SCHEDULE 14A INFORMATION
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) 14a-12 or Rule
COMMISSION FILE NO. 0-28452
UNITED SHIPPING & TECHNOLOGY, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ______
(2) Aggregate number of securities to which transaction applies: _________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): ___________
(4) Proposed maximum aggregate value of transaction: _____________________
(5) Total fee paid: ______________________________________________________
[ ] Fee paid previously with preliminary materials: ___________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid: ______________________________________________
(2) Form, Schedule or Registration Statement no.: ________________________
(3) Filing Party: ________________________________________________________
(4) Date Filed: __________________________________________________________
<PAGE>
UNITED SHIPPING & TECHNOLOGY, INC.
9850 51ST AVENUE NORTH, SUITE 110
MINNEAPOLIS, MINNESOTA 55442
December 22, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of
Shareholders of United Shipping & Technology, Inc. (the "Company") to be held at
The Northland Inn, 7025 Northland Drive, Brooklyn Park, Minnesota, on Friday,
January 19, 2001, at 3:00 p.m. Minneapolis time.
At the Annual Meeting you will be asked to vote for the election of
eight directors. Seven directors will be elected by the holders of all of the
Company's voting securities, voting together as a single class. One director
will be elected by the holders of the Company's Series B Preferred Stock, voting
as a separate class. All of these nominees are currently directors and, I
strongly believe, represent a cohesive team and are moving the Company in the
right direction. We are also asking you to approve amendments to our 1996
Director Stock Option Plan. We believe that the amendments are necessary in
order to attract independent directors and give the current directors an
incentive to remain with us. We are also asking you to ratify our decision to
appoint Ernst & Young LLP as the Company's independent public accountants for
the fiscal year ended June 30, 2001.
Whether or not you are able to attend the meeting in person, I urge you
to sign and date the enclosed proxy card and return it in the enclosed envelope.
If you do attend the meeting in person, you may withdraw your proxy and vote
personally on any matters properly brought before the meeting.
Sincerely,
UNITED SHIPPING & TECHNOLOGY, INC.
/s/ Peter C. Lytle
Peter C. Lytle
President and Chief Executive Officer
<PAGE>
UNITED SHIPPING & TECHNOLOGY, INC.
9850 51ST AVENUE NORTH, SUITE 110
MINNEAPOLIS, MINNESOTA 55442
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, JANUARY 19, 2001
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders of
United Shipping & Technology, Inc. (the "Company"), a Utah corporation, will be
held at The Northland Inn, 7025 Northland Drive, Brooklyn Park, Minnesota, on
Friday, January 19, 2001, at 3:00 p.m. Minneapolis time, and at any adjournment
or postponement thereof, for the following purposes, as more fully described in
the accompanying Proxy Statement:
1. To elect eight directors for the ensuing year and until their successors
are duly elected and qualified;
2. To consider and vote upon amendments to the Company's 1996 Director Stock
Option Plan, including an amendment to increase the number of shares for
which options may be granted under such plan from 210,000 to 600,000
shares;
3. To ratify the appointment of Ernst & Young LLP, independent certified
public accountants, as auditors of the Company for its fiscal year ending
June 30, 2001; and
4. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
Only shareholders of record holding Common Stock, Series B Convertible
Preferred Stock or Series C Convertible Preferred Stock at the close of business
on November 29, 2000, are entitled to receive notice of, and to vote at, the
Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Kenneth D. Zigrino
Kenneth D. Zigrino
Secretary
Minneapolis, Minnesota
December 22, 2000
--------------------------------------------------------------------------------
ALL SHAREHOLDERS ARE CORDIALLY INVITED AND REQUESTED TO ATTEND THE ANNUAL
MEETING IN PERSON. SHAREHOLDERS WHO ARE UNABLE TO ATTEND IN PERSON ARE REQUESTED
TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY EXACTLY AS YOUR NAME APPEARS
THEREON AND PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. YOUR PROXY IS BEING SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY. YOUR ATTENDANCE AT THE ANNUAL MEETING,
WHETHER IN PERSON OR BY PROXY, IS IMPORTANT TO ENSURE A QUORUM. IF YOU RETURN
YOUR PROXY, YOU STILL MAY VOTE YOUR SHARES IN PERSON BY GIVING WRITTEN NOTICE
(BY SUBSEQUENT PROXY OR OTHERWISE) TO THE SECRETARY OF THE COMPANY AT ANY TIME
PRIOR TO THE VOTE AT THE ANNUAL MEETING.
--------------------------------------------------------------------------------
<PAGE>
UNITED SHIPPING & TECHNOLOGY, INC.
9850 51ST AVENUE NORTH, SUITE 110
MINNEAPOLIS, MINNESOTA 55442
-------------------
PROXY STATEMENT FOR
2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 19, 2001
------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board of Directors" or the "Board")
of United Shipping & Technology, Inc. (the "Company"), to be voted at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at The Northland Inn,
7025 Northland Drive, Brooklyn Park, Minnesota, on Friday, January 19, 2001, at
3:00 p.m. Minneapolis time, and at any adjournment or postponement thereof. The
Notice of Annual Meeting, this Proxy Statement and the enclosed proxy are first
being mailed to shareholders on or about December 22, 2000.
The Board of Directors knows of no business which will be presented at
the Annual Meeting other than the matters referred to in the accompanying Notice
of Meeting. However, if any other matters are properly presented at the Annual
Meeting, it is intended that the persons named in the proxy will vote on such
matters in accordance with their best judgment. If the enclosed proxy is
executed and returned, it nevertheless may be revoked at any time before it has
been voted by a later-dated proxy or a vote in person at the Annual Meeting.
Shares represented by properly executed proxies received on behalf of the
Company will be voted at the Annual Meeting (unless revoked prior to their vote)
in the manner specified therein. If no instructions are specified in a signed
proxy returned to the Company, the shares represented thereby will be voted (i)
FOR the election of the eight director nominees named herein; (ii) FOR the
proposal to adopt the amendments to the Company's 1996 Director Stock Option
Plan, including an amendment to increase the number of shares for which options
may be granted under such plan from 210,000 to 600,000 shares; and (iii) FOR the
appointment of Ernst & Young LLP, independent certified public accountants, as
auditors of the Company for its fiscal year ending June 30, 2001. If any other
matters are properly presented at the Annual Meeting for action, including a
question of adjourning or postponing the Annual Meeting from time to time, the
persons named in the proxies and acting thereunder will have discretion to vote
on such matters in accordance with their best judgement.
RECORD DATE AND OUTSTANDING STOCK
Only holders of the Common Stock, Series B Convertible Preferred Stock
(the "Series B Preferred") or Series C Convertible Preferred Stock (the "Series
C Preferred") of the Company whose names appear of record on the books of the
Company at the close of business on November 29, 2000 (the "Record Date"), are
entitled to receive notice of, and to vote at, the Annual Meeting. On the Record
Date, the voting shares of the Company consisted of 16,639,399 shares of Common
Stock, 2,806,797 shares of Series B Preferred and 2,000,000 shares of Series C
Preferred, each entitled to one vote per share. In addition to the right to vote
on all matters submitted to the shareholders, the Series B Preferred, voting as
a separate class, are entitled to elect one director (the "Series B Director").
<PAGE>
REVOCABILITY OF PROXIES
Any shareholder who executes and returns a proxy may revoke it at any
time before it is voted. Any shareholder who wishes to revoke a proxy can do so
by (i) executing a later-dated proxy relating to the same shares and delivering
it to the Secretary of the Company prior to the vote at the Annual Meeting, (ii)
filing a written notice of revocation bearing a later date than the proxy with
the Secretary of the Company prior to the vote at the Annual Meeting, or (iii)
appearing in person at the Annual Meeting, filing a written notice of revocation
and voting in person the shares to which the proxy relates. Any written notice
or subsequent proxy should be delivered to United Shipping & Technology, Inc.,
9850 51st Avenue North, Suite 110, Minneapolis, Minnesota 55442, Attention:
Kenneth D. Zigrino, Secretary of the Company, or hand-delivered to the Secretary
of the Company prior to the vote at the Annual Meeting.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence, in person or by proxy, of the holders of at least a
majority of the shares of Common Stock, Series B Preferred and Series C
Preferred outstanding and entitled to vote, voting together as a single class,
except as described in the next sentence, is necessary to constitute a quorum
for the transaction of business at the Annual Meeting. For the election of
directors only, the holders of the Series B Preferred, voting separately as a
single class, shall be entitled to elect one director to serve until his
successor is duly elected by the holders of the Series B Preferred or he is
removed from office by the holders of the Series B Preferred. All votes will be
tabulated by the inspector of election for the Annual Meeting, who will
separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
If a properly executed proxy is returned and the shareholder has
abstained from voting on any matter, the shares represented by such proxy will
be considered present at the Annual Meeting for purposes of determining a quorum
and for purposes of calculating the vote, but will not be considered to have
been voted in favor of such matter.
If a properly executed proxy is returned by a broker holding shares in
street name which indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters, such shares will
be considered present at the Annual Meeting for determining a quorum, but will
not be considered to be represented at the Annual Meeting for purposes of
calculating the vote with respect to such matter.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Bylaws of the Company state that the Board shall consist of at
least three but not more than nine persons as determined by the Board or the
Company's shareholders. The Board has set the size of the Board at eight members
and has nominated for election to the Board the eight persons named below. The
shareholders are being requested to elect the eight nominees named below. The
holders of all of the Company's voting securities, voting together as a single
class, are entitled to elect seven directors, exclusive of James G. Brown who
has been designated the Series B Director. Only the holders of the Series B
Preferred, voting separately as a single class, are entitled to elect the Series
B Director. All of the nominees are currently members of the Board.
The persons named in the accompanying proxy will vote for the election
of the below named nominees, unless authority to vote is withheld. Shareholders
do not have cumulative voting rights with respect to the election of directors,
and proxies cannot be voted for a greater number of directors than the number of
nominees named below. The Board is informed that the nominees are willing to
serve as directors; however, if any nominee is unable to serve or for good cause
will not serve, the proxy may be voted for such other person as the proxies
shall, in their discretion, designate, or the Board may reduce the number of
directors to eliminate the vacancy.
2
<PAGE>
NOMINEES FOR ELECTION AS DIRECTOR
The seven nominees receiving the highest number of affirmative votes
from all of the Company's shares entitled to vote at the Annual Meeting shall be
elected to the Board of Directors. The holders of the Series B Preferred, voting
separately as a single class, shall be entitled to elect one director to serve
until his successor is duly elected by the holders of the Series B Preferred or
he is removed from office by the holders of the Series B Preferred. Mr. James G.
Brown has been designated by the holders of the Series B Preferred as the Series
B Director. The following table sets forth certain information regarding the
nominees for election as directors of the Company. All of the directors of the
Company elected at the Annual Meeting will serve for the ensuing year and until
their successors are duly elected and qualified. There are no family
relationships between any director or officer. THE BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THE NOMINEES LISTED BELOW.
NAME AGE POSITION
---- --- --------
Peter C. Lytle 50 Chairman, President, Chief Executive Officer and
Director
Timothy G. Becker 40 Executive Vice President Mergers and Acquisitions
and Director
Marshall T. Masko 42 Vice Chairman and Director
Marlin Rudebusch 52 Director
Timothy L. Traff 42 Director
Ronald G. Olson 59 Director
Peter W. Kooman 45 Director
James G. Brown 36 Director
PETER C. LYTLE. Mr. Lytle became employed by the Company in May 1998
and has served as the Company's Chairman, President, Chief Executive Officer and
a director since June 1998. From March 1998 to May 1998, Mr. Lytle rendered
consulting services to the Company in connection with its strategic
restructuring. Mr. Lytle is a principal with the Business Development Group (the
"BDG") which he co-founded in 1994. The BDG provides turnaround management
services and strategic planning to companies in the United States and Europe.
His responsibilities at the BDG included acting as Chief Executive Officer and
Chairman of Primo Piatto, Inc. during a successful acquisition of the Borden
Pasta Manufacturing business (which was subsequently sold to Dakota Growers
Pasta Company) and acting as Chairman of Pink Business Interiors during a
successful employee buyout and reorganization. From 1986 to 1994, Mr. Lytle was
employed by Land O' Lakes, Inc. in a variety of positions from Vice President of
Advanced Food Sciences to General Manager of Business Development. Prior to that
time he held positions with the Beatrice Companies as a Group Brand Manager, and
Allied International as Vice President of Marketing and Business Development. He
currently is on the board of directors of Humanetics Corporation, Agrotec, Inc.
and Pink Business Interiors, Inc. He is on the board of advisors for the Center
for Advanced Biotechnology in Africa, and Menu Direct, Inc.
TIMOTHY G. BECKER. Mr. Becker is a director of the Company and its
Executive Vice President Mergers and Acquisitions. From June 1998 to November
2000, Mr. Becker was the Company's Chief Financial Officer and Treasurer. From
March 1998 to May 1998, Mr. Becker rendered consulting services to the Company
in connection with its strategic restructuring. Between February 1994 and March
1998, Mr. Becker worked as an independent financial workout consultant for his
own firm, the Becker Group, Ltd., and during this time Mr. Becker served as
Chief Financial Officer of Primo Piatto, Inc. Between February 1992 and February
1994, Mr. Becker was employed as Director of Business Systems for Munsingwear,
Inc. Prior to 1992, Mr. Becker was employed as Senior Manager with Ernst & Young
LLP's Restructuring and
3
<PAGE>
Reorganization Consulting Practice. Mr. Becker has over 16 years of experience
with a variety of companies during periods of financial crisis and rapid change
along with positioning companies and their balance sheets for sale, merger or
acquisitions. Mr. Becker is a Certified Public Accountant and is a member of the
board of directors of the Minnesota Chapter of Turnaround Management
Association.
MARSHALL T. MASKO. Mr. Masko was elected as Vice Chairman and a
director of the Company in June 1998. In addition, Mr. Masko has been retained
as an independent consultant to assist the Company in its marketing efforts. Mr.
Masko is currently the Chief Executive Officer of North American Heritage
Brands, Inc. From April 1996 to February 1998, Mr. Masko served as the Senior
Vice President - Marketing of NordicTrack. From August 1994 to March 1996, he
served as Senior Vice President and General Manager of K-tel, International.
Prior to that, Mr. Masko was Group Vice President - Marketing for NordicTrack
from January 1990 to July 1994. His career experience includes new product
development, brand management, advertising management, direct response
marketing, international marketing, sales and retail marketing, strategic
planning and business development.
MARLIN RUDEBUSCH. Mr. Rudebusch was elected to the Company's Board in
March 1998. Mr. Rudebusch is an independent business consultant. From December
1997 to June 2000, Mr. Rudebusch was the Business Unit Director for Renal
Systems division of Minntech Corporation. Between September 1994 and November
1997 he was the Vice President of Marketing of Nutrition Medical and from 1993
to 1994 was Director of Marketing at AudioScience. He served in various sales
and marketing management positions at Medtronic, Inc. between 1981 to 1993.
TIMOTHY L. TRAFF. Mr. Traff was elected to the Company's Board in
November 2000. Since 1999, Mr. Traff has been the managing partner of Desert
Springs Investments, a private investment firm in Palm Desert, California. Mr.
Traff is the co-founder of USFilter Corporation, the largest water and waste
water treatment company in the world and a Fortune 300 company with annualized
revenues of approximately $5 billion, where he served as the Executive Vice
President Corporate Development from 1990 to 1999.
RONALD G. OLSON. Mr. Olson was elected to the Company's Board in
December 1998. Since March 2000 Mr. Olson has been a consultant to Grow Biz
International, Inc., where he served as President, Chief Executive Officer and a
Director from January 1990 until March 2000. Mr. Olson has also served as
President and Chief Executive Officer of Franchise Business Systems, Inc. since
July 1988.
PETER W. KOOMAN. Mr. Kooman was elected to the Company's Board in
November 1999. Mr. Kooman is a Managing Director of Bayview Capital Group, a
private equity firm in Wayzata, Minnesota. Mr. Kooman joined Bayview Capital
Group in July 1999. Between April 1990, and June 1999, Mr. Kooman served as Vice
President and Chief Investment Officer for Waycrosse, Inc. in Minneapolis,
Minnesota. Between 1984 and 1989, Mr. Kooman held various officer positions with
First Bank Systems, most recently as Vice President of FBS Merchant Bank. Prior
to 1984, Mr. Kooman worked for Fleet Financial Group.
JAMES G. BROWN. Mr. Brown was elected to the Company's Board in July
2000. Mr. Brown is a founder and Managing Director of TH Lee.Putnam Internet
Partners, a $1 billion private equity fund focused exclusively on Internet and
eCommerce companies. Previously, from 1995 to 1999, he served as a Senior Vice
President and Industry Leader of GE Equity where he was responsible for
strategic and financial investments in eCommerce/Internet, consumer services and
media/entertainment companies. Prior to joining GE Equity, Mr. Brown worked with
Lehman Brothers as a Vice President from 1994 to 1995. Before that, he served at
Bain & Co., an international consulting firm, from 1992 to 1994. He began his
career in the media industry, serving two years with A.C. Nielsen in research
and two years with CBS Television Network in marketing. In addition to the
Company, Mr. Brown is a director of HomePoint Corp., FaceTime Communications,
Inc., Prescient Markets, RealPulse.com, Inc. and LN Holdings, Inc.
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held seven meetings during the fiscal year ended
July 1, 2000. Each director attended at least 75% of the total number of
meetings of the Board held during the time the director was on the
4
<PAGE>
Board during the fiscal year ended July 1, 2000 and the total number of meetings
held by all committees of the Board on which he or she served during the fiscal
year ended July 1, 2000. The Board has established Audit and Compensation
committees.
The Audit Committee currently consists of Ronald G. Olson, Peter W.
Kooman and James G. Brown. The Audit Committee is empowered by the Board to
review the financial books and records of the Company in consultation with the
Company's accounting staff and its independent auditors and to review with the
accounting staff and independent auditors any questions raised with respect to
accounting and auditing policy and procedures. Where appropriate, the Audit
Committee also reviews transactions with management involving actual or
potential conflicts of interest. During the fiscal year ended July 1, 2000, the
Audit Committee held one meeting.
The Compensation Committee currently consists of Marlin Rudebusch,
James G. Brown and Peter C. Lytle. The Compensation Committee is authorized by
the Board to establish general levels of compensation for all employees of the
Company, to set the annual salary of each of the executive officers of the
Company, to grant options (other than to those individuals subject to Section
16(a) of the Securities Exchange Act of 1934, as amended, which governs
transactions between an issuer and its officers and directors) and to otherwise
administer the Company's stock option plans, and to review and approve
compensation and benefit plans of the Company. The Compensation Committee did
not meet during the fiscal year ended July 1, 2000
DIRECTOR COMPENSATION
CASH COMPENSATION. The Company has not paid any cash compensation in
the past to a director in his or her capacity as a director and has no present
plan to pay directors' fees.
DIRECTOR STOCK OPTION PLAN. In February 1995, the Company adopted its
1996 Director Stock Option Plan (the "1996 Director Plan"), pursuant to which it
automatically awards each outside director 15,000 shares of Common Stock for
each year of service as a director. The term of each option granted under the
plan is five years and the exercise price per share for stock granted under the
plan is 100% of the fair market value per share on the date on which the
respective option is granted.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid to
or accrued by each of the Company's executive officers receiving in excess of
$100,000 (the "Named Executive Officers") for services rendered to the Company
during the fiscal years ended July 1, 2000, June 30, 1999 and June 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------- -----------------------
FISCAL SECURITIES UNDERLYING
YEAR SALARY BONUS OPTIONS
-------- ----------- ---------- -----------------------
<S> <C> <C> <C> <C>
Peter C. Lytle (1)...................... 2000 $210,929 $105,000 525,000
Chief Executive Officer 1999 $100,000 $0 100,000
1998 $ 16,667 $0 125,000
Timothy G. Becker (2)................... 2000 $215,929 $175,000 525,000
Executive Vice President 1999 $100,000 $0 100,000
Mergers and Acquisitions 1998 $ 16,667 $0 125,000
Kenneth D. Zigrino (3).................. 2000 $ 33,333 $214,288 0
Secretary and Vice President 1999 $100,000 $0 100,000
1998 $ 12,500 $0 125,000
Mark E. Ties (4)........................ 2000 $ 23,702 $0 40,000
Chief Financial Officer
and Treasurer
</TABLE>
----------------------------
(1) Mr. Lytle's employment with the Company began on May 4, 1998. In June
2000, Mr. Lytle was granted a non-statutory stock option to purchase
450,000 shares of Common Stock. Such option is vested as to 400,000
shares, and the remainder vests one year from the date of grant.
(2) Mr. Becker's employment with the Company began on May 4, 1998. In June
2000, Mr. Becker was granted a non-statutory stock option to purchase
450,000 shares of Common Stock. Such option is vested as to 400,000
shares, and the remainder vests one year from the date of grant. From
June 1998 through November 2000, Mr. Becker served as the Company's
Chief Financial Officer and Treasurer. Mr. Becker became the Company's
Executive Vice President Mergers and Acquisitions in November 2000.
(3) Mr. Zigrino's employment with the Company began on May 4, 1998. In
November 1999, Mr. Zigrino entered into a consulting arrangement with
the Company.
(4) Mr. Ties became Vice President Finance of the Company on June 2, 2000.
In June 2000, Mr. Ties was granted an option to purchase 40,000 shares
of Common Stock, which option vests ratably over three years. Mr. Ties
became the Company's Chief Financial Officer and Treasurer in November
2000.
6
<PAGE>
The following tables summarize stock option grants and option exercises
during the fiscal year ended July 1, 2000 to or by the Named Executive Officers
and certain other information relative to such options.
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL OPTIONS
OPTIONS GRANTED TO EMPLOYEES EXERCISE
NAME GRANTED IN FISCAL YEAR PRICE EXPIRATION DATE
------------------------ ----------- -------------------------- ---------- -----------------
<S> <C> <C> <C> <C>
Peter C. Lytle (1) 75,000 2.0% $4.95 11/05/09
450,000 12.2% $10.875 06/01/10
Timothy G. Becker (2) 75,000 2.0% $4.95 11/05/09
450,000 12.2% $10.875 06/01/10
Kenneth D. Zigrino (3) 0 N/A N/A N/A
Mark E. Ties (4) 40,000 1.1% $10.875 06/01/10
</TABLE>
----------------------------
(1) Mr. Lytle's employment with the Company began on May 4, 1998. In June
2000, Mr. Lytle was granted a non-statutory stock option to purchase
450,000 shares of Common Stock. Such option is vested as to 400,000
shares, and the remainder vests one year from the date of grant.
(2) Mr. Becker's employment with the Company began on May 4, 1998. In June
2000, Mr. Becker was granted a non-statutory stock option to purchase
450,000 shares of Common Stock. Such option is vested as to 400,000
shares, and the remainder vests one year from the date of grant. Mr.
Becker served as the Company's Chief Financial Officer and Treasurer.
Mr. Becker became the Company's Executive Vice President Mergers and
Acquisitions in November 2000.
(3) Mr. Zigrino's employment with the Company began on May 4, 1998. In
November 1999, Mr. Zigrino entered into a consulting arrangement with
the Company.
(4) Mr. Ties became Vice President Finance of the Company on June 2, 2000.
In June 2000, Mr. Ties was granted an option to purchase 40,000 shares
of Common Stock, which option vests ratably over three years. Mr. Ties
became the Company's Chief Financial Officer and Treasurer in November
2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS AT FY-END
ACQUIRED ON EXERCISE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE PRICE UNEXERCISABLE UNEXERCISABLE
----------------------- ------------- ---------- ----------------------- -------------------
<S> <C> <C> <C> <C>
Peter C. Lytle (1) -- -- 680,000/70,000 $521,250/$25,000
Timothy G. Becker (2) -- -- 680,000/70,000 $521,250/$25,000
Kenneth D. Zigrino (3) -- -- 225,000/0 $175,000/$0
Mark E. Ties (4) -- -- 0/40,000 $0/$0
</TABLE>
----------------------------
(1) Mr. Lytle's employment with the Company began on May 4, 1998. In June
2000, Mr. Lytle was granted a non-statutory stock option to purchase
450,000 shares of Common Stock. Such option is vested as to 400,000
shares, and the remainder vests one year from the date of grant.
7
<PAGE>
(2) Mr. Becker's employment with the Company began on May 4, 1998. In June
2000, Mr. Becker was granted a non-statutory stock option to purchase
450,000 shares of Common Stock. Such option is vested as to 400,000
shares, and the remainder vests one year from the date of grant. Mr.
Becker served as the Company's Chief Financial Officer and Treasurer.
Mr. Becker became the Company's Executive Vice President Mergers and
Acquisitions in November 2000.
(3) Mr. Zigrino's employment with the Company began on May 4, 1998. In
November 1999, Mr. Zigrino entered into a consulting arrangement with
the Company.
(4) Mr. Ties became Vice President - Finance of the Company on June 2,
2000. In June 2000, Mr. Ties was granted an option to purchase 40,000
shares of Common Stock, which option vests ratably over three years.
Mr. Ties became the Company's Chief Financial Officer and Treasurer in
November 2000.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL AGREEMENTS
The Company has employment contracts and severance agreements, dated
November 5, 1999, in effect with Peter C. Lytle, its Chief Executive Officer,
and Timothy G. Becker, its Executive Vice President Mergers and Acquisitions.
Each agreement sets forth the officer's compensation level and eligibility for
salary increases, bonuses, benefits and option grants under stock option plans.
Pursuant to the agreements, each officer's employment is voluntary and may be
terminated by the Company with two months prior written notice, and by the
officer with six months written notice. If the Company terminates the officer's
employment without cause or upon the happening of other events set forth in his
employment agreement, the officer shall receive an amount equal to his base
salary per month at the end of each of the eighteen months following the date of
his termination. The Company may immediately terminate the officer's employment
for cause upon written notice without any further obligation to the officer.
8
<PAGE>
PROPOSAL NO. 2
TO APPROVE THE AMENDMENTS TO THE 1996 DIRECTOR STOCK OPTION PLAN
GENERAL
The Board of Directors and shareholders previously adopted the
Company's 1996 Director Stock Option Plan (the "1996 Director Plan") and
reserved 100,000 shares of Common Stock for issuance thereunder. At the
Company's 1998 Annual Meeting, the Company's shareholders voted to increase the
number of shares reserved for issuance pursuant to the 1996 Director Plan to
210,000. A general description of the 1996 Director Plan is set forth below, but
such description is qualified in its entirety by reference to the full text of
the 1996 Director Plan.
DESCRIPTION OF THE 1996 DIRECTOR PLAN
PURPOSE. The purpose of the 1996 Director Plan is to attract and retain
the best available individuals to serve as non-employee directors of the
Company, to provide additional incentives to the non-employee directors of the
Company to serve as directors, and to encourage their continued service on the
Board.
TERM. The term of the 1996 Director Plan is ten years; however, the
Board may terminate the 1996 Director Plan at any time, provided that such
termination will not affect options then outstanding.
ADMINISTRATION. The 1996 Director Plan is administered by the
Compensation Committee. The 1996 Director Plan gives broad powers to the
Committee to administer and interpret the 1996 Director Plan, including the
authority to select the fair market value of the Common Stock and to make all
other determinations necessary or advisable for the administration of the 1996
Director Plan.
ELIGIBILITY. Options may be granted only to non-employee directors. All
options are automatically granted in an amount of 15,000 shares upon becoming a
director and 15,000 shares on each anniversary date thereafter.
OPTIONS. When a stock option is granted under the 1996 Director Plan,
the Committee, in its discretion, specifies the exercise price. The exercise
price of a stock option may not be less than 100% of the fair market value of
the Company's Common Stock on the date of grant. On November 29, 2000, the
closing price of the Company's Common Stock as reported on the Nasdaq SmallCap
Market was $3.00. The term of each option is five years. Each option becomes
exercisable in full on the first anniversary of the grant of the option.
Optionees may pay for shares upon exercise of options with cash, certified check
or Common Stock of the Company valued at the stock's then fair market value.
Each option granted under the 1996 Director Plan is nontransferable during the
lifetime of the optionee. On November 29, 2000, there were outstanding options
granted under the 1996 Director Plan to purchase 195,000 shares of Common Stock.
The Committee determines the form of stock option agreements which will
be used for stock options granted under the 1996 Director Plan. Such agreements
govern the right of an optionee to exercise an option upon termination of
employment or affiliation with the Company during the life of an optionee and
following an optionee's death.
AMENDMENT. The Board of Directors may from time to time suspend or
discontinue the 1996 Director Plan or amend it in any respect; provided,
however, that no such revision or amendment shall be made without the approval
of the shareholders if it would: (a) materially modify the eligibility
requirements for participants; (b) increase the maximum aggregate number of
shares of stock which may be issued pursuant to options; (c) reduce the minimum
option price per share, except in accordance with the 1996 Director Plan's
antidilution provisions; (d) extend the period of granting options; or (e)
materially increase in any other way the benefits accruing to optionees.
9
<PAGE>
ANTIDILUTION PROVISIONS. The Board of Directors shall equitably adjust
the maximum number of shares of Common Stock reserved for issuance under the
1996 Director Plan, the number of shares covered by each outstanding option and
the option price per share in the event of stock splits or consolidations, stock
dividends or other transactions in which the Company receives no consideration.
PROPOSED PLAN AMENDMENTS
The Board has approved, subject to shareholder approval, an amendment
to the 1996 Director Plan which would increase the aggregate number of shares of
the Company's Common Stock available under the 1996 Director Plan from 210,000
to 600,000 shares. The Board believes that this increase will advance the
interests of the Company and its shareholders by increasing the proprietary
interest of directors in the Company's long-term success and more closely
aligning the interests of the directors with the Company's shareholders.
The Board has also approved, subject to shareholder approval, an
amendment to the 1996 Director Plan concerning options scheduled to be granted
to certain non-employee directors prior to the date of shareholder approval of
the above-referenced amendment. Because an insufficient number of shares is
available to meet the scheduled option grants for Peter W. Kooman and Ronald G.
Olson on their respective anniversary dates, the proposed amendment to the 1996
Director Plan would grant to each of them, on the date of shareholder approval,
the number of additional options each would have received on his anniversary
date if there had been sufficient shares available under the 1996 Director Plan.
The Board has also approved, subject to shareholder approval, an
amendment to the 1996 Director Plan which would permit the Committee to suspend
or discontinue it at any time and to revise or amend it in any respect;
provided, that no revision or amendment may be made without shareholder approval
that: (i) absent such shareholder approval, would cause Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to become
unavailable with respect to the 1996 Director Plan or (ii) requires shareholder
approval under any rules or regulations of the National Association of
Securities Dealers, Inc. or any exchange that are applicable to the Company. The
Board believes that this amendment will advance the interests of the Company and
its shareholders by more closely aligning the language of the 1996 Director Plan
to the provisions of Section 16 of the Exchange Act.
TAX INFORMATION
NONSTATUTORY STOCK OPTIONS. A participant will not recognize taxable
income upon the grant of a nonstatutory stock option. However, a participant who
exercises a nonstatutory stock option generally will recognize ordinary
compensation income in an amount equal to the excess of the fair market value of
the Common Stock acquired through the exercise of the option ("NSO Stock") on
the exercise date over the exercise price.
WITH RESPECT TO ANY NSO STOCK. A participant will have a tax basis
equal to the exercise price plus any income recognized upon the exercise of the
option. Upon selling NSO Stock, a participant generally will recognize capital
gain or loss in an amount equal to the excess of the sale price of the NSO Stock
over the participant's tax basis in the NSO Stock. This capital gain or loss
will be a long-term gain or loss if the participant has held the NSO Stock for
more than one year prior to the date of the sale, and will be a short-term
capital gain or loss if the participant has held the NSO Stock for a shorter
period.
TAX CONSEQUENCES TO THE COMPANY. The grant of an option under the 1996
Director Plan will have no tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction with respect to any
ordinary compensation income recognized by a participant upon the exercise of an
option under the 1996 Director Plan.
10
<PAGE>
INTEREST OF CERTAIN PERSONS IN PROPOSED AMENDMENTS TO THE 1996 DIRECTOR PLAN
Under the current terms of the 1996 Director Plan, each of the
non-employee directors become entitled to receive an option during fiscal year
2001 for 15,000 shares of Common Stock, said options to be automatically granted
as of the anniversary date of the director's election to the Board. However,
because an insufficient number of shares of Common Stock remained available for
issuance pursuant to options granted under the 1996 Director Plan, Peter W.
Kooman on November 11, 2000 received an option to purchase only 5,000 out of the
15,000 shares he would otherwise have received. On January 11, 2001, the
anniversary date of Ronald G. Olson's election to the Board, he will not receive
his scheduled option to purchase 15,000 shares under the 1996 Director Plan. In
addition, under the current terms of 1996 Director Plan, no shares would be
available for option grants to any other non-employee directors in fiscal 2001
or beyond. If the amendments to the 1996 Director Plan are approved, Peter W.
Kooman will receive an additional option for fiscal year 2001 totaling 10,000
shares of Common Stock, and Ronald G. Olson will receive an option for fiscal
year 2001 totaling 15,000 shares of Common Stock. These options will be granted
on the date of shareholder approval of the proposed amendments. In addition, the
other non-employee directors will receive their scheduled options to purchase
15,000 shares on their respective anniversary dates. See "New Plan Benefits."
NEW PLAN BENEFITS
The following table sets forth the number of additional shares each of
the above-named directors would receive for his option grant for fiscal year
2001 if the amendments to the 1996 Director Plan are approved. Under the current
terms of the 1996 Director Plan, Peter W. Kooman received an option for only
5,000 shares of Common Stock, and Ronald G. Olson will not receive any options,
but if the amendment to the 1996 Director Plan is approved each will receive
options so that each of their grants will total 15,000 shares of Common Stock
for fiscal year 2001. In addition, if the amendments to the 1996 Director Plan
are approved, other non-employee directors will receive their scheduled option
grants for fiscal 2001 and beyond.
1996 DIRECTOR OPTION PLAN
NUMBER OF
NAME AND POSITION DOLLAR VALUE SHARES
----------------- ------------ ------
Peter C. Lytle........................................ $0 0
Chief Executive Officer and Director
Timothy G. Becker..................................... $0 0
Executive Vice President Mergers and Acquisitions
and Director
Kenneth D. Zigrino.................................... $0 0
Vice President and Secretary
Mark E. Ties.......................................... $0 0
Chief Financial Officer and Treasurer
Executive Group....................................... $0 0
Non-Executive Director Group.......................... * 85,000
Non-Executive Officer Employee Group.................. $0 0
------------------
* Indeterminable, fair market value will be determined at the date of the 2000
Annual Meeting.
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares of Common
Stock, Series B Preferred and Series C Preferred, voting together as a single
group, present in person or represented by proxy and entitled to
11
<PAGE>
vote at the Annual Meeting is required to approve the amendments. Abstentions
will be considered shares entitled to vote in the tabulation of votes cast on
the proposal and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved. THE BOARD OF DIRECTORS CONSIDERS THE
AMENDMENTS TO THE 1996 DIRECTOR PLAN TO BE IN THE BEST INTERESTS OF THE COMPANY
AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE FOR THE AMENDMENTS.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP as independent
public accountants for the Company for the fiscal year ending June 30, 2001. A
proposal to ratify such appointment will be presented to the shareholders at the
Annual Meeting. Representatives of Ernst & Young LLP are expected to be present
at the Annual Meeting, will have an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions from
shareholders in attendance.
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares of Common
Stock, Series B Preferred and Series C Preferred, voting together as a single
group, present in person or represented by proxy and entitled to vote at the
Annual Meeting is required to ratify the appointment. Abstentions will be
considered shared entitled to vote in the tabulation of votes cast on the
proposal and will the same effect as negative votes. Broker non-votes are
counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved. THE BOARD OF DIRECTORS RECOMMENDS YOU
VOTE IN FAVOR OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 2001.
12
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
As of November 29, 2000, the Company had issued and outstanding
16,639,399 shares of Common Stock, 2,806,797 shares of Series B Preferred and
2,000,000 shares of Series C Preferred. Each share of Series B Preferred and
Series C Preferred may be converted into one share of Common Stock (in each
case, subject to adjustment to prevent dilution) at any time upon the request of
the holder thereof.
The following table contains certain information known to the Company
regarding beneficial ownership of its Common Stock, Series B Preferred and
Series C Preferred as of November 29, 2000, (i) each person who is known to the
Company to own beneficially more than five percent of the Company's Common
Stock, Series B Preferred and Series C Preferred (ii) each of the Company's
directors, (iii) each Named Executive Officer, and (iv) all current executive
officers and directors as a group. Unless otherwise noted, each person
identified below has sole voting and investment power with respect to such
shares.
NAME AND ADDRESS BENEFICIALLY BENEFICIALLY
OF BENEFICIAL OWNER OWNED (1) OWNED (2)
---------------------------------------------- -------------- --------------
TH Lee.Putnam Internet Partners, L.P. (3)
200 Madison Avenue, Suite 2225
New York, NY 10016............................ 5,231,797 19.6%
Richard and Mabeth Neslund (4)
15210 Wayzata Boulevard
Wayzata, MN 55391............................. 1,948,900 9.1%
Bayview Capital Partners LP (5)
641 East Lake Street, Suite 230
Wayzata, MN 55391............................. 1,507,529 6.6%
Peter C. Lytle (6)............................ 1,076,600 4.8%
Timothy G. Becker (7)......................... 762,502 3.4%
Kenneth D. Zigrino (8)........................ 412,500 1.9%
Marshall T. Masko (9)......................... 376,584 1.7%
Peter W. Kooman (10).......................... 29,865 *
Ronald G. Olson (11).......................... 43,000 *
Marlin Rudebusch (12)......................... 20,000 *
Timothy R. Traff ............................. 14,500 *
Mark E. Ties.................................. 669 *
James G. Brown................................ 0 *
Jeffry J. Parell.............................. 0 *
All directors and officers as
a group (11 persons) (13)..................... 2,736,220 11.6%
----------------------------------
* Represents less than 1%.
13
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
SEC and includes Common Stock or securities convertible into or
exercisable for Common Stock owned by or for, among others, the spouse,
children or certain other relatives of such person as well as other
securities as to which the person has or shares voting or investment
power or has the right to acquire within 60 days of November 29, 2000.
The same shares may be beneficially owned by more than one person.
Unless otherwise indicated, the address for each listed shareholder is
c/o United Shipping & Technology, Inc., 9850 51st Avenue North, Suite
110, Minneapolis, Minnesota 55442. To the Company's knowledge, except
as indicated in the footnotes to this table, the persons named in this
table have sole voting and investment power with respect to all Common
Stock shares.
(2) Percentage of beneficial ownership is based on 16,639,399 shares of
Common Stock, 2,806,797 shares of Series B Preferred and 2,000,000
shares of Series C Preferred outstanding as of November 29, 2000.
Shares issuable pursuant to warrants and stock options are deemed
outstanding for computing the percentage of the holders thereof, but
not for computing the percentage of any other person. Assumes no
issuance of 8,806,394 shares of Common Stock issuable upon exercise of
outstanding employee stock options, director stock options or warrants,
including warrants issued in conjunction with bridge financing
completed by the Company in December 1995 or private placements. Also
assumes no issuance of Common Stock upon exercise of the Common
Warrants or the Series C Warrants issued to TH Li or upon exercise of
warrants granted to broker-dealers in connection with private
placements and a public offering of the Company's securities.
(3) Includes (i) 1,508,861 shares of Common Stock issuable upon conversion
of Series B Preferred owned by TH Lee.Putnam Internet Partners, L.P.
and 1,297,936 shares of Common Stock issuable upon conversion of Series
B Preferred owned by TH Lee.Putnam Internet Parallel Partners, L.P.;
(ii) 1,089,043 shares of Common Stock issuable upon conversion of
Series C Preferred owned by TH Lee.Putnam Internet Partners, L.P.,
825,932 shares of Common Stock issuable upon conversion of Series B
Preferred owned by TH Lee.Putnam Internet Parallel Partners, L.P.,
61,400 shares of Common Stock issuable upon conversion of Series C
Preferred owned by TH Li Coinvestment Partners LLC, and 23,625 shares
of Common Stock issuable upon conversion of Series C Preferred owned by
Blue Star I, LLC; and (iii) 449,494 shares of Common Stock issuable
upon the exercise of warrants to purchase Series C Preferred owned by
TH Lee.Putnam Internet Partners, L.P., 340,897 shares of Common Stock
issuable upon the exercise of warrants to purchase Series B Preferred
owned by TH Lee.Putnam Internet Parallel Partners, L.P., 25,435 shares
of Common Stock issuable upon the exercise of warrants to purchase
Series C Preferred owned by TH Li Coinvestment Partners LLC, and 9,658
shares of Common Stock issuable upon the exercise of warrants to
purchase Series C Preferred owned by Blue Star I, LLC (collectively,
the "Series C Warrants"). Does not include 228,469 shares of Common
Stock purchasable pursuant to warrants to purchase Common Stock owned
by TH Lee.Putnam Internet Partners, L.P. and 196,531 shares of Common
Stock purchasable pursuant to warrants to purchase Common Stock owned
by TH Lee.Putnam Internet Parallel Partners, L.P. (collectively, the
"Common Warrants"). The Common Warrants become exercisable only in the
event and to the extent that 3,000,000 options granted under the
Company's 2000 Stock Option Plan are exercised, on a pro rata basis. TH
Lee.Putnam Internet Parallel Partners, L.P., TH Li Coinvestment
Partners LLC, and Blue Star I, LLC are affiliates of TH Lee Putnam
Internet Partners, L.P. Exercise of the Common Warrants was conditioned
upon satisfaction of the applicable waiting period under the
Hart-Scott-Rodino Improvements Act of 1976, as amended, which waiting
period has expired.
(4) Includes 1,885,567 shares owned directly and 63,333 shares purchasable
pursuant to warrants.
(5) Includes 1,507,529 shares purchasable pursuant to warrants, 28,147
shares of which become exercisable only in the event and to the extent
that 3,000,000 stock options granted under the Company's 2000 Stock
Option Plan are exercised, on a pro rata basis.
(6) Includes 251,600 shares owned directly, 125,000 shares purchasable
pursuant to warrants and 700,000 shares purchasable pursuant to stock
options.
14
<PAGE>
(7) Includes 41,688 shares owned directly, 20,834 shares purchasable
pursuant to warrants and 700,000 shares purchasable pursuant to stock
options.
(8) Includes 125,000 shares owned directly, 62,500 shares purchasable
pursuant to warrants and 225,000 shares purchasable pursuant to stock
options.
(9) Includes 181,584 shares owned directly and 195,000 shares purchasable
pursuant to stock options.
(10) Includes 13,514 shares owned directly, 1,351 shares purchasable
pursuant to warrants, and 15,000 shares purchasable pursuant to stock
options.
(11) Includes 20,000 shares purchasable pursuant to options and 23,000
shares purchasable pursuant to a warrant.
(12) Includes 20,000 shares purchasable pursuant to stock options.
(13) Includes an aggregate of 2,107,685 shares purchasable pursuant to stock
options and warrants.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 22, 2000, the Company completed a sale of shares of its
Series C Convertible Preferred Stock (the "Series C Preferred") and warrants to
purchase additional shares of Series C Preferred to TH Lee.Putnam Internet
Partners, L.P., TH Lee.Putnam Internet Parallel Partners, L.P., THLi
Coinvestment Partners LLC, and Blue Star I, LLC (collectively the "TH Li Funds")
under the terms of a Securities Purchase Agreement (the "Series C Agreement")
that the Company entered into with the TH Li Funds as of September 1, 2000.
Pursuant to the Series C Agreement, the Company sold 2,000,000 shares
of its Series C Preferred to the TH Li Funds, at a price of $6.00 per share, for
a total purchase price of $12,000,000. The Company also issued the TH Li Funds
warrants to purchase a total of 825,484 additional shares of its Series C
Preferred for a period of five years at an exercise price of $0.01 per share
(the "Series C Warrants"). This investment was structured into two tranches. The
first, in the amount of $5,000,000, was made on September 1, 2000 and the
second, in the amount of $7,000,000, was completed on September 22, 2000.
In exchange for the Series C Warrants, the TH Li Funds canceled the
Additional Warrants and the Series B Preferred Warrants, both as described
below. The Additional Warrants were canceled on September 1, 2000. The Series B
Preferred Warrants were canceled on September 22, 2000.
The shares of Series C Preferred are convertible into shares of the
Company's Common Stock (or shares or units of any security into which the Common
Stock is changed) at a conversion rate of 1:1, subject to adjustment to prevent
dilution. The shares of Series C Preferred purchased pursuant to the Series C
Agreement were, as of November 29, 2000, convertible into 2,000,000 shares of
Company Common Stock.
The Company also entered into an Amended and Restated Registration
Rights Agreement with the TH Li Funds dated as of September 1, 2000 (the
"Amended Registration Agreement"). Pursuant to the Amended Registration
Agreement, the previous registration rights agreement between the Company and
two of the TH Li Funds dated May 31, 2000 was canceled. Under the Amended
Registration Agreement, the holders of a majority of (a) the Company's Common
Stock issuable upon the conversion of any shares of Series B Preferred and/or
Series C Preferred issued or issuable to the TH Li Funds pursuant to the Series
B Agreement or Series C Agreement (whether held by the TH Li Funds or any
successors or assigns of the TH Li Funds) and (b) any other shares of the
Company's Common Stock held by the persons referred to in clause (a) may request
up to three long-form registrations of the registrable securities. Each holder
of registrable securities may request an unlimited number of short form
registrations of its registrable securities. The registrable securities enjoy
piggyback registration rights if the Company intends to register its other
securities.
On May 31, 2000, the Company completed a sale of shares of its Series B
Convertible Preferred Stock (the "Series B Preferred") and warrants to purchase
additional shares of Series B Preferred and Common Stock to TH Lee.Putnam
Internet Partners, L.P. and TH Lee.Putnam Internet Parallel Partners, L.P.,
(collectively "TH Lee") under the terms of a Securities Purchase Agreement (the
"Series B Agreement") that the Company entered into with TH Lee as of May 15,
2000.
Pursuant to the Series B Agreement, the Company sold 2,806,797 shares
of its Series B Preferred to TH Lee, at a price of $9.00 per share, for a total
purchase price of $25,261,173. The Company also issued TH Lee warrants to
purchase $30,000,000 of additional shares of its Series B Preferred (the "Series
B Preferred Warrants"). The number of shares purchased is determined by taking
the $30,000,000 and dividing it by the 45-day average closing sales price of the
Company's Common Stock immediately prior to the date of exercise, exercisable at
the above described market price as of the date of exercise. As described above,
the Series B Preferred Warrants were canceled on September 22, 2000.
The Company also issued TH Lee additional warrants to purchase up to an
aggregate of 452,901 shares of Series B Preferred (the "Additional Warrants").
The exercise price for the Additional Warrants was $9.00 per share, subject to
adjustment in order to prevent dilution. As described above, the Additional
Warrants were canceled on September 1, 2000.
16
<PAGE>
The Company also issued TH Lee Common Warrants to purchase up to an
aggregate of 425,000 shares of its Common Stock (the "Common Warrants"). The
Common Warrants become exercisable in the event and to the extent that 3,000,000
options granted under the Company's 2000 Stock Option Plan are exercised, on a
pro rata basis. The exercise price of the Common Warrants is equal to the lowest
exercise price of the initially approved 2000 Stock Option Plan options, subject
to adjustment to prevent dilution. The Common Warrants expire on May 31, 2004.
The shares of Series B Preferred are convertible into shares of the
Company's Common Stock (or shares or units of any security into which the Common
Stock is changed) at a conversion rate of 1:1, subject to adjustment to prevent
dilution. The shares of Series B Preferred purchased pursuant to the Agreement
were, as of November 29, 2000, convertible into 2,806,797 shares of the
Company's Common Stock.
The Company also entered into a registration rights agreement with TH
Lee dated as of May 31, 2000. This registration rights agreement has been
superceded by the Amended Registration Rights Agreement referred to above in
connection with the sale of the Series C Preferred.
In connection with the purchase of Velocity Express, the
Company, Velocity Express and each of its subsidiaries 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
Velocity Express 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 Capital Corporation, Bayview,
the Company, and Velocity Express 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 as originally issued, Bayview had 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.
The Bayview Warrant gives 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"). 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
stock issuable upon exercise of the Bayview Warrant (the "Warrant Stock").
Pursuant to the antidilution rights under the Bayview Warrant, in July
2000, the Company adjusted the exercise price and number of shares issuable
under the Bayview Warrant so that, as of July 7, 2000, the Bayview Warrant gave
Bayview the right to purchase up to 1,457,959 shares of the Company's Common
Stock at an exercise price equal to $3.1041 per share, subject to further
adjustment to prevent dilution. In July 2000, Bayview and the Company entered
into a letter agreement (the "Bayview Letter Agreement") that clarified
Bayview's antidilution and preemptive rights under the Bayview Warrant.
Accordingly, pursuant to Bayview's preemptive rights under Bayview Warrant, as
clarified, in July 2000 the Company issued to Bayview a warrant for the purchase
of 21,423 shares of Common Stock at a purchase price of $10.15 per share. Also
pursuant to said preemptive rights, in May 2000 the Company issued to Bayview an
additional warrant for the purchase of 28,147 shares of Common Stock, which
warrant becomes exercisable in the event and to the extent that 3,000,000
options granted under the Company's 2000 Stock Option Plan are exercised, on a
pro rata basis. The exercise price of this warrant is equal to the lowest
exercise price of the initially approved 2000 Stock Option Plan options, subject
to adjustment to prevent dilution. This warrant is substantially identical to
the terms of the Common Warrants issued to TH Lee in May of 2000.
17
<PAGE>
In addition, under the original Bayview Warrant, Bayview had the right
to require the Company to purchase the Bayview Warrant or the Warrant Stock 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
Bayview Warrant (the "Bayview Put Option"). 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 Bayview Put
Option, 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. The
Company also had the right to repurchase the Bayview Warrant or Warrant Stock at
the Put Exercise Price after the sixth anniversary of the date of the Bayview
Warrant, and upon other conditions as set forth in the Bayview Letter Agreement
(the "Company Put Option"). By a subsequent letter agreement dated September 20,
2000, both Bayview and the Company agreed to amend the Bayview Warrant to remove
the Bayview Put Option and the Company Put Option.
In January 2000, Richard and Mabeth Neslund purchased 666,667 shares
of the Company's Common Stock at a purchase price of $7.50 per share, for a
total purchase price of $5,000,000. In August 1999, the Neslunds purchased
100,000 shares of the Company's Common Stock at a purchase price of $3.50 per
share. On January 13, 1999, the Company sold to the Neslunds a $500,000
principal amount unsecured, 12% note (the "Note"). In connection with the sale
of the Note, the Company issued the Neslunds a five-year warrant for the
purchase of 13,333 shares of Common Stock exercisable at $1.875 per share.
Pursuant to a Note Conversion Agreement dated March 30, 1999, the Neslunds
converted the entire principal amount of the Note into 175,000 shares of Common
Stock and a warrant to purchase 50,000 shares of Common Stock at an exercise
price of $2.00 per share.
In October 1998, Peter C. Lytle, the Company's President and Chief
Executive Officer, was granted an incentive stock option to purchase 100,000
shares of Common Stock. Such option was vested as to 80,000 shares on the date
of grant, and the remainder vested on October 29, 2000, after the end of the
fiscal year ended July 1, 2000. In November 1999, Mr. Lytle was granted a
non-statutory stock option to purchase 75,000 shares of Common Stock, which
option is fully vested. In June 2000, Mr. Lytle was granted a non-statutory
stock option to purchase 450,000 shares of Common Stock. Such option is vested
as to 400,000 shares, and the remainder vests one year from the date of grant.
Beginning in May 1998, Marshall T. Masko, a director of the Company,
provided consulting services to the Company at a rate of $125 per hour. During
1999 Mr. Masko was compensated in Common Stock of the Company having a value of
$99,375; and as of December 1, 2000, Mr. Masko received $45,625 for his work as
a consultant to the Company.
In connection with its acquisition of Velocity Express, Inc., the
Company called the warrants it issued in connection with its sale in April and
June of 1998 of its Series A Preferred. The Company amended the warrants issued
in connection with its Series A Preferred which were purchased by Peter C.
Lytle, Timothy G. Becker, Kenneth D. Zigrino and Susan M. Clemens, each then an
officer or director of the Company. These warrants were amended so as to
eliminate the mandatory call provisions in the warrants, and allow the warrants
owned by the above named individuals to remain exercisable in accordance with
their terms.
On November 1, 1999, Kenneth D. Zigrino, the Company's Vice President
and Secretary, became a consultant to the Company rather than an employee. Mr.
Zigrino provides consulting services to the Company at a rate of $175 per hour.
From November 1, 1999 through December 1, 2000 Mr. Zigrino was paid an aggregate
of $302,138 for his work as a consultant to the Company. Also, in connection
with Mr. Zigrino's becoming a consultant to the Company rather than an employee,
Mr. Zigrino's 100,000 incentive stock options were amended so that they became
fully vested and became nonstatutory stock options.
On January 18, 2000 Peter W. Kooman, a director of the Company,
purchased in a private placement transaction with the Company, 13,514 shares of
Common Stock at a purchase price of $5.025 per share,
18
<PAGE>
together with warrants to purchase 1,351 shares of Common Stock at an exercise
price of $12.50 per share, exercisable for a period of five years.
The Company has employment contracts and severance agreements in effect
with Peter C. Lytle and Timothy G. Becker, both of whom are executive officers
of the Company. The employment contracts and severance agreements are described
in "Executive Compensation."
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers and the holders of 10% or more of
the Company's stock to file with the Securities and Exchange Commission initial
reports of changes in ownership of equity securities of the Company. Based on
the Company's review of copies of such reports received by it, or written
representations from reporting persons, the Company believes that during fiscal
year 2000 its directors and executive officers filed all reports on a timely
basis except as follows: (a) securities ownership reports on Form 4 for Marshall
T. Masko, Marlin Rudebusch, Susan M. Clemens and Ronald G. Olson in connection
with the vesting of previously-granted director options, and (b) securities
ownership reports on Form 3 for James G. Brown, that through inadvertence, were
filed late.
SHAREHOLDER PROPOSALS
If a shareholder of the Company wishes to present a proposal for
consideration for inclusion in the proxy materials for the 2001 Annual Meeting
of Shareholders, the proposal must be sent by certified mail, return receipt
requested, and must be received at the executive offices of the United Shipping
& Technology, Inc., at 9850 51st Avenue North, Suite 110, Minneapolis, Minnesota
55442, Attention: Kenneth D. Zigrino, no later than August 24, 2001. All
proposals must conform to the rules and regulations of the SEC. Under SEC rules,
if a shareholder notifies the Company of his or her intent to present a proposal
for consideration at the 2001 Annual Meeting of Shareholders after November 7,
2001, the Company, acting through the persons named as proxies in the proxy
materials for such meeting, may exercise discretionary authority with respect to
such proposal without including information regarding such proposal in its proxy
materials.
PROXY SOLICITATION
The cost of this solicitation of proxies will be paid by the Company.
Proxies will also be solicited by mail, except that solicitation personally or
by telephone may also be made by the Company's regular employees who will
receive no additional compensation for their services in connection with the
solicitation. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials and the annual report to beneficial owners of stock held by such
persons. The Company will reimburse such parties for their expenses in so doing.
19
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-KSB
A copy of the 2000 Annual Report to Shareholders of the Company
accompanies this Proxy Statement, which 2000 Annual Report includes a copy of
the Company's Annual Report on Form 10-KSB for fiscal year 2000. The Company
will furnish to any person whose proxy is being solicited any exhibit described
in the exhibit list accompanying the 10-KSB, upon payment, in advance, of fees
based upon the Company's reasonable expenses in furnishing such exhibit(s). The
written request should be directed to Shareholder Relations, attention: Kenneth
D. Zigrino, at United Shipping & Technology, Inc., 9850 51st Avenue North, Suite
110, Minneapolis, Minnesota 55442. No part of the 2000 Annual Report to
Shareholders is incorporated herein and no part thereof is to be considered
proxy soliciting material.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Peter C. Lytle
Peter C. Lytle
President and Chief Executive Officer
Minneapolis, Minnesota
December 22, 2000
20
<PAGE>
UNITED SHIPPING & TECHNOLOGY, INC.
9850 51ST AVENUE NORTH, SUITE 110
MINNEAPOLIS, MINNESOTA 55442
(612) 941-4080
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting of
Shareholders and the Proxy Statement, dated December 22, 2000, hereby appoints
Peter C. Lytle and Kenneth D. Zigrino as proxies (each with the power to act
alone and with the power of substitution and revocation), to represent the
undersigned and to vote, as designated below, all shares of Common Stock, Series
B Convertible Preferred Stock and Series C Convertible Preferred Stock of United
Shipping & Technology, Inc. (the "Company") held of record by the undersigned on
November 29, 2000, at the Annual Meeting of Shareholders to be held at The
Northland Inn, 7025 Northland Drive, Brooklyn Park, Minnesota, on Friday,
January 19, 2001, at 3:00 p.m., Minneapolis time, and at any adjournment or
postponement thereof.
1. To elect seven directors for the ensuing year and until their successors
are duly elected and qualified.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed
contrary below) below
PETER C. LYTLE TIMOTHY G. BECKER MARSHALL T. MASKO MARLIN RUDEBUSCH
TIMOTHY L. TRAFF RONALD G. OLSON PETER W. KOOMAN
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
---------------------------------------------------------------------------
(CONTINUED ON THE OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
2. To consider and vote upon amendments to the Company's 1996 Director Stock
Option Plan, including an amendment to increase the number of shares for
which options may be granted under such plan from 210,000 to 600,000
shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Ernst & Young LLP independent certified public
accountants, as auditors of the Company for its fiscal year ending June 30,
2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE
PROXY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3. ABSTENTIONS WILL BE COUNTED TOWARD THE
EXISTENCE OF A QUORUM.
Date _______________________________________
____________________________________________
Please sign exactly as name appears on this
proxy. When shares are held by joint
tenants, only one need sign. If signing as
attorney, executor, administrator, trustee
or guardian, please give full title as such.
If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by an authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
UNITED SHIPPING & TECHNOLOGY, INC.
9850 51ST AVENUE NORTH, SUITE 110
MINNEAPOLIS, MINNESOTA 55442
(612) 941-4080
FOR HOLDERS OF SERIES B PREFERRED STOCK ONLY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting of
Shareholders and the Proxy Statement, dated December 22, 2000, hereby appoints
Peter C. Lytle and Kenneth D. Zigrino as proxies (each with the power to act
alone and with the power of substitution and revocation), to represent the
undersigned and to vote, as designated below, all shares of Series B Convertible
Preferred Stock of United Shipping & Technology, Inc. (the "Company") held of
record by the undersigned on November 29, 2000, at the Annual Meeting of
Shareholders to be held at The Northland Inn, 7025 Northland Drive, Brooklyn
Park, Minnesota, on Friday, January 19, 2001, at 3:00 p.m., Minneapolis time,
and at any adjournment or postponement thereof.
1. To elect one director for the ensuing year and until his successor is duly
elected and qualified.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed
contrary below) below
JAMES G. BROWN.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
---------------------------------------------------------------------------
(CONTINUED ON THE OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE
PROXY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1. ABSTENTIONS WILL BE COUNTED TOWARD THE EXISTENCE OF A
QUORUM.
Date _______________________________________
____________________________________________
____________________________________________
Please sign exactly as name appears on this
proxy. When shares are held by joint
tenants, only one need sign. If signing as
attorney, executor, administrator, trustee
or guardian, please give full title as such.
If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by an authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
