INITIAL SUBSCRIPTION AGREEMENT
OF
XXXXXXXXXX.XXX, LLC
THIS INITIAL SUBSCRIPTION AGREEMENT (the "Subscription Agreement") is
entered into as of April 19, 2000 by Xxxxxxxxxx.xxx, LLC, a Nevada limited
liability company (the "Company") and Covenant Transport, Inc., a Nevada
corporation ("Covenant"), X.X. Xxxx Transport Services, Inc., an Arkansas
corporation ("Xxxx"), M.S. Carriers, Inc., a Tennessee corporation ("M.S."),
Swift Transportation Co., Inc., a Nevada corporation ("Swift"), U.S. Xpress
Enterprises, Inc., a Nevada corporation ("U.S. Xpress"), and Xxxxxx Enterprises,
Inc., a Nebraska corporation ("Xxxxxx") (all of which are referred to
collectively as the "Initial Subscribers" or the "parties"), or the respective
Affiliates of the foregoing six corporations.
WHEREAS, the Initial Subscribers, on March 13, 2000, entered into an
Agreement in Principal to Form Xxxxxxxxxx.xxx, an Internet-based global
transportation logistics company; and
WHEREAS, the Company was formed on April 18, 2000; and
WHEREAS, the Initial Subscribers and the Company wish to enter into an
agreement whereby the Initial Subscribers will transfer all of their freight
brokerage and non-asset based transportation logistics operations owned by them
or their subsidiaries (the "Transportation Logistics Businesses") into the
Company in return for all of the initial membership interests of the Company.
NOW, THEREFORE, in consideration of the foregoing recitals and mutual
promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1. INITIAL SUBSCRIPTION. The Initial Subscribers hereby
subscribe, and the Company accepts the Initial Subscribers' subscription, for
the initial Membership Interests (the "Membership Interests") in the Company as
described below:
Covenant - 13% Swift - 16%
Xxxx - 28% U.S. Xpress - 13%
M.S. - 14% Xxxxxx - 16%
SECTION 2. CONSIDERATION. In consideration of the Membership Interests
described above, the Initial Subscribers agree as follows:
(a) CAPITAL. Each of the Initial Subscribers shall contribute the
sum of Five Million Dollars ($5,000,000.00) (the "Individual
Subscription Capital") toward the capital of the Company,
payable as follows:
(i) Within five (5) business days following the
execution of this Subscription Agreement, each of the
Initial Subscribers shall transfer, in immediately
available funds, the sum of Fifty Thousand Dollars
($50,000.00) to the Company;
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(ii) Thereafter, not less than three (3) business
days after notice by the Chief Executive Officer of
the Company of the Company's need for additional
working capital, each of the Initial Subscribers
shall transfer to the Company, in immediately
available funds, one-sixth (1/6) of the total amount
of additional working capital then deemed necessary
for the Company's operations;
(iii) Not less than three (3) business days prior to
conversion of the Company's form to a corporation
each Initial Subscriber shall transfer to the
Company, in immediately available funds, any unfunded
balance of its Individual Subscription Capital.
(iv) Up to the time of any conversion of the Company
from a limited liability company to a corporation, no
portion of any Individual Subscription Capital may be
returned or distributed by the Company to any party
absent the unanimous consent of all of the Initial
Subscribers.
(b) CONTRIBUTION OF ASSETS. On or before June 30, 2000, each of
the Initial Subscribers shall contribute, and cause any
applicable Affiliate to contribute, to the Company all of the
intangible assets of its Transportation Logistics Businesses
to the Company, including, but not limited to all contracts
with customers (to the extent assignable), goodwill, Post
Office boxes and telephone and telefax numbers dedicated to
its Transportation Logistics Business software and software
licenses, patents, trademarks, service marks, copyrights,
Internet websites and domain names and registrations dedicated
to its Transportation Logistics Business, trade secrets,
know-how, and other intellectual property (collectively
referred to as the "Contributed Assets").
SECTION 3. NON-COMPETITION.
(a) As a condition of its ownership of a Membership Interest in
the Company, each of the Initial Subscribers acknowledges and
agrees that it will have access to and become familiar with
certain confidential information and trade secrets relating to
the Company's operations, customers, and other information,
and that much of the information that the Initial Subscribers
will be exposed to constitute trade secrets of the Company.
The Initial Subscribers understand and agree that the Company
has a legitimate interest in assuring that such confidential
information and trade secrets are not used by any of the
Initial Subscribers in a manner that would be disadvantageous
to the Company. As a result, in exchange for the consideration
provided pursuant to this Subscription Agreement, for a period
equal to the greater of (i) five (5) years from the date of
signing of this Subscription Agreement; or (ii) two (2) years
after such time as any Initial Subscriber shall have
transferred or sold such portion of its Membership Interest in
the Company so as to result in total ownership of less than a
two percent (2%) equity interest in the Company, and
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resigned from the management of the Company, each of the
Initial Subscribers agree that it will not, directly or
indirectly, whether voluntarily or involuntarily, engage in
any business activity within the United States that is in
competition or is reasonably expected to be in competition
with the Company or which performs services or sells goods
which are similar to those provided, sold, or contemplated to
be provided or sold, by the Company.
(b) Since the damages to the Company resulting from a breach of
these provisions could not adequately be compensated by money
damages, the Company shall be entitled to, in addition to any
other right or remedy available to it, an injunction
restraining such breach or threatened breach, and in any case
no bond or other security shall be required in connection
therewith except as required by law. The Initial Subscribers
agree that the provisions of this paragraph are necessary and
reasonable to protect the Company in the conduct of its
business. If any restriction contained in this paragraph shall
be deemed invalid, illegal or unenforceable by reason of
extent, duration, geographical scope hereof, or otherwise,
then the Court making such determination shall have the right
to reduce such extent, duration, geographical scope or other
provisions hereof, and, in its reduced form, such restriction
shall then be enforceable in the manner contemplated hereby.
SECTION 4. ADDITIONAL AGREEMENTS.
(a) TRANSFER OF CONTRIBUTED ASSETS TO THE COMPANY. Notwithstanding
the Agreement of the Initial Subscribers to contribute the
Contributed Assets to the Company on or before June 30, 2000,
the parties acknowledge and agree that the Company may not be
fully prepared to conduct its business in all respects as of
that date. Each of the Initial Subscribers agrees, therefore,
that it will, as requested by the Company, continue after June
30, 2000 to operate its Transportation Logistics Businesses
for the benefit of the Company pursuant to an Outsourcing
Agreement to be entered into between the parties as the
Company deems reasonably necessary (the "Outsourcing
Agreement") in order to effectuate a smooth transition to the
Company operations. In connection with the Outsourcing
Agreement, each Initial Subscriber agrees to account for and
remit to the Company all net revenues derived therefrom, less
the reasonable and customary expenses associated with its
continued operation of that business.
(b) PREPARATION OF AUDITED FINANCIAL STATEMENTS. The Initial
Subscribers acknowledge the necessity of the Company preparing
audited year-end financial statements for each Initial
Subscriber's Transportation Logistics Business for fiscal
years 1997, 1998, and 1999, as well as reviewed interim
financial statements through June 30, 2000. In connection
therewith, each of the Initial Subscribers commits and agrees
to provide such information as is necessary for the Company's
preparation of the audited financial statements by not later
than June 30, 2000, and the information necessary for
preparation of the interim statements by not later than August
30, 2000.
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All costs associated with preparation of the financial
statements described herein shall be borne by the Company.
(c) OTHER ASSETS. The Initial Subscribers acknowledge and agree
that the Company may desire to purchase additional assets from
each of the Initial Subscribers which are necessary for the
smooth transition of its business, including, but not limited
to computer hardware and furnishings. Each of the Initial
Subscribers hereby agree, to the extent such additional assets
are reasonably severable from any Initial Subscriber's other
operations, to transfer such additional assets as the Company
might reasonably require in return for payment by the Company
to the transferring Initial Subscriber of an amount equal to
the net-book value of any such additional assets.
(d) BEST EFFORTS. Each of the Initial Subscribers shall use its
best efforts to obtain any required consents to the assignment
of the Contributed Assets. In the event any such requisite
consent is withheld by any third party, such Initial
Subscriber shall subcontract its transportation brokerage or
logistics obligations to the Company unless prohibited by the
underlying contract, in which case the parties acknowledge and
agree that the Initial Subscriber at issue will be free to
perform the balance of its contractual obligations thereunder,
pursuant to the provisions of an Outsourcing Agreement
consistent with the terms of Section 4(a) above.
(e) INTELLECTUAL PROPERTY. If intellectual property is co-owned or
co-licensed by both a Initial Subscriber's Transportation
Logistics Business and the Initial Subscriber's other
businesses, both the Company and the Initial Subscriber will
have ownership and/or licensing rights after Closing. If a
software program is developed and owned by an Initial
Subscriber's Transportation Logistics Business and if one or
more of its other businesses have had the right to use such
software program, the Initial Subscriber will continue to have
the same right after Closing, but such software program shall
become the property of the Company. If a software program
directly related to an Initial Subscriber's Transportation
Logistics Business is developed and owned by an Initial
Subscriber's other business(es) and its Transportation
Logistics Business has had the right to use such software
program, the Company will receive the same right to use the
software program after Closing. Each Initial Subscriber shall
also be entitled to the use of software that is derived from
software it contributed that was substantially developed by
that Initial Subscriber. The Initial Subscribers shall use
their best efforts to obtain consents to the assignment of
software licensed from third parties.
(f) EMPLOYMENT OF JUN-XXXXX XX. Each of the Initial Subscribers
agrees that Jun-Xxxxx Xx shall be employed as the Company's
Chairman, President and Chief Executive Officer in accordance
with the terms of an Employment Agreement to be negotiated
between Jun-Xxxxx Xx and the Initial Subscribers' Compensation
Committee, and approved by the Initial Subscribers (the
"Employment Agreement"). Each of the Initial Subscribers
further acknowledges and agrees that, pursuant to the
Employment
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Agreement, and in exchange for Employee's assigning to the
Company all rights he may have in, under, and to the Dense
Network Efficiency optimization computer algorithm on or
before June 30, 2000, the Company shall transfer to Employee
on the same day four and one half percent (4.5%) of the equity
ownership of the Company ("Equity Interest"), which shall be
subject to a substantial risk of forfeiture and which Employee
shall not be permitted to sell or otherwise transfer prior to
its vesting over a seven-year period.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PARTIES
(a) REPRESENTATIONS OF THE INITIAL SUBSCRIBERS. Each of the
Initial Subscribers warrants and represents solely with
respect to itself as follows:
(i) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each
of the Initial Subscribers is a corporation duly
organized, validly existing and in good standing
under the laws of its state of incorporation. Each of
the Initial Subscribers has all requisite corporate
power and authority to own and operate its properties
and assets, to execute and deliver this Subscription
Agreement and to carry on its business as presently
conducted and as presently proposed to be conducted.
Each of the Initial Subscribers is duly qualified and
is authorized to do business and is in good standing
as a foreign corporation in all jurisdictions in
which the nature of its activities and of its
properties (both owned and leased) makes such
qualification necessary.
(ii) AUTHORIZATION; BINDING OBLIGATIONS. All corporate
action on the part of each of the Initial Subscribers
and their respective officers, directors and
stockholders necessary for the authorization of this
Subscription Agreement and the performance of all
their respective obligations hereunder have been
taken. This Subscription Agreement, when executed and
delivered, will be a valid and binding obligation of
each of the Initial Subscribers, enforceable in
accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application
affecting enforcement of creditors' rights and (b)
general principles of equity that restrict the
availability of equitable remedies.
(iii) COMPLIANCE WITH OTHER INSTRUMENTS. No Initial
Subscriber will be by virtue of entering into and
performing this Subscription Agreement and the
transactions contemplated hereunder in violation or
default of any term of its Certificate of
Incorporation or Bylaws or any term or provision of
any material mortgage, indenture, agreement,
instrument or contract to which it is party or by
which it is bound, nor, by virtue of entering into
and performing this Subscription Agreement and the
transactions contemplated hereunder, in violation of
any order addressed specifically to the Initial
Subscriber, as applicable, nor, to the best of the
Initial Subscriber's knowledge, any material order,
statute, rule or regulation applicable to it,
Page 5 of 10 - Xxxxxxxxxx.xxx Initial Subscription Agreement
other than any of the foregoing such violations that
do not, either individually or in the aggregate have
a material adverse effect on its businesses as
presently conducted or planned to be conducted.
(iv) ACQUISITION FOR OWN ACCOUNT. Each of the Initial
Subscribers is acquiring the Membership Interest
being issued hereunder for its own account for
investment only, and not with a view towards their
distribution.
(v) LACK OF PUBLIC MARKET FOR SHARES. The Initial
Subscribers understand that (1) the Membership
Interests being issued pursuant to this Subscription
Agreement have not been registered under the
Securities Act of 1933 or any applicable state law
(the "SECURITIES ACT") and that as such, such
Membership Interests are subject to restrictions on
transfer and bear a restrictive legend to such
effect, (2) the Membership Interests issued pursuant
hereto may not be transferred until registered under
the Securities Act, unless an exemption from
registration is available, (3) the Company has no
present intention of registering the Membership
Interests, and (4) each Initial Subscriber also
acknowledges that any certificate evidencing
Membership Interests shall bear a legend noting
restrictions on transfer contained in the Company=s
Operating Agreement, in addition to the private
offering legend referenced above. The Initial
Subscribers also understand that there is no
assurance that any exemption from registration under
the Securities Act will be available and that, even
if available, such exemption may not allow the
Initial Subscribers to transfer all or any portion of
the Membership Interest held by it under the
circumstances, in the amounts or at the times the
Initial Subscribers might propose.
(b) REPRESENTATIONS OF THE COMPANY. The Company hereby represents
and warrants as follows:
(i) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a limited liability company duly
organized, validly existing and in good standing
under the laws of the State of Nevada. The Company
has all requisite power and authority to own and
operate its properties and assets, to execute and
deliver this Subscription Agreement and to carry on
its business as presently conducted and as presently
proposed to be conducted. The Company is or will be,
as soon as is practicable following execution of this
Subscription Agreement, duly qualified and authorized
to do business and in good standing as a foreign
corporation in all jurisdictions in which the nature
of its activities and of its properties (both owned
and leased) makes such qualification necessary.
(ii) AUTHORIZATION; BINDING OBLIGATIONS. All action on the
part of the Company, necessary for the authorization
of this Subscription Agreement, the performance of
all obligations of the Company hereunder and the
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authorization, issuance and delivery of the
Membership Interests pursuant hereto has, in the case
of this Subscription Agreement, been taken. This
Subscription Agreement, when executed and delivered,
will be the valid and binding obligation of the
Company enforceable in accordance with its terms,
except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of
creditors' rights and (b) general principles of
equity that restrict the availability of equitable
remedies.
(iii) COMPLIANCE WITH OTHER INSTRUMENTS. The Company will
not be by virtue of entering, into and performing
this Subscription Agreement and the transactions
contemplated hereunder, in violation or default of
any term of its Certificate of Organization
("Charter") or Operating Agreement or any term or
provision of any material mortgage, indenture,
agreement, instrument or contract to which it is
party or by which it is bound, and is not, and will
not by virtue of entering into and performing this
Subscription Agreement and the transactions
contemplated hereunder be, in violation of any order
addressed specifically to the Company, nor, to the
best knowledge of the Company any material order,
statute, rule or regulation applicable to the
Company, other than any of the foregoing such
violations that do not, either individually or in the
aggregate have a material adverse affect on the
Company's businesses as presently conducted or
planned to be conducted.
(iv) ISSUANCE OF MEMBERSHIP INTERESTS. When issued in
compliance with the provisions of this Subscription
Agreement and the Charter and Operating Agreement of
the Company, and upon payment of the Individual
Subscription Capital as described herein, the
Membership Interests will be validly issued, fully
paid and nonassessable, and will be free of any liens
or encumbrances other than liens and encumbrances
created by or imposed upon the Initial Subscribers;
provided, however, that the Membership Interests may
be subject to restrictions on transfer under state
and/or federal securities laws, the Charter or the
Operating Agreement of the Company.
SECTION 6. COMMUNICATIONS; MARKETING. Except as required by law,
neither the Initial Subscribers nor the Company shall issue any press release or
other communication (including investor communications) regarding the existence
or the nature of this Subscription Agreement or the relationship of the parties
or use the name of the other party in any press release, other communication
(including investor communications), marketing materials or advertising, without
the prior written consent of the other party. Notwithstanding the foregoing, the
Company and the Initial Subscribers hereby agree to work together in good faith
to develop mutually agreeable advertising and marketing programs to exploit the
relationship for the benefit of both parties.
SECTION 7. GOVERNING LAW. This Subscription Agreement shall be governed
in all respects by the laws of the State of Nevada without reference to
principles of conflict-of-law.
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SECTION 8. SUCCESSORS AND ASSIGNS. With the exception of an assignment
by an Initial Subscriber to any of its Affiliates as provided by and subject to,
the provisions of the Operating Agreement between the Company and its Members,
this Subscription Agreement shall not be assignable by any Initial Subscriber
without the prior consent of all parties to this Subscription Agreement, except
that the benefits of, but not the obligations under, this Subscription Agreement
may be assigned by any party to any person acquiring a majority of the
outstanding voting capital stock of such party. Subject to the foregoing, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
SECTION 9. AFFILIATE. As used throughout this Subscription Agreement,
"Affiliate" means any person that is, directly or indirectly, through one or
more intermediaries, controlling, controlled by, or under common control with an
Initial Subscriber. The term "control," as used in the immediately preceding
sentence, means, with respect to a limited liability company or corporation, the
right to exercise, directly or indirectly, more than 50% of the voting rights of
such limited liability company or corporation and, with respect to any other
person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies thereof.
SECTION 10. ENTIRE AGREEMENT. This Subscription Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subject matter hereof and no party shall be liable or bound to any other
in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
SECTION 11. SEVERABILITY. In case any provision of the Subscription
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 12. AMENDMENT. This Subscription Agreement may be amended or
modified only upon the written consent of the parties hereto.
SECTION 13. DELAYS OR OMISSIONS. It is agreed that no delay or omission
to exercise any right, power, or remedy accruing to any party upon any breach,
default or noncompliance by another party under this Subscription Agreement
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter
occurring.
SECTION 14. NOTICES. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified, (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day, or (c) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent, if to the Company, to the Attention
of the Chief Executive Officer; and if to an Initial Subscriber, to the Initial
Subscriber's address of record set forth in the records of the Company or at
such other address as any party may designate by five (5) days' advance written
notice to the other parties hereto.
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SECTION 15. EXPENSES. Each party shall pay all costs and expenses that
it incurs with respect to the negotiation, execution, delivery and performance
of the Subscription Agreement.
SECTION 16. DISPUTE RESOLUTION. Any disagreement between the parties
with respect to this Agreement shall be resolved by arbitration conducted in
accordance with the rules of the American Arbitration Association. Upon written
request of any party hereto tendered to all other parties, such arbitration
shall be conducted before a panel of three arbitrators (unless the parties agree
to one arbitrator) with each side to the dispute selecting one arbitrator and
the arbitrators so selecting the third arbitrator. The arbitration award shall
be final and binding upon the parties, and judgment on the award may be entered
by and enforced in any court having competent jurisdiction. The expenses of the
arbitration proceedings shall be borne by the non-prevailing thereto. All
arbitration proceedings hereunder shall be conducted in Dallas, Texas.
SECTION 17. ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Subscription Agreement, the
prevailing party in such dispute shall be entitled to recover from the losing
party all fees, costs and expenses of enforcing any right of such prevailing
parry under or with respect to this Subscription Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation. all fees. costs and expenses of
appeals.
SECTION 18. TITLES AND SUBTITLES. The titles of the sections and
subsections of the Subscription Agreement are for convenience of reference only
and are not to be considered in construing this Subscription Agreement.
SECTION 19. COUNTERPARTS. This Subscription Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
SECTION 20. EFFECTIVE DATE. This Agreement shall become effective upon
execution.
[THE FOLLOWING PAGE IS THE SIGNATURE PAGE]
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SIGNATURE PAGE OF
INITIAL SUBSCRIPTION AGREEMENT
OF XXXXXXXXXX.XXX, LLC
DATE INITIAL SUBSCRIBERS
COVENANT TRANSPORT, INC.
April 19, 2000 BY: /s/ XXXXX X. XXXXXX
-----------------------------------
PRINTED NAME: XXXXX X. XXXXXX
-------------------------
TITLE: CHAIRMAN, PRES./CEO
--------------------------------
X.X. XXXX TRANSPORT SERVICES, INC.
April 19, 2000 BY: /s/ XXXXX XXXXXXXX
-----------------------------------
PRINTED NAME: XXXXX XXXXXXXX
-------------------------
TITLE: CHAIRMAN
--------------------------------
M.S. CARRIERS, INC.
April 19, 2000 BY: /s/ XXXXXXX X. XXXXXXX
-----------------------------------
PRINTED NAME: XXXXXXX X. XXXXXXX
-------------------------
TITLE: CHAIRMAN, PRESIDENT AND CEO
--------------------------------
SWIFT TRANSPORTATION CO., INC.
April 19, 2000 BY: /s/ XXXXX X. XXXXX
-----------------------------------
PRINTED NAME: XXXXX X. XXXXX
-------------------------
TITLE: CHAIRMAN, PRESIDENT AND CEO
--------------------------------
U.S. XPRESS ENTERPRISES, INC.
April 19, 2000 BY: /s/ XXX X. XXXXXX
-----------------------------------
PRINTED NAME: XXX X. XXXXXX
-------------------------
TITLE: CO-CHAIRMAN
--------------------------------
XXXXXX ENTERPRISES, INC.
April 19, 2000 BY: /s/ XXXXXXXX X. XXXXXX
-----------------------------------
PRINTED NAME: XXXXXXXX X. XXXXXX
-------------------------
TITLE: CHAIRMAN AND CEO
--------------------------------
Page 10 of 10 - Xxxxxxxxxx.xxx Initial Subscription Agreement
