
registration statement, except that the Company shall not for
any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so
qualified;
(5) notify the security holders participating in such
registration, promptly after it shall receive notice thereof,
of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
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(6) notify such holders promptly of any request by
the Commission for the amending or supplementing of such
registration statement or prospectus or for additional
information;
(7) prepare and file with the Commission, promptly
upon the request of any such holders, any amendments or
supplements to such registration statement or prospectus
which, in the opinion of counsel for such holders (and
concurred in by counsel for the Company), is required under
the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Warrant Shares by such
holder;
(8) prepare and promptly file with the Commission and
promptly notify such holders of the filing of such amendment
or supplement to such registration statement or prospectus as
may be necessary to correct any statements or omissions if, at
the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus
or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not
misleading;
(9) advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness
of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be
issued; and
(10) not file any amendment or supplement to such
registration statement or prospectus to which a majority in
interest of such holders shall have reasonably objected on the
grounds that such amendment or supplement does not comply in
all material respects with the requirements of the Securities
Act or the rules and regulations thereunder, after having been
furnished with a copy thereof at least five (5) business days
prior to the filing thereof, unless in the opinion of counsel
for the Company the filing of such amendment or supplement is
reasonably necessary to protect the Company from any
liabilities under any applicable federal or state law and such
filing will not violate applicable law.
(d) Expenses. With respect to any registration, requested
pursuant to Section 8(a) (except as otherwise provided in such section
with respect to registrations voluntarily terminated at the request of
the requesting security holders) and with respect to each inclusion of
securities in a registration statement pursuant to Section 8(b) (except
as otherwise provided in Section 8(b) with respect to registrations
terminated by the Company), the Company shall bear the following fees,
costs and expenses: all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the
Company, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if the Company and/or selling security
holders are required to bear such fees and disbursements), all internal
Company expenses, the
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premiums and other costs of policies of insurance against liability
arising out of the public offering, and all legal fees and
disbursements and other expenses of complying with state securities or
blue sky laws of any jurisdictions in which the securities to be
offered are to be registered or qualified. Fees and disbursements of
counsel and accountants for the selling security holders, underwriting
discounts and commissions and transfer taxes for selling security
holders and any other expenses incurred by the selling security holders
not expressly included above shall be borne by the selling security
holders.
(e) Copies of Prospectus; Amendments of Prospectus. The
Company will furnish the Warrantholder with a reasonable number of
copies of any prospectus or offering circular and one copy of the
registration statement included in such filings and will amend or
supplement the same as required during the nine (9) month period
following the effective date of the registration statement, provided,
that the expenses of any amendment or supplement made or filed more
than three (3) months after the effective date of the registration
statement, at the request of the Warrantholder, shall be borne by the
Warrantholder.
(f) Conditions of the Company's Obligations. It shall be a
condition of the Company's obligation to register the Warrant Shares
hereunder that the Warrantholder agrees to cooperate with the Company
in the preparation and filing of any such registration statement, or in
its efforts to establish that the proposed sale is exempt under the
Securities Act, as to any proposed distribution. It shall also be a
condition of the Company's obligations under this Agreement that, in
the case of the filing of any registration statement, and to the extent
permissible under the Securities Act, and controlling precedent
thereunder, the Company and the Warrantholder provide
cross-indemnification agreements to each other in customary scope
covering the accuracy and completeness of the information furnished by
each.
9. Notices. Any notice or other document required or permitted to be
given or delivered to the Warrantholder shall be delivered or sent by certified
mail to the Warrantholder at the last address shown on the books of the Company
maintained for the registry and transfer of the Warrants. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered or sent by certified or registered mail to the principal office of the
Company.
10. No Rights as Shareholders; Limitation of Liability. This Warrant
shall not entitle any holder hereof to any of the rights of a shareholder of the
Company. No provisions hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Purchase Price or as a shareholder of the
Company whether such liability is asserted by the Company or by creditors of the
Company.
11. Governing Law. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Minnesota, without regard
to conflicts of laws principles.
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12. Miscellaneous. This Warrant and any provision hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought. The headings in this Warrant are for purposes
of reference only and shall not affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
a duly authorized officer, and to be dated as of the _____ day of October, 1999.
UNITED SHIPPING & TECHNOLOGY, INC.
By: ______________________________
Peter C. Lytle
Chief Executive Officer
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "1933 ACT") OR UNDER THE SECURITIES LAWS OF ANY
OTHER STATE AND MAY NOT BE TRANSFERRED WITHOUT (i) THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT
REGISTRATION UNDER THE 1933 ACT OR THE SECURITIES LAWS OF ANY APPLICABLE STATE;
OR (ii) SUCH REGISTRATION."
ENDORSEMENT FOR SURRENDER OF WARRANT:
_________________________________
State of ________________)
) ss.
County of _______________)
Subscribed to before me this __________ day of
___________, _____, by _____________________.
________________________________
(Notary Public)
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FULL SUBSCRIPTION FORM
To Be Executed By the Registered Warrantholder if It/
She/He Desires to Exercise in Full the Within Warrant
The undersigned hereby exercises the right to purchase the
_____________ shares of Common Stock covered by the within Warrant at the date
of this subscription and herewith makes payment of the sum of
$____________________________ representing the Purchase Price of $__________ per
share in effect at that date. Certificates for such shares shall be issued in
the name of and delivered to the undersigned, unless otherwise specified by
written instructions, signed by the undersigned and accompanying this
subscription.
Dated:________________________________
Signature: _____________________
Address:
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PARTIAL SUBSCRIPTION FORM
To be Executed by the Registered Warrantholder if It/She/He
Desires to Exercise in Part Only the Within Warrant
The undersigned hereby exercises the right to purchase __________
shares of the total shares of Common Stock covered by the within Warrant at the
date of this subscription and herewith makes payment of the sum of $____________
representing the Purchase Price of $_________ per share in effect at this date.
Certificates for such shares and a new Warrant of like tenor and date
for the balance of the shares not subscribed for (if any) shall be issued in the
name of and delivered to the undersigned, unless otherwise specified by written
instructions, signed by the undersigned and accompanying this subscription.
The shares hereby subscribed for constitute ______________ shares of
Common Stock (to the nearest whole share) resulting from adjustment of
______________ shares of the total of __________________ shares of Common Stock
covered by the within Warrant, as said shares were constituted at the date of
the Warrant.
Dated:__________________________
Signature: ________________________
Address:
11
EXHIBIT 10.17
GUARANTY
This GUARANTY (this "Guaranty"), dated as of September ___,
1999, by and among UNITED SHIPPING & TECHNOLOGY, INC., a Utah corporation
("Guarantor"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation,
individually and as agent (in such capacity, "Agent") for itself and the lenders
from time to time signatory to the Credit Agreement, as hereinafter defined
("Lenders").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of
the date hereof by and among UST Delivery Systems, Inc., a Delaware corporation
formerly known as Corporate Express Delivery Systems, Inc. ("Borrower"), the
Persons named therein as Credit Parties, Agent and the Persons signatory thereto
from time to time as Lenders (as from time to time amended, restated,
supplemented or otherwise modified, the "Credit Agreement") Lenders have agreed
to make Loans to Borrower.
WHEREAS, Guarantor owns all of the issued and outstanding
capital stock of Borrower, and as such will derive direct and indirect economic
benefits from the making of the Loans and other financial accommodations
provided to Borrower pursuant to the Credit Agreement; and
WHEREAS, in order to induce Agent and Lenders to enter into
the Credit Agreement and other Loan Documents and to induce Lenders to make the
Loans as provided for in the Credit Agreement, Guarantor has agreed to guarantee
payment of the Obligations;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce Lenders to provide the Loans and
other financial accommodations under the Credit Agreement, it is agreed as
follows:
1. DEFINITIONS.
Capitalized terms used herein shall have the meanings assigned
to them in the Credit Agreement, unless otherwise defined herein.
References to this "Guaranty" shall mean this Guaranty,
including all amendments, modifications and supplements and any annexes,
exhibits and schedules to any of the foregoing, and shall refer to this Guaranty
as the same may be in effect at the time such reference becomes operative.
<PAGE>
2. THE GUARANTY.
2.1. Guaranty of Guaranteed Obligations of Borrower. Guarantor
hereby unconditionally guarantees to Agent and Lenders, and their respective
successors, endorsees, transferees and assigns, the prompt payment when due
(whether at stated maturity, by acceleration or otherwise) and performance of
the Obligations of Borrower (hereinafter the "Guaranteed Obligations").
Guarantor agrees that this Guaranty is a guaranty of payment and performance and
not of collection, and that its obligations under this Guaranty shall be
primary, absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or
any future amendment of, or change in this Guaranty, any other Loan
Document or any other agreement, document or instrument to which any
Credit Party and/or Guarantor is or may become a party;
(b) the absence of any action to enforce this Guaranty or any
other Loan Document or the waiver or consent by Agent and/or Lenders
with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to
perfect Agent's Lien against, any Collateral for the Guaranteed
Obligations or any action, or the absence of any action, by Agent in
respect thereof (including, without limitation, the release of any such
security); or
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor,
it being agreed by Guarantor that its obligations under this Guaranty shall not
be discharged until the Termination Date. Guarantor shall be regarded, and shall
be in the same position, as principal debtor with respect to the Guaranteed
Obligations. Guarantor agrees that any notice or directive given at any time to
Agent which is inconsistent with the waiver in the immediately preceding
sentence shall be null and void and may be ignored by Agent and Lenders, and, in
addition, may not be pleaded or introduced as evidence in any litigation
relating to this Guaranty for the reason that such pleading or introduction
would be at variance with the written terms of this Guaranty, unless Agent and
Lenders have specifically agreed otherwise in writing. It is agreed among
Guarantor, Agent and Lenders that the foregoing waivers are of the essence of
the transaction contemplated by the Loan Documents and that, but for this
Guaranty and such waivers, Agent and Lenders would decline to enter into the
Credit Agreement.
2.2. Demand by Agent or Lenders. In addition to the terms of
the Guaranty set forth in Section 2.1 hereof, and in no manner imposing any
limitation on such terms, it is
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expressly understood and agreed that, if, at any time, the outstanding principal
amount of the Guaranteed Obligations under the Credit Agreement (including all
accrued interest thereon) is declared to be immediately due and payable, then
Guarantor shall, without demand, pay to the holders of the Guaranteed
Obligations the entire outstanding Guaranteed Obligations due and owing to such
holders. Payment by Guarantor shall be made to Agent in immediately available
funds to an account, designated by Agent or at the address set forth herein for
the giving of notice to Agent or at any other address that may be specified in
writing from time to time by Agent, and shall be credited and applied to the
Guaranteed Obligations.
2.3. Enforcement of Guaranty. In no event shall Agent have any
obligation (although it is entitled, at its option) to proceed against Borrower
or any other Credit Party or any Collateral pledged to secure Guaranteed
Obligations before seeking satisfaction from Guarantor, and Agent may proceed,
prior or subsequent to, or simultaneously with, the enforcement of Agent's
rights hereunder, to exercise any right or remedy which it may have against any
Collateral, as a result of any Lien it may have as security for all or any
portion of the Guaranteed Obligations.
2.4. Waiver. In addition to the waivers contained in Section
2.1 hereof, Guarantor waives and agrees that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage of,
any appraisal, valuation, stay, extension, marshaling of assets or redemption
laws, or exemption, whether now or at any time hereafter in force, which may
delay, prevent or otherwise affect the performance by Guarantor of its
Guaranteed Obligations under, or the enforcement by Agent or Lenders of, this
Guaranty. Guarantor hereby waives diligence, presentment and demand (whether for
non-payment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Guaranteed Obligations, acceptance of further security,
release of further security, composition or agreement arrived at as to the
amount of, or the terms of, the Guaranteed Obligations, notice of adverse change
in Borrower's financial condition or any other fact which might increase the
risk to Guarantor) with respect to any of the Guaranteed Obligations or all
other demands whatsoever and waives the benefit of all provisions of law which
are or might be in conflict with the terms of this Guaranty. Guarantor
represents, warrants and agrees that, as of the date of this Guaranty, its
obligations under this Guaranty are not subject to any offsets or defenses
against Agent or Lenders or any Credit Party of any kind. Guarantor further
agrees that its obligations under this Guaranty shall not be subject to any
counterclaims, offsets or defenses against Agent or any Lender or against any
Credit Party of any kind which may arise in the future.
2.5. Benefit of Guaranty. The provisions of this Guaranty are
for the benefit of Agent and Lenders and their respective successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between any Credit Party and Agent or Lenders, the obligations of any Credit
Party under the Loan Documents. In the event all or any part of the Guaranteed
Obligations are transferred, indorsed or assigned by Agent or any
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<PAGE>
Lender to any Person or Persons, any reference to "Agent" or "Lender" herein
shall be deemed to refer equally to such Person or Persons.
2.6. Modification of Guaranteed Obligations, Etc. Guarantor
hereby acknowledges and agrees that Agent and Lenders may at any time or from
time to time, with or without the consent of, or notice to, Guarantor:
(a) change or extend the manner, place or terms of payment of,
or renew or alter all or any portion of, the Guaranteed Obligations;
(b) take any action under or in respect of the Loan Documents
in the exercise of any remedy, power or privilege contained therein or
available to it at law, equity or otherwise, or waive or refrain from
exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Loan
Documents;
(d) extend or waive the time for any Credit Party's
performance of, or compliance with, any term, covenant or agreement on
its part to be performed or observed under the Loan Documents, or waive
such performance or compliance or consent to a failure of, or departure
from, such performance or compliance;
(e) take and hold Collateral for the payment of the Guaranteed
Obligations guaranteed hereby or sell, exchange, release, dispose of,
or otherwise deal with, any property pledged, mortgaged or conveyed, or
in which Agent or Lenders have been granted a Lien, to secure any
Obligations;
(f) release anyone who may be liable in any manner for the
payment of any amounts owed by Guarantor or any Credit Party to Agent
or any Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of
Guarantor or any Credit Party are subordinated to the claims of Agent
and Lenders; and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by Guarantor or any Credit Party to Agent or any Lender
in such manner as Agent or any Lender shall determine in its
discretion;
and Agent and Lenders shall not incur any liability to Guarantor as a result
thereof, and no such action shall impair or release the Guaranteed Obligations
of Guarantor under this Guaranty.
-4-
<PAGE>
2.7. Reinstatement. This Guaranty shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Credit Party or Guarantor for liquidation or reorganization, should
any Credit Party or Guarantor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of such Credit Party's or Guarantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Guaranteed Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by Agent or any Lender, whether as a "voidable preference",
"fraudulent conveyance", or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Guaranteed Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
2.8. Deferral of Subrogation, Etc. Notwithstanding anything to
the contrary in this Guaranty, or in any other Loan Document, Guarantor hereby:
(a) expressly and irrevocably waives, on behalf of itself and
its successors and assigns (including any surety) until the Termination
Date, any and all rights at law or in equity to subrogation, to
reimbursement, to exoneration, to contribution, to indemnification, to
set off or to any other rights that could accrue to a surety against a
principal, to a guarantor against a principal, to a guarantor against a
maker or obligor, to an accommodation party against the party
accommodated, to a holder or transferee against a maker, or to the
holder of any claim against any Person, and which Guarantor may have or
hereafter acquire against any Credit Party in connection with or as a
result of Guarantor's execution, delivery and/or performance of this
Guaranty, or any other documents to which Guarantor is a party or
otherwise; and
(b) acknowledges and agrees (i) that this waiver is intended
to benefit Agent and Lenders and shall not limit or otherwise effect
Guarantor's liability hereunder or the enforceability of this Guaranty,
and (ii) that Agent, Lenders and their respective successors and
assigns are intended third party beneficiaries of the waivers and
agreements set forth in this Section 2.8 and their rights under this
Section 2.8 shall survive payment in full of the Guaranteed
Obligations.
2.9. Election of Remedies. If Agent may, under applicable law,
proceed to realize benefits under any of the Loan Documents giving Agent and
Lenders a Lien upon any Collateral owned by any Credit Party, either by judicial
foreclosure or by non-judicial sale or enforcement, Agent may, at its sole
option, determine which of such remedies or rights it may pursue without
affecting any of such rights and remedies under this Guaranty. If, in the
exercise of any of its rights and remedies, Agent shall forfeit any of its
rights or remedies,
-5-
<PAGE>
including its right to enter a deficiency judgment against any Credit Party,
whether because of any applicable laws pertaining to "election of remedies" or
the like, Guarantor hereby consents to such action by Agent and waives any claim
based upon such action, even if such action by Agent shall result in a full or
partial loss of any rights of subrogation which Guarantor might otherwise have
had but for such action by Agent. Any election of remedies which results in the
denial or impairment of the right of Agent to seek a deficiency judgment against
any Credit Party shall not impair Guarantor's obligation to pay the full amount
of the Guaranteed Obligations. In the event Agent shall bid at any foreclosure
or trustee's sale or at any private sale permitted by law or the Loan Documents,
Agent may bid all or less than the amount of the Guaranteed Obligations and the
amount of such bid need not be paid by Agent but shall be credited against the
Guaranteed Obligations. The amount of the successful bid at any such sale shall
be conclusively deemed to be the fair market value of the collateral and the
difference between such bid amount and the remaining balance of the Guaranteed
Obligations shall be conclusively deemed to be the amount of the Guaranteed
Obligations guaranteed under this Guaranty, notwithstanding that any present or
future law or court decision or ruling may have the effect of reducing the
amount of any deficiency claim to which Agent and Lenders might otherwise be
entitled but for such bidding at any such sale.
2.10. Funds Transfers. If Guarantor shall engage in any
transaction as a result of which Borrower is required to make a mandatory
prepayment with respect to the Guaranteed Obligations under the terms of the
Credit Agreement (including any issuance or sale of Guarantor's Stock or any
sale of its assets), Guarantor shall distribute to, or make a contribution to
the capital of, the Borrower, in an amount equal to the mandatory prepayment
required under the terms of the Credit Agreement.
3. DELIVERIES.
In a form satisfactory to Agent, Guarantor shall deliver to
Agent (with sufficient copies for each Lender), concurrently with the execution
of this Guaranty and the Credit Agreement, the Loan Documents and other
instruments, certificates and documents as are required to be delivered by
Guarantor to Agent under the Credit Agreement.
4. REPRESENTATIONS AND WARRANTIES.
To induce Lenders to make the Loans under the Credit
Agreement, Guarantor makes the representations and warranties as to Guarantor
contained in the Credit Agreement, each of which is incorporated herein by
reference, and the following representations and warranties to Agent and each
Lender, each and all of which shall survive the execution and delivery of this
Guaranty:
4.1. Corporate Existence; Compliance with Law. Guarantor (i)
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation; (ii) is duly qualified to do business
and is in good standing under the laws of each jurisdiction where its ownership
or lease of property or the conduct of
-6-
<PAGE>
its business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect; (iii) has the requisite
corporate power and authority and the legal right to own, pledge and mortgage
its properties; (iv) has all licenses, permits, consents or approvals from or
by, and has made all material filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct, except where the failure to possess or obtain
any such license, permit, consent or appraisal, or to make any such filing,
would not cause a Material Adverse Effect; (v) is in compliance with its charter
and by-laws; and (vi) is in compliance with all applicable provisions of law,
except where the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
4.2. Executive Offices. Guarantor's executive office and
principal place of business are as set forth in Schedule 4.2 hereto.
4.3. Corporate Power; Authorization; Enforceable Guaranteed
Obligations. The execution, delivery and performance of this Guaranty and all
other Loan Documents and all instruments and documents to be delivered by
Guarantor hereunder and under the Credit Agreement are within Guarantor's
corporate power, have been duly authorized by all necessary or proper corporate
action, including the consent of stockholders where required, are not in
contravention of any provision of Guarantor's charter or by-laws, do not violate
any law or regulation, or any order or decree of any Governmental Authority, do
not conflict with or result in the breach of, or constitute a default under, or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Guarantor is a party or by which Guarantor or any of its property is
bound, except for any conflict or breach which does not cause a Material Adverse
Effect, do not result in the creation or imposition of any Lien upon any of the
property of Guarantor, other than those in favor of Agent, for itself and the
benefit of Lenders, and the same do not require the consent or approval of any
Governmental Authority or any other Person except those referred to in Section
2.1(c) of the Credit Agreement, all of which have been duly obtained, made or
complied with prior to the Closing Date. On or prior to the Closing Date, this
Guaranty and each of the Loan Documents to which Guarantor is a party shall have
been duly executed and delivered for the benefit of or on behalf of Guarantor,
and each shall then constitute a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, fraudulent transfer or other similar laws affecting creditors'
rights generally or by principles governing the availability of equitable
remedies.
5. FURTHER ASSURANCES.
Guarantor agrees, upon the written request of Agent or any
Lender, to execute and deliver to Agent or such Lender, from time to time, any
additional instruments or documents reasonably considered necessary by Agent or
such Lender to cause this Guaranty to be, become or remain valid and effective
in accordance with its terms.
-7-
<PAGE>
6. PAYMENTS FREE AND CLEAR OF TAXES.
All payments required to be made by Guarantor hereunder shall
be made to Agent and Lenders free and clear of, and without deduction for, any
and all present and future Taxes. If Guarantor shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder, (a) the sum
payable shall be increased as much as shall be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 6) Agent or Lenders, as applicable, receive an amount
equal to the sum they would have received had no such deductions been made, (b)
Guarantor shall make such deductions, and (c) Guarantor shall pay the full
amount deducted to the relevant taxing or other authority in accordance with
applicable law. Within thirty (30) days after the date of any payment of Taxes,
Guarantor shall furnish to Agent the original or a certified copy of a receipt
evidencing payment thereof. Guarantor shall indemnify and, within ten (10) days
of demand therefor, pay Agent and each Lender for the full amount of Taxes
(including any Taxes imposed by any jurisdiction on amounts payable under this
Section 6) paid by Agent or such Lender, as appropriate, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted.
7. OTHER TERMS.
7.1. Entire Agreement. This Guaranty, together with the other
Loan Documents, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements
relating to a guaranty of the loans and advances under the Loan Documents and/or
the Guaranteed Obligations.
7.2. Headings. The headings in this Guaranty are for
convenience of reference only and are not part of the substance of this
Guaranty.
7.3. Severability. Whenever possible, each provision of this
Guaranty shall be interpreted in such a manner to be effective and valid under
applicable law, but if any provision of this Guaranty 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 of this Guaranty.
7.4. Notices. Whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other party, or
whenever any of the parties desires to give or serve upon another any such
communication with respect to this Guaranty, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
shall be addressed to the party to be notified as follows:
(a) If to Agent, at:
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<PAGE>
General Electric Capital Corporation
10 South LaSalle Street, Suite 2800
Chicago, Illinois 60603
Attention: UST Delivery Systems Account Manager
Telecopy Number: (312) 419-5957
With copies to:
Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz
55 East Monroe, Suite 3700
Chicago, IL 60603
Attention: Gary Zussman, Esq.
Telecopy Number: (312) 332-2196
(b) If to any Lender, at the address of such Lender specified
in the Credit Agreement or any Assignment Agreement.
(c) If to Guarantor, at the address of Guarantor specified on
Schedule 4.2 hereto.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been validly served, given or delivered (i) upon the earlier of actual
receipt and five (5) Business Days after the same shall have been deposited with
the United States mail, registered or certified mail, return receipt requested,
with proper postage prepaid, (ii) upon transmission, when sent by telecopy or
other similar facsimile transmission (with such telecopy or facsimile promptly
confirmed by delivery of a copy by personal delivery or United States mail as
otherwise provided in this Section 7.4), (iii) one (1) Business Day after
deposit with a reputable overnight carrier with all charges prepaid, or (iv)
when delivered, if hand-delivered by messenger.
7.5. Successors and Assigns. This Guaranty and all obligations
of Guarantor hereunder shall be binding upon the successors and assigns of
Guarantor (including a debtor-in-possession on behalf of Guarantor) and shall,
together with the rights and remedies of Agent, for itself and for the benefit
of Lenders, hereunder, inure to the benefit of Agent and Lenders, all future
holders of any instrument evidencing any of the Obligations and their respective
successors and assigns. No sales of participations, other sales, assignments,
transfers or other dispositions of any agreement governing or instrument
evidencing the Obligations or any portion thereof or interest therein shall in
any manner affect the rights of Agent and Lenders hereunder. Guarantor may not
assign, sell, hypothecate or otherwise transfer any interest in or obligation
under this Guaranty.
-9-
<PAGE>
7.6. No Waiver; Cumulative Remedies; Amendments. Neither Agent
nor any Lender shall by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder, and no waiver shall be valid
unless in writing, signed by Agent and then only to the extent therein set
forth. A waiver by Agent, for itself and the ratable benefit of Lenders, of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent or any
Lender, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Guaranty may be waived, altered, modified,
supplemented or amended except by an instrument in writing, duly executed by
Agent and Guarantor.
7.7. Termination. This Guaranty is a continuing guaranty and
shall remain in full force and effect until the Termination Date. Upon payment
and performance in full of the Guaranteed Obligations, Agent shall deliver to
Guarantor such documents as Guarantor may reasonably request to evidence such
termination.
7.8. Counterparts. This Guaranty may be executed in any number
of counterparts, each of which shall collectively and separately constitute one
and the same agreement.
8. SECURITY.
To secure payment of Guarantor's obligations under this
Guaranty, concurrently with the execution of this Guaranty, Guarantor has
entered into a Pledge Agreement pursuant to which Guarantor has pledged all of
the Stock of Borrower to Agent, for the benefit of Lenders.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Guaranty as of the date first above written.
UNITED SHIPPING & TECHNOLOGY, INC.
By___________________________________________________
Name_________________________________________________
Title________________________________________________
GENERAL ELECTRIC CAPITAL CORPORATION, as Agent
By___________________________________________________
Name_________________________________________________
Title________________________________________________
-11-
<PAGE>
SCHEDULE 4.2
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001002902
<NAME> UNITED SHIPPING & TECHNOLOGIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-01-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> OCT-02-1999
<CASH> 4,084,000
<SECURITIES> 0
<RECEIVABLES> 66,642,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 75,977,000
<PP&E> 19,869,000
<DEPRECIATION> (1,479,000)
<TOTAL-ASSETS> 132,688,000
<CURRENT-LIABILITIES> 78,299,000
<BONDS> 0
0
0
<COMMON> 46,000
<OTHER-SE> 19,324,000
<TOTAL-LIABILITY-AND-EQUITY> 132,688,000
<SALES> 53,724,000
<TOTAL-REVENUES> 53,724,000
<CGS> 42,439,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,764,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 188,000
<INCOME-PRETAX> (1,616,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,616,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,616,000)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
