EXHIBIT 10.2
CONVERTIBLE BRIDGE NOTE
$3,500,000
Minneapolis, Minnesota
January 4, 2001
FOR VALUE RECEIVED, United Shipping & Technology, Inc., a Utah
corporation, (the "Company"), promises to pay to the order of TH Xxx.Xxxxxx
Internet Partners, LP, a Delaware limited partnership, TH Xxx.Xxxxxx Internet
Parallel Partners, LP, a Delaware limited partnership, THLi Coinvestment
Partners LLC, a Delaware limited liability company, and Blue Star I, LLC, a
Delaware limited liability company (together, the "Holder"), at Holder's address
specified in the Bridge Loan Agreement of even date, or at such other place as
Holder may designate in writing from time to time, the principal sum of three
million five hundred thousand dollars ($3,500,000), in lawful money of the
United States, together with interest, compounding quarterly from the date
hereof on the unpaid principal balance outstanding from time to time, at the
rate of eighteen percent (18%) per annum (calculated on the basis of the actual
number of days elapsed and a 365-day year). Unless converted pursuant to Section
3 hereof, all outstanding principal and accrued interest on this Note shall be
due and payable on July 4, 2001.
1. Bridge Loan Agreement. This Note has been issued pursuant to and is
subject to the terms and provisions of a Bridge Loan Agreement (the
"Agreement"), dated as of the date hereof, between the Company and the Holder,
and this Note and the Holder are entitled to all the benefits provided for in
the Agreement. The provisions of the Agreement are incorporated herein by
reference with the same force and effect as if fully set forth herein.
2. Conversion. Prior to payment of the principal amount of this Note by
the Company, this Note may be converted as follows:
(a) Conversion at the Option of the Holder. Subject to the
Company having obtained the approval of its shareholders pursuant to
Section 10 of the Agreement, upon written notice to Company at any
time, all or any portion of (i) the principal balance of and accrued
interest on, and (ii) if any Event of Default has occurred, the amount
of the liquidated damages set forth in Section 6(b) hereof in respect
of, this Note may be converted, at the option of the Holder, into
shares of the Company's Series D Convertible Preferred Stock
("Conversion Shares") or, at the Holder's option, any other shares in
the capital of the Company available for issuance.
(b) Conversion Procedure. Upon receipt of a conversion notice
from the Company, or upon notice of conversion by Xxxxxx, Xxxxxx shall
surrender this Note against delivery of the Conversion Shares and
payment of interest on the Note. The Note shall cease to bear interest
on the date notice of conversion is given by the Company or Holder. The
number of shares issuable upon conversion shall be equal to (i) the
quotient of the amount converted, including accrued interest, and (ii)
if an event of default has occurred, the amount of the liquidated
damages set forth in Section 6(b) hereof, divided by the Conversion
Price. As promptly as possible thereafter, the Company shall issue and
deliver to the Holder a certificate representing the number of
Conversion Shares into which this Note has been converted. Thereupon,
this Note, or the portion hereof
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converted, shall be deemed to have been satisfied and discharged, and
the Conversion Shares into which this Note shall be so converted shall
be fully paid and nonassessable shares. In the event a conversion
pursuant to Section 5(a) results in the issuance of a fractional share,
the Holder shall receive, in lieu thereof, cash payment based upon the
Conversion Price. If less than the entire principal balance of this
Note is converted, the Company shall deliver to the Holder a new Note
of like tenor for the unconverted principal balance.
(c) Conversion Price. The Conversion Price shall be the lesser
of: (a) the average market price of the Company's stock as determined
by the average closing price of the Company's Common Stock as reported
by NASDAQ for five trading days prior to such conversion, or (b) a
price 25% lower than the price per share at which the Company's Series
D Convertible Preferred Stock, or the lowest price of any other voting
stock of the Company issued subsequent to such Series D Convertible
Preferred Stock, was last sold to one or more third party investors.
(d) Adjustments. The Conversion Price and the number of shares
into which the Note may be converted shall be appropriately adjusted to
reflect any stock split, stock dividend, merger, reorganization, or
similar action affecting the outstanding stock of the Company.
3. Payment of Interest. Interest shall be payable at maturity or upon
conversion of this Note pursuant to Section 3, if earlier, of this Note in
immediately available funds or, at the Holder's option, in shares of Conversion
Shares converted at the Conversion Price
4. Investment Intent. Neither this Note, the Common Stock of the
Company, the Warrant (the "Warrant") to be issued at the same time as this Note
nor the Conversion Shares issuable upon exercise of the Warrant have been
registered under the Securities Act of 1933, as a amended ("Securities Act"), or
under applicable state securities laws. Other than pursuant to registration
under federal and any applicable state securities laws or an exemption from such
registration, the availability of which the Company shall determine in its sole
discretion, neither this Note nor any Conversion Shares may be sold, pledged, or
otherwise disposed of unless the Company has received from the transferee hereof
such representations and agreements as the Company shall determine in its sole
discretion may be necessary to permit such transfer, and the Company shall
determine that such transfer will not violate applicable securities laws. The
Holder, by acceptance hereof, agrees to give written notice to the Company
before transferring this Note or any Conversion Shares of the Holder's intention
to do so, describing the manner of any proposed transfer. Within 30 days after
receiving written notice, the Company shall notify the Holder as to whether such
transfer may be effected and of the conditions to any such transfer.
5. Event of Default.
(a) Definition. For the purposes of this Note, an Event of
Default shall be deemed to have occurred if:
(i) the Company fails to pay when due and payable
(whether at maturity or otherwise) the full amount of interest
then accrued on any Note or the
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full amount of any principal payment on any Note, and such
failure to pay is not cured within ten business days after the
occurrence thereof; or
(ii) a sale of the Company (and any of its
subsidiaries) occurs, including in one or more series of
related transactions, pursuant to which a third party or
parties acquire (i) a majority of the outstanding capital
stock of the Company (whether by merger, consolidation, sale
or transfer of any or all of the outstanding capital stock of
the Company) or (ii) all or substantially all of the Company's
assets determined on a consolidated basis; or
(iii) any event of default or acceleration occurs or
is deemed to occur under any instrument evidencing or
otherwise securing any debt of the Company and such event of
default continues (whether consecutively or in the aggregate)
for a period of ten business days.
(b) Payment Upon Event of Default. If, while this Note remains
outstanding, any Event of Default (as defined above) occurs, the Holder
shall be entitled to receive immediately upon any such Event of Default
the entire outstanding principal amount of the note plus any accrued
dividends, plus liquidated damages equal to two times the outstanding
principal balance of this Note, plus all accrued and unpaid interest
(if any). The parties hereby acknowledge and agree that the payment of
such liquidated damages is a reasonable calculation of the Holder's
lost profits and damages and is hereby agreed to by the parties in view
of extreme difficulty of ascertaining actual damages by agreement of
the parties at the time of any such Event of Default.
6. Notices. All demands and notices to be given hereunder shall be
delivered or sent by certified mail, return receipt requested; or by courier, in
the case of the Company, to its corporate headquarters at 0000 00xx Xxxxxx
Xxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000, and in the case of the Holder,
addressed to the address provided in the Agreement.
7. Miscellaneous. This Note shall be governed by the law of the State
of New York, without application of conflicts of law principles. This Note shall
be binding upon, and enforceable in accordance with its terms against, the
Company and its successors and assigns.
8. Severability. If at the time of enforcement of this Note, a Court
shall hold that any provision or rate or term stated herein is unreasonable
under the circumstances then existing, the Company agrees that a provision
deemed reasonable by the Court shall be substituted for such provision or rate
or term and the Court shall be allowed to so revise such provision.
9. Subordination. NOTE: any capitalized terms used in this Section and
not otherwise defined in this Note shall have the meaning set forth in the
Senior Credit Agreement.
THE PROVISIONS OF THIS SECTION SHALL APPLY ONLY TO GENERAL ELECTRIC
CAPITAL CORPORATION ("GE") AS AGENT FOR THE LENDERS UNDER THE SENIOR CREDIT
AGREEMENT AND SHALL NOT APPLY TO ANY ASSIGNEE OR SUBSTITUTE FOR GE UNDER THE
SENIOR CREDIT AGREEMENT, OR ANY OTHER PARTY ENTERING INTO ANY OTHER CREDIT
AGREEMENT WIT THE COMPANY.
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Notwithstanding anything in this Note to the contrary, all indebtedness
evidenced by this Note shall be subordinate and junior to the Senior Debt. The
Company shall not make and the Holder shall not be permitted to ask, demand, sue
for or receive, by setoff, or otherwise, any payment hereunder; provided, that
so long as no Event of Default (as defined in the Senior Credit Agreement)
exists or would be caused thereby, the Company may pay and the Holder may
receive, regularly scheduled interest payments pursuant to this Note. After the
payment in full of all Senior Debt, the Holder shall be subrogated to the rights
of the holders of Senior Debt to receive payments or distributions of assets of
the Company payable or distributable to the holders of Senior Debt, until this
Note shall be paid in full, and as between the Company and the Holder, any such
payment by virtue of the subrogation herein provided for shall be deemed to be a
payment by the Company on account of this Note. No right of any present or
future holder of Senior Debt to enforce subordination as herein provided shall
at any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Company, or by any act or failure to act in good faith by any
such holder, or by any noncompliance by the Company, with the terms, provisions
and covenants of any agreement relating to Senior Debt, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
In the event of any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the assets of the Company or the proceeds thereof to the creditors
of the Company or readjustment of the obligations and indebtedness of the
Company, whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding involving the readjustment of all or any part of the indebtedness
evidenced by this Note, or the application of the assets of the Company to the
payment or liquidation thereof, or upon the dissolution, liquidation, cessation
or other winding up of the Company's business, or upon the sale of all or
substantially all of the Company's assets, then, and in any such event (i) the
Lenders shall be entitled to receive payment in full of any and all of the
Senior Debt then owing prior to the payment of all or any part of the
indebtedness evidenced by this Note, and (ii) any payment or distribution of any
kind or character, whether in cash, securities or other property, which shall be
payable or deliverable upon or with respect to any or all of the indebtedness
evidenced by this Note shall be paid or delivered directly to Agent, for the
benefit of itself and the Lenders, for application on any of the Senior Debt,
due or not due, until such Senior Debt shall have first been fully paid and
satisfied. In order to enable Agent to enforce its rights hereunder in any of
the aforesaid actions or proceedings, Agent is hereby irrevocably authorized and
empowered, in its discretion, to make and present for and on behalf of the
Holder such proofs of claim against the Company on account of the indebtedness
evidenced by this Note as Agent may deem expedient or proper and to vote such
proofs of claim in any such proceeding and to receive and collect any and all
dividends or other payments or disbursements made thereon in whatever form the
same may be paid or issued and to apply the same on account of any of the Senior
Debt. the Holder irrevocably authorizes and empowers Agent, for the benefit of
itself and the Lenders, to demand, sue for, collect and receive each of the
aforesaid payments and distributions and give acquittance therefor and to file
claims and take such other actions, in Agent's own name or in the name of the
Holder or otherwise, as Agent may deem necessary or advisable for the
enforcement of this Note; and the Holder will execute and deliver to Agent, for
the benefit of itself and the Lenders, such powers of attorney, assignments and
other instruments or documents, including notes (together with such assignments
or endorsements as Agent shall deem necessary) as may be requested by Agent in
order to enable Agent to enforce any and all claims upon or with respect to
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any or all of the indebtedness evidenced by this Note and to collect and receive
any and all payments and distributions which may be payable or deliverable at
any time upon or with respect to the indebtedness evidenced by this Note, all
for Agent's own benefit. Following payment in full of the Senior Debt, the
Lenders will remit to the Holder, to the extent of each of its interests
therein, all dividends or other payments or distributions paid to and held by it
in excess of the Senior Debt.
Should any payment or distribution or security, or the proceeds of any
thereof, be collected or received by the Holder which is required to be paid to
Agent, for the benefit of itself and the Lenders, under the terms hereof, the
Holder will forthwith deliver the same to Agent, for the benefit of itself and
the Lenders, in precisely the form received (except for the endorsement without
recourse or the assignment without recourse of the Holder where necessary) and,
until so delivered, the same shall be held in trust by the Holder as the
property of the Agent, for the benefit of itself and the Lenders.
The provisions of this Note are for the benefit of Agent and Lenders
and may be enforced directly by such entities against the Holder. The Holder
acknowledges and agrees, by acceptance hereof, that Agent and Xxxxxxx have
relied upon and will continue to rely upon the subordination provided for herein
in making the extensions of credit to the Company. The Holder hereby waives
notice of or proof of reliance hereon.
The holders of Senior Debt may at any time and from time to time,
without the consent of or notice to the Holder, without incurring responsibility
to the Holder and without impairing or releasing the subordination provided
herein or the obligations hereunder of the Holder to such holders (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, all or any of the Senior Debt, or otherwise amend or supplement in any
manner, or grant any waiver or release with respect to, Senior Debt or any
instrument evidencing the same (including, without limitation, the Senior Credit
Agreement), (ii) sell, exchange, release, not perfect or otherwise deal with any
property at any time pledged, assigned or mortgaged to secure or otherwise
securing, Senior Debt, or amend or grant any waiver or release with respect to,
or consent to any departure from any guarantee for all or any of the Senior
Debt, (iii) exercise or refrain from exercising any rights against the Company
and any other person, and (iv) apply any sums from time to time received to the
Senior Debt.
The provisions of this Section shall remain in full force and effect
irrespective of (i) any lack of validity or enforceability of the Senior Credit
Agreement or Senior Debt, or (ii) any other circumstances that might otherwise
constitute a defense available to, or a discharge of Holder.
The subordination provisions contained in this Section are solely for
the benefit of the holders of Senior Debt and may not be rescinded, canceled,
amended or modified in any way without the prior written consent thereto of such
holders.
The provisions of this Section shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Debt is rescinded or must otherwise be returned by any holder of Senior Debt
upon the insolvency, bankruptcy or reorganization of the Company or otherwise,
all as though such payment had not been made.
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11. Definitions. When used herein the following terms shall have the
following meanings:
"Senior Debt" shall mean all amounts due and payable under the Senior
Credit Agreement and any guaranty thereof, whether outstanding as of the date of
this Note or incurred after this Note, including, without limitation, all
principal, interest, prepayment premiums, fees and expenses incurred under the
Senior Credit Agreement and any guaranty thereof. Without limiting the
foregoing, Senior Debt includes interest accruing after the commencement of
bankruptcy proceedings by or against The Company, regardless of whether allowed
by the court.
"Senior Credit Agreement" shall mean the Credit Agreement dated as of
September 24, 1999, among Velocity Express, Inc. f/k/a UST Delivery Systems,
Inc., General Electric Capital Corporation, as a lender and as agent ("Agent")
for certain other lenders (collectively, the "Lenders"), and the other Credit
Parties signatory thereto, and all renewals, extensions, refinancings,
refundings, amendments and modification thereof.
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IN WITNESS WHEREOF, the Company has caused this Note to be executed on
its behalf by its duly authorized officer; on the day and year first above
written.
UNITED SHIPPING & TECHNOLOGY, INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Xxxxx X. Xxxxx
Chief Executive Officer
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY
WHOSE AUTHORIZED OFFICER HAS SIGNED THIS NOTE ABOVE.
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