EXHIBIT 10.43
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
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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
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described above, the Initial Subscribers agree as follows:
(a) Capital. Each of the Initial Subscribers shall contribute the sum of
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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
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immediately available funds, the sum of Fifty Thousand Dollars
($50,000.00) to the Company;
(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
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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.
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(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
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in the Company so as to result in total ownership of less than a two
percent (2%) equity interest in the Company, and 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.
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(a) Transfer of Contributed Assets to the Company. Notwithstanding the
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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
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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
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June 30, 2000, and the information necessary for preparation of the
interim statements by not later than August 30, 2000. 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
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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
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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-
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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
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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
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Committee, and approved by the Initial Subscribers (the "Employment
Agreement"). Each of the Initial Subscribers further acknowledges and
agrees that, pursuant to the Employment 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
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(a) Representations of the Initial Subscribers. Each of the Initial
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Subscribers warrants and represents solely with respect to itself as
follows:
(i) Organization, Good Standing and Qualification. Each of the
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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
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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
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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
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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, 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
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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
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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
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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
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warrants as follows:
(i) Organization, Good Standing and Qualification. The Company is a
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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.
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(ii) Authorization; Binding Obligations. All action on the part of
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the Company, necessary for the authorization of this
Subscription Agreement, the performance of all obligations of
the Company hereunder and the 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
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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
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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
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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
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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
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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
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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,
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"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
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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
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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
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modified only upon the written consent of the parties hereto.
Section 13. Delays or Omissions. It is agreed that no delay or omission
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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
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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
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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
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incurs with respect to the negotiation, execution, delivery and performance of
the Subscription Agreement.
Section 16. Dispute Resolution. Any disagreement between the parties with
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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
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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
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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
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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
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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
April 19, 2000 Covenant Transport, Inc.
By: Xxxxx X. Xxxxxx
Chairman, President & CEO
April 19, 2000 X.X. Xxxx Transport Services, Inc.
By: Xxxxx Xxxxxxxx
Chairman
April 19, 2000 M.S. Carriers, Inc.
By: Xxxxxxx X. Xxxxxxx
Chairman, President & CEO
April 19, 2000 Swift Transportation Co., Inc.
By: Xxxxx X. Xxxxx
Chairman, President & CEO
April 19, 2000 U.S. Xpress Enterprises, Inc.
By: Xxx X. Xxxxxx
Co-Chairman
April 19, 2000 Xxxxxx Enterprises, Inc.
By: Xxxxxxxx X. Xxxxxx
Chairman & CEO
XXXXXXXXXX.XXX, LLC
By: Xxxxx Xxxxxxxx
Tax Matters Manager
Page 12 of 10 B Xxxxxxxxxx.xxx Initial Subscription Agreement
