Exhibit 2.1
INITIAL SUBSCRIPTION AGREEMENT
OF
▇▇▇▇▇▇▇▇▇▇.▇▇▇, LLC
THIS INITIAL SUBSCRIPTION AGREEMENT (the "Subscription
Agreement") is entered into as of April 19, 2000 by
▇▇▇▇▇▇▇▇▇▇.▇▇▇, LLC, a Nevada limited liability company (the
"Company") and Covenant Transport, Inc., a Nevada corporation
("Covenant"), ▇.▇. ▇▇▇▇ Transport Services, Inc., an Arkansas
corporation ("▇▇▇▇"), 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 ▇▇▇▇▇▇ Enterprises, Inc., a
Nebraska corporation ("▇▇▇▇▇▇") (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 ▇▇▇▇▇▇▇▇▇▇.▇▇▇, 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%
▇▇▇▇ - 28% U.S. Xpress - 13%
M.S. - 14% ▇▇▇▇▇▇ - 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 resigned from the
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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. All costs associated with
preparation of the financial statements described
herein shall be borne by the Company.
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(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-▇▇▇▇▇ ▇▇. Each of the Initial
Subscribers agrees that Jun-▇▇▇▇▇ ▇▇ 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-▇▇▇▇▇
▇▇ 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 Agreement, and in exchange
for Employee's assigning to the Company all rights he
may have in, under, and to the Dense Network Efficiency
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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,
other than any of the foregoing such violations
that do not, either individually or in the
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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 authorization, issuance and
delivery of the Membership Interests pursuant
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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 proceed
ings 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 ▇▇▇▇▇▇▇▇▇▇.▇▇▇. LLC
DATE INITIAL SUBSCRIBERS
---- -------------------
April 19, 2000 Covenant Transport, Inc.
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman, President & CEO
April 19, 2000 ▇.▇. ▇▇▇▇ Transport Services, Inc.
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Chairman
April 19, 2000 M.S. Carriers, Inc.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President & CEO
April 19, 2000 Swift Transportation Co., Inc.
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman, President & CEO
April 19, 2000 U.S. Xpress Enterprises, Inc.
By: ▇▇▇ ▇. ▇▇▇▇▇▇
Co-Chairman
April 19, 2000 ▇▇▇▇▇▇ Enterprises, Inc.
By: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman & CEO
▇▇▇▇▇▇▇▇▇▇.▇▇▇, LLC
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tax Matters Manager
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