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EXHIBIT 10.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY TRANSFEREE OF THIS
DEBENTURE SHOULD CAREFULLY REVIEW THE TERMS OF THIS DEBENTURE, INCLUDING SECTION
2(E)(VI) HEREOF. THE PRINCIPAL AMOUNT AND THE INTEREST THEREON REPRESENTED BY
THIS DEBENTURE MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 2(E)(VI) OF THIS DEBENTURE.
SUBORDINATED CONVERTIBLE DEBENTURE
New York, New York
______________, 2000 $6,000,000
FOR VALUE RECEIVED, US TRUCKING, INC., a Colorado corporation
(the "Company"), hereby promises to pay to the order of Augusta/L.O.F., LLC, a
Cayman Islands limited liability company, or registered assigns in accordance
with Section 20 hereof ("Holder") the principal amount of Six Million Dollars
($6,000,000), on May 17, 2003, (the "Maturity Date"), and to pay interest on the
unpaid principal balance hereof until payment in full thereof at the rate of
11.5% per annum from the date hereof (the "Issuance Date") until the same
becomes due and payable, whether at maturity or upon acceleration or by
conversion or redemption in accordance with the terms hereof or otherwise.
Interest on this Debenture shall commence accruing on the Issuance Date and
shall be computed on the basis of a 365-day year and actual days elapsed and
shall be payable in cash, at the Company's option, on each Due Date or at the
time of optional or mandatory redemption or conversion of principal in
accordance with Section 1 hereof; as applicable; provided, that until the
Registration Statement contemplated by the Securities Purchase Agreement dated
as of the date hereof between the Company and Holder (the "Securities Purchase
Agreement") and Registration Rights Agreement (as defined in the Securities
Purchase Agreement) is declared effective by the Securities and Exchange
Commission, such interest shall be payable in accordance with the last sentence
of Section 1 hereof. Any amount of this Debenture which is not paid when due
shall bear interest at the rate of 2.5% per month (prorated for partial months)
(rather than at the rate set forth above) until the same is paid in full
("Default Interest").
1. PAYMENTS OF PRINCIPAL AND INTEREST.
All payments of principal and interest on this Debenture (to the extent
such principal and/or interest is not converted into Common Stock in accordance
with the terms hereof) shall be made in lawful money of the United States of
America by wire transfer of immediately available funds as follows: American
National Bank and Trust, 120 South LaSalle Street, Chicago, IL 60603, ABA
071000770, FBO Augusta/L.O.F., LLC, A/C 5330255686, or to such
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other account as Holder may from time to time designate by written notice in
accordance with the provisions of this Debenture. Whenever any amount expressed
to be due by the terms of this Debenture is due on any day which is not a
Business Day (as defined below), the same shall instead be due on the next
succeeding day which is a Business Day and, in the case of any interest payment
date which is not the date on which this Debenture is paid in full, the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. For purposes of this
Debenture, "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in the City of New York, New York are authorized
or required by law or executive order to remain closed. Each capitalized term
used herein, and not otherwise defined, shall have the meaning ascribed thereto
in the Securities Purchase Agreement. Notwithstanding anything to the contrary
set forth herein, interest shall be payable on a monthly basis in cash by wire
transfer of immediately available funds to the account designated above in this
Section 1 until such time as the Registration Statement contemplated by the
Securities Purchase Agreement and Registration Rights Agreement is declared
effective by the Securities and Exchange Commission.
2. CONVERSION OF DEBENTURE.
This Debenture shall be convertible into shares of the Company's common
stock, no par value per share (the "Common Stock"), on the terms and conditions
set forth in this Section 2.
(a) Certain Defined Terms. For purposes of this Debenture, the
following terms shall have the following meanings
(i) "Conversion Amount" means the sum of (A) the principal
amount of this Debenture to be converted, redeemed or otherwise
with respect to which this determination is being made, and (B)
all accrued and unpaid interest (other than Default Interest),
calculated as the outstanding principal amount of the Debenture
times .115 times (N/365) and (C) Default Interest, if any.
(ii) "Conversion Price" means, as of any Conversion Date (as
defined below) or other date of determination and subject to
adjustment as provided herein, a price equal to the lesser of (A)
the Fixed Conversion Price (as defined below) and (B) the
Variable Conversion Price (as defined below).
(iii) "Due Date" means the Issuance Date and each monthly
anniversary after the Issuance Date.
(iv) "Fixed Conversion Price" means a price equal to $ 4.00,
subject to adjustment as provided herein.
(v) "Interest Date" means the day on which the outstanding
interest on the Debenture is effected either through cash
payment, redemption or conversion (Conversion Date) as
appropriate.
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(vi) "Issuance Date" means the date of issuance of this
Debenture.
(vii) "N" means the number of days from, but excluding, the
most recent Interest Date through and including the Conversion
Date for any portion of this Debenture for which conversion is
being elected.
(viii) "Person" means a natural person, a partnership, a
corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated
organization or a governmental or any department, agency or
political subdivision thereof.
(ix) "Principal Market" means OTC Bulletin Board.
(x) "Variable Conversion Price" means a price equal to 100%
of the average of the three lowest daily trading prices of the
Common Stock (as reported by Bloomberg) for the twenty (20)
consecutive trading days ending on the trading day immediately
preceding the date of submission of a Conversion Notice by
Holder.
(b) Holder's Monthly Conversion Right; Conversion Upon Special
Event. Holder shall have the right, at Holder's option, to convert the
outstanding and unpaid principal amount of this Debenture into shares of the
Company's Common Stock, on the following terms and conditions:
(i) Monthly Payment Amount. Subject to the provisions of
Section 2(d) and Section 3 below, on the Issuance Date and each
Due Date thereafter, Holder shall be entitled to convert $250,000
of the outstanding and unpaid principal amount of this Debenture
(together with all accrued and unpaid interest of the Debenture)
into fully paid and nonassessable shares of Common Stock in
accordance with Section 2(e), at the Conversion Rate (as defined
below) (the "Monthly Payment Amount"). Delivery of such shares in
accordance with Section 2(e)(ii) shall be considered payment in
full of that portion of the Debenture.
(ii) Conversions Upon Special Event. Notwithstanding
Holder's option to convert the Monthly Payment Amount described
in item (i) above and in addition to all other rights of Holder
contained herein, upon the occurrence of any Special Event (as
described below), 100% of the remaining principal balance
hereunder, plus accrued and unpaid interest thereon, shall become
subject to conversion, at the option of Holder, upon delivery of
a Conversion Notice (as defined below) without any restriction or
limitation. A "Special Event" shall be deemed to have occurred at
such time as any of the following events:
(A) the consolidation, merger or other business
combination of the Company with or into another Person (other
than solely pursuant to a migratory merger effected solely for
the purpose of changing the jurisdiction of incorporation of the
Company and except for a merger in which the Company is the
surviving entity);
(B) the sale or transfer of 50% or more of the
Company's assets;
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(C) a purchase, tender or exchange offer made to
holders of more than 30% of the outstanding shares of Common
Stock; or
(D) any event constituting an Event of Default pursuant
to Section 9(a) hereof.
(iii) Fractional Shares. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All
shares of Common Stock (including fractions thereof) issuable
upon conversion of this Debenture by a holder thereof shall be
aggregated for purposes of determining whether the conversion
would result in the issuance of a fraction of a share of Common
Stock. If, after the aforementioned aggregation, the issuance
would result in the issuance of a fraction of a share of Common
Stock, the Company shall round such fraction of a share of Common
Stock up or down to the nearest whole share.
(c) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of a Conversion Amount of this Debenture pursuant to
Section 2(b) shall be determined according to the following formula (the
"Conversion Rate"):
Conversion Rate = Conversion Amount
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Conversion Price
(d) Limitation on Beneficial Ownership. The Company shall
not effect any conversion of this Debenture and Holder shall not have the right
to convert any portion of this Debenture pursuant to Section 2(b)(i) to the
extent that after giving effect to such conversion such Person (together with
such Person's affiliates) would beneficially own in excess of 4.99% of the
outstanding shares of the Common Stock following such conversion. For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially
owned by a Person and its affiliates or acquired by a Person and its affiliates,
as the case may be, shall include the number of shares of Common Stock issuable
upon conversion of this Debenture with respect to which the determination of
such sentence is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i) conversion of the remaining, nonconverted
portion of this Debenture beneficially owned by such Person and its affiliates
and (ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company (including, without limitation, any warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Person and its affiliates. Except as
set forth in the preceding sentence, for purposes of this Section 2(d),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. Notwithstanding anything to the
contrary contained herein, each Conversion Notice (as defined below) shall
constitute a representation by Holder that, after giving effect to such
Conversion Notice, Holder will not beneficially own (as determined in accordance
with this Section 2(d)) a number of shares of Common Stock in excess of 4.99% of
the outstanding shares of Common Stock (1) as reflected in the Company's most
recent shareholder list, which list shall be provided to Holder by the Company
on a quarterly basis and certified by the Company as true, complete and accurate
as of the date thereof, or (2) at such time as the Company is a Reporting
Company under the Securities Exchange Act of 1934, as reflected in the Company's
most recent Form 10-Q or Form 10-K, as the case may be, or more
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recent public press release by the Company or other notice by the Company to
Holder setting forth the number of shares of Common Stock outstanding, but after
giving effect to conversions of this Debenture (including the conversion with
respect this determination is being made) by Holder since the date as of which
such number of outstanding shares of Common Stock was disclosed.
(e) Mechanics of Conversion. The conversion of this
Debenture shall be conducted in the following manner:
(i) Holder's Delivery Requirements. To convert this
Debenture into shares of Common Stock on any date (the
"Conversion Date"), Holder hereof shall (A) transmit by
facsimile (or otherwise deliver), for receipt on or prior to
11:59 p.m., Eastern Time on such date, a copy of a fully
executed notice of conversion in the form attached hereto as
Exhibit A (the "Conversion Notice") to the Company and (B),
subject to Section 2(e)(vi), surrender to a common carrier
for delivery to the Transfer Agent as soon as practicable
following such date the original Debenture being converted
(or an indemnification undertaking with respect to such
Debenture in the case of its loss, theft or destruction).
(ii) Company's Response. Upon receipt by the Company of
a copy of a Conversion Notice, the Company shall as soon as
practicable, but in no event later than one (1) Business
Days after receipt of such Conversion Notice, send, via
facsimile, a confirmation of receipt of such Conversion
Notice to Holder and the Transfer Agent, which confirmation
shall constitute an instruction to the Transfer Agent to
process such Conversion Notice in accordance with the terms
herein. Upon receipt by the Transfer Agent of a copy of the
executed Conversion Notice, the Transfer Agent shall, no
later than the 2nd trading day following the date of receipt
by it of the Conversion Notice, (A) issue and surrender to a
common carrier for overnight delivery to Holder's brokerage
account #70215 (the "Augusta Brokerage Account") with Credit
Suisse First Boston (the "Broker"), a certificate,
registered in the name of Holder or its designee, for the
number of shares of Common Stock to which Holder shall be
entitled, or (B) in the event the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast
Automated Securities Transfer Program, upon the request of
Holder, credit such aggregate number of shares of Common
Stock to which Holder shall be entitled to the Broker's
balance account with DTC through its Deposit Withdrawal
Agent Commission system to be further credited to the
Augusta Brokerage Account by the Broker. Subject to Section
2(e)(vi), if less than the principal amount of this
Debenture is submitted for conversion, then the Company
shall, as soon as practicable and in no event later than
three Business Days after receipt of this Debenture and at
its own expense, issue and deliver to Holder or its designee
a new Debenture for the outstanding principal amount not
converted.
(iii) Dispute Resolution. In the case of a dispute as
to the determination of the Conversion Price or the
arithmetic calculation of the Conversion Rate, the Company
shall instruct the Transfer Agent to issue to Holder the
number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic
calculations to Holder via facsimile within one (1) Business
Day of receipt of Holder's Conversion Notice. If Holder and
the Company are unable to agree upon the
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determination of the Conversion Price or arithmetic
calculation of the Conversion Rate within one (1) Business
Days of such disputed determination or arithmetic
calculation being submitted to Holder, then the Company
shall within one (1) Business Days submit via facsimile (A)
the disputed determination of the Conversion Price to an
independent, reputable investment bank selected by the
Company and approved by Holder or (B) the disputed
arithmetic calculation of the Conversion Rate to the
Company's independent, outside accountant. The Company shall
cause the investment bank or the accountant, as the case may
be, to perform the determinations or calculations and notify
the Company and Holder of the results no later than the
third (3rd) day after the date it receives the disputed
determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may
be, shall be binding upon all parties absent manifest error.
(iv) Record Holder. The person or persons entitled to
receive the shares of Common Stock issuable upon a
conversion of this Debenture shall be treated for all
purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert.
(A) Cash Damages. If within five (5) Business Days
after Holder's delivery of the Conversion Notice (subject to
extension in accordance with Section 2(e)(iii) for a good
faith dispute made in accordance with the terms of Section
2(e)(iii)) (the "Share Delivery Period") the Transfer Agent
shall fail to issue a certificate to Holder or credit
Holder's balance account with The Depository Trust Company
for the number of shares of Common Stock to which Holder is
entitled upon Holder's conversion of this Debenture (a
"Conversion Failure"), in addition to all other available
remedies which Holder may pursue hereunder and under the
Securities Purchase Agreement (including indemnification
pursuant to Article 8 thereof), the Company shall pay
additional damages to Holder on each day after such fifth
(5th) Business Day such conversion is not timely effected
and/or such Debenture is not delivered in an amount equal to
2.0% of such principal amount of this Debenture submitted
for conversion by Holder.
(B) Void Conversion Notice; Adjustment to
Conversion Price. If for any reason Holder has not received
all of the shares of Common Stock prior to the tenth (10th)
Business Day after the expiration of the Share Delivery
Period with respect to a conversion of this Debenture, then
Holder, upon written notice to the Company, with a copy to
the Transfer Agent, may void its Conversion Notice with
respect to, and retain or have returned, as the case may be,
any principal amount of this Debenture that has not been
converted pursuant to Holder's Conversion Notice; provided,
that the voiding of Holder's Conversion Notice shall not
affect the Company's obligations to make any payments which
have accrued prior to the date of such notice pursuant to
Section 2(e)(v)(A) or otherwise. Thereafter, the Fixed
Conversion Price of the principal amount of this Debenture
returned or retained by Holder for failure to timely convert
shall be adjusted to the lesser of (I) the Conversion Price
as in effect on the date on which Holder submitted the
Conversion Notice and (II) the lowest trade price for the
Common Stock during the period beginning on the Conversion
Date and ending on the date Holder voided the Conversion
Notice.
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(vi) Book-Entry. Notwithstanding anything to the
contrary set forth herein, upon conversion of any portion of
this Debenture in accordance with the terms hereof, Holder
shall not be required to physically surrender this Debenture
to the Company unless the full Conversion Amount represented
by this Debenture is being converted. Holder and the Company
shall maintain records showing the Conversion Amount so
converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to Holder and the
Company, so as not to require physical surrender of this
Debenture upon each such conversion. In the event of any
dispute or discrepancy, such records of the Company shall be
controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if this Debenture is
converted as aforesaid, Holder may not transfer this
Debenture unless Holder first physically surrenders this
Debenture to the Company, whereupon the Company will
forthwith issue and deliver upon the order of Holder a new
Debenture of like tenor, registered as Holder may request,
representing in the aggregate the remaining Conversion
Amount represented by this Debenture. Holder and any
assignee, by acceptance of this Debenture or such new
Debenture, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of any
portion of this Debenture, the Conversion Amount (including
the principal of this Debenture) represented by this
Debenture may be less than the principal amount and the
accrued interest set forth on the face hereof.
(f) Taxes. The Company shall pay any and all transfer taxes
(but not income taxes) that may be payable with respect to the issuance and
delivery of Common Stock upon the conversion of this Debenture.
3. ANTI-DILUTION.
(a) Certain Defined Terms. For purposes of this Section, the
following terms shall have the following meanings:
(i) "Common Stock" shall mean the Common Stock, no par
value, of the Company as constituted on the date of this
Debenture and any stock into which such Common Stock shall
have been changed or any stock resulting from any
reclassification of such Common Stock.
(ii) "Convertible Securities" shall mean evidences of
indebtedness, shares (including, without limitation,
Preferred Shares) of stock or other securities which are
convertible into or exchangeable for, with or without
payment of additional consideration, shares of Common Stock,
either immediately or upon the arrival of a specified date
or the happening of a specified event.
(iii) "Preferred Shares," as applied to any Person,
shall mean shares of such Person which shall be entitled to
preference or priority over any other shares of such Person
in respect of either the payment of dividends or the
distribution of assets upon liquidation.
(iv) "Stock Purchase Rights" shall mean any warrants,
options or other rights to subscribe for, purchase or
otherwise acquire any shares of Common Stock or
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any Convertible Securities, either immediately or upon the
arrival of a specified date or the happening of a specified
event.
(b) Except as otherwise provided in Section 3(b)(vii))
below, the Fixed Conversion Price shall be subject to adjustment from time to
time as set forth in this Section 3.
(i) Issuance of Additional Common Stock. If and
whenever the Company shall issue or sell any shares of its
Common Stock for a consideration per share less than the
Fixed Conversion Price in effect immediately prior to the
time of such issuance or sale, then, upon such issuance or
sale, the Fixed Conversion Price shall be adjusted to that
price equal to the fraction (i) the numerator of which shall
be equal to (A) (x) the Fixed Conversion Price in effect
immediately prior to such event multiplied by (y) the total
number of outstanding shares of Common Stock immediately
prior to such event plus (B) the consideration received by
the Company upon such issuance, and (ii) the denominator of
which shall be the total number of outstanding shares of
Common Stock immediately after such event, treating as
outstanding all shares of Common Stock issuable upon
conversions or exchanges of Convertible Securities
(including any Debentures held by Holder) and exercises of
Stock Purchase Rights (including any Warrants held by
Holder) provided that, no adjustment shall be made with
respect to the issuance of shares of Common Stock issued
upon conversion of debentures or Preferred Shares or
exercise of warrants or options outstanding on the date
hereof and disclosed to Holder in a Schedule attached to the
Securities Purchase Agreement delivered in connection with
this Debenture, or in connection with the exercise of
options which may be granted after the date hereof under the
Company's 1998 Stock Option Plan, or as consideration in
connection with arms-length transactions involving the
acquisition of other companies or lines of business in the
transportation industry, including non-competition
covenants.
(ii) Stock Dividends, Subdivisions and Combinations. If
and whenever the Company subsequent to the date hereof:
(A) declares a dividend upon, or makes any
distribution in respect of, any of its capital stock,
payable in shares of Common Stock, Convertible Securities or
Stock Purchase Rights,
(B) subdivides its outstanding shares of Common
Stock into a larger number of shares of Common Stock, or
(C) combines its outstanding shares of Common
Stock into a smaller number of shares of Common Stock,
then the Fixed Conversion Price shall be adjusted to that price determined by
multiplying the Fixed Conversion Price in effect immediately prior to such event
by a fraction (A) the numerator of which shall be the total number of
outstanding shares of Common Stock immediately prior to such event, and (B) the
denominator of which shall be the total number of outstanding shares of Common
Stock immediately after such event, treating as outstanding all shares of Common
Stock issuable upon conversions or exchanges of Convertible Securities
(including any
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Debentures held by Holder) and exercises of Stock Purchase Rights (including any
Warrants held by Holder).
(iii) Issuance of Convertible Securities or Stock
Purchase Rights. If and whenever the Company shall issue or
sell any Convertible Securities or Stock Purchase Rights
(other than the granting of Stock Purchase Rights to
officers, employees, directors and consultants of the
Company pursuant to any qualified or non-qualified stock
option plan or employee stock ownership plan (ESOP)) under
which a consideration per share for which shares of Common
Stock may at any time thereafter be issuable upon exercise
thereof (or, in the case of Stock Purchase Rights
exercisable for the purchase of Convertible Securities, upon
the subsequent conversion or exchange of such Convertible
Securities) shall be less than the Conversion Price in
effect immediately prior to the time of such issuance or
sale, then upon such issuance or sale the Conversion Price
shall be adjusted as provided in Section 4(a) on the basis
that the maximum number of shares of Common Stock ever
issuable upon exercise of such Convertible Securities or
Stock Purchase Rights (or upon conversion or exchange of
such Convertible Securities following such exercise) shall
be deemed to have been issued as of the date of the
determination of the Fixed Conversion Price, provided that ,
no adjustment shall be made with respect to the issuance of
shares of Common Stock issued upon conversion of debentures
or Preferred Shares or exercise of warrants or options
outstanding on the date hereof and disclosed to Holder in a
Schedule attached to the Securities Purchase Agreement
delivered in connection with this Debenture, or in
connection with the exercise of options which may be granted
after the date hereof under the Company's 1998 Stock Option
Plan, or as consideration in connection with arms-length
transactions involving the acquisition of other companies or
lines of business in the transportation industry, including
non-competition covenants.
(iv) Readjustment of Conversion Price. Upon (i) each
change in the purchase price payable for any Stock Purchase
Rights or Convertible Securities referred to in Section
3(b)(iii) each change in the consideration, if any, payable
upon exercise of such Stock Purchase Rights or upon the
conversion or exchange of such Convertible Securities, (iii)
each change in the number of shares of Common Stock issuable
upon the exercise of such Stock Purchase Rights or the rate
at which such Convertible Securities are convertible into or
exchangeable for shares of Common Stock or (iv) the
expiration of any Stock Purchase Rights not exercised or of
any right to convert or exchange under any Convertible
Securities not exercised, the Fixed Conversion Price in
effect at the time of such event shall forthwith be
readjusted to the Fixed Conversion Price which would have
been in effect at such time had such Stock Purchase Rights
or Convertible Securities provided for such change or
expiration, as applicable.
(v) Reorganization, Reclassification or
Recapitalization of the Company. In the event that the
Company effects (i) any reorganization or reclassification
or recapitalization of the capital stock of the Company
(other than in the cases referred to in Section 4(b)), (ii)
any consolidation or merger of the Company with or into
another Person, (iii) the sale, transfer or other
disposition of the property, assets or business of the
Company as an entirety or substantially as an entirety or
(iv) any other transaction or event as a result of which
holders of Common Stock become entitled to receive any
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shares of stock or other securities and/or property
(including, without limitation, cash, but excluding any cash
dividend that is paid out of the earnings or surplus of the
Company legally available therefor) with respect to or in
exchange for the Common Stock of the Company, there shall
thereafter be deliverable upon the conversion of this
Debenture or any portion thereof (in lieu of or in addition
to the Common Stock theretofore deliverable, as appropriate)
the highest number of shares of stock or other securities
and/or the greatest amount of property (including, without
limitation, cash) to which the holder of the number of
shares of Common Stock which would otherwise have been
deliverable upon the conversion of this Debenture or any
portion thereof at the time would have been entitled upon
such transaction or event.
(vi) Other Dilutive Events. If the Company takes any
other action, or if any other event occurs to which the
other provisions of this Section 3 are not strictly
applicable, but which could result in an adjustment the
Conversion Price or to any of the other terms of this
Debenture that would not fairly protect the conversion
rights and other rights represented by this Debenture in
accordance with the essential intent and principles hereof,
an appropriate adjustment in such purchase rights comparable
to the adjustments described in (a) and (b) above shall be
made by the Company.
(vii) Maximum Conversion Price. At no time shall the
Fixed Conversion Price exceed the initial Conversion Price
set forth in Section 2(a) hereof except as a result of an
adjustment thereto pursuant to Section 3(b).
(viii) Application. All subdivisions of this Section 3
are intended to operate independently of one another. If a
transaction or an event occurs that requires the application
of more than one subsection, all applicable subdivisions
shall be given independent effect.
(ix) Waiver. In the event that Holder consents in
writing to limit, or waive in its entirety, any
anti-dilution adjustment to which it would otherwise be
entitled hereunder, the Company shall not be required to
make any adjustment whatsoever with respect to this
Debenture in excess of such limit or at all, as the terms of
such consent may dictate.
(x) Notice of Adjustments to Fixed Conversion Price. As
promptly as practicable after the occurrence of any event
requiring any adjustment under this Section 3 to the
Conversion Price (or to the number or kind of securities or
other property deliverable upon the conversion of this
Debenture), the Company shall, at its expense, mail to
Holder a certificate of an officer of the Company setting
forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was
calculated and specifying the adjusted Fixed Conversion
Price and the number of shares of Common Stock issuable upon
conversion of this Debenture after giving effect to such
adjustment.
(xi) Anti-Dilution Provisions in Other Securities. If
the Company issues any Stock Purchase Rights or Convertible
Securities or other securities containing provisions
protecting the holder or holders thereof against dilution in
any manner more favorable to such holder or holders thereof
than those set forth in this Debenture, such provisions
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(or any more favorable portion thereof) shall be deemed to be
incorporated herein as if fully set forth in this Debenture and, to
the extent inconsistent with any provision of this Debenture, shall be
deemed to be substituted therefor.
4. REDEMPTION.
This Debenture shall be subject to mandatory redemption upon the
occurrence of certain events and optional redemption at the option of the
Company, each as discussed below.
(a) Mandatory Monthly Redemption. Upon the occurrence of a
Mandatory Redemption Event, and on each month anniversary thereafter until such
Mandatory Redemption Event shall have been cured, if any, the Company will be
required to redeem the Monthly Payment Amount for such month, on the Due Date,
at a price equal to 120% of such Monthly Payment Amount, including all accrued
and unpaid interest on the Debenture (the "Mandatory Redemption Price"). For
purposes of this Debenture, "Mandatory Redemption Event" means any of the
following events:
(i) the failure of the Company to satisfy any listing
criteria of its Principal Market necessary to maintain the continued
listing of the Common Stock, without regard to any grace period or
other timing issues,
(ii) the suspension of the Common Stock from trading for
three (3) consecutive trading days or for a total of ten (10) trading
days out of the preceding 365 days;
(iii) if for any reason pursuant to the registration
statement (the "Registration Statement") covering the resale of shares
of Common Stock issuable upon conversion of this Debenture and the
exercise of the Warrants required to be filed by the Company pursuant
to the Registration Rights Agreement between the Company and Holder
(the "Registration Rights Agreement") sales cannot be made following
the date such Registration Statement has been declared effective by
the SEC (whether because of a failure to keep the Registration
Statement effective, to disclose such information as is necessary for
sales to be made pursuant to the Registration Statement, to register
sufficient shares of Common Stock, or otherwise) for three (3)
consecutive trading days or for a total of ten (10) trading days out
of the preceding 365 days unless due to the failure for a Registration
Statement to become effective, or the suspension of an effective
Registration Statement (provided such suspension is required by
applicable law) if the Company is required under the Securities
Exchange of 1934 to file financial statements of the acquired business
and proforma financial statements and such financial statements are
not readily available at the time the Company would have otherwise
been obligated to file the Registration Statement, but only for up to
thirty days with respect to any one acquisition and an aggregate of
forty-five days in a twelve month period. The Company shall use all
commercially reasonable efforts to file such financial statements at
the earliest practicable date.
(b) Optional Monthly Redemption.
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(i) At any time during the five (5) trading days prior to
each Due Date (other than the Issuance Date), if the Closing Bid Price
of the Common Stock on each such trading day is less than the Fixed
Conversion Price on such day then the Company shall have the option to
redeem (the "Optional Monthly Redemption Right") the Monthly Payment
Amount for such month at a price equal to 100% of the Monthly Payment
Amount, including all accrued and unpaid interest.
(ii) In each month that the Company elects to exercise its
Optional Redemption rights, Buyer shall vest 7,500 Redemption
Warrants.
(c) Mechanics of Company Redemption. Within one (1) day after the
occurrence of a Mandatory Redemption Event, or upon a determination by the
Company to exercise its Optional Monthly Redemption Right, the Company shall
deliver a written notice thereof via facsimile and overnight courier ("Notice of
Redemption") to Holder, which notice shall specify the type of redemption (and
the nature of event with respect to any Mandatory Redemption). The Company shall
pay the Redemption Price to Holder in cash upon the next Due Date by wire
transfer delivered to Holder as follows: American National Bank and Trust, 120
South LaSalle Street, Chicago, IL 60603, ABA 071000770, FBO Augusta/L.O.F., LLC,
A/C 5330255686, or to such other account or accounts as Holder may designate in
writing to the Company from time to time.
(d) Void Redemption. In the event that the Company does not pay
the Mandatory Full Redemption Price to Holder on a timely basis as described in
this Section 3, in addition to any remedy otherwise available to Holder
hereunder or under the Securities Purchase Agreement, such unpaid amount shall
bear interest at the Default Rate until paid in full. In the event that the
Company does not pay the Applicable Optional Redemption Price within the time
period set forth in Section 3(c), at any time thereafter and until the Company
pays such unpaid Applicable Optional Redemption Price in full, Holder shall have
the option (the "Void Optional Redemption Option") to, in lieu of redemption,
require the Company to rescind the Notice of Redemption for that portion of the
Debenture for which the Applicable Optional Redemption Price (together with any
interest thereon) has not been paid, by sending written notice thereof to the
Company via facsimile (the "Void Optional Redemption Notice"). Upon the
Company's receipt of such Void Optional Redemption Notice, (i) the Notice of
Redemption pursuant to the Company's optional redemption rights as described in
Section 3(c), shall be null and void with respect to that portion of the
Debenture subject to the Void Optional Redemption Notice, (ii) the Company shall
immediately rescind such Redemption Notice, and (iii) the Conversion Price of
that portion of the Debenture returned shall be adjusted to the lesser of (A)
the Conversion Price as in effect on the date on which the Void Optional
Redemption Notice is delivered to the Company and (B) the lowest trade price for
the Common Stock (as reported by Bloomberg) during the period beginning on the
date on which the Notice of Redemption is delivered to Holder and ending on the
date on which the Void Optional Redemption Notice is delivered to the Company.
(e) Disputes; Miscellaneous. In the event of a dispute as to the
determination of the lowest trade price or the arithmetic calculation of the
Redemption Price, such dispute shall be resolved pursuant to Section 2(e)(iii)
above with the term "lowest trade price" being substituted for the term
"Conversion Price" and the term "Redemption Price" being substituted for the
term "Conversion Rate." Holder's delivery of a Void Optional Redemption Notice
and
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exercise of its rights following such notice shall not affect the Company's
obligations to make any payments which have accrued prior to the date of such
notice. In the event of a redemption pursuant to this Section 3 of less than all
of the principal amount and interest of this Debenture and subject to Section
2(e)(vi), the Company shall promptly cause to be issued and delivered to Holder
a new Debenture representing the remaining unpaid principal amount which has not
been redeemed.
5. PREPAYMENT.
(a) At any time during the term of this Debenture, the Company may
prepay the Debenture at a price equal to (A)(x) the outstanding principal
balance on the Debenture plus (y) accrued interest multiplied by (B) the 110%.
(b) Should the Company exercise its right to prepay the Debenture, the
Investor shall immediately vest into all Warrants not theretofore vested by the
Investor, provided, however, that the Penalty Warrants shall not become vested
if the Company has timely complied with its obligation under Section 4.14 of the
Securities Purchase Agreement.
6. OTHER RIGHTS OF HOLDER.
(a) Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another Person or
other transaction which is effected in such a way that holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any (i) sale of all
or substantially all of the Company's assets to an acquiring Person or (ii)
other Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the "Acquiring Entity") a
written agreement (in form and substance satisfactory to Holder) to deliver to
Holder in exchange for this Debenture, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance to
this Debenture, and satisfactory to Holder. Prior to the consummation of any
other Organic Change, the Company shall make appropriate provision (in form and
substance satisfactory to Holder) to insure that Holder will thereafter have the
right to acquire and receive in lieu of or in addition to (as the case may be)
the shares of Common Stock immediately theretofore acquirable and receivable
upon the conversion of Holder's Debenture such shares of stock, securities or
assets that would have been issued or payable in such Organic Change with
respect to or in exchange for the number of shares of Common Stock which would
have been acquirable and receivable upon the conversion of Holder's Debenture as
of the date of such Organic Change (without taking into account any limitations
or restrictions on the convertibility of the Debenture).
(b) Purchase Rights. If at any time the Company grants, issues or
sells any options, convertible securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then Holder
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will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which Holder could have acquired if Holder had
held the number of shares of Common Stock acquirable upon complete conversion of
the Debenture (without taking into account any limitations or restrictions on
the convertibility of the Debenture) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights.
7. RESERVATION OF SHARES.
The Company shall, so long as any principal amount of the Debenture is
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the
Debenture, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the principal amount of the
Debenture then outstanding; provided that the number of shares of Common Stock
so reserved shall at no time be less than 140% of the number of shares of Common
Stock for which the principal amount of the Debenture are at any time
convertible.
8. VOTING RIGHTS.
Holder shall have no voting rights, except as required by law,
including but not limited to the Business Corporations Act of the State of
Colorado-, and as expressly provided in this Debenture.
9. RESTRICTION ON REDEMPTION AND CASH DIVIDENDS.
Until all of the outstanding principal amount of this Debenture has
been converted, redeemed or otherwise satisfied as provided herein, the Company
shall not, directly or indirectly, redeem, or declare or pay any cash dividend
or distribution on, the Common Stock without the prior express written consent
of Holder.
10. REISSUANCE OF DEBENTURE.
Subject to Section 2(e)(vi) in the event of a conversion or redemption
pursuant to this Debenture of less than all of the Conversion Amount represented
by this Debenture, the Company shall promptly cause to be issued and delivered
to Holder, upon tender by Holder of the Debenture converted or redeemed, a new
debenture of like tenor representing the remaining principal amount of this
Debenture which has not been so converted or redeemed.
11. DEFAULTS AND REMEDIES.
(a) Events of Default. An "Event of Default" is: (i) failure of
the Company's Registration Statement to be declared effective within 210 days
following the Issuance Date, (ii) default in payment of principal, interest or
Default Interest on this Debenture when and as due; (iii) failure by the Company
(A) for thirty (30) days after notice to it to comply with any other material
provision of this Debenture except for delivery of a replacement Debenture
within four (4) Business Days as described in Section 2(e)(ii); or (B) for six
(6) Business Days after notice to it to comply with the replacement Debenture
delivery requirement set forth in Section 2(e)(ii); (iv)
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any default under or acceleration prior to maturity of any mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed by the Company or for money
borrowed the repayment of which is guaranteed by the Company, whether such
indebtedness or guarantee now exists or shall be created hereafter in principal
amount greater than $10,000; (v) a closing price of the common stock which is
less than $0.10;, (vi) if the Company pursuant to or within the meaning of any
Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an
order for relief against it in an involuntary case; (C) consents to the
appointment of a Custodian of it or for all or substantially all of its
property; (D) makes a general assignment for the benefit of its creditors; or
(E) admits in writing that it is generally unable to pay its debts as the same
become due; or (vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (1) is for relief against the Company in an
involuntary case; (2) appoints a Custodian of the Company or for all or
substantially all of its property; or (3) orders the liquidation of the Company
or any subsidiary, and the order or decree remains unstayed and in effect for
ninety (90) days. The term "Bankruptcy Law" means Title 11, U.S. Code, or any
similar Federal or State Law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
(b) Remedies. If an Event of Default occurs and is continuing,
Holder notify the Company that it is declaring all of this Debenture, including
any interest and Default Interest and other amounts due, to be due and payable
immediately, except that in the case of an Event of Default arising from events
described in clauses (iv), (vi) and (vii) of Section 11(a), this Debenture shall
become due and payable without further action or notice by Holder. The Holder
may not enforce the agreements contained in this Debenture except as provided
herein. In addition to any remedy Holder may have under this Debenture and the
Securities Purchase Agreement, such unpaid amount shall bear interest at the
Default Rate until paid in full.
12. VOTE TO CHANGE THE TERMS OF THIS DEBENTURE.
This Debenture and any provision hereof may only be amended by an
instrument in writing signed by the Company and Holder. The term "Debenture" and
all reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
13. LOST OR STOLEN DEBENTURE.
Upon receipt by the Company of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of any Debenture, and, in the case of
loss, theft or destruction, of an indemnification undertaking by the holder to
the Company in a form reasonably acceptable to the Company and, in the case of
mutilation, upon surrender and cancellation of the Debenture, the Company shall
execute and deliver a new debenture of like tenor and date; provided, however,
the Company shall not be obligated to re-issue the Debenture if Holder
contemporaneously requests the Company to convert such remaining principal
amount into Common Stock.
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14. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
If: (i) this Debenture is placed in the hands of an attorney for
collection or enforcement or is collected or enforced through any legal
proceeding; or (ii) an attorney is retained to represent Holder of this
Debenture in any bankruptcy, reorganization, receivership or other proceedings
affecting creditors' rights and involving a claim under this Debenture; or (iii)
an attorney is retained to represent Holder of this Debenture in any other
proceedings whatsoever in connection with this Debenture, then the Company shall
pay to Holder all reasonable attorneys' fees, costs and expenses incurred in
connection therewith, in addition to all other amounts due hereunder.
15. CANCELLATION.
After all principal and accrued interest at any time owed on this
Debenture has been paid in full, this Debenture shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and shall not be
reissued.
16. DEBENTURE EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Debenture is exchangeable, upon the surrender hereof by Holder at
the principal office of the Company, for a new Debenture or Debenture (in
principal amounts of at least $1,000) containing the same terms and conditions
and representing in the aggregate the principal amount of this Debenture, and
each such new Debenture will represent such portion of such principal amount as
is designated by Holder at the time of such surrender. The date the Company
initially issues this Debenture will be deemed to be the "Issuance Date" hereof
regardless of the number of times a new Debenture shall be issued.
17. WAIVER OF NOTICE.
To the extent permitted by law, the Company hereby waives demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Debenture and
the Securities Purchase Agreement.
18. GOVERNING LAW.
This Debenture shall be construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation and
performance of this Debenture shall be governed by, the laws of the State of
Illinois, without giving effect to provisions thereof regarding conflict of
laws.
19. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF.
The remedies provided in this Debenture shall be cumulative and in
addition to all other remedies available under this Debenture, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy and nothing herein shall limit
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Debenture. The Company covenants to Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the
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computation thereof) shall be the amounts to be received by the holder thereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
Holder and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, Holder shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach, without the necessity of showing
economic loss and without any bond or other security being required.
20. SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION.
No specific provision contained in this Debenture shall limit or modify
any more general provision contained herein. This Debenture shall be deemed to
be jointly drafted by the Company and Holder and shall not be construed against
any person as the drafter hereof.
21. FAILURE OR INDULGENCE NOT WAIVER.
No failure or delay on the part of this Debenture in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
22. TRANSFER.
This Debenture and the rights granted to Holder are transferable
without the consent of the Company in whole or in part, upon notice and
surrender of this Debenture to the Company. The Company shall maintain at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to Holder), a register for this Debenture, in which the
Company shall record the name and address of the person in whose name this
Debenture has been issued, as well as the name and address of each transferee.
The Company may treat the person in whose name the Debenture is registered on
the register as the owner and Holder for all purposes, notwithstanding any
notice to the contrary, but in all events recognizing any transfers made in
accordance with the terms of this Debenture.
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed and delivered as of the 17th day of _______________, 2000.
US TRUCKING, INC.
By: ____________________________________
[Name]
[Title]
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EXHIBIT A
ISSUER
CONVERSION NOTICE
Reference is made to the Debenture issued by US TRUCKING, INC. (the
"Debenture"). In accordance with and pursuant to the Debenture, the undersigned
hereby elects to convert the principal amount of the Debenture, indicated below
into shares of common stock, no par value per share (the "Common Stock"), of the
Company, by tendering the Debenture amount specified below as of the date
specified below.
- --------------------------------------------------------------------------------
DATE ______________________________________
- --------------------------------------------------------------------------------
CURRENTLY OUTSTANDING PRINCIPAL ______________________________________
- --------------------------------------------------------------------------------
CURRENT VALUE OF LETTER OF CREDIT ______________________________________
- --------------------------------------------------------------------------------
ACCRUED BUT UNPAID INTEREST ______________________________________
- --------------------------------------------------------------------------------
CONVERSION AMOUNT ______________________________________
- --------------------------------------------------------------------------------
(divided by)
CONVERSION PRICE ______________________________________
- --------------------------------------------------------------------------------
(equals)
CONVERSION SHARES ______________________________________
- --------------------------------------------------------------------------------
ACCRUED INTEREST CONVERTED ______________________________________
- --------------------------------------------------------------------------------
PRINCIPAL CONVERTED ______________________________________
- --------------------------------------------------------------------------------
(times) LETTER OF CREDIT RATIO ______________________________________
- --------------------------------------------------------------------------------
(equals) LETTER OF CREDIT REDUCTION ______________________________________
- --------------------------------------------------------------------------------
NEW OUTSTANDING PRINCIPAL ______________________________________
- --------------------------------------------------------------------------------
NEW LETTER OF CREDIT AMOUNT ______________________________________
- --------------------------------------------------------------------------------
AGREED TO:
[-----------------] US TRUCKING, INC.
- -------------------------------------- --------------------------------------
- --------------------------------------------------------------------------------
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Addendum to Subordinated Convertible Debentures
The Huff Grandchildrens Trust hereby acknowledges and agrees that it is
a co-borrower under the Subordinated Convertible Debenture between U.S.
Trucking, Inc. ("UST") and Augusta/L.O.F., L.L.C. dated as of May 17, 2000 (the
"Debenture") and that it is obligated jointly and severally with UST as the
"Company" under the preamble and Sections 1, 12, 14, and 17-22, inclusive, of
the Debenture.
Dated: As of May 17, 2000
THE HUFF GRANDCHILDRENS TRUST
BY: /s/ Anthony Huff
-------------------------
Anthony Huff, a Trustee