<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________________
Commission file number 0-20797
------------------
RUSH ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1733016
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8810 I.H. 10 East
San Antonio, Texas 78219
(Address of principal executive offices)
(Zip Code)
(210) 661-4511
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicated below is the number of shares outstanding of the registrant's
only class of common stock, as of May 7, 1998.
Number of
Shares
Title of Class Outstanding
-------------- -----------
Common Stock, $.01 Par Value 6,643,730
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RUSH ENTERPRISES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1998 (unaudited) and December 31, 1997. . . . . . . 3
Consolidated Statements of Income - For the Three Months
Ended March 31, 1998 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows - For the Three Months Ended
March 31, 1998 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
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PART I
Item 1. Financial Statements
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
ASSETS (UNAUDITED) (AUDITED)
------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 17,894 $ 19,816
Accounts receivable, net 25,870 20,894
Inventories 88,206 66,757
Prepaid expenses and other 413 381
-------- --------
Total current assets 132,383 107,848
PROPERTY AND EQUIPMENT, net 39,604 34,158
OTHER ASSETS, net 14,123 13,472
-------- --------
Total assets $186,110 $155,478
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Floorplan notes payable $ 83,900 $ 63,268
Current maturities of long-term debt 2,754 2,439
Advances outstanding under lines of credit 10 20
Trade accounts payable 4,896 5,751
Accrued expenses 13,393 12,556
Note payable to shareholder 5,550 5,450
-------- --------
Total current liabilities 110,503 89,484
DEFERRED INCOME TAX LIABILITY, net 1,340 1,180
LONG-TERM DEBT, net of current maturities 30,858 22,742
SHAREHOLDERS' EQUITY:
Rush Enterprises, Inc., common stock, par value $.01 per share;
25,000,000 shares authorized; 3,750,000 and
6,643,730 outstanding at March 31, 1998 and 1997 66 66
Additional paid-in capital 33,342 33,342
Retained earnings 10,001 8,664
-------- --------
Total shareholders' equity 43,409 42,072
-------- --------
Total liabilities and shareholders' equity $186,110 $155,478
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
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RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE - UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
---------- -----------
<S> <C> <C>
REVENUES:
New and used truck sales $ 84,987 $61,805
Parts and service 23,329 16,295
Construction Equipment Sales 7,951 --
Lease and rental 4,830 3,208
Finance and insurance 2,358 1,025
Other 2,620 579
-------- -------
Total revenues 126,075 82,912
COST OF PRODUCTS SOLD 104,363 69,743
-------- -------
GROSS PROFIT 21,712 13,169
SELLING, GENERAL AND ADMINISTRATIVE 17,231 10,784
DEPRECIATION AND AMORTIZATION 955 628
-------- -------
OPERATING INCOME 3,526 1,757
INTEREST EXPENSE 1,298 490
-------- -------
INCOME BEFORE INCOME TAXES 2,228 1,267
PROVISION FOR INCOME TAXES 891 482
-------- -------
NET INCOME $ 1,337 $ 785
======== =======
Basic and diluted income from operations per share $ .20 $ .12
======== =======
Weighted average shares outstanding:
Basic 6,644 6,644
======== =======
Diluted 6,645 6,644
======== =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
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RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 1,337 $ 785
Adjustments to reconcile net income to cash provided
by (used in) continuing operations
Depreciation and amortization 955 628
Gain on sale of property, plant and equipment (47) --
Provision for deferred income tax expense 160 52
Change in receivables (4,251) 8,469
Change in inventories (17,019) 8,602
Change in other current assets (25) 902
Change in accounts payable (1,023) (1,272)
Change in accrued liabilities 244 (1,416)
-------- --------
Net cash provided by (used in) operating activities (19,669) 16,750
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (4,585) (2,032)
Proceeds from the sale of property and equipment 139 1,141
Business acquisitions (5,817) (7,915)
Change in other assets 607 (86)
-------- --------
Net cash provided by (used in) investing activities (9,656) (8,892)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 7,274 4,692
Principal payments on notes payable (503) (1,562)
Draws (payments) on floor plan financing, net 20,632 (16,850)
-------- --------
Net cash provided by (used in) financing activities 27,403 (13,720)
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,922) (5,862)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 19,816 21,507
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD 17,894 $ 15,645
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during year for interest $ 1,312 $ 937
======== ========
Cash paid during year for taxes $ 42 $ --
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
5
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RUSH ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1 - PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The interim consolidated financial statements included herein have been
prepared by Rush Enterprises, Inc. and its subsidiaries (collectively referred
to as the "Company"), without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). All adjustments have been made
to the accompanying interim consolidated financial statements which are, in the
opinion of the Company's management, necessary for a fair presentation of the
Company's operating results. All adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. It is
recommended that these interim consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on form 10-K for the year ended December
31, 1997.
2 - ACQUISITION
In March 1998 the Company acquired all of the issued and outstanding
capital stock of D & D Farm and Ranch Supermarket Inc., for approximately $10.5
million. The acquisition was accounted for as a purchase. The results of
operations have been included in the Company's financial statements since the
date of acquisition. No pro forma financial information with regard to this
acquisition has been presented as the acquisition does not have a significant
impact on the Company's prior or current period financial position or results of
operations.
3 - COMMITMENTS AND CONTINGENCIES
The Company is contingently liable to certain finance companies for
certain promissory notes and finance contracts, related to the sale of trucks
and construction equipment, sold to such finance companies. The Company's
recourse liability related to sold finance contracts is limited to 15 to 25
percent of the outstanding balance of each note sold to a finance company, with
the aggregate recourse liability for 1998 limited to $600,000.
The Company provides an allowance for repossession losses and early
repayment penalties.
The Company is involved in various claims and legal actions arising in
the ordinary course of business. The Company believes it is unlikely that the
final outcome of any of the claims or proceedings to which to Company is a party
would have a material adverse effect on the Company's financial position or
results of operations, however, due to the inherent uncertainty of litigation,
there can be no assurance that the resolution of any particular claim or
proceeding would not have a material adverse effect on the Company's results of
operations for the fiscal period in which such resolution occurred.
The Company has consulting agreements with certain individuals for an
aggregate monthly payment of $25,725. The agreements expire at various times
between 1999 through 2001.
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4 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Numerator:
Net income - numerator for basic and diluted earnings per share $1,337,000 $ 785,000
Denominator:
Denominator for basic earnings per share - weighted average shares 6,643,730 6,643,730
Effect of dilutive securities:
Employee and Director stock options 1,659 --
---------- ----------
Denominator for diluted earnings per share - adjusted weighted
average shares 6,645,389 6,643,730
========== ==========
Basic earnings per share $ .20 $ .12
========== ==========
Diluted earnings per share $ .20 $ .12
========== ==========
</TABLE>
5 - SEGMENT INFORMATION
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). This statement requires that public business
enterprises report certain information about operating segments in complete sets
of financial statements of the enterprise and in condensed financial statements
of interim periods issued to shareholders. It also requires that public business
enterprises report certain information about their products and services, the
geographic areas in which they operate, and their major customers. The effective
date for SFAS No. 131 is for fiscal years beginning after December 15, 1997.
The Company has two reportable segments: the Heavy Duty Truck segment, and the
Construction Equipment segment. The Heavy Duty Truck segment operates a regional
network of truck centers that provides an integrated one-stop source for the
trucking needs of its customers, including retail sales of new Peterbilt and
used heavy-duty trucks; after-market parts, service and body shop facilities;
and a wide array of financial services, including the financing of new and used
truck purchases, insurance products and truck leasing and rentals. The Heavy
Duty Truck segment has locations in Texas, California, Colorado, Oklahoma and
Louisiana. The Construction Equipment segment, formed during 1997, operates a
full-service John Deere dealership that serves the Houston, Texas Metropolitan
and surrounding areas. Dealership operations include the retail sale of new and
used construction equipment, after-market parts and service facilities,
equipment rentals, and the financing of new and used equipment. The Company had
only one segment prior to the October 1997 acquisition of such John Deere
dealership, thus for the quarter ended March 31, 1997 results depict only the
Heavy Duty Truck segment.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997. The Company evaluates
performance based on income before income taxes not including extraordinary
items.
The Company accounts for intersegment sales and transfers at current market
prices as if the sales or transfers were to third parties. There were no
intersegment sales during the three months ended March 31, 1998.
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The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. Business units
were maintained through expansion and acquisitions. The following table contains
summarized information about reportable segment profit or loss and segment
assets, for the three months ended March 31, 1998: (in thousands)
<TABLE>
<CAPTION>
HEAVY-DUTY CONSTRUCTION
TRUCK SEGMENT EQUIPMENT
SEGMENT SEGMENT ALL OTHER TOTALS
------- ------- --------- ------
<S> <C> <C> <C> <C>
Three months ended March 31, 1998
Revenues from external customers $110,864 $11,856 $ 3,355 $126,075
Segment income before taxes 2,091 2 135 2,228
Segment assets 126,415 41,202 18,493 186,110
</TABLE>
Revenues from segments below the reportable quantitative thresholds are
attributable to four operating segments of the Company. Those segments include a
tire company, a farm and ranch retail center, an insurance company, and a
hunting lease operation. None of those segments has ever met any of the
quantitative thresholds for determining reportable segments.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this Form 10-Q are "forward-looking
statements" within the meaning of the Section 27A of the Securities Act of and
Section 21E of the Exchange Act. Specifically, all statements other than
statements of historical fact included in this Form 10-Q regarding the Company's
financial position, business strategy and plans and objectives of management of
the Company for future operations are forward-looking statements. These
forward-looking statements are based on the beliefs of the Company's management,
as well as assumptions made by and information currently available to the
Company's management. When used in this report, the words "anticipate,"
"believe," "estimate," "expect" and "intend" and words or phrases of similar
import, as they relate to the Company or its subsidiaries or Company management,
are intended to identify forward-looking statements. Such statements reflect the
current view of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions related to certain factors
including, without limitation, competitive factors, general economic conditions,
customer relations, relationships with vendors, the interest rate environment,
governmental regulation and supervision, seasonality, distribution networks,
product introductions and acceptance, technological change, changes in industry
practices, onetime events and other factors described herein and in the
Company's Registration Statement on Form S-1 (File No. 333-3346) and in the
Company's annual, quarterly and other reports filed with the Securities and
Exchange Commission (collectively, "cautionary statements"). Although the
Company believes that its expectations are reasonable, it can give no assurance
that such expectations will prove to be correct. Based upon changing conditions,
should any one or more of these risks or uncertainties materialize, or should
any underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated, expected, or
intended. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the applicable cautionary statements. The Company
does not intend to update these forward-looking statements.
The following comments should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere in this
Quarterly Report on Form 10-Q.
GENERAL
Rush Enterprises, Inc. was incorporated in Texas in 1965 and currently
consists of two reportable segments: the Heavy Duty Truck segment, and the
Construction Equipment segment.
The Heavy Duty Truck segment operates a regional network of truck
centers that provide an integrated one-stop source for the trucking needs of its
customers, including retail sales of new Peterbilt and used heavy-duty trucks;
after-market parts, service and body shop facilities; and a wide array of
financial services, including the financing of new and used truck purchases,
insurance products and truck leasing and rentals. The Company's truck centers
are strategically located in high truck traffic areas on or near major highways
in Texas, California, Oklahoma, Colorado and Louisiana. The Company is the
largest Peterbilt truck dealer in the United States, representing approximately
14.7% of all new Peterbilt truck sales in 1997, and is the sole authorized
vendor for new Peterbilt trucks and replacement parts in its market areas. The
Company was named Peterbilt Dealer of the Year for North America for the
1993-1994 year. The criteria used to determine the recipients of this award
include, among others, image, customer satisfaction, sales activity and
profitability.
The Construction Equipment segment, formed during 1997, operates a
full-service John Deere dealership (the "Rush Equipment Center") that serves the
Houston, Texas Metropolitan and surrounding areas. Dealership operations include
the retail sale of new and used construction equipment, after-market parts and
service facilities, equipment rentals, and the financing of new and used
construction equipment. The Company believes the construction equipment industry
is highly-fragmented and offers opportunities
9
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for consolidation. As a result, the Company's growth strategy is to realize
economies of scale, favorable purchasing power, and cost savings by developing a
network of John Deere dealerships through acquisitions and growth inside
existing territories. The Company currently operates only one construction
equipment dealership and there can be no assurance that the Company will be able
to successfully develop a network of construction equipment dealerships or, if
such network of construction equipment dealerships is established, that it will
realize economies of scale, favorable purchasing power or cost savings.
In March 1997, the Company acquired the assets of Denver Peterbilt,
Inc., which consisted of two full service Peterbilt dealerships in Denver and
Greeley, Colorado. The purchase price was approximately $7.9 million, funded by
cash and borrowings under the Company's floor plan financing arrangement.
In September 1997, the Company opened a Rush Truck Center in Pharr,
Texas. This full-service Peterbilt dealership serves the Texas Rio Grande Valley
area.
In October 1997, the Company acquired certain assets and assumed
certain liabilities from C. Jim Stewart & Stevenson, Inc., which consisted of
its full service John Deere construction equipment dealership serving the
Houston, Texas metropolitan and surrounding areas. The purchase price was
approximately $30.2 million funded by cash, borrowings from various creditors,
and a note payable issued to the seller.
In March 1998, the Company acquired all of the outstanding capital
stock of D & D Farm and Ranch Supermarket, Inc. ("D & D"), for consideration of
approximately $10.5 million. D & D operates a retail farm and ranch superstore
in the Greater San Antonio, Texas area.
RESULTS OF OPERATIONS
The following discussion and analysis includes the Company's historical
results of operations for the three months ended March 31, 1998 and 1997.
The following table sets forth for the periods indicated certain
financial data as a percentage of total revenues:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
New and used truck sales ..................................... 67.4% 74.5%
Parts and service ............................................ 18.5 19.6
Construction equipment sales ................................. 6.3 --
Lease and rental ............................................. 3.8 3.9
Finance and insurance ........................................ 1.9 1.2
Other ........................................................ 2.1 .8
----- -----
Total revenues ...................................... 100.0 100.0
Cost of products sold ........................................ 82.8 84.1
----- -----
Gross profit ................................................. 17.2 15.9
Selling, general and administrative expenses ................. 13.7 13.0
Depreciation and amortization ................................ .7 .8
----- -----
Operating income ............................................. 2.8 2.1
Interest expense ............................................. 1.0 .5
----- -----
Income before income taxes ................................... 1.8 1.6
Provision for income taxes ................................... .7 .7
----- -----
Net income ................................................... 1.1% .9%
----- -----
</TABLE>
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THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Revenues
Revenues increased by approximately $43.2 million, or 52.1%, from $82.9
million to $126.1 million from the first quarter of 1997 to the first quarter of
1998. Approximately, $23.6 million in sales is attributable to the addition of
the Colorado and Pharr heavy-duty truck dealerships, and the John Deere
construction equipment dealership, while the remaining increase of $19.6 million
or 23.6%, is attributable to same store growth. Sales of new and used trucks
increased by approximately $23.2 million, or 37.5%, from $61.8 million to $85.0
million from the first quarter of 1997 to the first quarter of 1998. Unit sales
of new and used trucks increased by 25.3% and 34.3%, respectively, from the
first quarter of 1997 to the first quarter of 1998, while new truck average
revenue per unit increased by 5.8% and used truck average revenue per unit
increased by 16.8%. Average new truck prices and used truck prices increased due
to a change in product mix, and used truck demands increased due to increasing
delivery times on new truck orders.
Parts and service sales increased by approximately $7.0 million, or
43.0%, from $16.3 million to $23.3 million. The increase was due to same store
growth of 21.6% and parts and service sales associated with addition of the
Colorado and Pharr heavy-duty truck dealerships, and the John Deere construction
equipment dealership.
Lease and rental revenues increased by approximately $1.6 million, or
50.0% from $3.2 million to $4.8 million. The increase was due to $1.2 million of
lease and rental revenues generated by the John Deere dealership acquired in
October 1997, and same store growth in revenues of $396,000 or 12.4%.
Finance and insurance revenues increased by approximately $1.3 million,
or 130.0%, from $1.0 million to $2.3 million from the first quarter of 1997 to
the first quarter of 1998. The majority of the increase resulted from the
increase in used truck deliveries. Finance and insurance revenues have limited
direct costs and, therefore, contribute a disproportionate share of operating
profits.
Gross Profit
Gross profit increased by approximately $8.5 million, or 64.4%, from
$13.2 million to $21.7 million from the first quarter of 1997 to the first
quarter of 1998. Gross profit as a percentage of sales increased from 15.9% in
the first quarter of 1997 to 17.2% in the first quarter of 1998. The increase in
gross profit resulted from an increase in the sales mix to the parts, service
and body shop departments, in addition to increased gross margins on used truck,
service and body shop sales, as well as the addition of the Rush Equipment
Center, which achieved a gross margin of 19.6%. These margin increases were
offset by slight decreases in gross margins on new truck and parts sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by approximately
$6.4 million, from $10.8 million to $17.2 million, or 59.3%, from the first
quarter of 1997 to the first quarter of 1998. The increase resulted from
approximately $3.5 million of selling, general and administrative expense
related to the acquisition and integration of Denver Peterbilt Inc., the John
Deere construction equipment dealership, and D & D Farm and Ranch Supermarket,
Inc., and increased sales commissions resulting from increased gross margins.
Interest Expense
Interest expense increased by approximately $808,000 or 164.9%, from
$490,000 to $1.3 million, from the first quarter of 1997 to the first quarter of
1998, primarily as the result of increased levels of indebtedness due to higher
floor plan liability levels and the refinancing of certain real property owned
by the Company during the fourth quarter of 1997.
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Income before Income Taxes
Income before income taxes increased by $961,000, or 73.9%, from $1.3
million to $2.3 million from the first quarter of 1997 to the first quarter of
1998, as a result of the factors described above.
Income Taxes
The Company has provided for taxes at a 40% effective rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term cash needs are primarily for working capital,
including inventory requirements, expansion of existing facilities and the
acquisition of new facilities. These short-term cash needs have historically
been financed with retained earnings and borrowings under credit facilities
available to the Company.
In June 1996, the Company completed an initial public offering of
2,875,000 shares of common stock and received net proceeds of approximately
$32.1 million.
As a result of the initial public offering, working capital levels have
generally increased. At March 31, 1998, the Company had working capital of
approximately $21.7 million, including $17.9 million in cash and cash
equivalents, $25.9 million in accounts receivable, $88.2 million in inventories,
and $0.5 million in prepaid expenses, less $18.5 million of accounts payable and
accrued expenses, $2.8 million of current maturities on long-term debt, $5.6
million in a note payable to a shareholder, and $83.9 million outstanding under
floor plan financing. The aggregate maximum borrowing limits under working
capital lines of credit with various commercial banks are approximately $8.0
million. The Company's floor plan agreements with its primary lender limit the
aggregate amount of borrowings based on the number of new and used trucks and
the book value of construction equipment inventory.
For the first three months of 1998, operating activities resulted in
net cash used in operations of approximately $19.7 million. Net income of $1.3
million, an increase in accrued liabilities coupled with provisions for
depreciation, amortization and deferred taxes totaling $1.4 million was more
than offset by increases in accounts receivable, inventories and other assets
and a decrease in accounts payable totaling $22.4 million.
For the first three months of 1997, operating activities generated
$16.8 million of cash. Net income of $785,000, a decrease in accounts
receivable, inventories and other assets, coupled with provisions for
depreciation, amortization, and deferred taxes totaling $18.7 million more than
offset decreases in accounts payable and accrued liabilities of $2.7 million.
During the first three months of 1998, the Company used $9.7 million in
investing activities, including purchases of property, plant and equipment of
$4.6 million, a cash outlay of $5.8 million for the acquisition of D & D Farm
and Ranch Supermarket, Inc., offset by proceeds from the sale of property, plant
and equipment and a decrease in other assets totaling $746,000.
During the first three months of 1997, the Company used $8.9 million
for investing activities, primarily related to the acquisition of Denver
Peterbilt, Inc..
Net cash generated from financing activities in the first three months
of 1998 amounted to $27.4 million. Proceeds from additional floor plan financing
and increased notes payable more than offset principal payments on notes
payable.
For the first three months of 1997, net cash used in financing
activities amounted to $13.7 million. Payments on floor plan financing and
principal payments on notes payable more than offset the increase in notes
payable.
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Substantially all of the Company's truck purchases from PACCAR are made
on terms requiring payment within 15 days or less from the date of shipment from
the factory. The Company finances all, or substantially all, of the purchase
price of its new truck inventory, and 75% of the loan value of its used truck
inventory, under a floor plan arrangement with GMAC under which GMAC pays PACCAR
directly with respect to new trucks. The Company makes monthly interest payments
on the amount financed but is not required to commence loan principal repayments
to GMAC prior to the sale of new vehicles for a period of 12 months and for used
vehicles for a period of three months. At March 31, 1998, the Company had
approximately $54.8 million outstanding under its floor plan financing
arrangement with GMAC. GMAC permits the Company to earn, for up to 62.5% of the
amount borrowed under its floor plan financing arrangement with GMAC, interest
at the prime rate less one-half percent on overnight funds deposited by the
Company with GMAC.
The Company finances all, or substantially all, of the purchase price
of its new equipment inventory under its floor plan facilities with John Deere
and Associates Commercial Corp.. The agreement with John Deere provides for an
immediate 3% discount if the equipment is paid for within 30 days from the date
of purchase, or interest free financing for five months, after which time the
amount financed is required to be paid in full. When the equipment is sold prior
to the expiration of the five month period, the Company is required to repay the
principal within approximately 15 days of date of the sale. Should the equipment
financed by John Deere not be sold within the five month period, it is
transferred to the Associates Commercial Corp. floor plan arrangement. The
Company makes principal payments to Associates Commercial Corp., for sold
inventory, and interest payments for all inventory, on the 15th day of each
month. Used and rental equipment, to a maximum of book value, is financed under
a floor plan arrangement with Associates Commercial Corp. The Company makes
monthly interest payments on the amount financed and is required to commence
loan principal repayments on rental equipment as book value reduces. Principal
payments, for sold inventory, on used equipment are made the 15th day of each
month following the sale. The loans are collateralized by a lien on the
equipment. The Company's floor plan agreements limit the aggregate amount of
borrowings based on the book value of new and used equipment units. As of March
31, 1998, the Company's floor plan arrangement with Associates Commercial Corp.
permits the financing of up to $25 million in construction equipment. At March
31, 1998, the Company had $8.7 million and $20.4 million, outstanding under its
floor plan financing arrangements with John Deere and Associates Commercial
Corp., respectively.
Backlogs
The Company enters firm orders into its backlog at the time the order
is received. Currently, customer orders are being filled in approximately six to
nine months and customers have historically placed orders expecting delivery
within three to six months. However, certain customers, including fleets and
governments, typically place orders up to one year in advance of their desired
delivery date. The Company in the past has typically allowed customers to cancel
orders at any time prior to delivery, and the Company's level of cancellations
is affected by general economic conditions, economic recessions and customer
business cycles. As a percentage of orders, cancellations historically have
ranged from 5% to 12% of annual order volume. The Company's backlogs as of March
31, 1998, and 1997, were approximately $150 million and $95.0 million,
respectively. Backlogs increased principally due to the above noted longer lead
times for truck deliveries at March 31, 1998, compared to March 31, 1997,
delivery lead times of 75 to 90 days.
Seasonality
The Company's heavy-duty truck business is moderately seasonal.
Seasonal effects on new truck sales related to the seasonal purchasing patterns
of any single customer type are mitigated by the Company's diverse customer
base, which includes small and large fleets, governments, corporations and owner
operators. However, truck, parts and service operations historically have
experienced higher volumes of sales in the second and third quarters. The
Company has historically received benefits from volume purchases and meeting
vendor sales targets in the form of cash rebates, which are typically recognized
when received. Approximately 40% of such rebates are typically received in the
fourth quarter, resulting in a seasonal increase in gross profit.
13
<PAGE> 14
Seasonal effects in the construction equipment business are primarily
driven by weather conditions. As the Rush Equipment Center is located in
Houston, Texas, where winters are mild, seasonality currently does not have a
material effect on the Company's construction equipment segment. Additionally,
any seasonal effects, on construction equipment sales related to the seasonal
purchasing patterns of any single customer type are mitigated by the Company's
diverse customer base that includes contractors, for both residential and
commercial construction, utility companies, federal, state and local government
agencies, and various petrochemical, industrial and material supply type
businesses that require construction equipment in their daily operations.
Cyclicality
The Company's business, as well as the entire retail heavy-duty truck
and construction equipment industries, are dependent on a number of factors
relating to general economic conditions, including fuel prices, interest rate
fluctuations, economic recessions and customer business cycles. In addition,
unit sales of new trucks and construction equipment have historically been
subject to substantial cyclical variation based on such general economic
conditions. Although the Company believes that its geographic expansion and
diversification into truck and construction equipment related services,
including financial services, leasing, rentals and service and parts, will
reduce the overall impact to the Company resulting from general economic
conditions affecting heavy-duty truck sales, the Company's operations may be
materially and adversely affected by any continuation or renewal of general
downward economic pressures or adverse cyclical trends.
Effects of Inflation
The Company believes that the relatively moderate inflation over the
last few years has not had a significant impact on the Company's revenue or
profitability. The company does not expect inflation to have any near-term
material effect on the sales of its products, although there can be no assurance
that such an effect will not occur in the future.
Year 2000
The efficient operation of the Company's business is dependent on its
computer software programs and operating systems (collectively, "Programs and
Systems"). These Programs and Systems are used in several key areas of the
Company's business, including information management services and financial
reporting, as well as in various administrative functions. The Company has been
evaluating its Programs and Systems to identify potential year 2000 compliance
problems, as well as manual processes, external interfaces with customers, and
services supplied by vendors to coordinate year 2000 compliance and conversion.
The year 2000 problem refers to the limitations of the programming code in
certain existing software programs to recognize date sensitive information for
the year 2000 and beyond. Unless modified prior to the year 2000, such systems
may not properly recognize such information and could generate erroneous data or
cause a system to fail to operate properly.
Based on current information, the Company expects to attain year 2000
compliance and institute appropriate testing of its modifications and
replacements in a timely fashion and in advance of the year 2000 date change. It
is anticipated that modification or replacement of the Company's Programs and
Systems will be performed in-house by Company personnel. The Company believes
that, with modifications to existing software and conversions to new software,
the year 2000 problem will not pose a significant operational problem for the
Company. However, because most computer systems are, by their very nature,
interdependent, it is possible that non-compliant third party computers may not
interface properly with the Company's computer systems. The Company could be
adversely affected by the year 2000 problem if it or unrelated parties fail to
successfully address this issue. Management of the Company currently anticipates
that the expenses and capital expenditures associated with its year 2000
compliance project will not have a material effect on its financial position or
results of operations.
14
<PAGE> 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
------
<S> <C>
10.1* Master Loan Agreement between General Motors Acceptance Corporation and
Rush Enterprises, Inc. dated July 28, 1997.
10.2* Stock Purchase Agreement dated February 20, 1998 among Rush
Enterprises, Inc., Rush Retail Centers, Inc., D & D Farm and Ranch
Supermarket, Inc. and Georgette Hawkins.
27.1* Financial data schedule
* Filed herewith
</TABLE>
b) Reports on Form 8-K
None
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
RUSH ENTERPRISES, INC.
Date: May 13, 1998 By: /S/ W. MARVIN RUSH
-------------------------------------
Name: W. Marvin Rush
Title: Chairman and Chief Executive
Officer (Principal Executive
Officer)
Date: May 13, 1998 By: /S/ Martin A. Naegelin, Jr.
-------------------------------------
Name: Martin A. Naegelin, Jr.
Title: Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.1* Master Loan Agreement between General Motors Acceptance Corporation and
Rush Enterprises, Inc. dated July 28, 1997.
10.2* Stock Purchase Agreement dated February 20, 1998 among Rush Enterprises,
Inc., Rush Retail Centers, Inc., D & D Farm and Ranch Supermarket, Inc.
and Georgette Hawkins.
27.1* Financial data schedule
</TABLE>
* Filed herewith
<PAGE> 1
MASTER LOAN AGREEMENT
BETWEEN
GENERAL MOTORS ACCEPTANCE CORPORATION
AND
RUSH ENTERPRISES, INC.
JULY 28, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - Borrower Base Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.01 Consolidation of Borrowing Base Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.02 Establishment of Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.03 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.04 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.05 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.06 Permitted Use of Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.07 Collateral Formula Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.08 Security Interest and Collateral
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.09 Obligations Regarding Borrowing Base
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.10 Other Covenants by Rush Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III - Real Estate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.01 Consent to Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.02 Refinance of Oklahoma and Texas
Real Estate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV - Wholesale Floor Plan Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.01 Consolidation of Wholesale Floor
Plan Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.02 Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.03 Wholesale Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.04 Wholesale Credit Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.05 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.06 Other Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.07 Retail Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.08 Dealer Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.09 Absolute Discretion of GMAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.10 Documentation of Dealer Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.11 Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.01 Organization, Corporate Authority and
Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.02 Authorization and Compliance with Laws
and Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.03 Valid and Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.04 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.05 Litigation and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.06 Title to and Perfection of Security
Interest in Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.07 No Other Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.08 Purpose of Borrowers; Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.09 Ownership of Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.11 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.12 Compliance with Laws and Franchise
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.13 No Materially Adverse Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.14 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.15 Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.16 Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Article VI - Positive Covenants of Rush Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.01 Accounting Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.02 Financial Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.03 Continuing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.04 Financial Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.05 Liens, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.06 Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.07 Possession of Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.08 Monthly Certification Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.09 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.10 Insurance: Payment of Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.14 Future Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII - Negative Covenants of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.01 Reorganizations, Acquisitions, Change
of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.02 Management: Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.03 Restriction on Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.04 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII - Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.01 Representations True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.02 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.03 Good Standing and Certified Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.04 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.05 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.06 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.07 Due Diligence: UCC Filings and Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.08 Sales Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.09 Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.10 Real Estate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IX - Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE X - Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.01 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.02 Specific Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.03 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.04 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.05 Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.06 Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.07 No Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Article XI - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11.01 GMAC's Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 11.03 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.04 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.05 Limitations on Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.06 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.07 Venue and Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.08 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.09 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.10 GMAC's Discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.11 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.12 Rush Group In Control; No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.13 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.14 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.15 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.16 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.17 Executed Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.18 Entire Agreement of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.19 Statutory Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
-iii-
<PAGE> 5
MASTER LOAN AGREEMENT
This Master Loan Agreement ("Agreement") is made to be effective as of
July 28, 1997 by and between the following parties:
(i) General Motors Acceptance Corporation, a New York
corporation ("GMAC"),
(ii) Rush Enterprises, Inc., a Texas corporation ("Rush"),
(iii) Rush Truck Centers of California, Inc., a Delaware
corporation ("RTC-California"),
(iv) Rush Truck Centers of Louisiana, Inc., a Delaware
corporation ("RTC-Louisiana"),
(iv) Rush Truck Centers of Oklahoma, Inc., a Delaware
corporation ("RTC-Oklahoma"),
(iv) Rush Truck Centers of Texas, Inc., a Delaware
corporation ("RTC-Texas"), and
(v) Rush Truck Centers of Colorado, Inc., a Delaware
corporation ("RTC-Colorado").
RECITALS
A. GMAC is in the business of providing various credit
accommodations to motor vehicle dealers to facilitate (i) their purchase, sale,
lease, rental, and servicing of motor vehicles, (ii) their purchase of parts
and accessories, and (iii) their purchase of land and buildings for dealership
facilities, and related plant and equipment.
B. Rush presently has numerous loans with GMAC, as evidenced by
the Borrowing Base Loans, Oklahoma Real Estate Loans, Texas Real Estate Loans
and Wholesale Floor Plan Loans, as defined below.
C. Rush has formed RTC-California, RTC-Oklahoma, RTC-Louisiana,
RTC-Texas and RTC-Colorado as wholly owned subsidiaries to operate in each of
said referenced states. Rush has requested that GMAC consent to the conveyance
of certain of its assets to said subsidiaries, and to consolidate certain of
its loans, as well as modify certain of the payment and other terms of said
loans. GMAC has agreed to said items, and the parties wish to reflect their
agreement herein.
<PAGE> 6
NOW, THEREFORE, in consideration of the mutual agreements set forth
below, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. In addition to other defined terms
herein, as used in this Agreement, and unless the context otherwise requires,
the following terms shall have the respective meanings set forth below:
(a) Applicable Law - all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant or Loan Documents in question,
including all applicable common law and equitable principles; all provisions of
all applicable state and federal constitutions, statutes, rules, regulations
and orders of governmental bodies; and orders, judgments and decrees of all
courts and arbitrators.
(b) Best Knowledge - facts that are within the actual knowledge of
any officer of Borrower or a Dealer (as applicable) after due inquiry of
employees of Borrower or such Dealer reasonably likely to possess information
of the nature described.
(c) Borrower - Rush Enterprises, Inc.
(d) Borrowing Base Loans - the existing loans from GMAC to Rush
evidenced by the following:
(i) Demand Promissory Note dated September 26, 1990 in the
principal amount of $2,500,000, executed by Rush and payable to GMAC,
and Revolving Line of Credit Loan and Security Agreement dated
September 26, 1990 between Rush and GMAC. (This revolving line of
credit loan has subsequently been reduced to a maximum of $2,000,000)
(ii) Demand Promissory Note dated March 21, 1996 in the
principal amount of $2,500,000, executed by Rush (dba South Coast
Peterbilt) and payable to GMAC, and Revolving Line of Credit Loan and
Security Agreement dated March 21, 1996 between Rush and GMAC.
(iii) Promissory Note dated December 18, 1995 in the
principal amount of $800,000, executed by Rush (dba Oklahoma Trucks,
Inc.) and payable to GMAC, and Revolving Line of Credit Loan and
Security Agreement dated December 18, 1995 between Rush and GMAC.
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(iv) Promissory Note dated December 18, 1995 in the principal
amount of $700,000, executed by Rush (dba Tulsa Trucks, Inc.) and
payable to GMAC, and Revolving Line of Credit Loan and Security
Agreement dated December 18, 1995 between Rush and GMAC.
In accordance with Article II below, the above Borrowing Base Loans shall be
consolidated, and the credit line shall be increased, and shall be evidenced by
the execution of a new promissory note in the principal amount of
$8,000,000.00.
(e) Business Day - any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Texas or is a day on
which banking institutions located in such state is closed. Unless the terms
herein specifically provide that a period of time is measured by "Business
Days", time periods shall be deemed to refer to calendar days.
(f) Collateral - all of the Real Estate, Motor Vehicle Inventory and
Parts Inventory, and all other real or personal property and interests in same
that now or hereafter secure the payment and performance of any of the
Obligations.
(g) Dealer or Dealers - RTC-California, RTC-Louisiana, RTC-Oklahoma,
RTC-Texas and RTC-Colorado, as applicable, together with any future entities
formed by Rush to operate a dealership. A Dealer is also sometimes referred to
as a "Rush Group Affiliate". Notwithstanding the foregoing or any other
provision of this Agreement to the contrary, for the purposes of this
Agreement, neither Rush Truck Leasing nor any entity formed or acquired by Rush
for the primary purpose of selling and/or leasing construction machinery
equipment, including, without limitation, entities that primarily sell or lease
equipment manufactured by John Deere, John Deere Worksite Products, Sakai
America, Inc., Allied, Trail King Industries, Inc. or Diamond Z Manufacturing,
shall be considered a "Dealer", a "Rush Group Affiliate" or a member of the
"Rush Group".
(h) Default or Event of Default - as defined in Article IX of this
Agreement, or in any of the other Loan Documents.
(i) Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety or environmental matters, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980.
(j) (not used)
(k) Franchise Agreement - any licensing and other permit or
registration for the sale and service of vehicles with any motor vehicle
manufacturer.
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(l) GAAP - generally accepted account principles in the United States
of America in effect from time to time.
(m) Governmental Authority - any state, commonwealth, federal,
foreign, territorial, or other court or governmental department, commission,
board, bureau, agency, or instrumentality.
(n) Guarantor or Guarantors - the Dealers and Rush, as applicable, or
any other person or entity who may hereafter guarantee payment or performance
of the whole or any part of the Obligations.
(o) Guaranty Agreement or Guaranty Agreements - the Guaranty
Agreement(s) executed by the Guarantors. Each Dealer shall execute a Guaranty
Agreement in the forms acceptable to GMAC, pursuant to which each Dealer shall
guarantee all Obligations of Rush and the other Dealers under to this
Agreement.
(p) Hazardous Material - any radioactive, hazardous, or toxic
substance, material, waste, chemical, or similar item, the presence of which on
any Facility, or the discharge, emission, release, or threat of release of
which on or from the Facility, is prohibited or otherwise regulated by any
laws, ordinances, statutes, codes, rules, regulations, orders, and decrees of
the United States and all local, state or governmental or regulatory
authorities exercising jurisdiction over any Borrower or Facility, or which
require special handling in collection, storage, treatment, or disposal by any
such laws or requirements. The term Hazardous Material includes, but is not
limited to, any material, substance, waste or similar item which is now or
hereafter defined as a hazardous material or substance under the laws of any
state, the Federal Water Pollution Control Act (33 U.S.C. Section 1317), the
Federal Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et
seq.), the Federal Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601, et seq.), any rules or regulations
adopted by any administrative agency, including but not limited to, the
Environmental Protection Agency, the Occupational Safety and Health
Administration, and any similar state or local agency having jurisdiction over
any Facility, whether or not such rules and regulations have the force of law.
The term "Hazardous Material" shall also include any items subject to
regulation under the Toxic Substances Control Act (15 U.S.C., Section 2601 et
seq.).
(q) Indebtedness - (i) all principal and interest owing from time to
time by Borrower to Lender pursuant to the Loans, together with (ii) all other
amounts owing to Lender from time to time by Borrower to Lender under the Loan
Documents.
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(r) Loan Documents - this Agreement, the Guaranty Agreements,
Security Agreements, and any other document executed to evidence or secure the
Loans.
(s) Loans - all loans and advances of any kind made by GMAC pursuant
to this Agreement, including the loans described in Article II (the Borrowing
Base Line of Credit), Article III (the Oklahoma Real Estate Loans and the Texas
Real Estate Loans), Article IV (the Wholesale Facility), and any other loan or
other extension of credit from GMAC to Borrower or any Dealer. A Loan shall
refer to any one of such Loans.
(t) Loan Documents - This Agreement, the GMAC Forms and any security
agreements, guarantees, financing statements or other agreements, instruments
or certificates contemplated by this Agreement. A "Loan Document" shall refer
to any one of said instruments.
(u) Lender - the owner of the Indebtedness. As of the effective date
hereof, the Lender is GMAC.
(v) Material Adverse Effect - the effect of any event or condition
which, alone or when taken together with other events or conditions occurring
or existing concurrently therewith, (i) has a material adverse effect upon the
business, operations, Collateral, condition (financial or otherwise) or
business prospects of Borrower or any Dealer; (ii) has any material adverse
effect whatsoever upon the validity or enforceability of the Agreement or any
of the other Loan Documents; (iii) has or may be reasonably expected to have
any material adverse effect upon the value of the whole or any material part of
the Collateral, the liens of Lender with respect to the Collateral or any
material part thereof or the priority of such Liens; (iv) materially impairs
the ability of Borrower or any Dealer to perform its obligations under this
Agreement, any Guaranty Agreement or any of the other Loan Documents, including
repayment of the Obligations when due; or (v) materially impairs the ability of
Lender to enforce or collect the Obligations or realize upon any of the
Collateral in accordance with the Loan Documents and Applicable Law.
(w) Maximum Rate - the maximum non-usurious rate of interest
permitted by Applicable Law that at any time, or from time to time, may be
contracted for, taken, reserved, charged or received on the Indebtedness in
question.
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(x) Motor Vehicle Inventory - all of the following, whether now owned
or hereafter acquired by Borrower or any Dealer, whether now existing, or
whether arising or created hereafter:
(i) motor vehicles, trailers and semi-trailers, and
accessories held for sale; and the replacement parts for any of these;
and general intangibles, contract rights, chattel paper, present and
future accounts and assignment of accounts including, but not limited
to, those arising out of the sale or lease thereof, including rents
receivable under leases and rental agreements.
(ii) all proceeds of collateral described in (i) above,
including, but not limited to, cash, negotiable instruments, accounts,
chattel paper or insurance proceeds.
(iii) all replacements, substitutions, accessions, returns,
and repossession, of any of the above.
(y) Obligations - all (i) indebtedness of Borrower or any Dealer
to GMAC, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising pursuant to or in connection with this
Agreement, including without limitation the Borrowing Base Line of Credit
described in Article II, the Real Estate Loans described in Article III herein
and the Wholesale Floor Plan Loans described in Article IV herein, and (ii) all
other covenants and agreements made by Borrower and Dealers herein.
(z) Oklahoma Liens - all liens, presently existing or hereafter
arising, securing payment of the Oklahoma Real Estate Loans, including without
limitation those evidence by the following (collectively, the "Mortgages"):
(i) Mortgage, Assignment and Security Agreement dated March
1, 1996 from Rush to GMAC, recorded in Book 6862, Page 0378 of the
Oklahoma County Clerk Records, and the Security Agreement dated March
1, 1996 from Rush to GMAC.
(ii) Mortgage, Assignment and Security Agreement dated March
1, 1996 from Rush to GMAC, recorded in Book 6862, Page 0399 of the
Oklahoma County Clerk Records, and the Security Agreement dated March
1, 1996 from Rush to GMAC.
(aa) Oklahoma Real Estate Loans - the loans from Lender to Rush, as
evidence by the following promissory notes:
(i) Promissory Note dated March 1, 1996 in the original
principal amount of $487,500.00, executed by Rush (dba Translease) and
payable to GMAC.
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(ii) Promissory Note dated March 1, 1996 in the original
principal amount of $1,425,000.00, executed by Rush (dba Oklahoma
Trucks, Inc.) and payable to GMAC.
(ab) Parts Inventory - all of the following, whether now owned or
hereafter acquired by Borrower or any Dealer, whether now existing, or whether
arising or created hereafter:
(i) all inventory of the Borrower or any Dealer consisting of
new and unused parts and accessories of any type and description now
owned or hereafter acquired by Borrower or any Dealer for sale or
lease, excluding all raw materials and all such goods constituting
work in progress or as attachments or fixtures or other tangible
property.
(ii) all proceeds of collateral described in (i) above,
including, but not limited to, cash, negotiable instruments, accounts,
chattel paper or insurance proceeds.
(iii) all replacements, substitutions, accessions, returns,
and repossession, of any of the above.
The Parts Inventory shall include all items defined as the New Parts Inventory
in Section 2.07 below.
(ac) Person - an individual, partnership, corporation, limited
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political subdivision
thereof.
(ad) Prime Rate - the "prime" or "base" rate of interest announced
from time to time by a majority of the twelve (12) largest banks (the "Banks")
operating in the United States as their base rates for computing interest on
loans to borrowers of the highest credit standing. No change will be made in
the Prime Rate unless there is a single rate of interest which is publicly
announced by at least seven (7) of the Banks as their prime or base rate. In
determining the Prime Rate, GMAC's determination of the Banks and their
announced prime or base rates shall be conclusive upon the parties. For
purposes of this definition, the prime or base rate of the Banks is not
necessarily their rate of interest charged by the Banks on loans to their most
creditworthy customers, nor is the Prime Rate necessarily the rate of interest
charged by GMAC on loans to its most creditworthy customers. Notwithstanding
the foregoing, for the purposes of determining the Prime Rate, the Prime Rate
shall be considered to be five percent (5%) if the prime or base rate
established by said banks at any time is a figure which is less than five
percent (5%) per annum.
(ae) Real Estate - the real property, improvements, fixtures and
appurtenances described in the instruments evidencing the
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Oklahoma Liens and Texas Liens, together with any similar property given
hereafter as security for all or any part of the Indebtedness.
(af) Rush Group - Rush, RTC-California, RTC-Louisiana, RTC-Oklahoma,
RTC-Texas and RTC-Colorado collectively. If Rush forms a new Dealer in the
future, the "Rush Group" shall include such new Dealer (except for Rush Truck
Leasing, as set forth above). Whenever any obligation, covenant,
indemnification or other agreement is made herein by the Rush Group, such
obligation, covenant or agreement is made jointly and severally by each of
Rush, RTC-California, RTC- Louisiana, RTC-Oklahoma, RTC-Texas and RTC-Colorado,
together with any future Dealer, as applicable.
(ag) Rush Truck Leasing - Rush Truck Leasing, Inc., a Delaware
corporation.
(ah) Texas Liens - all liens, presently existing or hereafter
arising, securing payment of the Texas Real Estate Loans, including without
limitation those evidenced by the following (collectively, the "Deeds of
Trust"):
(i) Deed of Trust dated January 20, 1995 from Rush to William
H. Huffman, Trustee recorded in Volume 6324, Page 414 of the Official
Public Records of Bexar County, Texas and as Clerk's File No. R-242472
of the Official Public Records of Harris County, Texas.
(ii) Security Agreement dated January 20, 1995 from Rush to
GMAC.
(ai) Texas Real Estate Loans - the loans from Lender to Rush, as
evidence by the following promissory notes:
(i) Promissory Note dated January 20, 1995 in the original
principal amount of $564,000.00, executed by Rush and payable to GMAC.
(ii) Promissory Note dated January 20, 1995 in the original
principal amount of $893,000.00, executed by Rush and payable to GMAC.
(iii) Promissory Note dated January 20, 1995 in the original
principal amount of $799,000.00, executed by Rush and payable to GMAC.
(iv) Promissory Note dated January 20, 1995 in the original
principal amount of $658,000.00, executed by Rush and payable to GMAC.
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(v) Promissory Note dated January 20, 1995 in the original
principal amount of $1,786,000.00, executed by Rush and payable to
GMAC.
(aj) Security Agreements - all documents now existing or hereafter
given to secure payment of the Indebtedness and other Obligations, including
without limitation the Agreement, the documents evidencing the Oklahoma Liens
and Texas Liens, and the new security agreements to be executed by each Dealer.
(ak) Wholesale Floor Plan Loans - the existing loans from GMAC to
Rush evidenced by the following:
San Antonio Peterbilt-GMC Truck, Inc.:
(i) Promissory Note dated June 19, 1995 in the principal
amount of $5,000,000, executed by Rush (dba San Antonio Peterbilt-GMC
Truck, Inc.) and payable to GMAC.
(ii) Loan Agreement dated June 19, 1995 between GMAC and Rush
(dba San Antonio Peterbilt-GMC Truck, Inc.) and payable to GMAC.
(iii) Wholesale Security Agreement dated June 19, 1995
executed by Rush (dba San Antonio Peterbilt-GMC Truck, Inc.) in favor
of GMAC.
San Antonio Peterbilt, Inc.:
(i) Promissory Note dated August 19, 1992 in the principal
amount of $5,000,000, executed by Rush (dba San Antonio Peterbilt,
Inc.) and payable to GMAC.
(ii) Promissory Note dated July 5, 1995 in the principal
amount of $5,000,000, executed by Rush (dba San Antonio Peterbilt,
Inc.) and payable to GMAC.
(iii) Loan Agreement dated August 19, 1992 between GMAC and
Rush (dba San Antonio Peterbilt, Inc.) and payable to GMAC.
(iv) Wholesale Security Agreement dated August 19, 1992
executed by Rush (dba San Antonio Peterbilt, Inc.) in favor of GMAC.
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Houston Peterbilt:
(i) Promissory Note dated March 1, 1989 in the principal
amount of $3,500,000, executed by Rush (dba Houston Peterbilt, Inc.)
and payable to GMAC.
(ii) Promissory Note dated August 7, 1989 in the principal
amount of $1,000,000, executed by Rush (dba Houston Peterbilt, Inc.)
and payable to GMAC.
(iii Promissory Note dated April 21, 1994 in the principal
amount of $500,000, executed by Rush (dba Houston Peterbilt, Inc.) and
payable to GMAC.
(iv) Promissory Note dated June 28, 1995 in the principal
amount of $5,500,000, executed by Rush (dba Houston Peterbilt, Inc.)
and payable to GMAC.
(v) Promissory Note dated November 26, 1986 in the principal
amount of $4,500,000, executed by Rush (dba Houston Peterbilt, Inc.)
and payable to GMAC.
(vi) Loan Agreement dated March 1, 1989 between GMAC and Rush
(dba Houston Peterbilt, Inc.) and payable to GMAC.
(vii) Wholesale Security Agreement dated March 1, 1989
executed by Rush (dba Houston Peterbilt, Inc.) in favor of GMAC.
(viii) Wholesale Security Agreement dated April 22, 1993
executed by Rush (dba Houston Peterbilt, Inc.) in favor of GMAC.
Lufkin Peterbilt:
(i) Promissory Note dated August 5, 1993 in the principal
amount of $2,000,000, executed by Rush (dba Lufkin Peterbilt, Inc.)
and payable to GMAC.
(ii) Promissory Note dated July 5, 1995 in the principal
amount of $3,000,000, executed by Rush (dba Lufkin Peterbilt, Inc.)
and payable to GMAC.
(iii) Loan Agreement dated August 5, 1993 between GMAC and
Rush (dba Lufkin Peterbilt, Inc.) and payable to GMAC.
(iv) Wholesale Security Agreement dated August 5, 1993
executed by Rush (dba Lufkin Peterbilt, Inc.) in favor of GMAC.
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Laredo Peterbilt:
(i) Promissory Note dated October 4, 1994 in the principal
amount of $2,000,000, executed by Rush (dba Laredo Peterbilt, Inc.)
and payable to GMAC.
(ii) Promissory Note dated February 4, 1997 in the principal
amount of $1,000,000, executed by Rush (dba Laredo Peterbilt, Inc.)
and payable to GMAC.
(iii) Loan Agreement dated October 4, 1994 between GMAC and
Rush (dba Laredo Peterbilt, Inc.) and payable to GMAC.
(iv) Wholesale Security Agreement dated October 4, 1994
executed by Rush (dba Laredo Peterbilt, Inc.) in favor of GMAC.
South Coast Peterbilt:
Wholesale Security Agreement dated January 31, 1994 executed
by South Coast Peterbilt in favor of GMAC.
ARK-LA-TEX Peterbilt, Inc.:
Wholesale Security Agreement dated February 21, 1994 executed
by Rush (dba ARK-LA-TEX Peterbilt, Inc.) in favor of GMAC.
Oklahoma Trucks, Inc.:
Wholesale Security Agreement dated November 30, 1995 executed
by Rush (dba Oklahoma Trucks, Inc.) in favor of GMAC.
Tulsa Trucks, Inc.:
Wholesale Security Agreement dated November 30, 1995 executed
by Rush (dba Tulsa Trucks, Inc.) in favor of GMAC.
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ARTICLE II
BORROWING BASE LINE OF CREDIT
Section 2.01 Consolidation of Borrowing Base Loans. The credit
facility and funding terms of the Borrowing Base Loans shall be modified and
governed in accordance with this Article II.
Section 2.02 Establishment of Line of Credit. Subject to the terms
and conditions of this Agreement, GMAC hereby establishes a revolving line of
credit for Borrower in an amount not to exceed the lesser of:
(a) $8,000,000, or
(b) the Collateral Formula Amount, as defined in Section 2.07 below.
The amount available for loan under this Article II is referred to as the Line
of Credit. If, for any reason, the Credit Line Advances (defined below) shall
exceed the Line of Credit as determined above (such excess being hereinafter
referred to as Excess Amounts), the Line of Credit shall be deemed to include
the Excess Amounts for all purposes hereunder, except that Excess Amounts are
temporary only and shall not be deemed to permanently increase the Line of
Credit.
Section 2.03 Loans. Within 3 Business Days after each request made
by Borrower from time to time, GMAC will loan and advance Borrower the
principal amount of money so requested, up to the Line of Credit (hereinafter
the Credit Advance). The aggregate principal amounts so loaned and advanced
and remaining unpaid from time to time shall be deemed to be Credit Line
Advances. Each Credit Advance shall be disbursed by GMAC from its San Antonio,
Texas office and, upon such disbursement being made, shall be charged to
Borrower's account on GMAC's books and records. GMAC will render to Borrower a
statement at least once each month of Borrower's account which shall constitute
an account stated and shall be presumed to be correct.
Section 2.04 Repayment. Borrower shall repay the Credit Line
Advances to GMAC together with all accrued and unpaid interest and applicable
costs and expenses as hereinafter set forth (hereinafter the Total Borrowing
Base Indebtedness). Upon request made by GMAC, Borrower shall execute and
deliver such promissory note or notes in the form then in use by GMAC (being
hereafter referred to as the Borrowing Base Promissory Note) and guaranties to
further evidence the Credit Line Advances and related obligations; provided
that the failure of GMAC to so request or the failure of Borrower to execute
and deliver such Borrowing Base Promissory Note or Notes, or guaranty or
guaranties, shall not affect Borrower's obligation to
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repay GMAC as herein set forth. Any Borrowing Base Promissory Note or Notes,
or guaranty or guaranties, executed and delivered hereby shall be expressly
made subject to the terms and conditions of this Agreement. GMAC may send
monthly statements to Borrower for the amount owed; if Borrower fails to
question or otherwise contest the information on such statements within 10 days
of receipt by Borrower, Borrower shall be deemed to agree with the information
on the statements, including the accuracy of GMAC's calculation of the amount
owed.
(a) Permissive Repayment. Borrower may, at any time and without any
prepayment fee or premium or notice or penalty, repay all or any part of the
Credit Line Advances to GMAC.
(b) Mandatory Repayment. The Total Borrowing Base Indebtedness shall
be repaid by Borrower to GMAC immediately and without further notice or demand
therefor by GMAC upon the earlier of the following occurrences:
(i) an Event of Default, as hereinafter set forth, or
(ii) the effective date of the termination of this Agreement
as hereinafter set forth.
Section 2.05 Interest. The Credit Line Advances shall bear interest
on the unpaid principal amount of and from the date of each Credit Advance to
the date of repayment in full of the Credit Line Advances. Only one interest
rate will apply to the Credit Line Advances at any given time. Subject to the
provisions of the last sentence of this Section 2.05, the interest rate on each
Credit Line Advance will be determined from time to time at the Prime Rate plus
1.25 percentage points. Interest shall be calculated on the basis of a 360-day
year for the number of actual days outstanding. Interest shall be due and
payable monthly within 10 days of the billing date and the billing date shall
be within the first 5 Business Days of each month hereafter until Borrower have
paid GMAC all sums owing under this Agreement. GMAC may offer, from time to
time at is sole discretion, a wholesale incentive program which allows for a
1.25 percentage point reduction in the interest rate, as outlined in Exhibit
2.05; if such a program is at any time in place and Rush elects to participate
in it, then Rush shall receive such 1.25 percentage point reduction on the
interest rate in its Credit Line Advances; provided, however, that GMAC shall
have the right to terminate or modify the program upon 30 days' notice.
Section 2.06 Permitted Use of Credit Advances. Each and every Credit
Advance by GMAC to Borrower or on Borrower's behalf may be used solely for the
purposes of: (a) holding or acquiring inventory consisting of the New Parts
Inventory by the Rush Group;
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(b) for general working capital purposes; and (c) for such other purposes
related to the business of the Rush Group as may be reasonably acceptable to
GMAC.
Section 2.07 Collateral Formula Amount. The Collateral Formula
Amount shall be 75% of the Net Book Value of the New Parts Inventory of the
Rush Group, as of the date of this Agreement, and as subsequently adjusted from
time to time as certified in the Certification Report required to be submitted
to GMAC by Borrower.
New Parts Inventory of the Rush Group as utilized herein shall mean and
include all inventory of the Rush Group consisting of new and unused
parts and accessories of any type and description listed in the
manufacturers' current parts price catalog now owned or hereafter
acquired by the Rush Group for sale or lease, excluding all raw
materials and all such goods constituting work in progress or as
attachments or fixtures on other tangible property. Except as set
forth herein, "inventory" shall have the meaning attributed it by
Section 9.109(4) of the Texas Business and Commerce Code.
Net Book Value shall be the cost of an item of inventory as recorded in
the books of account of the Rush Group plus or minus any adjustments
made consistent with GAAP. In the event of any dispute or
disagreement as to the Net Book Value of an item or items of
inventory, the judgment and decision of GMAC shall be final.
Certification Report shall mean that form of document attached hereto
as Exhibit 2.07 attached hereto.
Section 2.08 Security Interest and Collateral Assignment. To secure:
(a) as to Rush, (i) the prompt and complete payment of the Total
Borrowing Base Indebtedness, (ii) the performance of any and all obligations
and duties of the Rush Group pursuant to this Agreement, and (iii) the payment
and performance of any and all other debts, obligations or duties of the Rush
Group to GMAC now existing or hereafter arising by this Agreement, and
(b) as to the Dealers, their obligations under the Guaranty
Agreements,
the Rush Group hereby pledge, assign and grant to GMAC a security interest in
the Parts Inventory (sometimes also referred to as the Borrowing Base
Collateral). Rush Group shall execute and deliver to GMAC one or more security
agreements, documents, and financing statements, in form and substance
satisfactory to GMAC in the exercise of reasonable judgment of GMAC (but not
inconsistent with this Agreement as to any subject dealt with in this
Agreement), as
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may be required by GMAC to grant and maintain a valid, perfected first lien or
security interest in the Borrowing Base Collateral. The security agreements to
be executed contemporaneously herewith shall be in the forms required by GMAC.
If an additional Dealer is formed in the future, such Dealer shall execute
similar documents required by GMAC granting to GMAC a security interest in the
Borrowing Base Collateral, conforming as necessary to the laws of the Dealer's
place of business.
Section 2.09 Obligations Regarding Borrowing Base Collateral. With
respect to the Borrowing Base Collateral, Rush Group shall:
(a) maintain, secure and protect it from diminution in value;
(b) keep it free and clear of the claims, liens, mortgage, pledge,
encumbrance, security interests and rights of all others;
(c) hold, control and dispose of it only for the purpose of
storing and exhibiting it for retail sale or lease in the ordinary course of
business;
(d) insure it against all risks in such amounts and with a carrier
and deductibles acceptable to GMAC in the exercise of reasonable judgment. Such
insurance policy shall name GMAC as loss payee and shall contain a cancellation
provision only upon 30 days prior written notice to GMAC.
Section 2.10 Other Covenants by Rush Group. In addition to the other
obligations and agreements here, Rush Group covenant and agree as follows:
(a) Rush Group shall maintain and furnish GMAC with reasonable
proof of insurance required pursuant to the provisions above. The receipt by
GMAC of any insurance proceeds shall not release Rush Group from payment of its
obligations hereunder, except to the extent of such proceeds.
(b) Rush Group shall permit representatives of GMAC to visit and
inspect any of the Borrowing Base Collateral and premises of any Dealer and
examine, copy (by electronic or other means) and abstract any of the books and
accounting and records of the Dealer, and to discuss the affairs, business,
finances and accounts of any Dealer with its officers and employees, at any
reasonable time and as often as may be reasonably desired.
(c) Rush Group shall furnish GMAC by the 20th day of each month a
Certification Report certified by the chief executive officer, chief financial
officer, president or vice president of a Dealer of that Dealer's Collateral
Formula Amount as of the last day of the previous month. GMAC may request, at
any time, a parts
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inventory schedule for any or all dealerships; Rush Group shall provide such
schedule within 48 hours of such request.
(d) Rush Group shall arrange and have conducted, at least
annually, and at the respective Dealers' expense, a complete physical inventory
of the New Parts Inventory. The said inventory shall be conducted by an
independent professional purveyor of such services and a certified copy of the
results thereof shall be promptly provided to GMAC.
(e) Rush Group shall keep their respective properties in good repair,
working order and condition and, from time to time, make all needful and proper
repairs, renewals, replacements, additions and improvements thereto, so that
the business carried on may be properly and advantageously conducted at all
times in accordance with prudent business management. As an exception to the
covenant of Rush Group continued in the preceding sentence, it is understood
that Rush Group shall not be deemed to have violated such covenant on account
of ordinary wear and tear and damage due to casualty or any cause beyond Rush
Group's reasonable control.
ARTICLE III
REAL ESTATE LOANS
Section 3.01 Consent to Conveyance. GMAC consents to the conveyance
of the Real Estate from Rush to RTC- Oklahoma and RTC-Texas respectively upon
the following terms and conditions:
(a) The deeds conveying the Real Estate must be satisfactory to GMAC
in its sole discretion.
(b) GMAC may offer, from time to time at is sole discretion, a
wholesale incentive program which allows for a 1.00 percentage point reduction
in the interest rate for real estate loans calling for a floating rate of
interest; if such a program is at any time in place and Rush elects to
participate in it, then Rush shall receive such 1.00 percentage point reduction
on the floating interest rate in its real estate loans; provided, however, that
GMAC shall have the right to terminate or modify the program upon 30 days'
notice.
(c) Rush Group shall provide GMAC with Mortgagee Policies of Title
Insurance, or endorsements to said existing Policies, acceptable to GMAC as to
form, coverage and exceptions, and showing GMAC's Mortgages and Deeds of Trust
to be in first lien position.
Section 3.02 Refinance of Oklahoma and Texas Real Estate Loans. On
the condition that there has been no Event of Default hereunder, GMAC shall
permit Rush Group to refinance the Oklahoma
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and Texas Real Estate Loans. Upon payment of all amounts owing under the
Oklahoma Real Estate Loans, GMAC agrees to release the liens evidenced by the
Mortgages referenced in Section 1.01(z)(i) and (ii) above. Upon payment of all
amounts owing under the Texas Real Estate Loans, GMAC agrees to release the
liens evidenced by the Deeds of Trust referenced in Section 1.01(ah)(i) above.
In addition to releasing the liens under said Deeds of Trust, GMAC agrees to
also release, as applicable, any other liens on personal or other property
which pertains to the real estate covered by said Deeds of Trust (by way of
example, security interests in equipment used at such locations).
ARTICLE IV
WHOLESALE FLOOR PLAN LOANS
Section 4.01 Consolidation of Wholesale Floor Plan Loans. The credit
facility and funding terms of the Wholesale Floor Plan Loans shall be modified
and governed in accordance with this Article IV.
Section 4.02 Establishment. From time to time prior to a termination
pursuant to Section 10.01 hereof, Borrower or any Dealer may, subject to the
terms and conditions of this Agreement, obtain loans from GMAC in order to
finance their acquisition of new and used motor vehicles from manufacturers,
distributors, customers, dealers and other sellers. Such credit facility is
referred to hereinafter as the "Wholesale Facility." The Wholesale Facility
will be used by solely for the purpose of acquiring new and used motor
vehicles.
Section 4.03 Wholesale Credit Advances. Upon request of Borrower or
any Dealer, GMAC will, subject to the terms and conditions of this Agreement,
loan funds (a "Wholesale Credit Advance") to Borrower or any Dealer, as
applicable, pursuant to the Wholesale Facility. Such request shall be in the
form prescribed by GMAC from time to time.
Section 4.04 Wholesale Credit Note. For Wholesale Floor Plan Loans
in Texas or other state where GMAC uses promissory notes for such loans, the
member of the Rush Group for whom the Wholesale Floor Plan Loan is made
(referred to herein as the "Borrowing Party") will repay the Wholesale Credit
Advances to GMAC, together with all accrued and unpaid expenses thereon, and
applicable costs and expenses as set forth in a promissory note or notes
payable to the order of GMAC, executed by the Borrowing Party and delivered to
GMAC concurrently with execution and delivery of this Agreement, substantially
in the form referenced in the GMAC Forms described below (the "Wholesale Credit
Note"). Notwithstanding anything in this Agreement or the Wholesale Credit
Note to the contrary, each
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Wholesale Credit Advance made (a) with respect to any new motor vehicle, will
be repaid by Borrowing Party to GMAC in the ordinary course of business, or
such earlier time as GMAC may determine in its sole, absolute discretion, after
the day of the sale, lease or other disposition of such vehicle by Borrowing
Party, and (b) with respect to any used motor vehicle, will be repaid by
Borrowing Party upon the earlier to occur of (i) 180 days from Borrowing
Party's acquisition of such vehicle or (ii) in the ordinary course of business,
or such earlier time as GMAC may determine in its sole, absolute discretion,
after the sale, lease or other disposition of such vehicle by Borrowing Party.
The Wholesale Credit Advances will bear interest at the Prime Rate plus 1.00
percentage points. GMAC may offer, from time to time at is sole discretion, a
wholesale incentive program which allows for a 1.00 percentage point reduction
in the interest rate; if such a program is at any time in place and Borrowing
Party elects to participate in it, then Borrowing Party shall receive such 1.00
percentage point reduction on the interest rate in its Wholesale Credit
Advances; provided, however, that GMAC shall have the right to terminate or
modify the program upon 30 days' notice.
Section 4.05 Limitations. The Wholesale Credit Advance will be (a)
100% of the original, factory invoice amount for the new motor vehicles; and
(b) 75% of the current listed average finance value, as provided in the
current, regional edition of the "The Truck Blue Book", for the used trucks
which are currently listed in The Truck Blue Book. Notwithstanding anything
herein contained to the contrary, the Wholesale Facility is expressly subject
to the written terms of the wholesale financing documents as listed in Section
4.10 and may be modified, suspended or terminated at the sole and absolute
discretion of GMAC.
Section 4.06 Other Financing. From time to time, GMAC may also
provide other categories of vehicle inventory and equipment financing to
members of the Rush Group, including, without limitation, financing under
GMAC's so-called Delayed Payment Privilege, Shop Rental Plan, Rental Plan,
plans for wholesale demonstrations and the like (collectively, "Other
Financing").
Section 4.07 Retail Financing. From time to time, GMAC may also
provide retail finance and lease accommodations to members of the Rush Group or
customers of Rush Group in accordance with GMAC's customary practices
(collectively "Retail Financing").
Section 4.08 Dealer Obligations. The amounts and obligations now or
hereafter owing to GMAC by any members of the Rush Group under the Wholesale
Facility, Other Financing, Retail Financing, and any and all other
indebtedness, obligations, or liabilities of Rush Group whether direct or
indirect, liquidated or contingent, are referred to hereinafter as "Dealer
Obligations." Rush Group hereby promises to pay to GMAC all Dealer Obligations
promptly on
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demand, except as may otherwise be set forth in accordance with the express
terms and conditions of this Agreement, the Loan Documents and the GMAC Forms
(as defined in Section 4.10 below).
Section 4.09 Absolute Discretion of GMAC. The amount, terms,
conditions, interest rate, repayment terms, advance rate, existence,
documentation, and administration of the Wholesale Facility will, at all times,
be subject to change, suspension, and cancellation at the sole, absolute
discretion of GMAC, notwithstanding anything herein or otherwise to the
contrary. Nothing contained in this Agreement will, at any time, obligate GMAC
to provide Other Financing or Retail Financing to Borrower or any Dealer, or
customer of Borrower or any Dealer. The making and amount of any Other
Financing or Retail Financing will be in the sole, absolute discretion of GMAC.
If GMAC elects to suspend or cancel financing under this Agreement, the
following notice provisions shall apply: (i) if there is no default of any
nature by any entity in the Rush Group, GMAC shall not make the suspension or
cancellation effective earlier than 120 days after notice to Borrower; (ii) if
there is any default of any nature by any entity in the Rush Group, GMAC may
make suspension or cancellation effective immediately upon notice of same.
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Section 4.10 Documentation of Dealer Obligations. Concurrently with
the execution and delivery of a Wholesale Facility, Borrower and Dealers will,
as appropriate, duly execute and deliver to GMAC at least one original of each
of the following documents, instruments, or agreements (the "GMAC Forms") to
further evidence the parties' intentions with respect to Dealer Obligations:
<TABLE>
<CAPTION>
Wholesale Facility GMAC Form No.
------------------
<S> <C>
(i) Inventory Loan and Security Agreement 177JV
(i) Wholesale Security Agreement 178
(ii) UCC-1 Financing Statement
(iii) Signature Card 524
(iv) Addendum to Financial Statement 505 C
(v) Loan Agreement 176 GLA
(vi) Promissory Note 176-GPN
(vii) Agreement Amending the Wholesale
Security Agreement and 570
Conditionally Authorizing the
Sale of New Floor Plan Vehicles
on a Delayed Payment Privilege
Basis
(viii) Assignment of DPP Vehicle Proceeds 570-1
(ix) Factory Authorization Letter
Retail Facility (for Dealer service vehicles)
---------------
(i) Inventory Security Agreement 141
</TABLE>
Copies of the GMAC Forms have been provided to Borrower.
Borrower and Dealers, as applicable, will duly execute and
deliver to GMAC such other documents, instruments, or
agreements and any amendments thereto with respect to the
Dealer Obligations, as GMAC may customarily require from time
to time. The existence of this Agreement, representations,
covenants, terms of default, and the like is in no way
intended to alter the demand nature of all Dealer Obligations
which in every instance are
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subject to change, suspension, and cancellation at the sole,
absolute discretion of GMAC.
It is acknowledged that the documentation of the Dealer
Obligations may vary from state to state, and the GMAC Forms
to be executed by Borrower and Dealers shall be in conformity
with GMAC's practice in a particular state.
It is also acknowledged that all members of the Rush Group
will guarantee all obligations of any Borrowing Party. If
requested by GMAC, members of the Rush Group will execute such
further acknowledgements, consents, guaranties and similar
documents to evidence such guaranty obligations.
Section 4.11 Security Interest. To secure:
(a) as to Borrower or any Dealer, as applicable, (i) the prompt and
complete payment of the Wholesale Credit Advances, (ii) the performance of any
and all obligations and duties of the Rush Group pursuant to this Agreement,
and (iii) the payment and performance of any and all other debts, obligations
or duties of the Rush Group to GMAC now existing or hereafter arising by this
Agreement, and
(b) as to Guarantors, their obligations under the Guaranty Agreements,
the Rush Group hereby pledges, assigns and grants to GMAC a security interest
in the Motor Vehicle Inventory. If an additional Dealer is formed in the
future, such Dealer shall execute similar documents required by GMAC granting
to GMAC a security interest in the Motor Vehicle Inventory.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Rush Group, individually and collectively, jointly and severally,
represent and warrant to GMAC as follows:
Section 5.01 Organization, Corporate Authority and Qualifications.
(a) Borrower and each Dealer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified to transact business or own real property
in each state or other jurisdiction in which its principal real properties are
located or
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in which it conducts any important or material part of its business.
(b) Borrower and each Dealer has the corporate power and authority
to execute, deliver and perform this Agreement and the Loan Documents.
(c) The persons signing this Agreement and the Loan Documents on
behalf of Borrower and each Dealer have full authority to execute the same on
behalf of said entities, and to bind said entities to the terms thereof.
Section 5.02 Authorization and Compliance with Laws and Material
Agreements. The execution, delivery and performance of this Agreement and the
Loan Documents, and the borrowings here under, by Rush Group have been duly
authorized by all requisite corporate action on the part of Rush Group and will
not violate the articles of incorporation or bylaws of Rush Group and will not
violate any provision of law, or order of any court or governmental agency
affecting it in any respect, and will not conflict with, result in a breach of
the provisions of, constitute a default under, or result in the imposition of
any lien, charge, or encumbrance upon any assets of the Rush Group pursuant to
the provisions of any indenture, mortgage, deed of trust, franchise, permit,
license, note or other agreement or instrument to which the Rush Group may be
bound. No approval or consent from any Governmental Authority or other third
party is required in connection with the execution of or performance under this
Agreement and the Loan Documents by Rush Group.
Section 5.03 Valid and Binding Obligation. All of the Loan Documents
to which Borrower or any Dealer is a party, will upon execution and delivery by
such party, constitute a valid binding obligation of the Rush Group,
enforceable in accordance with their terms.
Section 5.04 Financial Condition. The balance sheets and statements
of income and retained earnings of the Rush Group, heretofore furnished to
GMAC, are complete and correct and fairly represent the financial condition of
the Rush Group as at the dates of said financial statements and the results of
their operations for the periods ending on said dates. Neither Borrower nor
any Dealer has any material contingent obligations, liabilities for taxes,
long-term leases, or unusual forward or long-term commitments not disclosed by,
or reserved against in, said balance sheets or the notes thereto; and at the
present time, there are no material realized or anticipated losses from any
unfavorable commitments of Borrower or any Dealer. Said financial statements
were prepared in accordance with generally accepted principles and practices of
accounting consistently maintained throughout the periods involved. Since the
date of the latest of such statements,
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there has been no material adverse change in the financial condition of
Borrower or any Dealer from that set forth in said balance sheets as at that
date.
Section 5.05 Litigation and Judgments. There are no suits or
proceedings pending, or, to the knowledge of Borrower or any Dealer threatened,
against or affecting Borrower or any Dealer that, if adversely determined,
would have a Material Adverse Effect on the financial condition or business of
Borrower or any Dealer, as the case may be, or on the Collateral; and there are
no proceedings by or before any governmental commission, board, bureau, or
other administrative agency pending or to the knowledge of Borrower or any
Dealer, threatened against Borrower or any Dealer, which if adversely
determined, would have a Material Adverse Effect on the business, properties,
condition, financial or otherwise of the Borrower or any Dealer. There are no
outstanding judgments (final or otherwise) against Borrower or any Dealer.
Section 5.06 Title to and Perfection of Security Interest in
Collateral. Rush Group are the owners of all their respective Collateral, free
and clear of all liens, security interests, and encumbrances other than those
in favor of GMAC hereunder and those shown on Schedule 5.06 attached hereto,
and will execute all such financing statements or other documents and take such
actions as GMAC may deem necessary or desirable to evidence or perfect its
first and prior security interest and lien in Collateral under the Loan
Documents.
Section 5.07 No Other Financing Statements. No UCC-1 or other
financing statement covering any assets owned by Rush Group has been executed
or is on file in any public office, except those financing statements disclosed
on the attached Schedule 5.06 and the financing statements of GMAC.
Section 5.08 Purpose of Borrowers; Use of Proceeds. Rush Group has
entered into this Agreement for legitimate purposes, and will use the proceeds
of the Loans exclusively as set forth in this Agreement.
Section 5.09 Ownership of Properties; Liens. Rush Group has good and
indefeasible title or valid leasehold interests in all their significant or
material properties and assets, real and personal, which are owned or used in
connection with its products or services, and none of such properties or assets
or leasehold interests of Rush Group are subject to any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind which would
materially restrict the manner in which Rush Group uses or intends to use such
property.
Section 5.10 Taxes. Rush Group has filed all federal and state tax
returns or reports required of them, including but not
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limited to income, franchise, employment and sales taxes, and have paid or made
adequate provision for the payment of all taxes which have become due pursuant
to such returns or reports or pursuant to any assessment which has been
received, none of such being outstanding and unpaid, and Rush Group knows of no
pending investigations of Rush Group by any taxing authority, nor of any
material pending but unassessed tax liability.
Section 5.11 Guarantees. Except as set forth on Schedule 5.11
attached hereto, neither Borrower nor any Dealer has guaranteed any dividend or
any obligation of any other person, corporation or entity, including any
unconsolidated subsidiary, and no subsidiary has guaranteed any dividend,
obligation or indebtedness of any other person, corporation or entity,
including Borrowers, in each case other than deposit of items for collection in
the ordinary course of business and intercompany transactions.
Section 5.12 Compliance with Laws and Franchise Agreements. Except
to the extent that failure to comply would not have a Material Adverse Effect,
each Borrower has complied with all applicable laws, ordinances, statutes,
rules, regulations, orders, injunctions, writs or decrees (collectively,
"Laws") or any agreements, contracts and understandings, including without
limitation, all licensing and other permit or registration laws for the sale
and service of vehicles, and all agreements and understandings, written or
oral, to which it is party, or subject to, with any motor vehicle manufacturer
(each such agreement and understanding is referred to in this Agreement as a
"Franchise Agreement"), including with respect to: (a) any restrictions,
specifications or other requirements pertaining to vehicles or other products
sold by any Borrower or to services performed by any Borrower; (b) the conduct
of any Borrower's business; or (c) the use, maintenance and operation of the
real and personal properties owned by any Borrower or leased by it in the
conduct of its business.
Section 5.13 No Materially Adverse Agreements. Neither Borrower nor
any Dealer are a party to any agreement which in the opinion of Borrowers does
or will materially and adversely affect the business, operations or condition,
financial or otherwise, of any Borrower.
Section 5.14 Default. Neither Borrower nor any Dealer is in default
in any material respect under the provisions of any instrument evidencing any
material obligation, indebtedness or liability of a Borrower or of any
agreement relating thereto, or under any order, writ, injunction, or decree of
any court, or in default under or in violation of any order, regulation, or
demand of any governmental instrumentality which default or violation might
have consequences which would have a Material Adverse Effect
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<PAGE> 29
affect on the business, financial condition, or properties of a Borrower.
Section 5.15 Misrepresentation. There is no fact which Borrower or
any Dealer have failed to disclose to GMAC, which materially and adversely
affects nor, so far as Borrower or any Dealer can now foresee, is reasonably
likely to have a Material Adverse Effect on the business, operation,
properties, profits, or condition of Borrower or any Dealer or the Collateral,
or the ability of Borrower or any Dealer to perform this Agreement.
Section 5.16 Environmental Liabilities. To the Best Knowledge of
Borrower and Dealers there is no Hazardous Material (defined above) on or in
any facility, owned, managed or occupied by Borrower or any Dealer located on
the Real Estate (a "Facility"), except such Hazardous Material stored on a
Facility in the ordinary course of Borrower's or any Dealer's business on the
Facility and managed to prevent a release or threatened release thereof, and in
accordance with all federal, state and local Laws (as defined in Section 5.12)
relating to Hazardous Material or other environmental matters, nor is there any
Hazardous Material being released or threatened to be released from or on any
Facility. To the Best Knowledge of Borrower and Dealers, (i) no part of any
Facility has ever been used as a manufacturing, storage or dump site for
Hazardous Material (except such Hazardous Material stored on a Facility in the
ordinary course of Borrower's or any Dealer's business on the Facility and in
accordance with all federal, state and local Laws relating to Hazardous
Material or other environmental matters), nor is any part of the Facility
affected by any Hazardous Material contamination; (ii) no real estate adjoining
any Facility has ever been used as a manufacturing, storage or dump site for
Hazardous Material (except such Hazardous Material stored in the ordinary
course of business and in accordance with all federal, state and local Laws
relating to Hazardous Material or other environmental matters); and (iii) no
real estate adjoining any Facility is affected by Hazardous Material
contamination. To the Best Knowledge of Borrower and Dealers, no report,
analysis, study or other document exists. Further, no communications have been
received by Borrower or any Dealer asserting that Hazardous Material
contamination exists on any Facility or identifying any Hazardous Material as
being located upon or released on or from any Facility.
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ARTICLE VI
POSITIVE COVENANTS OF RUSH GROUP
Rush Group, individually and collectively, jointly and severally,
covenant and agree that, as long as the Indebtedness or any part thereof is
outstanding, unless otherwise allowed by written instrument of GMAC:
Section 6.01 Accounting Records. Rush Group shall maintain a
standard and modern system for accounting in accordance with generally accepted
accounting principles consistently applied throughout all accounting periods.
Section 6.02 Financial Reports. Rush Group will furnish GMAC:
(a) during the first full calendar month after the date of this
Agreement, (i) a financial statement for Borrower and each Dealer, which fairly
and accurately reflects a condition not adversely and materially changed from
the financial statement with respect to such party last provided to GMAC by
such party prior to the date of this Agreement; and (ii) a financial statement,
prepared on a consolidated basis for all the Rush Group which fairly and
accurately reflects a condition not adversely and materially changed from the
financial statement with respect to all of the Rush Group last provided to GMAC
by Rush Group prior to the date of this Agreement. Rush Group will continue to
provide to GMAC, by the 20th day of each month thereafter, financial statements
as described in this Section 6.01(a) for the prior calendar month.
(b) within 90 days after the end of each fiscal year of Rush Group,
copies of audited financial statements, including but not limited to balance
sheets, statements of income and retained earnings, cash flow statements,
prepared on a consolidated basis for all the Rush Group and certified by
independent certified public accountants selected by Rush Group and
satisfactory to GMAC.
(c) from time to time, such further information regarding the
business affairs and financial condition of Borrower or any Dealer as GMAC may
reasonably request.
All financial statements delivered hereunder shall be prepared on the
basis of GAAP applied on a basis consistent with those used in the preparation
of the audited financial statements Rush Group.
Section 6.03 Continuing Business. Except to the extent failure to do
so will not have a Material Adverse Effect on the business or operations of
Rush Group, Rush Group shall maintain and continue their present business and
maintain their corporate
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existence in good standing, shall preserve and keep in full force and effect
any franchise rights and trade names, and shall pay, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments, and
other governmental charges against Borrower or any Dealer or their property,
and any and all other liabilities, except to the extent, and so long as the
same are being contested in good faith by appropriate proceedings, with
adequate reserves provided for such payments.
Section 6.04 Financial Status. Rush will, on a consolidated basis
with all Dealers, maintain at all times (i) a Tangible Net Worth in the amount
of at least $12,500,000 and (ii) a ratio of Total Liabilities to Tangible Net
Worth of not greater than 8 to 1.
As used herein, the term "Tangible Net Worth" means the depreciated
book value amount of all assets of Borrowers (on a consolidated basis and
excluding intercompany items), plus gross 50% of LIFO reserves (if applicable)
(less purchase accounting adjustments), less:
(a) intangible assets, such as, without limitation, goodwill (whether
representing the excess of cost over book value of assets acquired or
otherwise, such excess to include, without limitation, the expense of all
noncompetition agreements), capitalized expenses, leasehold improvements (other
than improvements to dealership real property long-term leaseholds owned by a
Rush Group Affiliate), patents, trademarks, trade names, copyrights,
franchises, licenses, and deferred charges, such as, without limitation,
unamortized costs and costs of research and development;
(b) partnership and other equity interests reacquired but not
canceled;
(c) all reserves, including without limitation, reserves for
depreciation, depletion, obsolescence, amortization, deferred income taxes,
insurance, inventory valuation, and all other appropriations of retained
earnings;
(d) any minority interests in any corporation, partnership,
subsidiary or other affiliate; and
(e) Total Liabilities.
As used herein, the term "Total Liabilities" means with respect to
Rush Group, on a consolidated basis, all obligations for borrowed money,
including without limitation, all notes payable and drafts accepted
representing extensions of credit, commercial paper, all obligations evidenced
by bonds, debentures, notes or other similar instruments and all obligations
upon which interest charges are customarily paid, all obligations under
conditional
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sale or other title retention agreements, all obligations issued or assumed as
full or partial payment for property (whether or not any such obligations
represent obligations for borrowed money), all capitalized lease obligations,
and all indebtedness secured by any lien existing on property owned or acquired
by Rush Group subject to any such lien whether or not the obligations secured
thereby shall have been assumed.
Section 6.05 Liens, Etc. Borrower and Dealers will not create,
incur, or suffer any lien, mortgage, pledge, assignment, or other encumbrance
on, or security interest in, any of its properties, assets, or receivables, now
owned or hereafter acquired, securing the Obligations (all such security being
herein called "liens"), except:
(a) liens to GMAC.
(b) materialmen's, supplier's, tax, and other like liens arising in
the ordinary course of business and securing obligations that are not overdue
or are being contested in good faith by appropriate proceedings.
(c) purchase money security interests in [I] property described on
the attached Schedule 6.05(c) or [II] property hereafter acquired by Rush
Group, provided that absolutely no lien or interest shall be granted or allowed
by Rush Group to any other person with respect to any Motor Vehicle Inventory.
GMAC agrees that it will permit purchase money security interests in new Motor
Vehicle Inventory if each the following conditions exist: (i) the inventory is
not manufactured by General Motors or any of its subsidiaries (i.e., Cadillac,
Buick, Chevrolet, GMC Truck, Pontiac and Oldsmobile), and (ii) the interest
rate at which Borrower or Dealer will finance the inventory with another lender
is less than the interest rate that GMAC is willing to provide.
(d) equipment purchased in the ordinary course of business, which in
the aggregate for all of Rush Group, on a consolidated basis, shall not exceed
$1,000,000 annually.
(e) the liens shown in Schedule 5.06 attached hereto.
(f) liens against the Real Estate subject to the Oklahoma and Texas
Liens in connection with a refinance of the Oklahoma and Texas Real Estate
Loans pursuant to Section 3.02 above.
Section 6.06 Taxes, Etc. All taxes, levies, and assessments of
whatever description will be paid by Rush Group before interest or penalties
accrue thereon, unless the same is being contested in good faith by appropriate
proceedings.
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Section 6.07 Possession of Titles. Rush Group will permit GMAC upon
demand to hold all invoices, manufacturer certificates of origin, and title for
any Collateral (other than the Real Estate).
Section 6.08 Monthly Certification Report. Rush will furnish to
GMAC, within 20 days of each of the last day of each month, a report certified
by the chief executive officer or chief financial officer of Rush, in the form
attached as Exhibit 2.07, detailing the Collateral Formula Amount as of the
reporting date ("Monthly Certification Report"). Each Monthly Certification
Report submitted as of a month-end date shall have attached to it a complete
and detailed listing (by Dealer location) of New Parts Inventory, in the form
attached to Exhibit 2.07. GMAC may, in its sole and absolute discretion,
increase the frequency of such reports and demand such a report at any time.
Section 6.09 Inspection. Rush Group will permit GMAC or its designee
to: (a) visit, at any time during normal business hours upon GMAC's request,
all premises where any Collateral, or any records or documents of any of the
Rush Group, are located; (b) inspect during normal business hours all
Collateral and any records or documents of any of the Rush Group or which
relate to any Collateral; and (c) discuss their affairs, finances and accounts
with any director, officer, employee, accountant, partner, affiliate or agent
of any of the Rush Group.
Section 6.10 Insurance: Payment of Premium. Rush Group will, at
their sole cost and expense, keep and maintain their properties insured for
their full insurable value against loss or damage by fire, theft, explosion,
sprinklers and all other hazards and risks ordinarily insured against under all
risk policies in use by other owners or users of such properties in similar
businesses and notify GMAC promptly of any event or occurrence causing a
material loss or decline in value of its properties and the estimated (or
actual, if available) amount of such loss or decline. All policies of
insurance on the Collateral will be in form and with insurers acceptable to
GMAC and all such policies will be in such amounts as may be satisfactory to
GMAC. Rush Group will deliver to GMAC (i) the original (or certified copy) of
each policy of insurance or, in GMAC's sole, absolute discretion, a certificate
evidencing such insurance and (ii) evidence of payment of all premiums
therefor. Such policies and certificates of insurance will contain an
endorsement, in form and substance acceptable to GMAC, showing loss payable to
GMAC. Such endorsement, or an independent instrument furnished to GMAC, will
provide that the insurance companies will give GMAC at least 30 days' prior
written notice before any such policy or policies of insurance will be altered
or canceled and that no act or default of Borrower, Dealers or any other person
shall affect the right of GMAC to recover under such policy or policies of
insurance in case of loss or damage and that GMAC will have the right to cure
any such default by such parties. Rush
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Group hereby directs all insurers under such policies of insurance where loss
or damage to Collateral exceeds $500,000 under any such policy of insurance to
pay all proceeds payable thereunder directly to GMAC. So long as no Event of
Default exists hereunder, at the option of Rush Group, in the case of insurance
proceeds arising from the loss or damage of improvements to Rush Group's real
or personal property, the proceeds may be used to replace or restore same with
property having equal or greater value and utility to that lost or destroyed;
provided, however, Rush Group shall at its expense furnish to GMAC evidence
satisfactory to GMAC (including without limitation, title insurance policies or
endorsements thereto and opinions of counsel) that GMAC has a valid, duly
perfected lien on such property of equal or superior priority to the lien in
the property so replaced or restored. To the extent not so used, all such
proceeds shall be applied as a partial prepayment of the Loans. Borrower and
each Dealer irrecoverably makes, constitutes and appoints GMAC (and all
officers, employees or agents designated by GMAC) as its true and lawful
attorney (and agent-in- fact), effective from and after the occurrence of an
Event of Default, for the purpose of making, settling and adjusting claims
under such policies of insurance, endorsing the name of Borrower or any Dealer
on any check, draft, instrument or other item or payment for the proceeds of
such policies of insurance (which, in GMAC's sole discretion, shall either be
used towards the repair, restoration or replacement of the Collateral, or the
satisfaction of Borrower's obligations hereunder), and for making all
determinations and decisions with respect to such policies of insurance. In
the event Borrower or any Dealer, at any time or times hereafter, fails to
obtain or maintain any of the policies of insurance required above or to pay
any premium in whole or in part relating thereto, then GMAC, without waiving or
releasing any obligation or default by Rush Group hereunder, may (but will be
under no obligation to) at any time or times thereafter obtain and maintain
such policies of insurance and pay such premiums and take any other action with
respect thereto which GMAC deems advisable. All sums so disbursed by GMAC,
including reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, will be payable, on demand, by Rush Group to GMAC, will bear
interest until paid in full at the interest rate per annum equal to the Prime
Rate plus 1.00 percentage point (subject, if applicable, to the 1.00 percentage
point reduction under the wholesale incentive program described above) and will
be additional indebtedness hereunder secured by the Collateral. In addition,
Rush Group will obtain and maintain in full force and effect policies of
liability, workers compensation and business interruption insurance in amounts
at least equal to that customarily carried by persons or entities conducting
comparable businesses.
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Section 6.11 Environmental Matters.
(a) From the Effective Date, Borrower, Dealers and any of its agents,
authorized representatives and employees (collectively "Agents") shall not
engage in any of the following prohibited activities, and Rush Group will use
their best and diligent efforts to see that their invitees, tenants and
contractors, and such persons' employees, agents, and invitees, shall not:
(i) cause or permit any release, discharge, or threat of
release of Hazardous Material on or from any Facility.
(ii) cause or permit any manufacturing, transporting,
spilling, leaking, or dumping of Hazardous Material in or on any
portion of any Facility, except in the ordinary course of Rush Group's
business on the Facility and in a manner not to allow any
contamination of the Facility and in accordance with all federal,
state and local Laws relating to Hazardous Material or other
environmental matters.
(iii) cause or permit any holding, handling or retaining of
Hazardous Material in or on any portion of any Facility, except in the
ordinary course of Rush Group's business on the Facility and in a
manner not to allow any contamination of the Facility and in
accordance with all federal, state and local Laws relating to
Hazardous Material or other environmental matters.
(iv) otherwise place, keep, or maintain, or allow to be
placed, kept, or maintained, any Hazardous Material on any portion of
any Facility, except in the ordinary course of Rush Group's business
on the Facility and in a manner not to allow any contamination of the
Facility and in accordance with all federal, state and local Laws
relating to Hazardous Material or other environmental matters.
Rush Group and their Agents will comply, and cause all Facilities to comply,
with all Laws of all authorities having Jurisdiction over Rush Group or their
Agents, any Facility, or the use of the Facility and pertaining to any
Hazardous Material.
(b) If Hazardous Material is discovered on any Facility, Rush Group
will pay (or cause those responsible to pay) immediately when due the cost of
removal of any Hazardous Material from the Facility (or other appropriate
remediation of the Hazardous Material) in compliance with all governmental
requirements, and keep the entire Facility free of any lien imposed pursuant to
any Laws having to do with the removal of Hazardous Material. Within 30 days
after
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demand by GMAC, Rush Group will obtain and deliver to GMAC a bond, letter of
credit, or similar financial assurance for the benefit of GMAC, evidencing, to
GMAC's satisfaction in its sole, absolute discretion, that the necessary funds
are available to pay the cost of removing, treating, and disposing of all
Hazardous Material on the Facility or any contamination caused thereby, and
discharging any assessments or liens which may be established on the Facility
as a result thereof.
(c) Borrower and each Dealer will:
(i) Give written notice to GMAC immediately upon their
acquiring knowledge of the presence of any Hazardous Material on any
Facility (other than that used in the ordinary course of Rush Group's
business) or of any Hazardous Material contamination thereon, with a
full description thereof;
(ii) Immediately advise GMAC in writing of any notices
received by them or their Agents alleging that any Facility contains
Hazardous Material or contamination thereof, or that a violation or
potential violation of any Hazardous Material Laws by Rush Group or
their agents, or the Facility exists;
(iii) Immediately advise GMAC in writing upon discovery of
any and all enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened with respect to
any Facility or any real estate adjoining the Facility; and
(iv) Immediately advise GMAC in writing upon Rush Group's
discovery or any discovery by their Agents of any occurrence or
condition on any real property adjoining or in the vicinity of any
Facility which does, or could, cause the Facility, or any part
thereof, to contain Hazardous Material or otherwise be in violation of
any Hazardous Material Laws or cause the Facility to be subject to any
restrictions on the ownership, occupancy, transferability or use
thereof under any Hazardous Material Laws. Nothing in this Section
6.11(c)(iv) is intended or shall operate to create a duty on the part
of Rush Group or any of its Agents to inquire as to the condition
(environmental or otherwise) of any property not owned or leased by
Rush Group.
(d) GMAC will have the right, but not the obligation, to cause all
Hazardous Material and Hazardous Material contamination found on or in any
Facility (except that used in the ordinary course of Rush Group's business) to
be removed therefrom or remediated on site if cost effective and permitted by
law. In such
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event, the cost of the removal or remediation, including all expenses, charges,
and fees incurred by any GMAC in connection therewith, including attorneys',
engineers', and consultants' fees, shall be payable by Rush Group on demand.
Rush Group will give to GMAC and its Agents access to the Facility for such
purposes and Rush Group hereby grant to GMAC and its Agents full right and
authority to remove any such Hazardous Material and Hazardous Material
contamination from the Facility or to remediate it on site if cost effective
and permitted by law.
(e) If at any time during the term of any Loan, GMAC has reasonable
cause to believe that an environmental condition in violation of Section 5.16
above exists (other than in the ordinary course of Rush Group's business), GMAC
may notify Rush Group in writing that it desires a site assessment or
environmental audit ("Audit") of any or all Facility(s) to be made, and at any
time thereafter cause such Audit to be made of the Facility(s) at Rush Group's
sole expense. Such Audit(s) will be performed in a manner reasonably
calculated to confirm and verify compliance with the provisions of this Section
6.11. Rush Group will reasonably cooperate with the persons conducting the
Audit to allow entry and reasonable access to all portions of the Facility(s)
for the purpose of the Audit(s), to supply the auditors with all available
historical and operational information regarding the Facility(s), as may
reasonably be requested by the auditors, and to make available for meetings
with the auditors appropriate personnel having knowledge of matters relevant to
the Audit(s). Rush Group will comply, at their sole cost and expense, with all
recommendations contained in the Audit(s) to the extent necessary to bring Rush
Group into compliance with the other provisions of the Section 6.11, including
any recommendations for additional testing and studies to detect the presence
of Hazardous Material, or to otherwise confirm and verify Rush Group's
compliance with the provisions of this Section, to the extent required by GMAC.
(f) The representations and obligations of Rush Group under this
Section 6.11 shall, with respect to each tract or parcel of real property
constituting the Real Estate, remain in effect until GMAC releases its liens in
any applicable part of the Real Estate; upon such release, the obligations
shall cease only as to that portion of the Real Estate released. Without
limiting the foregoing, it is expressly understood that if, for example, GMAC
becomes the owner of any part of the Real Estate through foreclosure, deed in
lieu of foreclosure or otherwise, all obligations of Rush Group under this
Section 6.11 shall remain in full force and effect.
Section 6.12 Indemnification. Rush Group will defend, indemnify and
hold GMAC (including the successors, assigns, employees, agents, officers and
directors of GMAC) harmless from and against any and all actions, claims,
losses, liabilities,
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damages and expenses (including, without limitation, cleanup costs and
reasonable attorneys' fees) arising from or relating to any breach of any
covenants, agreements or obligation arising under this Agreement or any
inaccuracy of or omission from any representation or warranty of Rush Group set
forth in this Agreement, including without limitation, those arising directly
or indirectly from, or relating, to the handling, manufacture, transport,
storage, treatment, emission, spill, leak, dump or disposal of any Hazardous
Material by or in respect of Rush Group or any Collateral. This indemnity will
apply notwithstanding any negligent or other contributory conduct by or on the
part of GMAC (except to the extent the actions, claims, losses, liabilities,
damages or expenses are solely attributable to the gross negligence or willful
or wanton misconduct of GMAC) or any one or more other persons or entities, and
will be enforceable notwithstanding any attempts by Rush Group to exercise due
diligence. The loss, liability, damage, cost or expense which is covered by
this indemnity will include, without limitation, all foreseeable consequential
damages; the costs of any required or necessary repair, cleanup or
detoxification of any Facility, including the soil and ground water thereof,
and the preparation and implementation of any closure, remedial or other
required plans; damage to any natural resources; and all reasonable costs and
expenses incurred by GMAC in connection with the above, including but not
limited to, attorneys' and consultants' fees. The provisions of this Section
6.12 will survive repayment of the Loans or other obligation to GMAC in full
and expiration or termination of this Agreement.
Section 6.13 Further Assurances. At its costs and expense, upon
request of GMAC, Rush Group will duly execute and deliver or cause to be duly
executed and delivered, to GMAC such further instruments, documents,
certificates, financing and continuation statements, and do and cause to be
done such further acts that may be reasonably necessary or advisable in the
opinion of GMAC to carry out more effectively the provisions and purposes of
this Agreement and the other Loan Documents.
Section 6.14 Future Dealers. In the event any future entity formed
by Rush becomes a "Dealer" subject to the terms of this Agreement, such new
Dealer shall execute a Guaranty Agreement on a form acceptable to GMAC
conforming to the laws of the state where that Dealer does business. Rush
shall also execute a Guaranty Agreement of any obligations of the Dealers
pursuant to this Agreement, including without limitation any Wholesale Floor
Plan Loans made to Dealers under Article IV. From time to time GMAC may
require members of the Rush Group to execute such acknowledgments, consents,
revised guaranty agreements and the like to affirm and ratify the obligations
of each member of the Rush Group for the payment and performance of all
Obligations hereunder.
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ARTICLE VII
NEGATIVE COVENANTS OF BORROWER
Rush Group covenants and agrees that on and after the Effective Date,
while any part of the Indebtedness remains unpaid, they shall not cause or
permit, without the written consent of GMAC (which consent shall not be
unreasonably withheld or delayed):
Section 7.01 Reorganizations, Acquisitions, Change of Name. (a) merge
or consolidate with or into any partnership, trust, or corporation or other
entity whatsoever; or (b) sell, lease, transfer, or otherwise dispose of any of
its assets which is greater than ten (10%) of the aggregate total assets of
Rush Group (except in the ordinary course of business), whether now owned or
hereafter acquired.
Section 7.02 Management: Ownership. Except in the case of unforeseen
death disability, or other similar emergency, not make any significant change
in its structure or management.
Section 7.03 Restriction on Other Indebtedness. Incur any
indebtedness for borrowed money or extensions of credit except:
(a) the Obligations;
(b) indebtedness incurred in the ordinary course of business for
necessary merchandise, services, equipment, materials, and supplies, all of
which will be paid not more than 60 days from the due date of invoice except
when being contested in good faith;
(c) any other indebtedness the repayment of which is expressly
subordinated, in writing satisfactory to GMAC in its sole, absolute discretion,
to the repayment to GMAC of all Obligations;
(d) indebtedness relating to liens permitted by Sections 6.05 above;
(e) indebtedness secured by mortgages or deed of trust liens on real
estate which is financed with another lender; or
(f) any other indebtedness of Rush Group not exceeding in the
aggregate $5,000,000.
Section 7.04 Loans and Investments. Lend or advance money, credit or
property to any Person, or invest in (by capital contribution or otherwise), or
purchase or repurchase the stock or indebtedness, of all or a substantial part
of the assets or
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properties of any Person, or agree to do any of the foregoing, except for:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America and which mature within one year from the date of acquisition thereof;
(b) investments in commercial paper of any corporation with a
maturity not in excess of one year from the date of acquisition thereof and
rated P-1 or better by Moody's Investors Services Inc., or A-1 or better by
Standard & Poor's Corporation;
(c) investments in negotiable or non-negotiable time certificates
of deposit and time deposits, with a maturity not in excess of one year from
the date of acquisition thereof, issued by or placed with, and money market
deposit accounts issued or offered by any commercial bank organized and
existing under the laws of the United States of America or under any states of
the United States of America and having a combined capital and undivided
surplus of not less than $500,000,000, provided, however, that such
certificates of deposit or time deposits at any one bank shall at no time
exceed ten percent (10%) of the undivided capital and surplus of such bank;
(d) (omitted)
(e) advances by Borrower or a Dealer to another entity in the Rush
Group whether constituting capital contributions or indebtedness or otherwise
made; provided, no Event of Default is occurring at the time of such advance
and no Event of Default would occur as a result thereof;
(f) acquisition of all or any portion of any assets or interests
of any Person engaged in the automobile dealership business; provided that the
Borrowers deliver prior written notice of any such acquisition to GMAC; and
(g) any guaranty of any of the indebtedness permitted by Section 7.03
hereof by any member of the Rush Group.
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ARTICLE VIII
CONDITIONS PRECEDENT
Notwithstanding any other terms of this Agreement, GMAC will not be
required to make any Loans to Borrower unless the following conditions have
been met as to Rush Group on or before the date hereof (the "Effective Date")
and are also met on the date of each Credit Advance or Wholesale Credit
Advance, except as noted herein.
Section 8.01 Representations True. The representations and
warranties of Rush Group contained in this Agreement and in any other Loan
Document are true; there is not then in existence any Event of Default
hereunder or any event which upon the service of notice or passage of time
would constitute an Event of Default hereunder; there is not any suit or
proceeding at law or in equity or of any governmental authority instituted or,
to the knowledge of any of the Rush Group, threatened which in either case
would materially adversely affect the financial condition of Borrower or any
Dealer or the Collateral.
Section 8.02 Opinion of Counsel. GMAC will have received an opinion
of counsel to Rush Group in the form required by GMAC.
Section 8.03 Good Standing and Certified Copies. GMAC will have
received (a) a current certificate of corporate status with respect to each of
the Rush Group, or confirmation by telecommunication, if such confirmation is
available, from the jurisdiction of incorporation or organization of each such
entity and each foreign jurisdiction where Borrower's or a Dealer's failure to
be duly qualified or licensed would have a Material Adverse Effect on the
financial condition of such entity or on the Collateral; (b) certified copies
of the corporation charter and by-laws of Borrower and each Dealer, to the
extent applicable; (c) signature and incumbency certificates with respect to
the officers executing this Agreement, and the other Loan Documents; and (d) a
certified copy of the corporate action taken by Borrower and each Dealer
authorizing execution, delivery and performance of this Agreement and the other
Loan Documents.
Section 8.04 Guarantees. GMAC will have received guarantees executed
and delivered by the Guarantors in accordance with Section 1.01(n) above.
Section 8.05 Loan Documents. All of the Loan Documents relating to
the Collateral, including without limitation the Guaranty Agreements, will have
been executed by Borrower and the Dealers, or other applicable persons or
entities, and delivered to GMAC.
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Section 8.06 Material Adverse Change. No material adverse change
will have occurred in the business, operations, financial condition or
prospects of Rush Group or the Collateral.
Section 8.07 Due Diligence: UCC Filings and Searches. GMAC will, to
its satisfaction, have completed and received all audits, inspections,
examinations and surveys deemed necessary in the sole, absolute discretion of
GMAC with respect to the Collateral and the financial and business condition of
Borrower or Dealers; GMAC will have received (a) confirmation of UCC-1
Financing Statements with respect to Rush Group describing the Collateral
having been filed in the proper places in each jurisdiction designated by GMAC
and (b) UCC and other record searches acceptable to GMAC showing the first
priority of GMAC's security interest in the Collateral.
Section 8.08 Sales Authority. Except as disclosed on the attached
Schedule 8.08, Borrower or each Dealer, as the case may be, will have been duly
and continuously approved (a) by the appropriate original manufacturer or
distributor of motor vehicles to sell and service the brand of new motor
vehicles contemplated by the parties hereto to be sold by Borrower or such
Dealer; and (b) by any pertinent local, state, or federal government agency to
purchase, sell, lease, and service motor vehicles as a new and used dealer
thereof.
Section 8.09 Repurchase Agreements. GMAC will have executed the
customary vehicle factory (a) drafting and delivery instructions and (b)
repurchase agreements between GMAC and the manufacturer or distributor of the
new motor vehicles which Rush Group intends to acquire.
Section 8.10 Real Estate Loans. All conditions set out in Article
III have been met to the satisfaction of GMAC.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01 Events of Default. The occurrence of any one or more of
the following events shall constitute an "Event of Default":
(a) Payment of Wholesale Floor Plan Loans. Failure to make any
payments of principal or interest when and as due under the promissory notes or
other instruments evidencing the Wholesale Floor Plan Loans.
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(b) Payment of Borrowing Base Loans, Real Estate Loans, and future
working capital and equipment loans. Failure to make any payments of principal
or interest within 3 Business Days following notification from GMAC of payments
being past due under the promissory notes or other instruments evidencing the
Borrowing Base Loans, Real Estate Loans, and future working capital and
equipment loans.
(c) Payment of Other Obligations. Failure to pay, when due, any
other monetary obligation under any of the Loan Documents.
(d) Noncompliance with Loan Documents. Borrower, any Dealer or
Guarantor shall fail to perform or observe any of the other agreements,
covenants or conditions contained in this Agreement, in any other Loan Document
or otherwise in existence with GMAC or any of its affiliates, and such default
shall continue for more than 10 Business Days
(e) Default on Other Debt. Borrower, any Dealer or Guarantor
shall fail to pay all or any part of the principal of or interest on any other
indebtedness, when due (whether at maturity, by acceleration or otherwise) and
such default shall not be cured within the period of grace, if any, specified
in the evidence of such other indebtedness.
(f) Misrepresentations. Any representation, warranty or other
statement made or furnished to GMAC by or on behalf of Borrower, any Dealer or
Guarantor in this Agreement, any of the other Loan Documents or any instrument,
certificate or financial statement furnished in compliance with or in reference
thereto proves to have been false or misleading in any material respect.
(g) Challenge to Agreement. Borrower, any Dealer or Guarantor
shall challenge or contest in any action, suit or proceeding the legality,
validity or enforceability of this Agreement or any of the other Loan
Documents, or the perfection or priority of any lien granted to GMAC.
(h) Repudiation of or Default Under Guaranty Agreements. Any
Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof.
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(i) Bankruptcy, Insolvency, etc. The occurrence of any of the
following:
(i) The appointment of a receiver, trustee, custodian,
conservator, or liquidator, or other similar official for Borrower,
any Dealer or Guarantor, any of its property, or any other property of
Borrower, any Dealer or Guarantor.
(ii) Borrower, any Dealer or Guarantor shall generally not
pay its debts as they become due or shall admit in writing an
inability to pay its debts, or shall make a general assignment for the
benefit of creditors.
(iii) Borrower, any Dealer or Guarantor shall commence any
case, proceeding or other action seeking relief, reorganization,
arrangement, adjustment, liquidation, dissolution or composition of
such Borrower, any Dealer or Guarantor or its debts under any debtor
relief laws.
(iv) Any case, proceeding or other action is commenced
against Borrower, any Dealer or Guarantor seeking to have an order for
relief entered against such Borrower, any Dealer or Guarantor, as
debtor, or seeking a reorganization, arrangement, adjustment,
liquidation, dissolution or composition of Borrower, any Dealer or
Guarantor or their debts under any debtor relief laws, or seeking an
appointment of a receiver, trustee, custodian or other similar
official for Borrower, any Dealer or Guarantor or for all or any of
its property, or any other property of Borrower, any Dealer or
Guarantor and such case, proceeding or other action: (i) results in
the entry of an order for relief against Borrower, any Dealer or
Guarantor and (ii) remains undismissed for a period of 30 days after
commencement.
(v) Borrower, any Dealer or Guarantor shall have concealed,
removed or permitted to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud any of its
creditors; or made or suffered a transfer of any of its property which
may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or shall have made any transfer of its property to or for
the benefit of a creditor at a time when other creditors similarly
situated have not been paid (unless adequate provision in cash has
been made for payment of the similar claim); or shall have suffered or
permitted, while insolvent, any creditor to obtain a lien upon any of
the Collateral through legal proceedings which is not vacated within
30 days.
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(vi) Borrower, any Dealer or Guarantor shall have suffered
(i) a casualty as to any material asset or assets used in the conduct
of its business which is not, except for deductibles reasonably
acceptable to GMAC, fully covered by insurance or (ii) a material
adverse change in the business, properties, conditions, financial or
otherwise of Rush Group, as a whole.
(j) Termination of Franchise. Any Franchise Agreement shall be
terminated, whether according to its terms or action taken by any party
thereto, or any vehicle manufacturers take any action against Borrower or any
Dealer that could have a Material Adverse Effect.
(k) Wholesale Credit Advance. Borrower or any Dealer shall fail
to maintain a Wholesale Credit Advance except where, with the prior written
consent of GMAC, the Dealer has been sold or otherwise transferred or its
operations terminated.
(l) Cross-Default. The occurrence of (i) any Event of Default
under this Agreement; (ii) a default under any other Loan Document; or (iii) a
default under any other agreement between Borrower, any Dealer or Guarantor and
GMAC now existing or hereafter arising, will constitute an immediate default of
this Agreement, the Loan Documents and all other such agreements.
ARTICLE X
REMEDIES
Upon an Event of Default, GMAC shall have, in addition to any other
rights or remedies available at law or in equity, the following rights and
remedies:
Section 10.01 Termination of Agreement. GMAC may terminate this
Agreement or any part thereof. By way of example only, GMAC may terminate the
Line of Credit under Article II (the Borrowing Base Line of Credit) and the
Wholesale Facility, Other Financing and Retail Facility under Article IV (the
Wholesale Floor Plan Loans).
Section 10.02 Specific Remedies. GMAC shall have the right to:
(a) institute proceedings to collect all or a portion of the
Indebtedness and to recover a judgment for the same and to collect upon such
judgment out of any property of Borrowers wherever situated;
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(b) to offset and apply any monies, credits or other proceeds of
property of Rush Group that has or may come into possession or under the
control of GMAC against any amount owing by Rush Group to GMAC;
(c) with respect to accounts, contract rights, chattel paper, tax
refunds and general intangibles constituting Collateral herein, GMAC:
(i) may settle, adjust and compromise all present and future
claims arising thereunder or in connection therewith;
(ii) may sell, assign, pledge or make any other agreement
with respect thereto or the proceeds thereof;
(iii) may notify all such account, contract right, or other
debtors of GMAC's interest therein and require direct payment to GMAC
of such obligations;
(iv) may receive, sign, endorse, and deliver in its name or
the name of Borrower or any Dealer any and all notes, instruments,
documents, titles, negotiable instruments and the like necessary and
appropriate to effect the collection of such intangibles, and
Borrowers hereby waive notice of presentment, protest and non-payment
of any instrument so endorsed;
(v) is hereby constituted and appointed by Borrower and
Dealers as their attorney-in-fact with power to accept and to receipt
and endorse Borrower's and Dealers' names upon any notes, acceptances,
checks, drafts, money orders or other evidences of payment or
Collateral that may come into GMAC's possession; to notify the Post
Office authorities to change the address for delivery of mail
addressed to Borrower and Dealers to such address as GMAC may
designate; to do all other acts and things necessary to carry out this
Agreement. Except for gross negligence and willful misconduct, all
acts of said attorney or designee are hereby ratified and approved,
and said attorney or designee shall not be liable for any acts of
omission or commission, nor for any error of judgment or mistake of
act or law made in good faith; this power being coupled with an
interest is irrevocable while any of the Obligations remains unpaid;
(d) subject to any specific, contrary provision in any other security
agreement executed now or in the future: sell or lease the Collateral, or any
portion thereof, after giving 5 days' written notice, at public or private
sale. The sale by GMAC of less than the whole of the Collateral shall not
exhaust the power
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of sale, and GMAC is empowered to make successive sales under such power until
all of the Collateral shall be sold; the liens, security interests and rights
hereunder shall remain in full force and effect as to the unsold portion of the
Collateral. The decision to sell all or only a portion of the Collateral at
any sale shall be at the sole discretion of Secured Party.
(e) require Rush Group to assemble all or any of the Collateral
(except Real Estate) and make it available to GMAC at a place to be designated
by GMAC that is reasonably convenient to the parties.
Rush Group agree that the sale by GMAC of any new or unused property
repossessed by GMAC to the original seller thereof, or to any person designated
by such seller, at the invoice cost thereof to Rush Group less any credits
granted to Rush Group with respect thereto and reasonable costs of
transportation and reconditioning, shall be deemed to be a commercially
reasonable means of disposing of the same. Rush Group further agree that if
GMAC shall solicit bids from three or more other sellers or dealers in the type
of property repossessed by GMAC hereunder, any sale by GMAC of such property in
bulk or in parcels to the bidder submitting the highest cash bid therefor also
shall be deemed to be a commercially reasonable means of disposing of the same.
Notwithstanding the foregoing, it is expressly understood that such means of
disposal shall not be exclusive, and that GMAC shall have the right to dispose
of any property repossessed hereunder by any commercially reasonable means.
Section 10.03 Remedies Cumulative. GMAC shall have all rights and
remedies contained in any other Loan Document, all of which rights and remedies
shall be cumulative of those granted herein, or otherwise available at law or
in equity. All of GMAC's rights and remedies may be enforced successively or
concurrently. GMAC's rights shall include all rights of a secured party under
the Uniform Commercial Code applicable in any particular state.
Section 10.04 Expenses. Rush Group shall pay all expenses and
reimburse GMAC for any expenditures, including reasonable attorney fees and
legal expenses, in connection with GMAC's exercise of any of its rights and
remedies under this Agreement.
Section 10.05 Proceeds. Proceeds realized by GMAC on the sale or
other disposition of the Collateral, after payment of all expenses incurred by
GMAC in enforcing the Indebtedness or in retaking, holding, preparing for sale
or lease, selling, leasing or otherwise disposing of or realizing on the
Collateral or the Indebtedness, shall be applied by GMAC to the remaining
Indebtedness in such manner as GMAC shall elect.
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<PAGE> 48
Section 10.06 Default Interest. In addition to the remedies provided
above or elsewhere in this Agreement, all Indebtedness which is not paid when
due, by acceleration, at maturity or otherwise, shall bear interest (i) in the
case of Indebtedness evidenced by promissory notes, at the default rate (if
any) provided in the applicable notes, and (ii) in the case of all Indebtedness
not covered by item (i), at the highest nonusurious default rate provided for
in any of the notes.
Section 10.07 No Agency. Nothing herein contained shall be construed
to constitute Borrower or any Dealer as agent of GMAC for any purpose
whatsoever, and GMAC shall not be responsible nor liable for any shortage,
discrepancy, damage, loss or destruction of any part of the Collateral wherever
the same may be located and regardless of the cause thereof, except to the
extent the same results from GMAC's own gross negligence or willful misconduct.
GMAC shall not, under any circumstances or in any event whatsoever, have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Collateral or any instrument
received in payment thereof or for any damage resulting therefrom, except to
the extent the same results from GMAC's own gross negligence or willful
misconduct. GMAC does not by anything herein or in any assignment or
otherwise, assume any of Rush Group's obligations under any contract or
agreement assigned to GMAC, and GMAC shall not be responsible in any way for
the performance by Rush Group of any of the terms and conditions thereof.
ARTICLE XI
MISCELLANEOUS
Section 11.01 GMAC's Accounts. GMAC shall maintain on its books in
accordance with its usual practice an account or accounts with respect to the
Loans, which account or accounts shall include, without limitation, (i) the
outstanding principal amount of each of the Loans, (ii) the amount of principal
and interest due under each of the Loans and the required payment dates, (iii)
all other fees, costs, expenses, losses and indemnities due under this
Agreement or any other Loan Document, and (iv) all amounts received by GMAC
with respect to the foregoing. For purposes of any legal action or proceeding
arising out of or in connection with this Agreement or any other Loan Document,
and for all other purposes, the entries made in such account or accounts
maintained by GMAC pursuant to this Section shall create a presumption as to
the existence and amounts of the foregoing, absent manifest error. However,
Rush Group shall have 30 days from the date the GMAC Account statement is
received to contest the accuracy of the statement; the failure of Rush Group to
contest the accuracy shall constitute conclusive evidence of its accuracy. If
Rush Group contests the accuracy with
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<PAGE> 49
said 30 days, GMAC shall have 30 days to reconcile the disputed GMAC Account
balance. The failure by GMAC to maintain such account or accounts shall not in
any manner affect the Indebtedness.
Section 11.02 Notices. All notices or other communications required
or permitted to be given pursuant to the provisions of this Agreement shall be
in writing and shall be considered as properly given if mailed by first class
United States mail, postage prepaid, registered or certified with return
receipt requested, or by delivering same in person to the intended addressee,
or by prepaid telegram, telex or telecopy. Notice given in any other manner
shall be effective only if and when received by the addressee. For purposes of
notice, the addresses of the parties shall be as set forth below; provided,
however, that either party shall have the right to change its address for
notice hereunder to any other location within the continental United States by
the giving of 30 days' notice to the other party in the manner set forth
hereinabove. The addresses for notice hereunder are:
<TABLE>
<S> <C>
If to Rush or any member P.O. Box 34630
of the Rush Group: San Antonio, Texas 78265-4630
And:
If to RTC-California: P.O. Box 223
Pico Rivera, California 90660-0223
If to RTC-Louisiana: 5220 Industrial Drive Extension
Bossier City, Louisiana 71112
If to RTC-Oklahoma: P.O. Box 271148
Oklahoma City, Oklahoma 73137
If to RTC-Texas: P.O. Box 200105
San Antonio, Texas 78220-0105
If to RTC-Colorado: P.O. Box 16474
Denver, Colorado 80216
For notices to Rush Mr. Phillip M. Renfro
or any Dealer, with Fulbright & Jaworski L.L.P.
a copy to: 300 Convent Street, Suite 2200
San Antonio, Texas 78205-3792
If to GMAC: P.O. Box 40500
San Antonio, Texas 78229
Attn: Branch Manager
</TABLE>
-45-
<PAGE> 50
<TABLE>
<S> <C>
For notices to GMAC, Ms. Mary Ann McKinnon
with a copy to: General Motors Acceptance Corporation
P.O. Box 33122
Detroit, Michigan 48232
</TABLE>
Section 11.03 Waiver. No course of dealing, or any failure by GMAC
to insist, or any election by GMAC not to insist, upon any of Rush Group's
strict performance of any of the terms, provisions or conditions of the Loan
Documents shall not be deemed to be a waiver of same or of any other term,
provision or condition thereof; and GMAC shall have the right at any time
thereafter to insist upon strict performance by Borrower or any Dealer of any
and all of same. Specifically, no Advance by GMAC when there exists an Event
of Default under Article IX hereinabove shall in any way preclude GMAC from
thereafter declaring such failure to comply to be an Event of Default
hereunder.
Section 11.04 Survival. All agreements, representations, warranties
and covenants of Borrower and Dealers contained in this Agreement shall survive
the execution of this Agreement and the other Loan Documents, and the making of
the Loans; provided, however, that to the extent any agreement, representation,
warranty or covenant of Borrower or any Dealer herein, either by its express
terms or by the determination of a court of competent jurisdiction, survives
the repayment of the Loans and the expiration or termination of this Agreement,
such agreement, representation, warranty or covenant shall in no event survive
more than 2 years from the later of the (i) date of repayment of the Loans or
(ii) the expiration or termination of this Agreement.
Section 11.05 Limitations on Interest. All agreements between GMAC,
Borrower and Dealers, whether now existing or hereafter arising and whether
written or oral, are hereby limited so that in no contingency, whether by
reason of demand for payment or acceleration of the maturity hereof or
otherwise, shall the interest contracted for, charged or received by GMAC
exceed the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to Lender in
excess of the maximum lawful amount, the interest payable to GMAC shall be
reduced to the maximum amount permitted under applicable law; and if from any
circumstance GMAC shall ever receive anything of value deemed interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive interest shall be applied to the reduction of the principal balance
of the Indebtedness and not to the payment of interest, or if such excessive
interest exceeds the principal balance such excess shall be refunded to
Borrower and/or Dealers, as applicable. All interest paid or agreed to be paid
to GMAC shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full period until payment in
full of the principal so that the interest hereon for
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<PAGE> 51
such full period shall not exceed the maximum amount permitted by applicable
law. This paragraph shall control all agreements between GMAC, Borrower and
Dealers.
Section 11.06 Applicable Law. This Agreement and the other Loan
Documents (except as may be otherwise expressly provided in such other Loan
Documents), shall be governed by and construed in accordance with the laws of
the State of Texas and the laws of the United States applicable to transactions
within such State. The Guaranty Agreements, Security Agreements or other Loan
Documents (except this Agreement) executed by a Dealer or Guarantor doing
business in a state other than Texas, or granting a lien on collateral located
in a state other than Texas, shall be governed by the laws of the state
specified in such documents.
Section 11.07 Venue and Waiver of Jury Trial. The parties agree that
all actions or proceedings arising in connection with this Agreement and any of
the Loan Documents shall be tried and litigated only in the state and federal
courts located in the State of Texas or, at the sole option of GMAC, in any
other court in which GMAC shall initiate legal or equitable proceedings and
which has subject matter jurisdiction over the matter in controversy. All the
parties to this Agreement waive any right each may have to assert the doctrine
of forum non conveniens or to object to venue to the extent any proceeding is
brought in accordance with this Section 11.07. All the parties to this
Agreement hereby further jointly and severally waive any right to trial by jury
with respect to any action, claim, suit or proceeding in respect of or relating
to this Agreement or any other Loan Document and/or any relationship between
GMAC and Rush Group.
Section 11.08 Severability. If any provision hereof or of any of
the other Loan Documents or the application thereof to any person or
circumstance shall, for any reason and to any extent, be invalid or
unenforceable, neither the application of such provision to any other person or
circumstance nor the remainder of the instrument in which such provision is
contained shall be affected thereby, but rather shall be enforced to the
greatest extent permitted by law.
Section 11.09 Construction. This Agreement and each other Loan
Document are being entered into by competent and experienced businessmen,
represented by counsel, and the parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and the Loan Documents;
therefore, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement, the Loan Documents or any amendments or
exhibits hereto. The parties intend that all Loan Documents shall be construed
and interpreted in a consistent manner.
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<PAGE> 52
Section 11.10 GMAC's Discretion. In any instance hereunder
(including any exhibits, schedules, annexes or addenda hereto) where GMAC's
satisfaction, approval or consent or the exercise of GMAC's judgment is
required, the granting or denial of such satisfaction, approval or consent and
the exercise of such judgment shall be within the sole discretion of GMAC.
This provision shall govern any such satisfaction requirements, consents,
approvals or exercise of judgment required in connection with any of the Loan
Documents.
Section 11.11 No Third Party Beneficiary. This Agreement is for the
sole benefit of GMAC and Rush Group and is not for the benefit of any third
party.
Section 11.12 Rush Group In Control; No Partnership. In no event
shall GMAC's rights and interests under the Loan Documents be construed to give
GMAC the right to, or be deemed to indicate that GMAC is in control of the
business, management or properties of Rush Group or has power over the daily
management functions and operating decisions made by Rush Group. Nothing
contained herein or in any of the other Loan Documents shall be construed as
creating joint venture, partnership, tenancy-in-common or joint tenancy
arrangement between GMAC and Rush Group. The relationship of GMAC and Rush
Group is and at all times shall be solely that of debtor and creditor.
Section 11.13 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors, legal representatives and assigns. However,
Borrowers shall not assign or encumber this Agreement or any rights herein, it
being expressly understood and agreed that Rush Group's rights hereunder are
not assignable.
Section 11.14 Number and Gender. Whenever used herein, the singular
number shall include the plural and the plural the singular, and the use of any
gender shall be applicable to all genders. The duties, covenants, obligations,
and warranties of Borrower and Dealers in this Agreement shall be joint and
several obligations of Borrower and of each Dealer if more than one.
Section 11.15 Captions. The captions, headings, and arrangements
used in this Agreement are for convenience only and do not in any way affect,
limit, amplify, or modify the terms and provisions hereof.
Section 11.16 Time of the Essence. Time is of the essence with
respect to each and every matter pertaining to performance under this Agreement
and of each provision hereof.
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<PAGE> 53
Section 11.17 Executed Copies. This Agreement may be executed in any
number of counterpart copies, each of which counterparts shall be deemed an
original for all purposes.
Section 11.18 Entire Agreement of the Parties. This Agreement,
including all agreements referred to or incorporated herein and all recitals
hereto, is the entire agreement among the parties relating to the subject
matter hereof, supersedes all prior agreements, commitments and understandings
among the parties hereto relating to the subject matter hereof, and cannot be
changed or terminated orally, and shall be deemed effective as of the date
hereof. To the extent that the terms of the documents heretofore evidencing
the Borrowing Base Loans, Oklahoma Real Estate Loan, Texas Real Estate Loans or
Wholesale Floor Plan Loans are inconsistent with the terms hereof, or if any
contemporaneous or subsequent documents evidencing said loans are inconsistent
with the terms hereof, the terms of this Agreement shall control.
Section 11.19 Statutory Notice. In accordance with Section 26.02 of
the Texas Business and Commerce Code, GMAC hereby notifies Rush Group that:
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-49-
<PAGE> 54
Executed on the dates indicated below, but to effective as of the date
and year first above written.
<TABLE>
<S> <C>
General Motors Acceptance Rush Enterprises, Inc.
Corporation
By: /s/ R. L. MARTINEZ By: /s/ W. M. "RUSTY" RUSH
---------------------------- ----------------------------
Name: R. L. MARTINEZ Name: W. M. "RUSTY" RUSH
----------------------- -----------------------
Title: Operation Manager Title: President
---------------------- ----------------------
Rush Truck Centers of Rush Truck Centers of
California, Inc. Louisiana, Inc.
By: /s/ W. M. "RUSTY" RUSH By: /s/ W. M. "RUSTY" RUSH
---------------------------- ----------------------------
Name: W. M. "RUSTY" RUSH Name: W. M. "RUSTY" RUSH
----------------------- -----------------------
Title: President Title: President
---------------------- ----------------------
Rush Truck Centers of
Oklahoma, Inc.
By: /s/ W. M. "RUSTY" RUSH
----------------------------
Name: W. M. "RUSTY" RUSH
-----------------------
Title: President
----------------------
</TABLE>
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<PAGE> 55
EXHIBIT 2.05
WHOLESALE INCENTIVE PROGRAM
[GENERAL MOTORS ACCEPTANCE CORPORATION LETTERHEAD]
June 25, 1998
Mr. W. Marvin Rush
Rush Enterprises, Inc.
8810 IH 10 East
San Antonio, Texas 78219
Subject: Special Wholesale Incentive Plan Interest Rate Allowances
From time to time GMAC offers to dealers a reduced interest rate on new and used
floor plan finance obligations and certain floating rate loans. This special
rate is offered for competitive reasons as an incentive to encourage dealers to
provide GMAC with continued wholesale financing. It is known as the Wholesale
Incentive Plan ("WIP").
This letter confirms GMAC's agreement to provide you with a WIP. The following
sets forth the percent reduction which GMAC will provide you below the standard
rate of interest we have been charging for your new and used wholesale floor
plan financing, dealer real-estate loans and Borrowing Base Line of Credit. All
wholesale, dealer real-estate loans and Borrowing Base Line of Credit will be at
prime. Existing rates: prime (wholesale); prime plus 1.00p.p. (all dealer
real-estate loans); prime plus 1.25p.p. (Borrowing Base Line of Credit).
Minimum wholesale outstandings must total at least $20 million and GMAC must
retain all current wholesale and dealer loan outstandings for the Rush
dealership franchises presently owned and in the future. GMAC must also be
provided first right of refusal on all future loans and wholesale financing.
The WIP becomes effective as of July 1, 1996. It will remain in effect
indefinitely, subject to modifications, restrictions, qualifications, or
outright cancellation by GMAC at any time in its sole and absolute discretion;
provided that absent any default by you, any such change in the WIP will not be
effective except upon a ninety (90) day notice to you.
Notwithstanding the foregoing, your wholesale credit lines are expressly
subject to the written terms of the Wholesale Security Agreement
under which they were extended. They are discretionary lines of credit and may
be modified, suspended or terminated at our election, and at our sole and
absolute discretion.
/s/ WM. R. HUFFMAN
Wm. R. Huffman
Area Manager
<PAGE> 56
EXHIBIT 2.07
CERTIFICATION REPORT
Parts & Accessories Borrowing Base Credit Line
Loan Agreement Between GMAC and ("Borrower")
dated_________________, 199_ (the "Loan Agreement")
As of _________, 199_
To: Attention: __________, Area Manager
General Motors Acceptance Corporation
100 NE Loop 410, Suite 500
San Antonio, TX 78216
DEALER CERTIFICATION REPORT SUMMARY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9 10 TOTAL
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Parts & Accessories (per Schedule of
Inventory Acct. 242) 1) $ $ $ $ $ $ $ $ $ $ $
---------------------------------------------------------------------------------------
Less: Parts and Accessories in
stock, not owned 2) $ $ $ $ $ $ $ $ $ $ $
---------------------------------------------------------------------------------------
Less: Parts and Accessories known
to be obsolete. 3) $ $ $ $ $ $ $ $ $ $ $
---------------------------------------------------------------------------------------
Adjusted Schedule of Inventory Value
(Line 1 minus 2 & 3) 4) $ $ $ $ $ $ $ $ $ $ $
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The undersigned hereby certifies that as of the date hereof, the above
information and attached balance sheets (and parts inventory schedules - for
aduits only) of the Rush Truck Group are true and correct and that there exists
no default under the Loan Agreement.
The Monthly Certification Report of Borrower shall be subject to GMAC's
approval. No failure by GMAC to provide notice of approval or notice of
disapproval shall limit or constitute a waiver of any of the rights or remedies
of GMAC hereunder or under any other loan document. Notwithstanding anything
herein to the contrary and notwithstanding that GMAC may have previously
approved any parts and accessories for Inclusion in the Collateral Formula
Amount at a specified value, GMAC may, at any time and from time to time,
revalue any parts and accessories included in the Collateral Formula Amount.
Incident to any such revaluation, the Borrower shall promptly provide to GMAC
any materials GMAC may reasonably require. GMAC, in its sole and absolute
discretion, may determine as a result of any such revaluation to reduce the
amount which any parts and accessories contributes to the Collateral Formula
Amount or to exclude such amount of any parts and accessories entirely, which
determination shall be conclusive and binding in the absence of manifest error.
If GMAC so determines that the Collateral Formula Amount of Borrower is to be
reduced, GMAC shall give written notice thereof to the Borrower stating the
amount of the reduction, the nature of the action taken by GMAC, and the
reduction shall be effective upon GMAC's issuance of that notice.
BORROWER PREPARER'S NAME
-------------------------- ------------------------
DATE OF REPORT PREPARER'S SIGNATURE
-------------------- -------------------
PREPARER'S TITLE
-----------------------
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------
1. San Antonio Peterbilt (Med. & Hvy Trucks) 4. Lufkin Peterbilt 7. Tulsa Peterbilt 10. Pharr Peterbilt
-----------------------------------------------------------------------------------------------------------------------------
2. Houston Peterbilt 5. Ark-La-Tex Peterbilt 8. Oklahoma Peterbilt 11.
-----------------------------------------------------------------------------------------------------------------------------
3. Laredo Peterbilt 6. South Coast Peterbilt 9. Denver Peterbilt 12.
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 57
SCHEDULE 5.06
Liens, Security Interests and Encumbrances
Other Than Those in Favor of GMAC
(see attached pages)
<PAGE> 58
1. Real Estate Mortgage dated December 1, 1995, from Rush Enterprises, Inc.
("Rush") to Kerr Consolidated, Inc., covering the Oklahoma County,
Oklahoma real estate covered and described in the Mortgage Assignment and
Security Agreement dated March 1, 1996, from Rush to GMAC recorded in Book
6862, Page 0378 of the Oklahoma County Clerk Records; and
2. The liens shown on the attached summaries of UCC financing statements for
each member of the Rush Group.
<PAGE> 59
UCCs on file for
Rush Truck Centers of Texas, Inc.
Rush Truck Centers of Oklahoma, Inc.
Rush Truck Centers of California, Inc.
Rush Truck Centers of Louisiana, Inc.
Rush Truck Centers of Colorado, Inc.
(as of April 30, 1997)
Online Lexis searches were conducted in the following databases on April 30,
1997: (1) Texas Secretary of State--Uniform Commercial Code and Federal Tax
Liens (information current through April 29, 1997); (2) California Secretary of
State--Uniform Commercial Code Lien Filings and Federal and State Tax Liens
(information current through April 30, 1997); (3) Oklahoma Central Filing
Office--Uniform Commerical Code Filings (information current through February
7, 1997); (4) Louisiana Parish Clerk's Office--Uniform Commercial Code Filings
(information current through January 31, 1997); and Colorado Secretary of
State--Uniform Commercial Code Filings information current through March 12,
1997).
The results of the searches, separated by state and debtor, are summarized
below. Filings in which General Motors Acceptance Corporation is the secured
party were omitted.
TEXAS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
DEBTOR INSTRUMENT # SECURED PARTY
- ------------------------------------------------------------------------------
<S> <C> <C>
Rush Truck Centers of Texas, Inc. 96-163153 Paccar Inc.
Houston Peterbilt, Inc.
(Houston and Lufkin)
- ------------------------------------------------------------------------------
Rush Truck Centers of Texas, Inc. 96-183894 Paccar Inc.
San Antonio Peterbilt-GMAC
Truck, Inc.
Laredo Peterbilt, Inc.
(San Antonio and Laredo)
- ------------------------------------------------------------------------------
</TABLE>
1
<PAGE> 60
CALIFORNIA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DEBTOR INSTRUMENT # SECURED PARTY
- --------------------------------------------------------------------------------
<S> <C> <C>
Rush Truck Centers of 9623460653 Paccar Inc. and its divisions
California, Inc. dba South
Coast Peterbilt
- --------------------------------------------------------------------------------
</TABLE>
LOUISIANA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DEBTOR INSTRUMENT # SECURED PARTY
- --------------------------------------------------------------------------------
<S> <C> <C>
Rush Truck Centers of 08-373190 Paccar Inc.
Louisiana, Inc.
Ark-La-Tex Peterbilt, Inc.
- --------------------------------------------------------------------------------
</TABLE>
COLORADO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DEBTOR INSTRUMENT # SECURED PARTY
- --------------------------------------------------------------------------------
<S> <C> <C>
Rush Truck Centers of Colorado 97-2017852 Interstate Building (Billing?)
Service Inc.
- --------------------------------------------------------------------------------
Rush Truck Center Peterbilt 97-2017853 Interstate Billing Service Inc.
Greeley
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 61
UCCs on file for Rush Enterprises, Inc. (as of April 25, 1997)
Online Lexis searches were conducted in the following databases on April 25,
1997: (1) Texas Secretary of State-Uniform Commercial Code and Federal Tax Liens
(information current through April 22, 1997); (2) California Secretary of
State-Uniform Commercial Code Lien Filings and Federal and State Tax Liens
(information current through April 18, 1997); (3) Oklahoma Central Filing
Office-Uniform Commercial Code Filings (information current through December
17,1996); (4) Louisiana Parish Clerk's Office-Uniform Commercial Code Filings
(information current through January 31, 1997); and Colorado Secretary of
State-Uniform Commercial Code Filings (information current through March 12,
1997).
The results of the searches, separated by state and debtor, are summarized
below. Filings in which General Motors Acceptance Corporation is the secured
party were omitted.
TEXAS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Debtor Instrument # Secured Party
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. 88-000470 Paccar Inc. and Its Divisions
Houston Peterbilt Inc.
Rush Enterprises Inc. 88-000471 Paccar Inc. and Its Divisions
Houston Peterbilt Inc.
Rush Enterprises Inc. 88-068301 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 88-076273 Paccar Financial Corp.
Houston Peterbilt Inc.
Rush Enterprises Inc. 88-095950 Paccar Financial Corporation
San Antonio Truck Sales
and Service Inc.
San Antonio Peterbilt Inc.
Rush Enterprises Inc. 88-095951 Paccar Financial Corporation
Houston Peterbilt Inc.
Rush Enterprises Inc. 88-287860 Paccar Financial Corp.
San Antonio Truck Sales and
Service Inc.
San Antonio Peterbilt Inc.
Rush Enterprises Inc. 89-003429 Paccar Financial Corp.
Houston Peterbilt Inc.
- --------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 62
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. 89-092679 Paccar Financial Corp.
Houston Peterbilt Inc.
Rush Enterprises Inc. 89-200359 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 89-222922 Paccar Leasing Corporation
Translease, Corp.
Rush Enterprises Inc. 90-232411 Paccar Inc. and Its Divisions
Lufkin Peterbilt Inc.
Rush Enterprises Inc. 92-129020 Associates Commercial Corp.
Trans Lease Corp.
Rush Enterprises Inc. 92-199818 Associates Commercial Corporation
Translease Corp.
Rush Enterprises Inc. 92-199819 Associates Commercial
Trans Lease Corp. Corporation
Rush Enterprises Inc. 92-208891 Southern Pacific Thrift &
San Antonio Truck Sales & Loan Association Leasing
Service Division
Rush Enterprises Inc. 92-235780 Paccar Inc.
Laredo Peterbilt Inc.
Rush Enterprises Inc. 93-017410 Associates Commercial
Corporation
Rush Enterprises Inc. 93-033961 Associates Commercial
Trans Lease Corp. Corporation
Rush Enterprises Inc. 93-066280 Paccar Machinery
Translease Corp. Corporation
Rush Enterprises Inc. 93-071664 Paccar Machinery
Translease Corp. Corporation
Rush Enterprises Inc. 93-086174 Associates Commercial Corp.
Translease Corporation
Rush Enterprises Inc. 93-086175 Associates Commercial Corp.
Translease Corporation
Rush Enterprises Inc. 93-086176 Associates Commercial Corp.
Translease Corporation
Rush Enterprises Inc. 93-130316 Bell & Howell Acceptance Corp.
- --------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 63
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Hush Enterprises Inc. 93-133881 The Frost National Bank of
San Antonio
Rush Enterprises 93-142774 Associates Commercial
Corporation
Rush Enterprises Inc. 93-145372 Interstate Billing Service
Hou Tex Industrial & Truck
Supply
Rush Enterprises Inc. 93-145373 Interstate Billing Service Inc.
Laredo Peterbilt Inc.
Rush Enterprises Inc. 93-145374 Interstate Ming Service Inc.
Rush Pontiac GMC Truck Center
San Antonio Peterbilt Inc.
Rush Enterprises Inc. 93-145375 Interstate Billing Service Inc.
Lufkin Peterbilt Inc.
Rush Enterprises Inc. 93-145376 Interstate Billing Service Inc.
Translease Corp.
Rush Enterprises Inc. 93-145377 Interstate Billing Service Inc.
Houston Peterbilt Inc.
Rush Enterprises Inc. 93-198744 Paccar Inc. and Its Divisions
Houston Peterbilt Inc.
Rush Enterprises Inc. 93-212357 Paccar Inc. and Its Divisions
Houston Peterbilt, Inc.
Rush Enterprises Inc. 94-012120 Associates Commercial
Houston Peterbilt, Inc. Corporation
Rush Enterprises Inc. 94-066816 Concord Commercial
Corporation
Rush Enterprises Inc. 94-154856 Associates Commercial
Corporation
Rush Enterprises Inc. 94-209560 Associates Commercial
Corporation
Rush Enterprises Inc. 94-246554 Paccar Financial Corp.
Laredo Peterbilt Inc.
Rush Enterprises Inc. 95-004085 Associates Leasing Inc.
Translease Corporation
Rush Enterprises Inc. 95-032812 Paccar Financial Corp.
Houston Peterbilt Inc.
- --------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 64
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. 95-112036 Associates Commercial
Trans Lease Corp. Corporation
Rush Enterprises Inc. 95-126184 Associates Commercial
Trans Lease Corp. Corporation
Rush Enterprises Inc. 95-126686 Paccar Lease Corporation
Translease Corp.
Rush Enterprises Inc. 95-137228 Associates Commercial Corporation
Trans Lease Corp. Corporation
Rush Enterprises Inc. 95-145368 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 95-145369 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 95-145370 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 95-145372 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 95-145375 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 95-145377 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 95-164075 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 95-168405 Associates Leasing Inc.
Translease Corp.
Rush Enterprises Inc. 95-173744 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 95-233113 Interstate Billing Service Inc.
Translease
Rush Enterprises Inc. 95-233114 Interstate Billing Service Inc.
Tulsa Trucks Inc.
Rush Enterprises Inc. 95-233115 Interstate Billing Service Inc.
Oklahoma Trucks Inc.
Rush Enterprises Inc. 95-235381 General Electric Capital
Corporation
Rush Enterprises Inc. 95-241763 Paccar Leasing Corporation
Translease Corp.
- --------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 65
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. 81-079376 Paccar Inc.
San Antonio Truck Sales &
Service Inc.
San Antonio Peterbilt-GMC
Truck Inc.
Rush Enterprises Inc. 96-012838 Concord Commercial
South Coast Peterbilt
Rush Enterprises Inc. 96-013403 Concord Commercial
Rush Enterprises Inc. 96-065340 Associates Leasing Inc.
Translease Corp.
Rush Enterprises Inc. 6-078156 Entergy (sp.?) Systems and
Service Inc.
Rush Enterprises Inc. 6-110415 Concord Commercial
Translease Corp. 5-140834 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 5-145367 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 5-145371 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 5-145373 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 5-145374 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 5-145376 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 5-164074 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 5-173745 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 5-173746 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 5-174172 Paccar Leasing Corporation
Rush Enterprises Inc.
Translease Corp. 6-019586 Paccar Leasing Corporation
Rush Enterprises Inc.
- --------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 66
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Translease Corp. 96-042349 Paccar Leasing Corporation
Rush Enterprises Inc.
Worldwide Tires 82-033549 Dunlop Tire Corporation
Truck Tires Inc.
Rush Enterprises Inc.
Rush Enterprises Inc. 96-169452 Associates Leasing, Inc.
Translease Corp.
- --------------------------------------------------------------------------------------------
</TABLE>
CALIFORNIA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Debtor Instrument # Secured Party
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. 94-019355 Paccar Inc.
Rush Enterprises Inc. 94-019358 Paccar Inc.
Rush Enterprises Inc. 94-019361 Paccar Inc.
Rush Enterprises Inc. 94-019365 Paccar Inc.
Rush Enterprises Inc. 94-056247 Paccar Financial Corp.
Rush Enterprises Inc. 94-077448 G E Capital Corp.
Rush Enterprises Inc. dba 95-17860450 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660903 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660917 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660920 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660923 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660934 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660944 Paccar Leasing Corporation
Translease Corp.
- --------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 67
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. dba 95-20660952 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660956 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660959 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660966 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660970 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 95-20660981 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 94-124271 Paccar Leasing Corp.
Translease Corp.
Rush Enterprises Inc. dba 94-124272 Paccar Leasing Corp.
Translease Corp.
Rush Enterprises Inc. dba 95-33260613 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 96-00860909 Paccar Leasing Corporation
Translease, Corp.
Rush Enterprises Inc. dba 96-02960277 Paccar Leasing Corporation
Translease, Corp.
Rush Enterprises 96-07960073 Paccar Financial Corp.
Translease
Rush Enterprises Inc. 94-056249 Paccar Financial Corp.
Rush Enterprises Inc.
dba South Coast Peterbilt
Rush Enterprises Inc. dba 96-09460122 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 96-09460146 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 94-046626 Interstate Billing Service Inc.
South Coast Peterbilt
Tom McKeller Inc.
- --------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 68
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. dba South 94-056253 Paccar Financial Corp.
Coast Peterbilt
South Coast Peterbilt
Rush Enterprises Inc. 94-114482 Interstate Billing Service Inc.
Translease
South Coast Peterbilt
Tom McKeller Inc.
Rush Enterprises Inc. dba 95-17860441 Paccar Leasing Corporation
Translease, Corp.
Rush Enterprises Inc. dba 95-33260618 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 96-02960285 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 96-02960291 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 96-09460138 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. dba 96-15160996 Paccar Leasing Corporation
Translease Corp.
Rush Truck Leasing Inc. 96-32560446 Paccar Leasing Corporation
- --------------------------------------------------------------------------------------------
</TABLE>
OKLAHOMA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Debtor Instrument # Secured Party
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. 043520 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 065798 Paccar Inc.
Tulsa Trucks
Rush Enterprises Inc. 065799 Paccar Inc.
Oklahoma Trucks
Rush Enterprises Inc. 063706 Interstate Billing Service Inc.
Oklahoma Trucks Inc.
Rush Enterprises Inc. 063707 Interstate Billing Service Inc.
Tulsa Trucks Inc.
Rush Enterprises Inc. 063705 Interstate Billing Service Inc.
Translease
- --------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 69
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. 067723 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 014862 Volvo GM Heavy Truck
Tulsa Trucks Inc. Corporation
Rush Enterprises Inc. 014863 Volvo GM Heavy Truck
Oklahoma Trucks Inc. Corporation
Rush Enterprises Inc. 020057 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 020060 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 020061 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 020064 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 020696 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 043519 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 062425 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 020058 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 020059 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 020062 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 020063 Paccar Leasing Corporation
Translease Corp.
- --------------------------------------------------------------------------------------------
</TABLE>
LOUISIANA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Debtor Instrument# Secured Party
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. 08368221 Paccar Inc.
Ark-La-Tex Peterbilt Inc.
Rush Enterprises Inc. 08-369984 Paccar Leasing Corporation
Translease Corp.
- --------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 70
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rush Enterprises Inc. 08-370042 Paccar Financial Corp.
Ark-La-Tex Peterbilt Inc.
Rush Enterprises Inc. 08-369002 Interstate Billing Service Inc.
Ark-La-Tex Peterbilt
Rush Enterprises Inc. 08-369983 Paccar Leasing Corporation
Translease Corporation
Rush Enterprises Inc. 09-919648 Interstate Billing Service Inc.
Ark-La-Tex Peterbilt
Rush Enterprises Inc. 08-371259 Paccar Leasing Corporation
Translease, Corp.
Rush Enterprises Inc. 08-369983 Paccar Leasing Corporation
Translease Corp.
Rush Enterprises Inc. 08-369984 Paccar Leasing Corporation
Translease Corp.
- --------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 71
SCHEDULE 5.11
RUSH GROUP GUARANTEES
1. Guaranty Agreement between Rush and Associates Commercial Corporation
dated effective December 26, 1996, whereby Rush guarantees repayment of
indebtedness of Los Cuernos, Inc. to Associates Commercial Corporation in
the original principal amount of $1,238,000.
2. It is contemplated that RTC-Oklahoma might assume a certain $2,800,000
promissory note payable by Rush to Kerr Consolidated, Inc. ("Kerr") and/or
the obligations of Rush to Kerr under a Dealership Purchase Agreement
dated November 10, 1995, and that Rush might guarantee the repayment of
such promissory note and/or the satisfaction by RTC-Oklahoma of its
obligations under such Dealership Purchase Agreement. In the alternative,
RTC-Oklahoma might guarantee the repayment of such promissory note and/or
the satisfaction by Rush of its obligations under such Dealership Purchase
Agreement.
3. Rush has guaranteed the obligations of RTC-Colorado under the asset
purchase agreement whereby RTC-Colorado recently acquired its Colorado
assets.
<PAGE> 72
SCHEDULE 6.05(C)
Property Subject to Purchase Money Security Interests
to Lenders Other Than GMAC
None
<PAGE> 73
SCHEDULE 8.08
Circumstances Under Which Borrower or Any Dealer
Is Not Approved By Any Manufacturer or Distributor to Sell and Service
or By Any Governmental Agency to Purchase, Sell, Lease and Service
None
<PAGE> 1
STOCK PURCHASE AGREEMENT
DATED AS OF
FEBRUARY 20, 1998
BY AND AMONG
RUSH ENTERPRISES, INC.
RUSH RETAIL CENTERS, INC.
D&D FARM & RANCH SUPERMARKET, INC.
AND
GEORGETTE HAWKINS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
-----------------
<S> <C> <C>
1. Definitions................................................................................... 1
1.1 Acquisition.......................................................................... 1
1.2 Adverse Consequences................................................................. 1
1.3 Affiliate or affiliate............................................................... 1
1.4 Agreement............................................................................ 1
1.5 Audited Financial Statements......................................................... 1
1.6 Basis................................................................................ 2
1.7 Business Combination................................................................. 2
1.8 Business Day......................................................................... 2
1.9 Cash Consideration................................................................... 2
1.10 Closing.............................................................................. 2
1.11 Closing Date......................................................................... 2
1.12 Closing Date Balance Sheet........................................................... 2
1.13 Code................................................................................. 2
1.14 Company Contracts.................................................................... 2
1.15 Company Licenses..................................................................... 2
1.16 Company Stock........................................................................ 2
1.17 Confidential Information............................................................. 2
1.18 Contaminated Site List............................................................... 2
1.19 Defensible Title..................................................................... 3
1.20 Employee Plans....................................................................... 3
1.21 Environmental Conditions............................................................. 3
1.22 Environmental Information............................................................ 3
1.23 Environmental Laws................................................................... 3
1.24 Environmental Liabilities............................................................ 3
1.25 Environmental Remediation Costs...................................................... 4
1.26 ERISA................................................................................ 4
1.27 ERISA Affiliate...................................................................... 4
1.28 ESA.................................................................................. 4
1.29 Exchange Act......................................................................... 4
1.30 Feasibility Period................................................................... 4
1.31 Financial Statements................................................................. 4
1.32 Governmental Entity.................................................................. 4
1.33 Governmental Authority............................................................... 4
1.34 Governmental Requirement............................................................. 5
1.35 Hazardous Materials.................................................................. 5
1.36 Intellectual Property................................................................ 5
1.37 IRS.................................................................................. 5
1.38 Knowledge............................................................................ 5
1.39 Liability............................................................................ 5
1.40 Market Price......................................................................... 5
1.41 Material Adverse Change.............................................................. 5
1.42 Material Adverse Effect.............................................................. 5
1.43 Ordinary Course of Business.......................................................... 6
1.44 Parties.............................................................................. 6
1.45 PBGC................................................................................. 6
1.46 Permitted Exceptions................................................................. 6
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
1.47 Person............................................................................... 6
1.48 Promissory Note...................................................................... 6
1.49 Real Property........................................................................ 6
1.50 Purchase Price....................................................................... 6
1.51 Regulatory Authority................................................................. 6
1.52 Release.............................................................................. 6
1.53 Rush Stock........................................................................... 6
1.54 SEC.................................................................................. 6
1.55 Securities Act....................................................................... 6
1.56 Security Interest.................................................................... 7
1.57 Subsidiary........................................................................... 7
1.58 Tax.................................................................................. 7
1.59 Tax Return........................................................................... 7
1.60 Title Company........................................................................ 7
1.61 Title Commitment..................................................................... 7
1.62 Trade Secrets........................................................................ 7
1.63 UCC Report........................................................................... 7
1.64 Unaffiliated Firm.................................................................... 7
2. Purchase and Sale............................................................................. 7
2.1 Purchase and Sale.................................................................... 7
2.2 Closing.............................................................................. 8
2.3 Adjustments to Purchase Price........................................................ 8
3. Representations and Warranties Concerning the Company......................................... 10
3.1 Organization, Etc.................................................................... 10
3.2 Subsidiaries......................................................................... 11
3.3 Capitalization....................................................................... 11
3.4 Authorization........................................................................ 11
3.5 No Violation......................................................................... 12
3.6 Approvals............................................................................ 12
3.7 Financial Statements and Other Information........................................... 12
3.8 No Undisclosed Liabilities........................................................... 14
3.9 Corporate Action..................................................................... 14
3.10 Events Subsequent to April 30, 1997.................................................. 14
3.11 Taxes................................................................................ 16
3.12 Litigation........................................................................... 18
3.13 Compliance with Laws................................................................. 18
3.14 Title to and Condition of Property................................................... 18
3.15 Environmental Matters................................................................ 21
3.16 Inventories.......................................................................... 22
3.17 Contracts............................................................................ 23
3.18 Employee and Labor Matters and Plans................................................. 24
3.19 Insurance Policies................................................................... 28
3.20 Records.............................................................................. 29
3.21 No Illegal or Improper Transactions.................................................. 29
3.22 Brokerage Fees....................................................................... 29
3.23 No Product Liabilities; Product Warranties........................................... 29
3.24 Suppliers and Customers.............................................................. 29
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
3.25 Intellectual Properties.............................................................. 30
3.26 Licenses............................................................................. 31
3.27 Restrictive Documents and Territorial Restrictions................................... 32
3.28 No Misleading Statements............................................................. 32
4. Additional Representations and Warranties Relating to Seller.................................. 32
4.1 Due Authorization.................................................................... 32
4.2 No Conflict.......................................................................... 33
4.3 Stock................................................................................ 33
4.4 Brokers.............................................................................. 33
5. Representations and Warranties of Purchaser................................................... 34
5.1 Organization......................................................................... 34
5.2 Due Authorization.................................................................... 34
5.3 No Conflict.......................................................................... 34
5.4 Brokers.............................................................................. 35
5.5 Securities Act....................................................................... 35
6. Pre-closing Covenants......................................................................... 35
6.2 Notices and Consents................................................................. 35
6.3 Operation of Business................................................................ 35
6.4 Preservation of Business............................................................. 36
6.5 Full Access.......................................................................... 36
6.6 Notice of Developments............................................................... 36
6.7 Updated Financial Statements......................................................... 36
6.8 Exclusivity.......................................................................... 36
6.9 Environmental Inspections and Assessments............................................ 37
6.10 Schedules............................................................................ 37
6.11 Inventory Audit...................................................................... 37
6.12 Company Information.................................................................. 37
7. Post-closing Covenants........................................................................ 38
7.1 General.............................................................................. 38
7.2 Litigation Support................................................................... 38
7.3 Transition........................................................................... 38
7.4 Confidentiality...................................................................... 38
7.5 Tax Matters.......................................................................... 39
8. Conditions to Obligation to Close............................................................. 41
8.1 Conditions to Obligation of Purchaser................................................ 41
8.2 Conditions to Obligation of Seller................................................... 43
9. Indemnity by Seller........................................................................... 44
9.1 Survival of Representations and Warranties........................................... 44
9.2 Indemnification Provisions for Benefit of the Purchaser and
Rush.......................................................................................... 45
9.3 Indemnification Provisions for Benefit of the Seller................................. 46
9.4 Matters Involving Third Parties...................................................... 46
9.5 Determination of Adverse Consequences................................................ 47
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
9.6 Other Indemnification Provisions..................................................... 47
9.7 Indemnification if Negligence of Indemnitee.......................................... 48
9.8 Releases............................................................................. 48
10. Offset Provisions............................................................................. 49
11. Termination................................................................................... 49
11.1 Termination of Agreement............................................................. 49
11.2 Effect of Termination................................................................ 50
12. Requirements of Securities Laws............................................................... 50
12.1 Accredited Investors................................................................. 50
12.2 Legend............................................................................... 51
12.3 SEC Documents........................................................................ 51
13. Non-Competition Agreement..................................................................... 51
13.1 Non-Competition...................................................................... 51
13.2 Judicial Reformation................................................................. 52
13.3 Customer Lists; Non-Solicitation..................................................... 52
13.4 Covenants Independent................................................................ 52
13.5 Remedies............................................................................. 53
13.6 Exceptions........................................................................... 53
14.1 Survey............................................................................... 53
14.2 Remedies for Failure to Deliver Survey............................................... 54
15. Title Commitment and Condition of Title....................................................... 54
15.1 Title Commitment..................................................................... 54
15.2 UCC Reports.......................................................................... 55
15.3 Disclosure of Exceptions by Title Commitment and UCC Report.......................... 55
16. Environmental Studies and Remediation Activities.............................................. 56
16.1 Environmental Studies................................................................ 56
16.2 Remediation.......................................................................... 56
16.3 No Waiver............................................................................ 57
17. Miscellaneous................................................................................. 57
17.1 Damage to Assets..................................................................... 57
17.2 Expenses............................................................................. 57
17.3 Further Actions...................................................................... 57
17.4 Dispute Resolution................................................................... 57
17.5 Effect of Due Diligence.............................................................. 59
17.6 Press Releases and Public Announcements.............................................. 59
17.7 No Third Party Beneficiaries......................................................... 59
17.8 Entire Agreement..................................................................... 59
17.9 Succession and Assignment............................................................ 59
17.10 Counterparts......................................................................... 60
17.11 Headings............................................................................. 60
17.12 Notices.............................................................................. 60
17.13 Governing Law........................................................................ 61
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C> <C>
17.14 Amendments and Waivers...................................................... 61
17.15 Severability................................................................ 61
17.16 Expenses.................................................................... 61
17.17 Construction................................................................ 61
17.18 Incorporation of Exhibits, Annexes, and Schedules........................... 62
17.19 Specific Performance........................................................ 62
</TABLE>
-v-
<PAGE> 7
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of February 20, 1998 (this
"Agreement"), by and among RUSH RETAIL CENTERS, INC., a Delaware corporation
("Purchaser"), D&D FARM & RANCH SUPERMARKET, INC., a Texas corporation (the
"Company") and GEORGETTE HAWKINS, the sole stockholder of the Company
("Seller"). RUSH ENTERPRISES, INC., a Texas corporation ("Rush"), joins this
Agreement for the limited purposes expressly set forth in this Agreement.
RECITALS:
WHEREAS, Seller owns all of the outstanding capital stock of the
Company.
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser, all of the outstanding capital stock of the Company on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions. The following terms shall have the following
respective meanings for all purposes of this Agreement:
1.1 Acquisition. "Acquisition" shall mean the purchase and sale
of the Company Stock pursuant to the terms of this Agreement.
1.2 Adverse Consequences. "Adverse Consequences" shall mean all
actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses, expenses
and fees, including court costs and reasonable attorneys' fees and
expenses.
1.3 Affiliate or affiliate. "Affiliate or affiliate" shall mean,
with respect to any Person, any other Person that, directly or
indirectly, controls or is controlled by or is under common control
with such Person, and shall include the spouse of any natural person.
As used in this definition of "Affiliate", the term "control" and any
derivatives thereof mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities, by
contract, or otherwise.
1.4 Agreement. "Agreement" shall mean this Stock Purchase
Agreement, as it may be from time to time amended.
1.5 Audited Financial Statements. "Audited Financial Statements"
shall have the meaning set forth in Section 3.7(a).
<PAGE> 8
1.6 Basis. "Basis" shall mean any past or present fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction that
forms or could form the basis for any specified consequence.
1.7 Business Combination. "Business Combination" shall mean (i)
any merger or consolidation of, or share exchange involving, the
Company with or into any Person, (ii) any sale, lease, exchange,
transfer or other disposition (whether in one transaction or a series
of related transactions) of more than ten percent of the Company's
consolidated assets, (iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Company, (iv) any issuance, sale,
purchase or redemption of equity securities, any reclassification of
equity securities or recapitalization of the Company, and (v) any
transaction having an effect similar to those described above.
1.8 Business Day. "Business Day" shall mean any day, other than
a Saturday, Sunday or legal holiday under the Federal laws of the
United States.
1.9 Cash Consideration. "Cash Consideration" shall have the
meaning set forth in Section 2.1.
1.10 Closing. "Closing" shall mean the completion of the
Acquisition pursuant to this Agreement.
1.11 Closing Date. "Closing Date" shall mean the date the Closing
takes place.
1.12 Closing Date Balance Sheet. "Closing Date Balance Sheet"
shall have the meaning assigned to it in Section 2.3.
1.13 Code. "Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.14 Company Contracts. "Company Contracts" shall have the
meaning set forth in Section 3.17(a).
1.15 Company Licenses. "Company Licenses" shall have the meaning
set forth in Section 3.26.
1.16 Company Stock. "Company Stock" shall mean all the issued and
outstanding capital stock of D&D Farm & Ranch Supermarket, Inc.
1.17 Confidential Information. "Confidential Information" shall
mean any information concerning the businesses and affairs of the
Company that is not already generally available to the public.
1.18 Contaminated Site List. "Contaminated Site List" shall mean
any list, registry or other compilation established by any Governmental
Entity of sites that require or potentially require investigation,
removal actions, remedial
2
<PAGE> 9
actions or any other response under any Environmental Laws or treaty
covering environmental matters, as the result of a Release or
threatened Release of any Hazardous Materials.
1.19 Defensible Title. "Defensible Title" shall mean such title
that is good, valid and indefeasible.
1.20 Employee Plans. "Employee Plans" shall have the meaning set
forth in Section 3.18(a).
1.21 Environmental Conditions. "Environmental Conditions" shall
mean any pollution, contamination, degradation, damage or injury caused
by, related to, arising from or in connection with the generation,
handling, use, treatment, storage, transportation, disposal, discharge,
Release or emission of any Hazardous Materials.
1.22 Environmental Information. "Environmental Information" shall
have the meaning set forth in Section 16.1.
1.23 Environmental Laws. "Environmental Laws" shall mean all
laws, rules, regulations, statutes, ordinances, decrees or orders of
any governmental entity relating to (a) the control of any potential
pollutant or protection of the air, water or land, (b) solid, gaseous
or liquid waste generation, handling, treatment, storage, disposal or
transportation, and (c) exposure to hazardous, toxic or other
substances alleged to be harmful, and includes without limitation final
and binding requirements related to the foregoing imposed by (i) the
terms and conditions of any license, permit, approval or other
authorization by any governmental entity, and (ii) applicable judicial,
administrative or other regulatory decrees, judgments and orders of any
governmental entity. The term "Environmental Laws" shall include, but
not be limited to the following statutes and the regulations
promulgated thereunder, as currently in effect or as subsequently
amended: the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the Clean Water
Act, 33 U.S.C. ss. 1251 et seq., the Resource Conservation Recovery Act
("RCRA"), 42 U.S.C. ss. 6901 et seq., the Superfund Amendments and
Reauthorization Act, 42 U.S.C. ss. 11011 et seq., the Toxic Substances
Control Act, 15 U.S.C. ss. 2601 et seq., the Water Pollution Control
Act, 33 U.S.C. ss. 1251, et seq., the Safe Drinking Water Act, 42
U.S.C. ss. 300f et seq., the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq.,
and any similar state, federal or local statute or ordinance.
1.24 Environmental Liabilities. "Environmental Liabilities" shall
mean any and all liabilities, responsibilities, claims, suits, losses,
costs (including remediation, removal, response, abatement, clean-up,
investigative and/or monitoring costs and any other related costs and
expenses, including without limitation Environmental Remediation
Costs), other causes of action recognized now or at any later time,
damages, settlements, expenses, charges, assessments, liens, penalties,
fines, pre-judgment and post-judgment interest, attorney fees and other
legal fees (a) pursuant to any agreement, order, notice, directive
(including directives embodied in Environmental Laws), injunction,
judgment or similar
3
<PAGE> 10
documents (including settlements), or (b) pursuant to any claim by a
governmental entity or other person for personal injury, property
damage, damage to natural resources, remediation or similar costs or
expenses incurred or asserted by such governmental entity or person
pursuant to common law or statute.
1.25 Environmental Remediation Costs. "Environmental Remediation
Costs" shall mean all costs and expenses of actions or activities to
(a) clean-up or remove Hazardous Materials from the environment, (b)
prevent or minimize the movement, leaching or migration of Hazardous
Materials into the environment, (c) prevent, minimize or mitigate the
Release or threatened Release of Hazardous Materials into the
environment, or injury or damage from such Release, and (d) comply with
the requirements of any Environmental Laws. Environmental Remediation
Costs include, without limitation, costs and expenses payable in
connection with the foregoing for legal, engineering or other
consultant services, for investigation, testing, sampling and
monitoring, for boring, excavation and construction, for removal,
modification or replacement of equipment or facilities, for labor and
material, and for proper storage, treatment and disposal of Hazardous
Materials.
1.26 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.27 ERISA Affiliate. "ERISA Affiliate" shall mean any person,
firm or entity (whether or not incorporated) which, by reason of its
relationship with the Company, is required to be aggregated with the
Company under Sections 414(b), 414(c) or 414(m) of the Code, or which,
together with the Company is a member of a controlled group within the
meaning of Section 4001(a) of ERISA.
1.28 ESA. "ESA" shall have the meaning set forth in Section 16.1.
1.29 Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.30 Feasibility Period. "Feasibility Period" shall have the
meaning set forth in Section 16.1.
1.31 Financial Statements. "Financial Statements" shall have the
meaning set forth in Section 3.7(a).
1.32 Governmental Entity. "Governmental Entity" shall mean any
foreign or domestic court, administrative agency or commission or other
governmental authority or instrumentality.
1.33 Governmental Authority. "Governmental Authority" shall mean
any and all foreign, federal, state or local governments, governmental
institutions, public authorities and governmental entities of any
nature whatsoever, and any subdivisions or instrumentalities thereof,
including, but not limited to, departments, boards, bureaus,
commissions, agencies, courts, administrations and
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panels, and any divisions or instrumentalities thereof, whether
permanent or ad hoc and whether now or hereafter constituted or
existing.
1.34 Governmental Requirement. "Governmental Requirement" shall
mean any and all laws (including, but not limited to, applicable common
law principles), statutes, ordinances, codes, rules, regulations,
interpretations, guidelines, directions, orders, judgments, writs,
injunctions, decrees, decisions or similar items or pronouncements,
promulgated, issued, passed or set forth by any Governmental Authority.
1.35 Hazardous Materials. "Hazardous Materials" shall mean any (a)
toxic or hazardous materials or substances; (b) solid wastes, including
asbestos, buried contaminants, chemicals, flammable or explosive
materials; (c) radioactive materials; (d) petroleum wastes and spills
or releases of petroleum products; and (e) any other chemical,
pollutant, contaminant, substance or waste that is regulated by any
governmental entity under any Environmental Law.
1.36 Intellectual Property. "Intellectual Property" shall mean all
patents (including all reissues, divisions, continuations, and
extensions thereof), patent applications, trademarks, servicemarks,
trade names, all other names, logos and slogans embodying business,
product or service goodwill and all computer software (including data
and related documentation).
1.37 IRS. "IRS" shall mean the Internal Revenue Service.
1.38 Knowledge. "Knowledge" shall mean, with respect to a Person,
actual knowledge after reasonable investigation, including the
knowledge of such Person's directors and officers and employees of such
Person with responsibility for the particular matters referred to.
1.39 Liability. "Liability" shall mean any liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
liability for Taxes.
1.40 Market Price. "Market Price" shall mean the average of the
closing bid and asked prices of a share of Rush Stock for the trading
day immediately prior to the Closing Date, as reported in the
over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotation System.
1.41 Material Adverse Change. "Material Adverse Change" shall mean
an occurrence, event or development which has had or is reasonably
likely to have a Material Adverse Effect.
1.42 Material Adverse Effect. "Material Adverse Effect" shall
mean, with respect to any Person, a material adverse effect on the
business, prospects, results of operations, financial condition or
assets of such Person and its Subsidiaries taken as a whole. In
determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does
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not of itself have such effect, a Material Adverse Effect shall be
deemed to have occurred if the cumulative effect of such event and all
other then existing events would result in a Material Adverse Effect.
1.43 Ordinary Course of Business. "Ordinary Course of Business"
shall mean the ordinary course of business consistent with past custom
and practice (including with respect to quantity and frequency).
1.44 Parties. "Parties" shall mean collectively Purchaser, the
Company and Seller.
1.45 PBGC. "PBGC" shall mean the United States Pension Benefit
Guaranty Corporation.
1.46 Permitted Exceptions. "Permitted Exceptions" shall have the
meaning set forth in Section 15.3.
1.47 Person. "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative or
a governmental entity or agency thereof.
1.48 Promissory Note. "Promissory Note" shall have the meaning set
forth in Section 2.1.
1.49 Real Property. "Real Property" shall mean all of that
property located in Guadalupe County, Texas, which is comprised of
three tracts of land as more fully described in three legal
descriptions attached hereto as Exhibit 1.49 A.
1.50 Purchase Price. "Purchase Price" shall mean the Cash
Consideration and the aggregate amount of the Promissory Note,
collectively, as adjusted in accordance with Section 2.3.
1.51 Regulatory Authority. "Regulatory Authority" shall mean any
foreign, United States Federal or state government or governmental
authority the approval of which, or filing with, is legally required or
permitted for consummation of the transactions contemplated by this
Agreement.
1.52 Release. "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment.
1.53 Rush Stock. "Rush Stock" shall mean the common stock, $.01
par value, of Rush.
1.54 SEC. "SEC" shall mean the Securities and Exchange Commission.
1.55 Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended, and the rules and regulations thereunder.
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1.56 Security Interest. "Security Interest" shall mean any
mortgage, pledge, lien, encumbrance, charge or other security interest,
other than (a) mechanic's, materialmen's and similar liens, (b) liens
for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings and for which
adequate reserves exist on such Person's books, (c) purchase money
liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
1.57 Subsidiary. "Subsidiary" shall mean, with respect to any
entity, any corporation of which securities or other ownership
interests having ordinary voting power to elect a majority of the board
of directors or other persons performing similar functions are directly
or indirectly owned by such entity.
1.58 Tax. "Tax" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties,
capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.
1.59 Tax Return. "Tax Return" shall mean any return, declaration,
report, claim for refund or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
1.60 Title Company. "Title Company" shall mean Alamo Title
Company, Attention Ron Bates, 112 E. Pecan, Suite 125, San Antonio,
Texas 78205.
1.61 Title Commitment. "Title Commitment" shall have the meaning
set forth in Section 15.1.
1.62 Trade Secrets. "Trade Secrets" shall have the meaning
assigned to it in Section 3.25.
1.63 UCC Report. "UCC Report" shall have the meaning set forth in
Section 15.2.
1.64 Unaffiliated Firm. "Unaffiliated Firm" shall have the meaning
assigned to it in Section 2.3.
2. Purchase and Sale.
2.1 Purchase and Sale. At the Closing and subject to and upon
the terms and conditions of this Agreement, Seller shall sell, transfer
and deliver to Purchaser, and Purchaser shall purchase and acquire from
Seller, all right, title and interest in and to all of the outstanding
shares of Company Stock free and
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<PAGE> 14
clear of all Security Interests or other restriction on transfer (other
than restrictions on transfer imposed by the Securities Act and state
securities laws) in consideration for the Purchase Price. At the
Closing, (a) Purchaser shall deliver to Seller $8,750,000, subject to
adjustment, in cash (the "Cash Consideration") by wire transfer of
immediately available funds, with such account being specified to
Purchaser in writing at least five Business Days prior to the Closing
Date, and (b) Rush shall execute and deliver to Seller a promissory
note (the "Promissory Note") in the original principal sum of
$1,750,000 and in the form of Exhibit 2.1 A.
2.2 Closing.
(a) Subject to the provisions of Article 8 hereof,
the Closing of the Acquisition shall take place at 10:00 a.m.,
San Antonio time, at the offices of Duncan, Ulman, Weakley &
Bressler, Inc., 603 Navarro Street, Suite 1000, South Texas
Building, San Antonio, Texas 78205-1838, no later than the
second Business Day after satisfaction of the latest to occur
of the conditions set forth in Article 8 hereof (other than
the delivery of the officers' certificates referred to therein
and other than any conditions which are waived in accordance
with said Article) or such other time, place or date as Seller
and Purchaser may mutually agree. Failure to consummate the
transactions provided for in this Agreement on the date and
time selected pursuant to this Section 2.2(a) shall not,
except as permitted by Article 8 hereof, result in the
termination of this Agreement and shall not relieve any party
to this Agreement of any obligation hereunder.
(b) At the Closing, Seller shall deliver to Purchaser
certificate(s) representing the Company Stock accompanied by
stock power(s) duly executed in blank, and with all necessary
transfer tax and other revenue stamps, acquired at Seller's
expense, affixed and canceled. Seller agrees to cure any
deficiencies with respect to the endorsements of the
certificates representing the Company Stock or with respect to
the stock powers accompanying any such certificates.
2.3 Adjustments to Purchase Price.
(a) At the Closing, Purchaser shall have the option,
exercised by written notice from Purchaser to Seller delivered
at the Closing, subject to Seller's rights under Section
8.2(f), to reduce the value of any inventory on the Closing
Date Balance Sheet which Purchaser, in its sole discretion,
determines to be obsolete or not saleable in the ordinary
course of business in such amount as Purchaser shall determine
in its sole discretion and of which Purchaser shall give
written notice to Seller at the Closing.
(b) As soon as practicable and in any event no later
than ninety (90) days after the Closing Date, Seller shall
deliver to Purchaser a consolidated balance sheet of the
Company as of the Closing Date,
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prepared by the Company's independent auditors in accordance
with generally accepted accounting principles and on a basis
consistent with the Audited Financial Statements, subject to
the reductions pursuant to Section 2.3(a) and excluding any
accounts receivable of the company existing on the Closing
Date and not collected by the date of such delivery, (the
"CLOSING DATE BALANCE SHEET"). The Company shall pay the costs
of preparing the Closing Date Balance Sheet.
(c) Within thirty (30) days after receipt of the
Closing Date Balance Sheet and copies of the workpapers
relating thereto, Purchaser shall inform Seller in writing
that either the Closing Date Balance Sheet is acceptable or
object to the Closing Date Balance Sheet in writing setting
forth a specific description of Purchaser's objections (it
being agreed that the failure of Purchaser to deliver such
written notice to Seller within such thirty (30) day period
shall be deemed acceptance by Purchaser). If Purchaser objects
as provided above and if Seller does not agree with
Purchaser's objections, if any (it being agreed that the
failure of Seller to deliver written notice to the Purchaser
of Seller's disagreement with Purchaser's objections within
thirty (30) days of Seller's receipt of Purchaser's objections
shall be deemed acceptance by Seller), or such objections are
not resolved on a mutually agreeable basis within thirty (30)
days after Seller's receipt of Purchaser's objections, any
such disagreement shall be promptly submitted to a mutually
acceptable "big-six" accounting firm that has no affiliation
with any of Purchaser, Seller or the Company (the
"UNAFFILIATED FIRM"). The Unaffiliated Firm shall resolve
within thirty (30) days after said Unaffiliated Firm's
engagement by the parties the differences regarding the
Closing Date Balance Sheet in accordance with generally
accepted accounting principles consistently applied and this
Agreement. The decision of such Unaffiliated Firm shall be
final and binding upon, and its fees, costs and expenses shall
be shared equally by, Seller and Purchaser. Seller and
Purchaser shall each bear the fees, costs and expenses of its
own accountants. Upon resolution of any such dispute, the
determination of the Closing Date Balance Sheet shall be
deemed to be final.
(d) If the Closing Date Balance Sheet as finally
determined pursuant to this Section 2.3 shows that
stockholders' equity is less than $8,600,000, then the
purchase price shall be reduced through the return to
Purchaser of cash in an amount equal to the difference between
$8,600,000 and the amount of stockholders' equity of the
Company as reflected on the Closing Date Balance Sheet. Such
amount shall be promptly returned by wire transfer of
immediately available funds to Purchaser. If the Closing Date
Balance Sheet as finally determined pursuant to this Section
2.3 shows that stockholders' equity is greater than
$8,600,000, then the purchase price shall be increased through
the prompt payment to Seller of cash in an amount equal to 50%
of the difference between $8,600,000 and the amount of
stockholders' equity of the Company as reflected on the
Closing Date Balance Sheet. Such amount shall be paid by wire
transfer of immediately available funds to
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Seller. If the Closing Date Balance Sheet as finally
determined pursuant to this Section 2.3 shows that
stockholders' equity is equal to $8,600,000, no adjustment to
the Purchase Price shall be made.
(e) From and after the Closing, the Company shall use
its best efforts to sell any inventory reduced in value
pursuant to Section 2.3(a) and to collect any accounts
receivable excluded pursuant to Section 2.3(b) and shall
promptly pay to Seller by wire transfer of immediately
available funds 50% of the proceeds of such sale in excess of
the reduced value and 50% of the proceeds of such collection;
provided, however, that the Company may, at its option, at any
time transfer any of such inventory and accounts receivable to
Seller and shall have no further obligation under this Section
2.3(e) with respect to the inventory and accounts receivable
so transferred.
3. Representations and Warranties Concerning the Company.
Seller represents and warrants to Purchaser and Rush that the
statements contained in this Article 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article 3), except as set forth in the disclosure
schedule delivered by Seller to Purchaser on the date hereof and initialed by
the Parties (the "Disclosure Schedule"). Nothing in the Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article 3.
3.1 Organization, Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas and has full corporate power and authority to conduct
its business as it is now being conducted and to own, operate or lease
the properties and assets it currently owns, operates or holds under
lease. The Company is duly qualified or licensed to do business and is
in good standing as a foreign corporation in each jurisdiction where
the character of its business or the nature of its properties makes
such qualification or licensing necessary, all of which jurisdictions
are set forth on the Disclosure Schedule. The Company has heretofore
delivered to Purchaser true and correct copies of its Certificate of
Incorporation and By-laws as in effect on the date hereof. The minute
books (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the
stock certificate books, and the stock record books of the Company are
correct and complete.
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3.2 Subsidiaries. The Company does not have, directly or
indirectly, any legal or beneficial interest in any Subsidiary,
partnership, joint venture or other entity.
3.3 Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth on the Disclosure
Schedule. All of the issued and outstanding shares of capital stock of
the Company are owned, of record and beneficially, by Seller. No Person
other than Seller is or will be entitled to receive any payment with
respect to the Company Stock. On the Closing Date, no shares of Company
Stock will be held as treasury shares. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the
Company are as set forth in the Company's Certificate of Incorporation,
and all such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable and in
accordance with all applicable laws. All outstanding shares of capital
stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable. All of the outstanding securities of
the Company were issued in compliance with all applicable Federal and
state securities laws. None of such outstanding securities has been
issued in violation of any preemptive rights, rights of first refusal
or similar rights. There are no outstanding options, warrants,
convertible securities, calls, rights, commitments, preemptive rights
or agreements or instruments or understandings of any character to
which the Company is a party or by which the Company is bound,
obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, contingently or otherwise, additional shares
of its capital stock or any securities or obligations convertible into
or exchangeable for such shares or to grant, extend or enter into any
such option, warrant, convertible security, call, right, commitment,
preemptive right or agreement. There are no outstanding obligations,
contingent or other, of the Company to purchase, redeem or otherwise
acquire any shares of its capital stock. There are no voting trust
agreements or other contracts, agreements, arrangements, commitments,
plans or understandings restricting or otherwise relating to voting,
dividend or other rights with respect to the capital stock of the
Company.
3.4 Authorization. The Company has all requisite corporate
power and authority to enter into this Agreement and each of the other
agreements contemplated hereby, to carry out its obligations under this
Agreement and each of the other agreements contemplated hereby and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the performance by the Company of
its obligations hereunder have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been
duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable against the
Company and in accordance with its terms (except as the enforceability
thereof may be limited by any applicable bankruptcy, insolvency or
other laws affecting creditors' rights generally or by general
principles of equity, regardless of whether such enforceability is
considered in equity or at law).
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3.5 No Violation. The execution and delivery of this
Agreement by the Company does not, and the consummation by the Company
of the transactions contemplated hereby and compliance with the terms
hereof will not, (a) conflict with, or result in any violation of or
default or loss of any benefit under, any provision of the Company's
Certificate of Incorporation or By-laws; (b) conflict with, or result
in any violation of or default or loss of any benefit under, any
permit, concession, grant, franchise, law, rule or regulation, or any
judgment, decree or order of any court or other governmental agency or
instrumentality to which the Company is a party or to which any of its
property is subject; (c) conflict with, or result in a breach or
violation of or default or loss of any benefit under, or accelerate the
performance required by, the terms of any agreement, contract,
indenture or other instrument to which the Company is a party or to
which any of its property is subject, or constitute a default or loss
of any right thereunder or an event which, with the lapse of time or
notice or both, might result in a default or loss of any right
thereunder or the creation of any Security Interest upon any of the
assets or properties of the Company; or (d) result in any suspension,
revocation, impairment, forfeiture or non-renewal of any Company
License.
3.6 Approvals. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by the
Company will not require the consent, approval, order or authorization
of any Governmental Entity or Regulatory Authority or any other Person
under any statute, law, rule, regulation, permit, license, agreement,
indenture or other instrument to which the Company or Seller is a party
or to which any of its or their properties are subject, and no
declaration, filing or registration with any Governmental Entity or
Regulatory Authority is required or advisable by the Company or Seller
in connection with the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, or the
performance by each of the Company and Seller of its or their
respective obligations hereunder.
3.7 Financial Statements and Other Information.
(a) Seller has delivered to Purchaser (i) true, correct
and complete copies of the audited consolidated balance sheets
of the Company as of April 30, 1997 and 1996, and the related
statements of operations, retained earnings and cash flows
(together with the auditors' reports thereon) for each of the
years in the three year period ended April 30, 1997, together
with notes to such financial statements (the "Audited
Financial Statements") and (ii) true, correct and complete
copies of the unaudited balance sheets of the Company as of
December 31, 1997, and the related statements of operations
and cash flows for the eight-month period ended December 31,
1997 (the "Interim Financial Statements"). The Audited
Financial Statements and Interim Financial Statements are
herein collectively referred to as the "Financial Statements".
(b) The Financial Statements are in accordance with the
books and records of the Company and have been prepared in
accordance with generally accepted accounting principles
consistently applied throughout
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the periods covered thereby, and the balance sheets included
therein present fairly as of their respective dates the
financial condition of the Company (subject, in the case of
Interim Financial Statements, to year-end adjustments that may
be required upon audit, which adjustments will not have a
Material Adverse Effect on such financial statements). All
liabilities and obligations, whether absolute, accrued,
contingent or otherwise, whether direct or indirect, and
whether due or to become due, which existed at the date of
such Financial Statements have been disclosed in the balance
sheets included in the Financial Statements or in notes to the
Financial Statements to the extent such liabilities were
required, under generally accepted accounting principles, to
be so disclosed. The statements of operations, retained
earnings and cash flows included in the Financial Statements
present fairly the results of operations and cash flows of the
Company for the periods indicated (subject, in the case of
Interim Financial Statements, to year-end adjustments that may
be required upon audit, which adjustments will not have a
Material Adverse Effect on such financial statements), and the
notes included in the Financial Statements present fairly the
information purported to be shown thereby. The statements of
operations included in the Financial Statements do not contain
any items of special or non-recurring income or other income
not earned in the ordinary course of business except as
expressly specified therein.
(c) All properties and tangible assets reflected in the
latest balance sheet included in the Financial Statements have
a fair market or realizable value at least equal to the value
thereof as reflected therein. Purchaser acknowledges that
certain personal property located on the premises of the
Company is owned by Seller, all of which property is
designated as such on the Disclosure Schedule. Purchaser
further acknowledges that certain rebates identified as such
on the Disclosure Schedule, if received by the Company within
nine months after the Closing Date, shall be paid to Seller as
a commission.
(d) The accounts receivable of the Company, net of
applicable allowances in accordance with generally accepted
accounting principles consistently applied, as set forth on
the latest balance sheet included in the Financial Statements
or arising since the date thereof are valid and genuine; have
arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions in the
ordinary course of business consistent with past practice; are
not subject to valid defenses, set-offs or counterclaims; and
are collectible at the full recorded amount thereof over the
period of usual trade terms (by use of the Company's normal
collection methods without resort to litigation or reference
to a collection agency). The Company has fully performed all
obligations with respect thereto which they were obligated to
perform to the date hereof. Seller has delivered to Purchaser
an aging schedule for the accounts receivable as of December
31, 1997.
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(e) The books, records and accounts of the Company
maintained with respect to its business accurately and fairly
reflect, in reasonable detail, the transactions and their
assets and liabilities with respect to their business. The
Company has not engaged in any transaction with respect to its
business, maintained any bank account for its business or used
any of its funds in the conduct of its business except for
transactions, bank accounts and funds which have been and are
reflected in its normally maintained books and records.
(f) Since April 30, 1997, there has been (i) no adverse
change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of
operations or prospects, of the Company, whether as a result
of any legislative or regulatory change, revocation of any
license or right to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or otherwise, and (ii) to the best
Knowledge of the Company and Seller, no fact or condition
exists or is contemplated or threatened which could reasonably
be anticipated to cause such a change in the future.
3.8 No Undisclosed Liabilities. Except as set forth in the
notes to the Financial Statements, the Liabilities on the latest
balance sheet included in the Financial Statements consist solely of
accrued obligations and Liabilities incurred by the Company in the
ordinary course of its business to Persons which are not Affiliates of
the Company. There are no Liabilities of the Company of any kind
whatsoever, whether or not accrued and whether or not contingent or
absolute, determined or determinable or otherwise, including without
limitation documentary or standby letters of credit, bid or performance
bonds, or customer or third party guarantees, and no existing
condition, situation or set of circumstances that could reasonably
result in such a Liability, other than (i) Liabilities disclosed in the
Financial Statements or (ii) Liabilities which have arisen after April
30, 1997 in the Ordinary Course of Business and consistent with past
practice (none of which is a Liability for breach of contract, breach
of warranty, tort, infringement claim or lawsuit). There are no
asserted claims for indemnification by any Person against the Company
under any law or agreement or pursuant to the Company's Certificate of
Incorporation or By-laws and the Company is not aware of any facts or
circumstances that might reasonably give rise to the assertion of such
a claim against the Company thereunder.
3.9 Corporate Action. All corporate action of the Board of
Directors and of the stockholders of the Company taken on or prior to
the date hereof has been duly authorized, adopted or ratified in
accordance with applicable law and the Certificate of Incorporation and
By-laws (or analogous organizational documents) of the Company and has
been duly recorded in its corporate minute books (which have been made
available for inspection by Purchaser).
3.10 Events Subsequent to April 30, 1997. Since April 30,
1997, the Company has not (a) sold, leased, transferred or assigned any
of its assets, tangible or intangible, other than for fair
consideration in the Ordinary Course of Business; (b) entered into any
agreement, contract, lease or license (or series
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<PAGE> 21
of related agreements, contracts, leases and licenses) either involving
more than $5,000 or outside the Ordinary Course of Business; (c)
discharged or satisfied any lien or encumbrance or incurred or paid any
obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the most recent balance sheet included in
the Financial Statements and current liabilities incurred since April
30, 1997 in the Ordinary Course of Business; (d) imposed any Security
Interest upon any of its assets, tangible or intangible; (e) made any
capital expenditure (or series of related capital expenditures) either
involving more than $5,000 or outside the Ordinary Course of Business;
(f) made any capital investment in, any loan to, or any acquisition of
the securities or assets of, any other Person (or series of related
capital investments, loans and acquisitions) either involving more than
$5,000 or outside the Ordinary Course of Business; (g) borrowed any
amount or incurred or become subject to any liability (absolute,
accrued or contingent), except current liabilities incurred,
liabilities under contracts entered into, borrowings under its
revolving credit facility and liabilities in respect of letters of
credit issued under the credit facility, all of which were in the
Ordinary Course of Business; (h) delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business; (i) canceled, compromised, waived or released any right or
claim (or series of related rights and claims) either involving more
than $5,000 or outside the Ordinary Course of Business; (j) granted any
license or sublicense of any rights under or with respect to any
Intellectual Property; (k) made or authorized any change in its charter
or bylaws; (l) issued, sold or otherwise disposed of any of its capital
stock, or granted any options, warrants or other rights to purchase or
obtain (including upon conversion, exchange or exercise) any of its
capital stock; (m) declared, set aside or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased or otherwise acquired any of its capital
stock; (n) experienced any damage, destruction or loss (whether or not
covered by insurance) to its property; (o) made any loan to, or entered
into any other transaction with, any of its directors, officers and
employees outside the Ordinary Course of Business; (p) suffered any
adverse change in its relations with, or any loss or threatened loss
of, any of its suppliers or customers disclosed pursuant to Section
3.24; (q)(i) granted any severance or termination pay to any of its
directors, officers or employees, (ii) entered into any employment,
deferred compensation, collective bargaining or other similar agreement
(or any amendment to any such existing agreement) or arrangement with
any of its directors, officers or employees, (iii) increased any
benefits payable under any existing severance or termination pay
policies or employment agreements, or (iv) increased the compensation,
bonus or other benefits payable to any of its directors or officers or,
other than in the Ordinary Course of Business and consistent with past
practice, employees; (r) accelerated, terminated, modified or canceled
any agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses), or had any third party do
so, involving more than $5,000 to which it is a party or by which it is
bound; (s) made any change in the manner of its business or operations;
(t) made any change in any method of accounting or accounting practice,
except for any such change required by reason of a concurrent change in
generally accepted accounting principles or disclosed in the Financial
Statements; (u) entered into
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<PAGE> 22
any transaction except in the Ordinary Course of Business or as
otherwise contemplated hereby; or (v) entered into any commitment
(contingent or otherwise) to do any of the foregoing; provided,
however, that the Company may pay dividends, make distributions and pay
bonuses so long as the foregoing do not exceed, in the aggregate,
$250,000. There has not been any other occurrence, event, incident,
action, failure to act or transaction outside the Ordinary Course of
Business involving the Company.
3.11 Taxes.
(a) The Company has filed all Tax Returns that it was
required to file (taking into account all extensions). All
such Tax Returns and the information and data contained
therein have been properly and accurately compiled and
completed, fairly present the information purported to be
shown therein and reflect all Liabilities for Taxes for the
periods covered by such Tax Returns. All Taxes owed by the
Company (whether or not shown on any Tax Return) have been
paid. The Company currently is not the beneficiary of any
extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction
where the Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of the Company that
arose in connection with any failure (or alleged failure) to
pay any Tax.
(b) The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(c) No Seller or director or officer (or employee
responsible for Tax matters) of the Company expects any
authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of the Company either (i)
claimed or raised by any authority in writing or (ii) as to
which Seller or the Company has Knowledge based upon personal
contact with any agent of such authority. The Disclosure
Schedule lists all federal, state, local and foreign income
Tax Returns filed with respect to the Company for taxable
periods ended on or after April 30, 1995, indicates those Tax
Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Seller has
delivered to Purchaser correct and complete copies of all
federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by
the Company since April 30, 1995.
(d) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
16
<PAGE> 23
(e) The Company has not filed a consent under Section
341(f) of the Code concerning collapsible corporations. The
Company has not made any payments, is obligated to make any
payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will
not be deductible under Section 280G of the Code. The Company
has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. The Company has disclosed on their federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the
meaning of Section 6662 of the Code. The Company is not a
party to any Tax allocation or sharing agreement. The Company
(i) has not been a member of an affiliated group (within the
meaning of Section 1504 of the Code) filing a consolidated
federal income Tax Return (other than a group the common
parent of which was the Company) or (ii) has no Liability for
the Taxes of any Person (other than the Company) under Treas.
Reg. ss.1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or
otherwise.
(f) All elections and consents with respect to any
Tax (or the computation thereof) affecting the Company as of
the date hereof are obvious from the Tax Returns or are set
forth on the Disclosure Schedule. After the date hereof, no
election or consent with respect to any Tax (or the
computation thereof) affecting the Company will be made
without the written consent of Purchaser. The Company has not
agreed to make or is required to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(g) The Disclosure Schedule sets forth the following
information with respect to the Company as of the most recent
practicable date (as well as on an estimated pro forma basis
as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (i) the basis of the
Company in its assets; (ii) the amount of any net operating
loss, net capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution
allocable to the Company; and (iii) the amount of any deferred
gain or loss allocable to the Company arising out of any
Deferred Intercompany Transaction (as defined in Treas. Reg.
ss.1.1502-13).
(h) The unpaid Taxes of the Company (i) did not, as
of the date of the latest balance sheet included in the
Financial Statements, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set
forth on the face of the latest balance sheet included in the
Financial Statements (rather than in any notes thereto) and
(ii) do not exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the past
custom and practice of the Company in filing its Tax Returns.
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<PAGE> 24
3.12 Litigation. There is no action, suit, investigation,
arbitration or proceeding pending or, to the best Knowledge of the
Company and Seller threatened against or affecting the Company or any
of its respective properties or rights (including without limitation no
charge of patent and/or trademark infringement), by or before any
Governmental Entity, or any Basis in fact therefor known to the Company
or Seller, against or involving the Company or any of its officers,
directors or employees (in their capacity as such), assets, business or
products, whether at law or in equity. None of the actions, suits,
proceedings, hearings and investigations set forth in the Disclosure
Schedule could result in any adverse change in the Company. With
respect to each litigation or claim described in the Disclosure
Schedule, copies of all pleadings, filings, correspondence with
opposing parties and their counsel, opinions of counsel, results of
studies, judgments, orders, attachments, impositions of or recordings
of Security Interests and other documents have been furnished to
Purchaser. The Company is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge.
3.13 Compliance with Laws. The Company and its predecessors
and Affiliates, has complied in all respects with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings and charges thereunder) of any Governmental
Entity relating to or affecting the operation, conduct or ownership of
their respective property or business, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has
been filed or commenced or, to the best Knowledge of the Company and
Seller, threatened against any of them alleging any failure so to
comply. Neither the Company nor, to the best Knowledge of the Company
and Seller, any of the Company's directors, officers, consultants or
employees (in their capacity as such), is in default in any respect
with respect to any order, writ, injunction or decree known to or
served upon the Company of any Governmental Entity or Regulatory
Authority. There is no existing law, rule, regulation or order, whether
Federal, state, local or foreign, which would prohibit or restrict the
Company from, or otherwise adversely affect the Company in, conducting
its business in any jurisdiction in which it is now conducting business
or in which it currently proposes to conduct business.
3.14 Title to and Condition of Property.
(a) The Disclosure Schedule identifies all of the
rights and interests in real property and leasehold estates
owned by the Company as of the date hereof, and the nature and
amount of its respective interest therein. The Company has
Defensible Title to all real property and have valid,
subsisting and enforceable leases to all leasehold estates
identified and reflected in the Disclosure Schedule and either
good and indefeasible title or rights as lessee to all
personalty of any kind or nature owned or used by the Company
in its business, in each case free and clear of all Security
Interests, easements, covenants or other restrictions
whatsoever, except for (i) Security Interests or
irregularities of title identified on the Disclosure Schedule
which, individually or in the aggregate, do not detract from
or interfere with the present or reasonably foreseeable use or
value
18
<PAGE> 25
of the properties subject thereto, and (ii) Security Interests
for non-delinquent ad valorem taxes and non-delinquent
statutory liens arising other than by reason of default by the
Company and (iii) Permitted Exceptions.
(b) With respect to each parcel of owned real
property:
(i) there are no pending or, to the best
Knowledge of the Company and Seller, threatened
condemnation proceedings, lawsuits or administrative
actions relating to the property or other matters
affecting adversely the current use, occupancy or
value thereof;
(ii) the legal description for the parcel
contained in the deed thereof describes such parcel
fully and adequately, the buildings and improvements
are located within the boundary lines of the
described parcels of land, are not in violation of
applicable setback requirements, zoning laws and
ordinances (and none of the properties or buildings
or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming
structure" classifications), and do not encroach on
any easement which may burden the land, and the land
does not serve any adjoining property for any purpose
inconsistent with the use of the land, and the
property is not located within any flood plain or
subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have
not been obtained;
(iii) to the best Knowledge of the Company
and Seller, all facilities have received all
approvals of Governmental Entities (including
licenses and permits) required in connection with the
ownership or operation thereof and have been operated
and maintained in accordance with applicable laws,
rules and regulations;
(iv) there are no leases, subleases,
licenses, concessions or other agreements, written or
oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real
property;
(v) there are no outstanding options or
rights of first refusal to purchase the parcel of
real property, or any portion thereof or interest
therein;
(vi) there are no parties (other than the
Company) in possession of the parcel of real
property, other than tenants under any leases
disclosed in the Disclosure Schedule which are in
possession of space to which they are entitled;
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<PAGE> 26
(vii) all facilities located on the parcel
of real property are supplied with utilities and
other services necessary for the operation of such
facilities, including gas, electricity, water,
telephone, sanitary sewer and storm sewer, all of
which services are adequate in accordance with all
applicable laws, ordinances, rules and regulations
and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the
parcel of real property; and
(viii) each parcel of real property abuts on
and has direct vehicular access to a public road, or
has access to a public road via a permanent,
irrevocable, appurtenant easement benefitting the
parcel of real property, and access to the property
is provided by paved public right-of-way with
adequate curb cuts available.
(c) The Company as lessee has the right under
valid leases to occupy, use, possess and control all property
leased by the Company as now occupied, used, possessed and
controlled by the Company. With respect to each parcel of
leased real property:
(i) the Company has not assigned,
transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold;
(ii) to the best Knowledge of the Company
and Seller, all leased facilities have received all
approvals of Governmental Entities (including
licenses and permits) required in connection with the
operation thereof and have been operated and
maintained in accordance with applicable laws, rules
and regulations; and
(iii) all leased facilities are supplied
with utilities and other services necessary for the
operation of said facilities.
(d) Each lease or agreement under which the
Company is a lessee or lessor of any property, real or
personal, is a valid and binding agreement of the Company and,
to the best Knowledge of the Company and Seller, the other
party thereto, without any default by the Company thereunder
and, to the best Knowledge of the Company and Seller, without
any default thereunder by any other party thereto. No event
has occurred and is continuing which, with due notice or lapse
of time or both, would constitute a default or event of
default by the Company under any such lease or agreement or,
to the best Knowledge of the Company and Seller, by any other
party thereto. The Company's possession of such property has
not been disturbed and no claim has been asserted in writing
against the Company adverse to its rights in such leasehold
interests.
(e) All buildings, structures, appurtenances and
items of machinery, equipment and other tangible assets used
by the Company are in good operating condition and repair,
normal wear and tear excepted,
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<PAGE> 27
are usable in the ordinary course of business, are adequate
and suitable for the uses to which they are being put and
conform, to the best Knowledge of the Company and Seller, to
all applicable laws, ordinances, codes, rules, regulations and
authorizations relating to their construction, use and
operation. To the best Knowledge of the Company and Seller,
none of the Company's premises or equipment are in need of
maintenance or repairs other than ordinary routine maintenance
and repairs which are not material, individually or in the
aggregate, in nature or cost.
(f) The assets and properties owned or leased by the
Company are sufficient to operate and conduct the business of
the Company in a manner consistent with at least the same
standards of quality and reliability as have been achieved as
of the date hereof.
3.15 Environmental Matters.
(a) With respect to permits and licenses, (i) all
licenses, permits, consents or other approvals required under
Environmental Laws that are necessary to the operations of the
business of the Company have been obtained and are in full
force and effect and neither the Company nor Seller is aware
of any Basis for revocation or suspension of any such
licenses, permits, consents or other approvals; (ii) to the
best Knowledge of the Company and Seller, no Environmental
Laws impose any obligation upon Purchaser, as a result of any
transaction contemplated hereby, requiring prior notification
to any Governmental Entity of the transfer of any permit,
license, consent or other approval which is necessary to the
operations of the business of the Company; (iii) all of the
facilities and operations of the business of the Company were
constructed, and have been operated, in accordance with the
representations and conditions made or set forth in the permit
applications and the permits for the business of the Company;
and (iv) the business of the Company has at all times been
operated in full compliance with such permits, licenses,
consents or approvals, and within the production levels or
emission levels specified in such permits, licenses, consents
or approvals.
(b) To the best Knowledge of the Company and Seller,
the Company has at all times operated its business in
compliance with all applicable limitations, restrictions,
conditions, standards, prohibitions, requirements and
obligations of Environmental Laws and related orders of any
court or other Governmental Entity.
(c) There are not any existing, pending or, to the
best Knowledge of the Company and Seller, threatened actions,
suits, claims, investigations, inquiries or proceedings by or
before any court or any other Governmental Entity directed
against the Company in connection with the operation of its
business which pertain or relate to (i) any remedial
obligations under any applicable Environmental Law, (ii)
violations by the Company of any Environmental Law, (iii)
personal injury or property damage claims relating to a
release of chemicals or Hazardous
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<PAGE> 28
Materials by the Company, or (iv) response, removal or
remedial costs under the Comprehensive Environmental Response,
Compensation, and
Liability Act or any similar state law.
(d) No portion of the real property owned or leased
by the Company with respect to its business is listed on any
Contaminated Site List.
(e) There has been no Release of any Hazardous
Materials on or underlying any Real Property owned or leased
by the Company.
(f) No asbestos-containing materials or
polychlorinated biphenyls ("PCBs") are present on or
underlying any real property owned or leased by the Company.
(g) There are no underground storage tanks for
Hazardous Materials, active or abandoned, at any property now
or previously owned or leased by the Company.
(h) Seller has provided to Purchaser all engineering,
geologic, environmental and other documents or maps in the
possession of Seller or the Company relating to (i) any
Environmental Conditions existing on any real property owned
or leased by the Company, or (ii) any violations by the
Company of any Environmental Laws.
(i) All Hazardous Materials, if any, generated by the
Company in its business have been transported, stored, treated
and disposed of by transporters or carriers, or at treatment,
storage and disposal facilities, authorized or maintaining
valid permits under all applicable Environmental Laws.
(j) The Company nor Seller is aware of any
Environmental Remediation Costs which are required or have
been planned relating to the operation of their business by
the Company for which Seller or the Company reasonably
anticipates payment or accrual.
3.16 Inventories. The inventories of the Company reflected
on the Closing Date Balance Sheet consist of items of a quality and
quantity usable and saleable in the normal course of business of the
Company at an aggregate value at least equal to the value at which such
inventories are reflected on the Closing Date Balance Sheet. The method
of valuing such inventories on the Closing Date Balance Sheet is
consistent with that used in respect of the beginning and end of each
of the two (2) most recent fiscal years of the Company. The value of
obsolete materials and materials below standard quality has been
written down on the books of account of the Company to realizable
market value, or adequate reserves have been provided therefor. To the
best Knowledge of Seller and the Company, the inventories of the
Company are not excessive in kind or amount in light of the business
done or reasonably expected to be done by it. The values at which such
inventories are carried reflect the inventory valuation
22
<PAGE> 29
policy applied by the Company of stating inventory at the lower of
actual cost (first in-first out method) or realizable market value in
accordance with generally accepted accounting principles.
3.17 Contracts.
(a) The Disclosure Schedule contains a complete list
of all currently effective written or oral (i) employment
contracts, arrangements or policies (including without
limitation any collective bargaining contract or union
agreement) of the Company which may not be immediately
terminated without penalty (or any augmentation or
acceleration of benefits); (ii) leases, sales contracts and
other agreements with respect to any property, real or
personal, of the Company, except for leases of personal
property involving less than $1,000 individually and $10,000
in the aggregate; (iii) contracts or commitments for capital
expenditures or acquisitions in excess of $5,000 for one
project or set of related projects; (iv) agreements,
contracts, indentures or other instruments relating to the
borrowing of money, or the guarantee of any obligation (third
party or otherwise) for the borrowing of money; (v) contracts
or agreements providing for any covenant not to compete by the
Company or otherwise restricting in any way the Company's
engaging in any business activity (including a description of
the businesses to which the covenant not to compete applies);
(vi) contracts or agreements relating to consultancies,
professional retentions, agency, sales or distributorship
arrangements pertaining to the Company or its products,
services or activities; (vii) any agreement (or group of
related agreements) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property,
or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year,
result in a loss to the Company, or involve consideration in
excess of $5,000; (viii) contracts, agreements or commitments
requiring the Company to indemnify or hold harmless any Person
other than purchase orders entered into in the Ordinary Course
of Business; (ix) all contracts with any customer or supplier
listed on the Disclosure Schedule pursuant to Section 3.24
hereto other than outstanding purchase orders in the Ordinary
Course of Business; and (x) contracts, agreements,
arrangements or commitments, other than the foregoing, which
could reasonably be considered material to the business of the
Company (all agreements, arrangements or commitments to which
the Company is a party, whether or not listed on the
Disclosure Schedule, being hereinafter referred to as "Company
Contracts"). True and correct copies of all the Company
Contracts listed on the Disclosure Schedule have been
furnished to Purchaser. With respect to each Company Contract:
(i) the agreement is legal, valid, binding, enforceable and in
full force and effect; (ii) the agreement will continue to be
legal, valid, binding, enforceable and in full force and
effect on identical terms following the consummation of the
transactions contemplated hereby; (iii) neither the Company
nor, to the best Knowledge of the Company and Seller, any
other party thereto, is in breach or default, and no event has
occurred which with notice or lapse
23
<PAGE> 30
of time would constitute a breach or default, or permit
termination, modification or acceleration, under the
agreement; and (iv) no party has repudiated any provision of
the agreement. There are no Liabilities of the Company or, to
the best Knowledge of the Company and Seller, any other party
to any of the Company Contracts arising from any breach of or
default in any provision thereof, nor has there occurred any
breach or default thereof by the Company which would permit
the acceleration of any obligation of any party thereto or the
creation of a Security Interest upon any asset(s) of the
Company. There are no negotiations pending or in progress to
revise any terms of such Company Contracts.
(b) (i) No purchase contracts or commitments of the
Company continue for a period of more than 12 months or are in
quantities or amounts in excess of the normal, ordinary, usual
and current requirements of its business or in excess of
market prices generally available to purchasers of similar
quantities; (ii) no Company Contract requires the Company to
provide services at a fixed price; (iii) the Company does not
have outstanding any bid, contract, commitment or proposal
either (x) continuing for a period of more than 12 months or
(y) quoting prices which will not result in profits consistent
with past experience; and (iv) none of such Company Contracts
obligates the Company to sell products or to perform services
to third parties which the Company or Seller knows or has
reason to believe are at a price which would result in a net
loss on the sale of such products or the provision of
services, or are pursuant to terms or conditions they cannot
reasonably expect to satisfy or fulfill in their entirety.
3.18 Employee and Labor Matters and Plans.
(a) The Disclosure Schedule lists each of the
following plans, contracts, policies and arrangements which is
or, within six years prior to the date hereof, was sponsored,
maintained or contributed to by, or otherwise binding upon the
Company, or in the case of an "employee pension plan" (as
defined in Section 3(2) of ERISA), an ERISA Affiliate for the
benefit of any current or former employee, director or other
personnel (including any such plan, contract, policy or
arrangement approved or adopted before, but effective on or
after, the date of this Agreement): (i) any "employee benefit
plan," as such term is defined in Section 3(3) of ERISA,
whether or not subject to the provisions of ERISA; (ii) any
personnel policy; and (iii) any other employment, consulting,
collective bargaining, stock option, stock bonus, stock
purchase, phantom stock, incentive, bonus, deferred
compensation, retirement, severance, vacation, dependent care,
employee assistance, fringe benefit, medical, dental, sick
leave, death benefit, golden parachute or other compensatory
plan, contract, policy or arrangement which is not an employee
benefit plan as defined in Section 3(3) of ERISA (each such
plan, contract, policy and arrangement being herein referred
to as an "Employee Plan").
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<PAGE> 31
(b) With respect to each Employee Plan, Seller has
delivered to Purchaser true and complete copies of (i) each
contract, plan document, policy statement, summary plan
description and other written material governing or describing
the Employee Plan and/or any related funding arrangements
(including, without limitation, any related trust agreement or
insurance company contract) or, if there are no such written
materials, a summary description of the Employee Plan; and
(ii), where applicable, (1) the last two annual reports (5500
series) filed with the IRS or the Department of Labor; (2) the
most recent balance sheet and financial statement; (3) the
most recent actuarial report or valuation statement; (4) the
most recent determination letter issued by the IRS, as well as
any other determination letter, private letter ruling, opinion
letter or prohibited transaction exemption issued by the IRS
or the Department of Labor within the last six years and any
application therefor which is currently pending; and (5) the
last PBGC-1 filed with the PBGC.
(c) Each Employee Plan (which, for the purpose of
this subsection (c), includes any Employee Plan which, within
six years prior to the date hereof, was sponsored, maintained,
contributed to or binding upon the Company or an ERISA
Affiliate) has been maintained and administered in all
respects in accordance with its terms and in compliance with
the provisions of applicable law, including, without
limitation, applicable disclosure, reporting, funding and
fiduciary requirements imposed by ERISA and/or the Code. All
contributions, insurance premiums, benefits and other payments
required to be made to or under each Employee Plan have been
made timely and in accordance with the governing documents and
applicable law. With respect to each Employee Plan, (i) no
application, proceeding or other matter is pending before the
IRS, the Department of Labor, the PBGC or any other
governmental agency; (ii) no action, suit, proceeding or claim
(other than routine claims for benefits) is pending or
threatened; and (iii) to the Knowledge of Seller, no facts
exist which could give rise to an action, suit, proceeding or
claim which, if asserted, could result in a liability or
expense to the Company or the plan assets.
(d) With respect to each Employee Plan which is an
"employee benefit plan" within the meaning of Section 3(3) of
ERISA or which is a "plan" within the meaning of Section
4975(e) of the Code, there has occurred no transaction which
is prohibited by Section 406 of ERISA or which constitutes a
"prohibited transaction" under Section 4975(c) of the Code and
with respect to which a prohibited transaction exemption has
not been granted and is not currently in effect.
(e) The Disclosure Schedule identifies each funded
Employee Plan which is an employee pension plan within the
meaning of Section 3(2) of ERISA (other than a multiemployer
plan within the meaning of Section 3(37) of ERISA). With
respect to each such Employee Plan, (i) the Employee Plan is a
qualified plan under Section 401(a) or 403(a) of the Code, and
its related trust is exempt from Federal income taxation
25
<PAGE> 32
under Section 501(a) of the Code; (ii) a favorable IRS
determination letter is currently in effect and, since the
date of the last determination letter, the Employee Plan has
not been amended or operated in a manner which would adversely
affect its qualified status and no event has occurred which
has caused or could cause the loss of such status; (iii) there
has been no termination or partial termination within the
meaning of Section 411(d)(3) of the Code; (iv) with respect to
each such Employee Plan which is covered by Section 412 of the
Code, there has been no accumulated funding deficiency,
whether or not waived, within the meaning of Section 302(a)(2)
of ERISA or Section 412 of the Code, and there has been no
failure to make a required installment by its due date under
Section 412(m) of the Code; and (v) with respect to each such
Employee Plan which is covered by Title IV of ERISA, (1) no
reportable event within the meaning of Section 4043(b) of
ERISA and the regulations thereunder has occurred; (2) no
notice of intent to terminate the plan has been provided to
participants or filed with the PBGC under Section 4041 of
ERISA, nor has the PBGC instituted or threatened to institute
any proceeding under Section 4042 of ERISA to terminate the
plan; (3) no liability has been incurred under Title IV of
ERISA to the PBGC or otherwise (except for the payment of PBGC
premiums) and no event or set of conditions exists which would
subject the assets of the Company to a lien under Section 412
of the Code or under ERISA; and (4) in the case of a defined
benefit pension plan (including for this purpose any Employee
Plan which is described in Section 4(b)(4) of ERISA), the
value of the plan assets exceeds the total present value of
the plan's benefit liabilities on a plan termination Basis
based upon actuarial assumptions and asset valuation
principles applied by the PBGC (or applicable foreign law).
Neither the Company nor any ERISA Affiliate has ceased
operations at a facility so as to become subject to the
provisions of Section 4068(f) of ERISA, withdrawn as a
substantial employer so as to become subject to the provisions
of Section 4063 of ERISA or ceased making contributions to any
Employee Plan which is a pension plan subject to Section
4064(a) of ERISA.
(f) Each trust which is intended to be exempt from
federal income taxation pursuant to Section 501(c)(9) of the
Code has been identified as such on the Disclosure Schedule,
and each such trust satisfies the requirements of that Section
and is covered by a favorable IRS determination letter, and
neither the trust nor any related plan has been amended or
operated since the date of the most recent determination
letter in a manner which would adversely affect such exempt
status.
(g) No Employee Plan listed on the Disclosure
Schedule is a multiemployer plan within the meaning of Section
3(37) of ERISA. Neither the Company nor ERISA Affiliate is, or
within six years prior to the date hereof was, obligated to
contribute or otherwise a party to any such multiemployer
plan. Neither the Company nor any ERISA Affiliate has incurred
or expects to incur any withdrawal liability under Title IV of
ERISA (either as a contributing employer or as part of a
controlled
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group which includes a contributing employer) in connection
with a complete or partial withdrawal from a multiemployer
plan, and no ERISA Affiliate has received notice from any such
multiemployer plan that the plan is in reorganization or
insolvency pursuant to Sections 4241 or 4245 or ERISA or that
the plan is intended to terminate or has terminated under
Sections 4041A or 4042 of ERISA.
(h) The Company and its ERISA Affiliates have
complied in all respects with the provisions of Section
4980(B) of the Code with respect to any Employee Plan or
benefit arrangement which is a group health plan within the
meaning of Section 5001(b)(1) of the Code. Except as may be
required under Section 4980(B) of the Code or any similar
state law requiring continuous coverage with respect to health
plans, the Company does not maintain, contribute to, and is
not obligated under any plan, contract, policy or arrangement
providing health or death benefits (whether or not insured) to
current or former employees or other personnel beyond the
termination of their employment or other services. Except as
set forth in the Disclosure Schedule, each Employee Plan may
be unilaterally terminated and/or amended by the Company at
any time.
(i) The consummation of the transactions contemplated
by this Agreement will not (either alone or in conjunction
with another event, such as a termination of employment or
other services) entitle any employee or other person to
receive severance or other compensation which would not
otherwise be payable absent the consummation of the
transactions contemplated by this Agreement or cause the
acceleration of the time of payment or vesting of any award or
entitlement under any Employee Plan.
(j) The Disclosure Schedule sets forth a complete and
accurate list showing the names, the rate of compensation (and
the portions thereof attributable to salary and bonuses,
respectively) and location of all current officers of the
Company or any ERISA Affiliate and of all employees of or
consultants to the Company or any ERISA Affiliate that
received, for the year ended December 31, 1996, or are
expected to receive, during the year ending December 31, 1997,
annual base salary or other compensation in excess of $40,000
(or the equivalent thereof in foreign currency). There are no
covenants, agreements or restrictions to which the Company or
any ERISA Affiliate is a party, including but not limited to
employee non-compete agreements, prohibiting, limiting or in
any way restricting any officer or employee listed on the
Disclosure Schedule from engaging in any types of business
activity in any location. To the best Knowledge of the Company
and Seller, no officer or employee listed on the Disclosure
Schedule, and no group of the Company's or any ERISA
Affiliate's employees, has any plans to terminate their
employment. There has not been, and neither the Company nor
Seller anticipates, any adverse change in relations with
employees as a result of the announcement of the transactions
contemplated by this Agreement. Neither the Company nor any
ERISA Affiliate has instituted any "freeze"
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of, or delayed or deferred the grant of, any cost-of-living or
other salary adjustments for any of its employees.
(k) The Disclosure Schedule sets forth by number and
employment classification the approximate numbers of employees
employed by the Company and each ERISA Affiliate as of the
date of this Agreement, and, except as set forth therein, none
of said employees are subject to union or collective
bargaining agreements. There have been no audits of the equal
employment opportunity practices of the Company and, to the
best Knowledge of the Company and Seller, no Basis for such
claim exists. There is no unfair labor practice charge or
complaint against the Company pending before the National
Labor Relations Board or strike, dispute, slowdown or stoppage
pending or threatened against or involving the Company and
none has occurred since April 30, 1995. No representation
question exists respecting the employees of the Company and no
collective bargaining agreement is currently being negotiated
by the Company, nor is any grievance procedure or arbitration
proceeding pending under any collective bargaining agreement
and no claim therefor has been asserted. Neither Seller nor
the Company has received notice from any union or employees
setting forth demands for representation, elections or for
present or future changes in wages, terms of employment or
working conditions.
(l) The Disclosure Schedule sets forth all
outstanding loans and other advances (other than travel
advances in the ordinary course of business which do not
exceed $5,000 per individual) made by the Company to any of
its officers, directors, employees, stockholders or
consultants.
3.19 Insurance Policies. The Disclosure Schedule contains
a correct and complete description of all insurance policies of the
Company covering the Company and its business, employees, agents and
assets. Each such policy is in full force and effect and is, to the
best Knowledge of the Company and Seller, adequate in coverage and
amount to insure fully against risks to which the Company and its
employees, businesses, properties and other assets may be exposed in
the operation of their respective business. All retroactive premium
adjustments under any worker's compensation policy of the Company have
been recorded in the Financial Statements in accordance with generally
accepted accounting principles and are reflected in the Financial
Statements. All premiums with respect to such insurance policies have
been paid on a timely basis, and no notice of cancellation or
termination has been received with respect to any such policy. The
Company has not failed to give any notice or present any claim
thereunder in due and timely fashion. There are no pending claims
against such insurance by the Company as to which the insurers have
denied coverage or otherwise reserved rights. The Company has not been
refused any insurance with respect to assets or operations, nor has its
coverage been limited, by any insurance carrier to which it has applied
for any such insurance with which it has carried insurance since April
30, 1995.
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3.20 Records. The Company has records that accurately and
validly reflect its transactions and accounting controls sufficient to
insure that such transactions are (i) in all respects executed in
accordance with its management's general or specific authorization and
(ii) recorded in conformity with generally accepted accounting
principles.
3.21 No Illegal or Improper Transactions. Neither the
Company nor any of its officers, directors, employees, agents or
Affiliates has offered, paid or agreed to pay to any person or entity
(including any governmental official) or solicited, received or agreed
to receive from any such person or entity, directly or indirectly, any
money or anything of value for the purpose or with the intent of (i)
obtaining or maintaining business, (ii) facilitating the purchase or
sale of any product or service, or (iii) avoiding the imposition of any
fine or penalty, in any such case in any manner which is in violation
of any applicable ordinance, regulation or law; and there have been no
false or fictitious entries made in the books or records of the
Company.
3.22 Brokerage Fees. Neither the Company, Seller nor any
of their respective Affiliates has retained any financial advisor,
broker, agent or finder or paid or agreed to pay any financial advisor,
broker, agent or finder on account of this Agreement or any transaction
contemplated hereby or any transaction of like nature that would be
required to be paid by the Company.
3.23 No Product Liabilities; Product Warranties.
(a) The Company has not incurred, nor does the
Company or Seller know of or have any reason to believe there
is any Basis for alleging, any liability, damage, loss, cost
or expense as a result of any defect or other deficiency
("Product Liability") with respect to any service rendered by
the Company, whether such Product Liability is incurred by
reason of any express or implied warranty (including, without
limitation, any warranty of merchantability or fitness), any
doctrine of common law (tort, contract or other), any
statutory provision or otherwise and irrespective of whether
such Product Liability is covered by insurance.
(b) Seller has furnished Purchaser with the standard
forms of warranties or guarantees of the Company's services
that are in effect or proposed to be used by it, which forms
contain all warranties and guarantees given by the Company to
its customers with respect to their services, except for those
warranties imposed by law. There are no pending or, to the
best Knowledge of the Company and Seller, threatened claims
under any warranty or guaranty against the Company. The
Disclosure Schedule lists all payments or settlements made in
respect of any such warranty or guaranty (including without
limitation any returns or allowances) in excess of $10,000
since April 30, 1995, indicating the name of each customer,
the amount of each payment and a brief description of the
facts relating thereto.
3.24 Suppliers and Customers.
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(a) The Disclosure Schedule lists (i) all suppliers
of the Company to which the Company made payments greater than
$5,000 during the year ended April 30, 1997, or expect to make
payments during the year ending April 30, 1998, and (ii) all
customers maintaining charge accounts with the Company or that
have purchased trailers from the Company that paid the Company
greater than $5,000 during the year ended April 30, 1997 or
that the Company expects will pay to the Company during the
year ending April 30, 1998.
(b) Neither the Company nor Seller has any
information which would currently indicate that any of the
suppliers of the Company listed on the Disclosure Schedule
intend to cease selling to or dealing with the Company nor has
any information been brought to its attention which currently
leads it to believe any such supplier intends to alter in any
respect the amount of such sales or the extent of dealings
with the Company or would alter in any respect such sales or
dealings in the event of the consummation of the Acquisition.
The Company has no information which might reasonably
indicate, nor has any information been brought to its
attention which might reasonably lead it to believe that, (i)
any supplier will not be able to fulfill outstanding or
currently anticipated purchase orders placed by the Company
which, individually or in the aggregate, exceed $10,000, or
(ii) any customer will cancel outstanding or currently
anticipated purchase orders placed with the Company which,
individually or in the aggregate, exceed $10,000.
(c) Neither the Company nor, to the best Knowledge of
the Company and Seller, any of their respective officers,
directors or Affiliates, nor any relative or spouse (or
relative of such spouse) of any such officer, director or
Affiliate, nor any entity controlled by one of more of the
foregoing:
(i) owns, directly or indirectly, any
interest in (excepting less than 1% stock holdings
for investment purposes in securities of publicly
held and traded companies), or is an officer,
director, employee or consultant of, any Person which
is, or is engaged in business as, a competitor,
lessor, lessee, supplier, distributor, sales agent,
customer or client of the Company;
(ii) owns, directly or indirectly, in whole
or in part, any tangible or intangible property that
the Company uses in the conduct of business; or
(iii) has any cause of action or other claim
whatsoever against, or owes any amount to, the
Company, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued
benefits under employee benefit plans, and similar
matters and agreements existing on the date hereof.
3.25 Intellectual Properties.
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(a) Schedule 3.25 includes a true, complete and
accurate list of all Intellectual Property held or owned by
the Company or in which the Company has any interest and is
all the Intellectual Property necessary for use in the
Company's businesses as presently conducted. Except as
completely and accurately set forth on Schedule 3.25, the
Company owns or has the perpetual right to use, without
payment to or interference from any person, all Intellectual
Property identified in Schedule 3.25, such Intellectual
Property being valid, enforceable and in good standing. The
Company does not know, and has received no notice of any claim
or infringement or interference or other conflict with the
asserted rights of others with respect to any Intellectual
Property.
(b) The Company owns or has the right to use all
inventions (whether or not patentable), all proprietary rights
and all business information (including, without limitation,
ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications,
customer/subscriber lists, supplier lists, pricing and cost
information and business and marketing plans and proposals)
(collectively, "Trade Secrets") necessary for the operation of
the business or operations of the Company as presently
conducted and as proposed to be conducted, free and clear of
all Security Interests and no Trade Secret has been challenged
or misappropriated in any way or to the best Knowledge of
Seller and the Company, has any proceeding been threatened
with respect thereto and none of the subject matter of any
such Trade Secret has been misappropriated or is alleged to
have been misappropriated from any person.
(c) Each item of Intellectual Property owned or used
by the Company immediately prior to the Closing hereunder will
be owned or available for use by the Company on identical
terms and conditions immediately subsequent to the Closing
hereunder. The Company has taken all necessary and desirable
action to maintain and protect each item of Intellectual
Property that it owns or uses.
3.26 Licenses. The Company has all licenses, permits and
other governmental certificates, authorizations and approvals required
by every Federal, state, local and foreign Governmental Entity for the
conduct of its business and the use of its properties as presently
conducted or used including, without limitation, all licenses required
under Environmental Laws and any Federal, state, local or foreign law
relating to public health and safety, or employee health and safety
(collectively, "Company Licenses"). The Disclosure Schedule contains a
true and complete list of the Company Licenses, exclusive of any
Company Licenses with respect to state or local sales, use or other
Taxes. All of the Company Licenses are in full force and effect and no
action or claim is pending nor, to the best Knowledge of the Company
and Seller, is threatened to revoke or terminate any Company License or
declare any Company License invalid in any respect. The Company has
taken all necessary action to maintain such Company Licenses. The
Disclosure Schedule contains a true and complete
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list of all Federal, state, local and foreign governmental or judicial
consents, orders, decrees and other compliance agreements relating to
the Company or any of its assets or business under which the Company is
operating or bound.
3.27 Restrictive Documents and Territorial Restrictions.
The Company is not subject to, or a party to, any charter, by-law,
mortgage, Security Interest, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment
or decree, or any other restriction of any kind or character, which
adversely affects the business, prospects, operations or condition
(financial or otherwise) of the Company or any of its assets or
property, or which would prevent consummation of the transactions
contemplated hereby, or the continued operation of the Company's
business after the date hereof on substantially the same basis as
heretofore operated or which would restrict the ability of the Company
to acquire any property or conduct business in any area.
3.28 No Misleading Statements. This Agreement, the
information and schedules referred to herein and the information that
has been furnished to Purchaser in connection with the transactions
contemplated hereby do not include any untrue statement of a material
fact and do not omit to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact known to
the Company or Seller which adversely affects or in the future may (so
far as the Company or Seller can now reasonably foresee) adversely
affect the business, condition (financial or otherwise), property or
assets of the Company which has not been set forth herein.
4. Additional Representations and Warranties Relating to Seller.
Seller represents and warrants to Purchaser and Rush that the
statements contained in this Article 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article 4), except as set forth in the Seller
Disclosure Schedule attached hereto. Nothing in the Seller Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Seller Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Seller Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article 4.
4.1 Due Authorization. Seller has full power and
authority to execute and deliver this Agreement and to perform her
obligations hereunder and thereunder. Seller has duly executed this
Agreement, and this Agreement is, and each other agreement contemplated
hereby to which she will be a party will be, upon execution and
delivery thereof by her, her legal, valid and binding
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obligation, enforceable against her in accordance with its terms
(except as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditors' rights
generally or by general principles of equity, regardless of whether
such enforceability is considered in equity or at law).
4.2 No Conflict. Neither Seller's execution and delivery
of this Agreement nor the consummation of the transactions contemplated
hereby or thereby by her will (i) conflict with, result in a breach or
violation of or constitute (or with notice or lapse of time or both
constitute) a default under any law, statute, regulation, order,
judgment or decree or any instrument, contract or other agreement to
which she is a party or by which she (or any of her assets or
properties) is bound; or (ii) require her to obtain any authorization,
consent, approval or waiver from, to give notification to, or to make
any filing with, any Governmental Entity or Regulatory Authority, or to
obtain the approval or consent of any other Person.
4.3 Stock. Seller has full right, power and authority to
sell, transfer, assign and deliver the Company Stock being sold by her
hereunder. Immediately prior to the delivery of the shares of Company
Stock being sold by her, she was the sole registered and beneficial
owner of such shares of Company Stock and had good and valid title to
such shares of Company Stock, free and clear of all Security Interests,
rights or claims of others, restrictions on transfer or other
encumbrances (other than restrictions on transfer imposed by the
Securities Act and state securities laws) and, upon consummation of the
transactions contemplated hereby, assuming that Purchaser purchases
such shares of Company Stock in good faith without notice of any
adverse claims as defined in Section 8.302 of the Uniform Commercial
Code as in effect in the State of Texas on the date hereof, Purchaser
will have acquired all the rights of Seller in such shares of Company
Stock free of any adverse claim, any lien in favor of the Company or
restrictions on transfer (other than restrictions on transfer imposed
by the Securities Act and state securities laws). There are no
outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights or agreements or instruments or
understandings of any character to which Seller is a party or by which
Seller is bound, obligating Seller to issue, deliver or sell, or cause
to be issued, delivered or sold, contingently or otherwise, any shares
of Company Stock owned by Seller or any securities or obligations
convertible into or exchangeable for such shares or to grant, extend or
enter into any such option, warrant, convertible security, call, right,
commitment, preemptive right or agreement. Seller is not a party to any
voting trust agreements or other contracts, agreements, arrangements,
commitments, plans or understandings restricting or otherwise relating
to voting, dividend or other rights with respect to the Company Stock
owned by her. The Company Stock is the separate property of Seller and
neither Bobby Hawkins nor any other Persons have any community property
or other interest in such Company Stock.
4.4 Brokers. Seller has not paid or become obligated to
pay any fee or commission to any broker, finder, investment banker or
other intermediary in connection with the transactions contemplated by
this Agreement.
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5. Representations and Warranties of Purchaser.
Purchaser represents and warrants to Seller that the statements
contained in this Article 5 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article 5), except as set forth in Purchaser
Disclosure Schedule attached hereto. Nothing in Purchaser Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Purchaser Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). The Purchaser Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Article 5.
5.1 Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to own or
lease its properties and carry on its business as presently conducted.
Purchaser is licensed or qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the
character of its business or the nature of its properties makes such
qualification or licensing necessary.
5.2 Due Authorization. Purchaser has all requisite
corporate power and authority to execute and deliver this Agreement and
to perform fully its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by Purchaser, the performance
by Purchaser of its obligations hereunder and thereunder, and the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Purchaser.
This Agreement has been duly executed by Purchaser, and this Agreement
is a legal, valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms (except as the
enforceability thereof may be limited by any applicable bankruptcy,
insolvency or other laws affecting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability
is considered in equity or at law).
5.3 No Conflict. Neither the execution and delivery of
this Agreement by Purchaser nor the consummation of the transactions
contemplated hereby or thereby by Purchaser will (i) conflict with,
result in a breach or violation of or constitute (or with notice or
lapse of time or both constitute) a default under, (A) the certificate
of incorporation or by-laws of Purchaser, or (B) any law, statute,
regulation, order, judgment or decree or any instrument, contract or
other agreement to which Purchaser is a party or by which it (or any of
its properties or assets) is subject or bound; (ii) result in the
creation of, or give any party the right to create, any Security
Interest or other adverse interest upon any property or asset of
Purchaser; (iii) terminate or modify, or give any third party the right
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<PAGE> 41
to terminate or modify, the provisions or terms of any agreement or
commitment to which Purchaser is a party or by which it (or any of its
properties or assets) is subject or bound; or (iv) require Purchaser to
obtain any authorization, consent, approval or waiver from, to give
notification to, or to make any filing (other than filing to qualify as
a foreign corporation where necessary) with, any Governmental Entity or
Regulatory Authority, or to obtain the approval or consent of any other
Person.
5.4 Brokers. Neither Purchaser nor any of its Affiliates
has paid or become obligated to pay any fee or commission to any
broker, finder, investment banker or other intermediary in connection
with the transactions contemplated by this Agreement.
5.5 Securities Act. Purchaser represents and warrants to
Seller that the Company Stock is being acquired solely for its own
account for investment and not with a view to, or for offer or resale
in connection with, a distribution thereof within the meaning of the
Securities Act.
6. Pre-closing Covenants.
The Parties agree as follows, except as otherwise described on the
Disclosure Schedule, with respect to the period between the execution of this
Agreement and the Closing:
6.1 General. Each of the Parties will use her or its
reasonable best efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in
Article 8 below).
6.2 Notices and Consents. Each of the Parties, as
promptly as practicable, (i) will make, or cause to be made, all
filings and submissions required under laws, rules and regulations
applicable to it, or to its Subsidiaries and Affiliates, as may be
required for it to consummate the transactions contemplated hereby;
(ii) will use their respective reasonable efforts to obtain, or cause
to be obtained, all authorizations, approvals, consents and waivers
from all Persons, Governmental Entities and Regulatory Authorities
necessary to be obtained by each of them, or any of their respective
Subsidiaries or Affiliates, in order for each of them, respectively, so
to consummate such transactions; and (iii) will use their respective
best efforts to take, or cause to be taken, all other actions
necessary, proper or advisable in order for each of them to fulfill
their respective obligations hereunder.
6.3 Operation of Business. The Company will not, and
Seller will not cause or permit the Company to engage in any practice,
take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing,
the Company will not, and Seller will not cause or permit the Company
to, (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock, except as provided in
Section
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3.10(v), or redeem, purchase or otherwise acquire any of its capital
stock, (ii) take any action or omit to take any action which act or
omission would result in the inaccuracy of any of its representations
and warranties set forth herein if such representations or warranties
were to be made immediately after the occurrence of such act or
omission, or (iii) otherwise engage in any practice, take any action or
enter into any transaction of the sort described in Section 3.10 above.
6.4 Preservation of Business. The Company and Seller
will, and Seller will cause the Company to, (a) keep its business and
properties substantially intact, including its present operations,
physical facilities, working conditions and relationships with lessors,
licensors, suppliers, customers and employees and (b) comply in all
respects with all laws, ordinances, rules, regulations and orders
applicable to its business.
6.5 Full Access. The Company and Seller will, and Seller
will cause the Company to, permit representatives of Purchaser and its
financing parties, upon not less than 24 hours notice to Seller, to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company to all
premises, properties, personnel, books, records (including Tax records
and the workpapers of the independent accountants for the Company,
contracts and documents of or pertaining to the Company).
6.6 Notice of Developments. Each Party will give prompt
written notice to the others of any adverse development causing a
breach of any of her or its own representations and warranties in
Articles 3, 4 or 5 above. No disclosure by any Party pursuant to this
Section 6.6, however, shall be deemed to amend or supplement the
Disclosure Schedule, the Seller Disclosure Schedule or the Purchaser
Disclosure Schedule or to prevent or cure any misrepresentation, breach
of warranty or breach of covenant.
6.7 Updated Financial Statements. As soon as available
and in any event within 30 days after the end of each month prior to
the Closing Date, commencing with January 31, 1998, Seller shall
deliver to Purchaser a consolidated balance sheet and related statement
of operations and cash flows of the Company. All such financial
statements shall be covered by and conform to the representations and
warranties set forth in Section 3.7 hereof and shall be included in the
term "Financial Statements" for purposes of this Agreement.
6.8 Exclusivity.
(a) Seller will not, and will not cause or permit any
of the Company to, (i) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating
to a Business Combination or (ii) participate in any
discussions or negotiations regarding, furnish any information
with respect to, assist or participate in, or facilitate in
any other manner any effort or attempt by any Person to do or
seek a Business Combination. Seller will notify Purchaser
immediately if any
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Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(b) The Parties hereto recognize and acknowledge that
a breach by Seller of this Section 6.8 will cause irreparable
and material loss and damage to Purchaser as to which it will
not have an adequate remedy at law or in damages. Accordingly,
each Party acknowledges and agrees that the issuance of an
injunction or other equitable remedy is an appropriate remedy
for any such breach. In addition, in the event of any breach
of the foregoing which results in Business Combination with a
Person other than Purchaser within 12 months of the date of
such breach, Seller shall promptly reimburse Purchaser for the
reasonable expenses incurred by Purchaser in connection with
the transactions contemplated by this Agreement.
6.9 Environmental Inspections and Assessments. Purchaser
shall have the right to inspect the records and the operations of the
Company with respect to environmental matters, and shall have the right
to require the Company to conduct Phase I assessments, as it deems
appropriate. The Company shall pay the cost of such Phase I
assessments. The representations, warranties, indemnities and other
undertakings set forth herein shall not be affected by any such
inspection or assessment or lack thereof, or the results of any such
inspection or assessment.
6.10 Schedules. From time to time prior to the Closing,
Seller and the Company will promptly supplement or amend the Disclosure
Schedule with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule. No
supplement or amendment of the Disclosure Schedule made pursuant to
this Section shall be deemed to cure any breach of, affect or otherwise
diminish any representation or warranty made in this Agreement unless
Purchaser specifically agrees thereto in writing.
6.11 Inventory Audit. Within thirty (30) days prior to
Closing, Seller and Purchaser shall mutually agree on an appraiser
knowledgeable in the farm and ranch business, and shall cause such
appraiser to conduct an audit (in accordance with generally accepted
accounting principles, consistently applied) of the inventory of the
Company's assets as of the Closing Date. Each of the Company and
Purchaser shall pay one-half of the cost of conducting such audit.
6.12 Company Information. The Company and Seller shall
provide to Purchaser all financial information of the Company in the
format required in connection with the filing of financial information
of the Company with Purchaser's Current Report on Form 8-K under the
Exchange Act required in connection with Purchaser's acquisition of the
Business. Once such information has been provided to Purchaser, the
expense of preparation of such Form 8-K shall be borne entirely by
Purchaser.
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7. Post-closing Covenants.
The Parties agree as follows with respect to the period following the
Closing:
7.1 General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of
this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole
cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefor under Article 9 below). Seller
acknowledges and agrees that from and after the Closing Purchaser will
be entitled to possession of all documents, books, records (including
Tax records), agreements, and financial data of any sort relating to
the Company. Purchaser will afford to Seller reasonable access to, and
copies of, the records of the Company transferred to Purchaser at the
Closing during normal business hours after the Closing.
7.2 Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand
in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure
to act or transaction on or prior to the Closing Date involving the
Company, each of the other Parties will cooperate with her or it and
her or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled
to indemnification therefor under Article 9 below).
7.3 Transition. Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier or other business associate of any of the
Company from maintaining the same business relationships with the
Company after the Closing as it maintained with the Company prior to
the Closing. Seller will refer all customer inquiries relating to the
businesses of the Company to Purchaser from and after the Closing.
7.4 Confidentiality. Seller recognizes and acknowledges
that she has and will have access to certain Confidential Information
of the Company that, after the consummation of the transactions
contemplated hereby, will be valuable, special and unique property of
Purchaser. Seller agrees that she will, and will cause her Affiliates
and representatives, to keep confidential and not disclose to any other
Person or use for her own benefit or for the benefit of any other
Person, and she will use her best efforts to prevent disclosure by any
other Person of, any such Confidential Information to any Person for
any purpose or reason whatsoever, except to authorized representatives
of Purchaser; provided, however, such limitation shall not apply to any
information which (i) is then generally known to the public; (ii)
become or becomes generally known to the
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public through no fault of Seller, her Affiliates or representatives;
and (iii) is disclosed in accordance with an order of a court of
competent jurisdiction or applicable law. In the event of a breach or a
threatened breach by Seller of any of the provisions contained in this
Section 7.4 of this Agreement, Seller acknowledges that Purchaser and
Rush will suffer irreparable damage or injury not fully compensable by
money damages, or the exact amount of which may be impossible to
obtain, and, therefore, will not have an adequate remedy available at
law. Accordingly, Purchaser and Rush shall be entitled to obtain such
injunctive relief or other equitable remedy, without the necessity of
posting bond therefor, from any court of competent jurisdiction as may
be necessary or appropriate to prevent or curtail any such breach,
threatened or actual. The foregoing shall be in addition to and without
prejudice to any other rights that the Purchaser and Rush may have
under this Agreement, at law or in equity, including, without
limitation, the right to sue for damages.
7.5 Tax Matters. The following provisions shall govern
the allocation of responsibility as between Purchaser and Seller for
certain tax matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date.
Seller shall prepare or cause to be prepared and file or cause
to be filed all Tax Returns for the Company for all periods
ending on or prior to the Closing Date which are filed after
the Closing Date. Seller shall permit Purchaser to review and
comment on each such Tax Return described in the preceding
sentence prior to filing. Seller shall reimburse Purchaser for
Taxes of the Company with respect to such periods within
fifteen (15) days after payment by Purchaser or the Company of
such Taxes to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Closing
Date Balance Sheet.
(b) Tax Periods Beginning Before and Ending After the
Closing Date. Purchaser shall prepare or cause to be prepared
and file or cause to be filed any Tax Returns of the Company
for Tax periods which begin before the Closing Date and end
after the Closing Date. Seller shall pay to Purchaser within
fifteen (15) days after the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such
Taxes which relates to the portion of such Taxable period
ending on the Closing Date to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of
the Closing Date Balance Sheet. For purposes of this clause
(b), in the case of any Taxes that are imposed on a periodic
basis and are payable for a Taxable period that includes (but
does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such Taxable period ending on
the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed
to be the amount of such Tax for the entire Taxable period
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multiplied by a fraction, the numerator of which is the number
of days in the Taxable period ending on the Closing Date, and
the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or
related to income or receipts be deemed equal to the amount
which would be payable if the relevant Taxable period ended on
the Closing Date. Any credits relating to a Taxable period
that begins before and ends after the Closing Date shall be
taken into account as though the relevant Taxable period ended
on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Company.
(c) Cooperation on Tax Matters.
(i) Purchaser, the Company and Seller shall
cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the
provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder. The Company and Seller agree (A) to retain
all books and records with respect to Tax matters pertinent to
the Company relating to any Taxable period beginning before
the Closing Date until the expiration of the Taxable period
beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by
Purchaser or Seller, any extensions thereof) of the respective
Taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and
records and, if the other party so requests, the Company or
Seller, as the case may be, shall allow the other party to
take possession of such books and records.
(ii) Purchaser and Seller further agree,
upon request, to use their reasonable best efforts to obtain
any certificate or other document from any Governmental Entity
or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated
hereby).
(iii) Purchaser and Seller further agree,
upon request, to provide the other party with all information
that either party may be required to report pursuant to
Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(d) Certain Taxes. All transfer, documentary,
sales, use, stamp, registration and other such Taxes and fees
(including any penalties and
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interest) incurred in connection with this Agreement, shall be
paid by Seller when due, and Seller will, at its expense, file
all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees.
(e) Name. Seller will not use any name or
trademark containing the phrase "D&D" or any derivative
thereof.
8. Conditions to Obligation to Close.
8.1 Conditions to Obligation of Purchaser. The obligation
of Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) all representations and warranties of the Company
and Seller contained in this Agreement (including the
Schedules hereto), and all written information delivered to
Purchaser by the Company and Seller on or prior to the Closing
Date pursuant to this Agreement, (i) that are qualified as to
materiality shall be true in all respects on and as of the
Closing Date and (ii) that are not qualified as to materiality
shall be true in all material respects on and as of the
Closing Date, with the same force and effect as though such
representations and warranties were made, and such written
information was delivered, on and as of the Closing Date;
(b) the Company and Seller shall have performed and
complied with all of its or her covenants hereunder in all
material respects through the Closing;
(c) there shall have been no Material Adverse Change
in the Company from April 30, 1997 to the Closing Date not
consented to by Purchaser in writing;
(d) the Company shall have procured all of the third
party consents required in connection with the consummation of
the transactions contemplated hereby;
(e) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would
(i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affect adversely the right of
Purchaser to own the Company Stock and to control the Company,
(iv) affect adversely the right of the Company to own its
assets and to operate its businesses, (v) require or could
reasonably be expected to require any divestiture by the
Company of a portion of its business that Purchaser in its
reasonable judgment believes will have a Material Adverse
Effect on the Company or (vi) imposes any condition upon the
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Company that in Purchaser's reasonable judgment (x) would be
materially burdensome to the Company or (y) would materially
increase the costs incurred or that will be incurred by
Purchaser as a result of consummating the Acquisition and the
other transactions contemplated hereby (and no such
injunction, judgment, order, decree, ruling or charge shall be
in effect);
(f) Seller shall have delivered to Purchaser a
certificate to the effect that (i) each of the conditions
specified above in Section 8.1(a) through (e) is satisfied in
all respects;
(g) the Parties shall have received all
authorizations, consents, and approvals of any Governmental
Entity or Regulatory Authority required in connection with the
consummation of the transactions contemplated hereby;
(h) Seller shall have delivered to Purchaser an MAI
appraisal, dated as of a date within two months prior to the
Closing Date, concluding that the orderly liquidation value of
the Real Property is not less than $1,500,000 (Purchaser shall
provide a list of prospective MAI appraisers to Seller from
which list Seller shall choose the appraiser who shall conduct
the appraisal and the Company shall pay the costs of such
appraisal);
(i) Purchaser shall have received the resignations,
effective as of the Closing, of each director and officer of
the Company other than those whom Purchaser shall have
specified in writing at least five Business Days prior to the
Closing;
(j) all actions, proceedings, instruments and
documents required or incidental to carrying out this
Agreement and all other related legal matters shall have been
approved by counsel to Purchaser;
(k) the board of directors of Purchaser and Rush, in
its sole discretion, shall have approved this Agreement and
the consummation by Purchaser and Rush of the transactions
contemplated hereby;
(l) Purchaser is satisfied with the results of its
continuing business, legal, and accounting due diligence
regarding the Company;
(m) the Company and Seller shall have provided to
Purchaser all financial information of the Company in the
format required in connection with the filing of financial
information of the Company with Purchaser's Current Report on
Form 8-K under the Exchange Act required in connection with
Purchaser's acquisition of the Business; provided, however,
Purchaser shall pay for the preparation of the Form 8-K at its
own expense;
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(n) the inventory audit contemplated by Section 6.11
shall have been completed and the results thereof shall be
satisfactory to Purchaser;
(o) Bobby Hawkins shall have entered into the
Non-Competition and Confidentiality Agreement attached hereto
as Schedule 8.1(o)(1), and the Consent Agreement attached
hereto as Schedule 8.1(o)(2);
(p) Purchaser shall have had issued to it upon terms
satisfactory to Purchaser a five-year term life insurance
policy on each of the lives of Seller and Bobby Hawkins in the
amount of $5.0 million and $1.0 million, respectively; and
(q) all actions to be taken by Seller in connection
with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to Purchaser.
Purchaser may waive any condition specified in this Section 8.1 if it
executes a writing so stating at or prior to the Closing.
8.2 Conditions to Obligation of Seller. The obligation of
Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) all representations and warranties of Purchaser
contained in this Agreement, and all written information
delivered to Seller by Purchaser on or prior to the Closing
Date pursuant to this Agreement, (i) that are qualified as to
materiality shall be true in all respects on and as of the
Closing Date and (ii) that are not qualified as to materiality
shall be true in all material respects on and as of the
Closing Date, with the same force and effect as though such
representations and warranties were made, and such written
information was delivered, on and as of the Closing Date;
(b) Purchaser shall have performed and complied with
all of its covenants hereunder in all material respects
through the Closing;
(c) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would
(A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment,
order, decree, ruling or charge shall be in effect);
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(d) Purchaser shall have delivered to Seller a
certificate to the effect that each of the conditions
specified above in Section 8.2(a) through (c) is satisfied in
all respects;
(e) the Parties shall have received all other
authorizations, consents and approvals of any Governmental
Entity or Regulatory Authority required in connection with the
consummation of the transactions contemplated hereby;
(f) Purchaser shall not have elected to reduce the
value of the inventory of the Company as reflected on the
Closing Date Balance Sheet by greater than $150,000;
(g) the inventory audit contemplated by Section 6.11
shall have been completed and the results thereof shall be
satisfactory to Seller;
(h) all actions to be taken by Purchaser in
connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance
to Seller; and
(i) Rush shall execute and deliver to each of Bobby
Hawkins and Seller an option (the "Option") in the form of
Exhibits 8.2A and 8.2B.
Seller may waive any condition specified in this Section 8.2 if they execute a
writing so stating at or prior to the Closing.
9. Indemnity by Seller.
9.1 Survival of Representations and Warranties. All of
the representations and warranties contained in this Agreement shall
survive the Closing hereunder (even if the other Party knew or had
reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of
three years thereafter, regardless of any investigation made by Rush,
Purchaser or Seller or on their behalf, except as to any matters with
respect to which a bona fide written claim shall have been made or an
action at law or in equity shall have commenced before such date, in
which event survival shall continue (but only with respect to, and to
the extent of, such claim) until the final resolution of such claim or
action, including all applicable periods for appeal; provided, however,
that the representations and warranties relating to (i) environmental
matters and ERISA shall survive and remain in full force and effect for
the periods equal to the applicable statutes of limitation relating
thereto and (ii) Taxes shall survive and remain in full force and
effect until the latest to occur of (x) three years from the date of
the last filing of a Tax Return covering all Taxes relating to all
periods prior to the Closing Date, (y) the expiration of the applicable
statute of limitations, or (z) six months following the ultimate
disposition of any claim with respect to any
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Taxes; and provided further that the representations set forth in
Sections 3.3 and 4.3 shall survive and remain in full force and effect
forever.
9.2 Indemnification Provisions for Benefit of the
Purchaser and Rush.
(a) In the event the Company or Seller breaches (or
in the event any third party alleges facts that, if true,
would mean the Company or Seller has breached) any of their
representations, warranties and covenants contained herein,
and, if there is any applicable survival period pursuant to
Section 9.1 above, provided that the Purchaser makes a written
claim for indemnification against Seller within such survival
period, then Seller agrees to indemnify the Purchaser and Rush
from and against the entirety of any Adverse Consequences the
Purchaser, the Company or Rush may suffer through and after
the date of the claim for indemnification (including any
Adverse Consequences the Purchaser, the Company or Rush may
suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of
or caused by the breach (or the alleged breach); provided,
however, that Seller shall not have any obligation to
indemnify the Purchaser or Rush from and against any Adverse
Consequences resulting from, arising out of, relating to, in
the nature of or caused by the breach (or alleged breach) of
any representation or warranty of the Company or Seller until
Rush, Purchaser or the Company have, in the aggregate,
suffered Adverse Consequences by reason of all such breaches
(or alleged breaches) in excess of $25,000, and then for all
such Adverse Consequences, and provided further that Seller's
maximum liability hereunder shall not exceed the Purchase
Price. Notwithstanding anything herein to the contrary, the
$25,000 and $10.5 million limitations shall not apply to any
Adverse Consequences resulting from breaches of the
representations and warranties contained in Sections 3.3 and
4.3 hereof.
(b) Seller agrees to indemnify the Purchaser and Rush
from and against the entirety of any Adverse Consequences the
Purchaser, Rush or the Company may suffer resulting from,
arising out of, relating to, in the nature of or caused by any
Liability of any of Seller, the Company, the Purchaser and
Rush (w) for any Taxes of the Company with respect to any Tax
year or portion thereof ending on or before the Closing Date
(or for any Tax year beginning before and ending after the
Closing Date to the extent allocable (determined in a manner
consistent with Section 7.5) to the portion of such period
beginning before and ending on the Closing Date), to the
extent such Taxes are not reflected in the reserve for Tax
Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) shown on the face of the Closing Date Balance Sheet,
(x) for the unpaid Taxes of any Person (other than the
Company) under Treas. Reg. ss. 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise, (y) for the legal
proceedings listed on the Disclosure Schedule or any legal
proceedings (whether or not disclosed on the Disclosure
Schedule) commenced after the Closing Date but in which the
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principal event(s) giving rise thereto occurred prior to the
Closing, or (z) for any Environmental Liabilities.
9.3 Indemnification Provisions for Benefit of the Seller.
In the event the Purchaser breaches (or in the event any third party
alleges facts that, if true, would mean the Purchaser has breached) any
of its representations, warranties and covenants contained herein, and,
if there is an applicable survival period pursuant to Section 9.1
above, provided that the Seller makes a written claim for
indemnification against the Purchaser within such survival period, then
the Purchaser agrees to indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Seller may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the
nature of or caused by the breach (or alleged breach); provided,
however, that Purchaser shall not have any obligation to indemnify the
Seller from and against any Adverse Consequences resulting from,
arising out of, relating to, in the nature of or caused by the breach
(or alleged breach) of any representation or warranty of the Purchaser
until the Seller has, in the aggregate, suffered Adverse Consequences
by reason of all such breaches (or alleged breaches) in excess of
$25,000, and then for all such Adverse Consequences up to and including
the $25,000, and provided further that Purchaser's maximum liability
hereunder shall not exceed the Purchase Price.
9.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD
PARTY CLAIM") which may give rise to a claim for
indemnification against any other Party (the "INDEMNIFYING
PARTY") under this Article 9, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(b) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim
with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within fifteen (15)
days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of or caused by the
Third Party Claim, (ii) the Indemnifying Party provides the
Indemnified Party with the evidence reasonably acceptable to
the Indemnified Party that the Indemnifying Party will have
the financial resources to defend against the Third Party
Claim and fulfill its indemnification obligations hereunder,
(iii) the Third Party Claim involves only money damages and
does not seek an injunction or other
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equitable relief, (iv) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with
Section 9.4(b) above, (i) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the Prior written consent of the
Indemnifying Party (not to be withheld, delayed or conditioned
unreasonably), and (iii) the Indemnifying Party will not
consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be
withheld, delayed or conditioned unreasonably).
(d) In the event any of the conditions in Section
9.4(b) above is or becomes unsatisfied, however, (i) the
Indemnified Party may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with,
or obtain any consent from, any Indemnifying Party in
connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for
the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii)
the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent
provided in this Article 9.
9.5 Determination of Adverse Consequences. All
indemnification payments under this Article 9 shall be deemed
adjustments to the Purchase Price.
9.6 Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation
of, any statutory, equitable or common law remedy any Party may have
for breach of representation, warranty or covenant. Seller hereby
agrees that she will not make any claim for indemnification against the
Company by reason of the fact that she was a stockholder, director,
officer, employee or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer,
employee or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise and whether such claim is
pursuant to any statute, charter document, bylaw, agreement or
otherwise) with respect to any action, suit, proceeding, complaint,
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claim or demand brought by the Purchaser against such Seller (whether
such action, suit, proceeding, complaint, claim, or demand is pursuant
to this Agreement, applicable law or otherwise).
9.7 INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE. THE
INDEMNIFICATION PROVIDED IN THIS ARTICLE 9 SHALL BE APPLICABLE WHETHER
OR NOT THE SOLE OR CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF THE
PARTY SEEKING INDEMNIFICATION, OR THE SOLE OR CONCURRENT STRICT
LIABILITY IMPOSED ON THE PARTY SEEKING INDEMNIFICATION, OR THE SOLE OR
CONCURRENT LIABILITY IMPOSED VICARIOUSLY ON THE PARTY SEEKING
INDEMNIFICATION, IS ALLEGED OR PROVEN.
9.8 Releases.
(a) As of the Closing, Seller does hereby for such
Seller and such Seller's Affiliates, heirs, executors,
administrators and legal representatives remise, release,
acquit and forever discharge the Company and its Affiliates,
officers, directors, controlling Persons or entities,
employees, attorneys and successors and assigns (collectively,
the "Company Released Parties") of and from any and all
claims, demands, liabilities, responsibilities, disputes,
causes of action and obligations of every nature whatsoever,
liquidated or unliquidated, known or unknown, matured or
unmatured, fixed or contingent, which such Seller and such
Seller's Affiliates now have, own or hold or have at any time
previously had, owned or held against the Company Released
Parties, including without limitation all liabilities created
as a result of the sole or contributory negligence, gross
negligence and willful acts of any Company Released Party,
existing as of the Closing or relating to any matter that
occurred on or prior to the Closing; provided, however, that
any claims, liabilities, debts or causes of action that may
arise in connection with the failure of any of the parties
hereto to perform any of their obligations hereunder or under
any other agreement relating to the transactions contemplated
hereby or from any breaches by any of them of any
representations or warranties herein or in connection with any
of such other agreements shall not be released or discharged
pursuant to this Agreement. Seller represents and warrants
that such Seller has not previously assigned or transferred,
or purported to assign or transfer, to any Person or entity
whatsoever all or any part of the claims, demands,
liabilities, responsibilities, disputes, causes of action or
obligations released in this Section 9.8(a). Seller covenants
and agrees that such Seller will not assign or transfer to any
Person or entity whatsoever all or any part of the claims,
demands, liabilities, responsibilities, disputes, causes of
action or obligations released in this Section 9.8(a). Each of
Seller and Purchaser represent and warrant to the other that
they have been represented or advised by legal counsel and
other professional advisors in connection with the negotiation
and delivery of this Agreement.
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(b) As of the Closing, the Company does hereby for
such Company remise, release, acquit and forever discharge
Seller and Seller's Affiliates, heirs, executors,
administrators and legal representatives (collectively, the
"Seller Released Parties") of and from any and all claims,
demands, liabilities, responsibilities, disputes, causes of
action and obligations of every nature whatsoever, liquidated
or unliquidated, known or unknown, matured or unmatured, fixed
or contingent, which such Company now have, own or hold or
have at any time previously had, owned or held against the
Seller Released Parties, including without limitation all
liabilities created as a result of the sole or contributory
negligence, gross negligence and willful acts of any Seller
Released Party, existing as of the Closing or relating to any
matter that occurred on or prior to the Closing; provided,
however, that any claims, liabilities, debts or causes of
action that may arise in connection with the failure of any of
the parties hereto to perform any of their obligations
hereunder or under any other agreement relating to the
transactions contemplated hereby or from any breaches by any
of them of any representations or warranties herein or in
connection with any of such other agreements shall not be
released or discharged pursuant to this Agreement. The Company
covenants and agrees that after the Closing Date the Company
will not assign or transfer to any Person or entity whatsoever
all or any part of the claims, demands, liabilities,
responsibilities, disputes, causes of action or obligations
released in this Section 9.8(b). Seller represents and
warrants that neither Seller nor Seller Released Parties are
indebted to the Company as of the Closing Date and that
neither Seller nor Seller Released Parties will owe any amount
to the Company that will be reflected as an asset on the
Closing Date Balance Sheet.
10. Offset Provisions. Notwithstanding any other provisions of
this Agreement, in the event Seller becomes obligated to pay sums to Purchaser,
Rush or any party entitled to indemnification under this Agreement or any of the
documents or agreements referenced herein or contemplated hereby (whether as a
result of indemnity, breach of contract or otherwise), Purchaser shall be
entitled to, and shall have the right to, reduce and offset payments due under
the Promissory Note in such amount or amounts as Purchaser (and Rush and any
Indemnified Party that is not promptly paid by Seller) is entitled to receive
from Seller, and any such offset shall be deemed to be a payment under the
Promissory Note.
11. Termination.
11.1 Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(a) Purchaser and Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(b) Purchaser may terminate this Agreement by giving
written notice to Seller on or before the Closing Date if
Purchaser is not satisfied
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with the results of its continuing business, legal, and
accounting due diligence regarding the Company;
(c) Purchaser may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing (i)
in the event the Company or Seller has breached any
representation, warranty or covenant contained in this
Agreement in any material respect, Purchaser has notified
Seller of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach or
(ii) if the Closing shall not have occurred on or before April
30, 1998, by reason of the failure of any condition precedent
under Section 8.1 hereof (unless the failure results primarily
from Purchaser itself breaching any representation, warranty
or covenant contained in this Agreement); and
(d) Seller may terminate this Agreement by giving
written notice to Purchaser at any time prior to the Closing
(i) in the event the Purchase has breached any representation,
warranty or covenant contained in this Agreement in any
material respect, Seller has notified Purchaser of the breach,
and the breach has continued without cure for a period of 30
days after the notice of breach or (ii) if the Closing shall
not have occurred on or before April 30, 1998, by reason of
the failure of any condition precedent under Section 8.2
hereof (unless the failure results primarily from the Company
or Seller themselves breaching any representation, warranty or
covenant contained in this Agreement).
11.2 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 11.1 above, all rights and obligations of
the Parties hereunder shall terminate without any Liability of any
Party to any other Party (except for any Liability of any Party then in
breach).
12. Requirements of Securities Laws.
12.1 Accredited Investors. Seller recognizes that the
Option Stock is not being registered under the Securities Act in
reliance upon an exemption from the Securities Act which is predicated,
in part, on the representations and agreements of Seller set forth in
this Agreement. Seller represents and warrants to Purchaser and Rush
that she is an "accredited investor" as that term is defined in Rule
501(a) of the Securities Act and that the Option Stock is being
acquired solely for her own account for investment and not with a view
to, or for offer or resale in connection with, a distribution thereof
within the meaning of the Securities Act. Seller understands that the
effect of such representation and warranty is that the Option Stock
must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available at
the time for any proposed sale or other transfer thereof. Seller also
understands that neither Purchaser nor Rush is under any obligation to
file a registration statement under the Securities Act covering the
Option Stock or to take any other action to enable Seller to transfer
or otherwise dispose of the Option Stock. Seller represents that she
has consulted with counsel in regard to the Securities Act and that she
is fully familiar with the circumstances under
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which she is required to hold the Option Stock and the limitations upon
the transfer or other disposition thereof. Seller acknowledges that
Purchaser and Rush are relying upon the truth and accuracy of the
foregoing representations and warranties in issuing the Option Stock
under the Securities Act. Seller agrees to indemnify and hold Purchaser
and Rush harmless against all liabilities, costs and expenses,
including reasonable attorneys' fees, incurred by either Purchaser or
Rush as a result of any sale, transfer or other disposition by him of
all or any part of the Option Stock in violation of the Securities Act.
12.2 Legend. The certificates representing the Option
Stock shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
12.3 SEC Documents. Seller acknowledges that she has been
furnished by Rush with (a) a copy of the Annual Report on Form 10-K of
Purchaser for the fiscal year ended December 31, 1996, in the form
filed with the SEC, and (b) copies of all filings since December 31,
1996, by Purchaser with the SEC in compliance with Section 13 or 14 of
the Exchange Act. Seller represents that she has reviewed the foregoing
documents and acknowledge that she has been afforded the opportunity to
obtain any additional information necessary to verify the accuracy of
the information contained in the foregoing documents, including the
opportunity to ask questions of, and receive answers from, officers and
representatives of Rush concerning Rush and the terms and conditions of
the transactions contemplated by this Agreement.
13. Non-Competition Agreement.
13.1 Non-Competition. In consideration of the benefits of
this Agreement to the Seller and as a material inducement to Purchaser
and Rush to enter into this Agreement and pay the Purchase Price,
Seller hereby covenants and agrees that, commencing on the Closing Date
and ending on the later of (i) five years from the Closing Date, or
(ii) three years following the date Seller ceases to be employed by
Purchaser or an Affiliate of Purchaser, regardless of how such
cessation of employment may be brought about; she shall not, and the
Seller will cause her Affiliates and representatives not to, directly
or indirectly, as proprietor, partner, stockholder, director,
executive, officer, employee, consultant, joint venturer, investor or
in any other capacity, engage in, or own, manage, operate or control,
or participate in the ownership, management, operation or control, of
any entity which engages anywhere in the States of California, Arizona,
New Mexico, Texas, Oklahoma, Louisiana, Arkansas, Tennessee,
Mississippi, Alabama, Georgia or Florida, in any business activity in
which the Company participates or participated as of the Closing
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Date; provided, however, the foregoing shall not prohibit the Seller
and her representatives from purchasing and holding as an investment
not more than 1% of any class of publicly-traded securities of any
entity which conducts a business in competition with the business of
the Company, so long as Seller, her Affiliates and representatives do
not participate in any way in the management, operation or control of
such entity.
13.2 Judicial Reformation. Seller acknowledges that, given
the nature of the Purchaser's business, the covenants contained in
Section 13.1 establish reasonable limitations as to time, geographic
area and scope of activity to be restrained and do not impose a greater
restraint than is reasonably necessary to protect and preserve the
goodwill of Purchaser's and Rush's business and to protect their
legitimate business interests. If, however, Section 13.1 is determined
by any court of competent jurisdiction to be unenforceable by reason of
its extending for too long a period of time or over too large a
geographic area or by reason of it being too extensive in any other
respect or for any other reason, it will be interpreted to extend only
over the longest period of time for which it may be enforceable and/or
over the largest geographic area as to which it may be enforceable
and/or to the maximum extent in all other aspects as to which it may be
enforceable, all as determined by such court.
13.3 Customer Lists; Non-Solicitation. Seller hereby
further covenants and agrees that she shall not, and Seller will cause
her Affiliates and representatives not to, directly or indirectly, for
a period commencing on the Closing Date and ending on the later of (i)
five years from the Closing Date, or (ii) three years following the
date Seller ceases to be employed by Purchaser or an Affiliate of
Purchaser, the Company or Rush (a) use or make known to any person or
entity the names or addresses of any clients or customers of the
Company or Purchaser or Rush or any other information pertaining to
them; provided, however, such limitation shall not apply to any
information which (i) is then generally known to the public; (ii)
become or becomes generally known to the public through no fault of
Seller, her Affiliates or representatives; and (iii) is disclosed in
accordance with an order of a court of competent jurisdiction or
applicable law, (b) call on, solicit, or attempt to call on or solicit
any clients or customers of the Company or Purchaser or Rush, (c)
solicit for employment, recruit, hire or attempt to recruit or hire any
employees of the Company or Purchaser or Rush, nor (d) become the
employee or consultant of or otherwise render services to, or own any
interest in, any enterprise that directly or indirectly competes with
the business engaged in by the Company as of the Closing Date.
13.4 Covenants Independent. The covenants of the Seller
contained in Sections 13.1, 13.2 and 13.3 of this Agreement will be
construed as independent of any other provision in this Agreement, and
the existence of any claim or cause of action by Seller against
Purchaser or Rush will not constitute a defense to the enforcement by
Purchaser or Rush of said provisions. Seller understands that the
provisions contained in Sections 13.1, 13.2 and 13.3 are essential
elements of the transactions contemplated by this Agreement and, but
for the agreement of Seller to Sections 13.1, 13.2 and 13.3, Purchaser
and Rush would not have
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agreed to enter into this Agreement and the transactions contemplated
herein. Seller has been advised to consult with counsel in order to be
informed in all respects concerning the reasonableness and propriety of
Sections 13.1, 13.2 and 13.3 with specific regard to the nature of the
business conducted by the Company and Purchaser and Rush and Seller
acknowledges that Sections 13.1, 13.2 and 13.3 are reasonable in all
respects.
13.5 Remedies. In the event of a breach or a threatened
breach by either Seller of any of the provisions contained in Sections
13.1, 13.2 or 13.3 of this Agreement, Seller acknowledges that
Purchaser and Rush will suffer irreparable damage or injury not fully
compensable by money damages, or the exact amount of which may be
impossible to obtain, and, therefore, will not have an adequate remedy
available at law. Accordingly, Purchaser and Rush shall be entitled to
obtain such injunctive relief or other equitable remedy, without the
necessity of posting bond therefor, from any court of competent
jurisdiction as may be necessary or appropriate to prevent or curtail
any such breach, threatened or actual. The foregoing shall be in
addition to and without equity, including, without limitation, the
right to sue for damages.
13.6 Exceptions. Notwithstanding the foregoing provisions
of Article 13, Seller shall be entitled at all times from and after the
Closing to (i) have membership in, hold office in and perform services
on behalf of any trade association or similar organization, (ii)
collect any accounts receivable transferred to Seller pursuant to
Section 2.3(e), (iii) sell any inventory transferred to Seller pursuant
to Section 2.3(a), (iv) solicit for employment and employ members of
the immediate family of Seller, and (v) utilize the services of Susan
Hubbert in a capacity not in competition with the Company's business so
long as such utilization does not materially interfere with Ms.
Hubbert's performance of services as an employee of the Company.
14. Survey.
14.1 Survey. Within 20 days from and after the date
hereof, The Company agrees, and Seller agrees to cause the Company to,
at the Company's sole cost and expense, (a) to cause a registered,
licensed state surveyor approved by Purchaser and the Title Company to
prepare a new or updated on the ground survey or surveys of the Real
Property (whether one or more, the "Survey"), and (b) to deliver to
Purchaser at least three copies, to Purchaser's counsel at least one
copy, and to the Title Company at least one copy of each Survey plat
and a certificate under the seal of the surveyor, which Survey shall be
made in accordance with the "Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys" jointly adopted by the American Land
Title Association and the American Congress on Surveying and Mapping in
1992, including items 1, 2, 3, 4, 6, 7, 8, 9, 10, 11 and 13 thereof.
The survey shall also include the surveyor's registered number and
seal, the date of the Survey, and the following narrative certificate:
"The undersigned does hereby certify that (i) this
survey was this day made upon the ground of the
property reflected hereon, for the
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benefit of and reliance by Rush Enterprises, Inc., Rush Retail
Centers, Inc. and Alamo Title Company, (ii) the description
contained hereon is correct, (iii) the Real Property has
separate access to and from a dedicated roadway as shown
hereon, (iv) except as shown hereon, there are no
discrepancies, conflicts, shortages in area, encroachments,
improvements, overlapping of improvements, set-back lines,
easements or roadways, (v) the gross and net areas (both
acreage and square footage) of the Real Property shown hereon
are correct, and (vi) the area of the Real Property is shown,
if any, which lies within the one hundred year (100) year
plain or any area having special flood hazards as designated
by the U.S. Army Corps of Engineers, the Federal Emergency
Management Agency, or any other government agency."
The Survey shall be in form and substance acceptable to the
Title Company as a basis for deleting to the maximum extent permitted
by applicable title insurance regulations (at the Company's expense)
the standard printed exceptions from the Owner Policy of Title
Insurance to be delivered by Seller as hereinabove provided. The terms
"net acreage" and "net square footage" as used herein shall mean the
number of acres and square feet determined by the Surveyor to be equal
to (a) the total acreage and square footage within the Real Property
less (b) the number of total acres and square feet contained within any
land lying within any easement or right-of-way or other such matter as
described in Subsections (iv), (v) and (vi) above, and contained within
any land lying within the 100 year flood plain. Without in any way
limiting the foregoing, the surveyor shall provide separate written
field note descriptions for the Real Property.
14.2 Remedies for Failure to Deliver Survey. In the event
Seller does not cause the Survey to be delivered within such 20-day
period, then and thereafter, Purchaser shall have the option to (a)
procure the Survey, at the expense of Seller (and Seller shall
reimburse Purchaser immediately upon demand for all amounts incurred or
expended in procuring the same, and in the event Seller does not so
reimburse Purchaser, Purchaser may deduct such amounts from the Cash
Consideration on the Closing Date), or (b) waive the Survey
requirements and proceed to close the sale contemplated by this
Agreement.
15. Title Commitment and Condition of Title.
15.1 Title Commitment. Within ten days from and after the
date hereof, at the Company's sole cost and expense, Seller agrees to
cause the Company to, and the Company agrees to cause the Title Company
to furnish Purchaser and its counsel a Commitment for Owner Policy of
Title Insurance (the "Title Commitment") prepared and issued by the
Title Company describing and covering the Real Property, listing the
Company as the prospective named insured and showing as the policy
amount an amount equal to the value of the Real Property as determined
by the appraisal to be conducted pursuant to Section 8 hereof. The
Title Commitment shall constitute the commitment of the
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Title Company to insure, by title insurance in the standard form
promulgated by the Board of Insurance of the State of Texas, The
Company's title to the Real Property to be good and indefeasible and
subject to the standard printed exceptions except as modified below,
but deleting (at the Company's expense) to the maximum extent permitted
by applicable title insurance regulations the standard printed form
survey exception from the Owner Policy of Title Insurance as
hereinabove provided. The standard exception as to the lien for taxes
shall be limited to the year of Closing, and shall be endorsed "Not Yet
Due and Payable." The Title Commitment shall contain no exception for
"visible and apparent easements" or for "public or private roads" or
the like. The Title Commitment shall contain no exception for "rights
of parties in possession".
15.2 UCC Reports. Within ten days from and after the date
hereof, Seller shall cause the Company to, and the Company shall, at
the Company's sole cost and expense, furnish to Purchaser a report (the
"UCC Report") of searches made of the Uniform Commercial Code Records
of Guadalupe County, Texas, of the Official Public Records of Real
Property of Guadalupe County, Texas, and of the Office of the Secretary
of State, State of Texas, or the proper offices in the State of Texas
where Uniform Commercial Code records are maintained, which searches
shall show that none of the Company's assets are subject to any lien or
security interest (other than liens and security interests which are
not objected to by Purchaser). An update of the searches (dated no more
than two days prior to the Closing Date, but delivered prior to the
Closing Date) shall be provided by Seller to Purchaser at the Company's
sole cost and expense.
15.3 Disclosure of Exceptions by Title Commitment and UCC
Report. Purchaser shall have a period of 20 days from the last to be
delivered to Purchaser and its counsel of each of the Survey, UCC
Report, Title Commitment and the documents referred to therein as
conditions or exceptions to title to the Real Property in which to
review such items and to deliver to Seller in writing such objections
as Purchaser may have to anything contained or set forth in the Survey,
UCC Report, Title Commitment or title exception documents. Any items to
which Purchaser does not object within such period shall be deemed to
be permitted exceptions hereunder ("Permitted Exceptions"). In the
event Purchaser timely objects to any matter contained in the Survey,
UCC Report, Title Commitment or title exception documents, Seller shall
have a reasonable time, not to exceed twenty five days from the date
such objections are made known in writing to Seller, to cure such
objections. Any curative actions shall be completed and all curative
materials shall be filed by Seller, at the Company's sole cost and
expense, within such 25-day period. If Seller cannot cure the
objections within such twenty-five day period, Purchaser shall have the
option to (a) cancel this Agreement, in which event the parties shall
have no further obligations hereunder; (b) if the matters to which
Purchaser has objected can be cured for $25,000 or less, to cure and
deduct the cost of such cure from the Cash Consideration; or (c) waive
the objections, and proceed to close the transaction contemplated
hereby. In the event, however, that a lien indebtedness against any of
the Company's Assets (including past due taxes) is disclosed by the
Title Commitment or the UCC Report, then Seller shall (y) discharge
such lien
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indebtedness prior to the Closing, or (z) authorize the Title Company
to discharge such lien indebtedness at the Closing out of the Cash
Consideration, and all costs incurred in connection with discharging
such lien indebtedness shall not count against the $25,000 amount
referenced in clause (b) of the immediately preceding sentence.
16. Environmental Studies and Remediation Activities.
16.1 Environmental Studies. Seller shall cause the Company
to, and the Company shall, at the Company's cost and expense, undertake
or is undertaking a Phase I environmental site assessment ("ESA") with
respect to the Real Property utilizing the party designated by
Purchaser. Within 20 days after the date hereof, Seller shall provide
to Purchaser, at the Company's sole cost and expense, copies of (a) all
existing ESAs (whether Phase I, Phase II or otherwise) covering all or
any portion of the Real Property, to the extent the same are in
Seller's or the Company's possession or Seller or the Company have
access to them, and (b) any other environmental studies, reports and
information, including, without limitation, correspondence from
Governmental Authorities, concerning the environmental condition of the
Real Property, to the extent the same are in Seller's or the Company's
possession or Seller or the Company have access to them (all of the
foregoing information, whether obtained by Purchaser or provided by
Seller, being hereinafter referred to as "Environmental Information").
Without in any way limiting the provisions of the preceding sentence,
Purchaser and its contractors and representatives, at Purchaser's
expense, shall have at least 60 days from the date hereof, but in no
event less than 20 days from receipt of the Environmental Information
(the "Feasibility Period") within which to conduct any and all
engineering, environmental and economic feasibility studies and tests
of the Real Property which Purchaser, in Purchaser's sole discretion,
deems necessary to determine whether the Real Property is
environmentally, engineeringly and economically suitable for
Purchaser's intended use. Each of Seller and Company have granted and
hereby grant to Purchaser and its contractors and representatives
access to the Real Property for the purpose of performing such studies
or tests. Such persons shall conduct their studies and tests in such a
manner as to minimize interference with the Company's business, and,
upon completion of their activities on the Real Property, shall restore
the Real Property as nearly as is reasonably possible to the condition
it was in immediately prior to such activities.
16.2 Remediation. In the event that any of the
Environmental Information or any studies or tests performed or
commissioned by Purchaser indicate the existence of any Environmental
Conditions on the Real Property, then Seller shall have a period of 30
days after notification thereof in which to remediate or otherwise cure
the same in accordance with all applicable Governmental Requirements.
In the event that an Environmental Condition exists or is discovered on
the Real Property and Seller fails or refuses to remediate or otherwise
cure or have cured such Environmental Condition within the required
30-day period, or in the event such Environmental Condition is not
capable of being remediated or otherwise cured within such 30-day
period, then Purchaser shall have the following options: (a) cancel
this Agreement by written
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notice thereof given to Seller prior to the Closing Date, in which
event the parties hereto shall have no further obligations hereunder or
(b) if the Environmental Condition can be remediated or cured for
$25,000 or less, to remediate or cure and deduct the cost of such cure
from the Cash Consideration.
16.3 No Waiver. It is expressly understood and agreed by
Purchaser and Seller that nothing in this Article 16 shall in any way
operate as a waiver of or limitation on the environmental
indemnification obligations of Seller set forth in this Agreement, and
such indemnification obligations shall apply without regard to whether
(a) any Environmental Conditions are disclosed as existing on reports
performed or commissioned by Seller, the Company or Purchaser, (b) any
environmental remediation or curative actions are undertaken by
Purchaser, the Company or Seller hereunder, or (c) Purchaser elects to
waive remediation or other curative actions with respect to
Environmental Conditions on the Real Property and to proceed to
Closing.
17. Miscellaneous.
17.1 Damage to Assets. If, on or before the Closing Date,
the assets or properties of the Company are damaged or destroyed,
Seller will immediately notify Purchaser of such damage or destruction.
In the event of any such damage or destruction, Purchaser shall have
the right, in its sole discretion, to either (i) reduce the Purchase
Price by an amount equal to the difference between the insurance
proceeds and the value of the damaged or destroyed asset or assets, and
complete the purchase, or (ii) terminate this Agreement as provided by
Section 11.1 hereof and not complete the purchase.
17.2 Expenses. Whether or not the transactions
contemplated hereby are consummated, each of the Parties will pay all
costs and expenses of its performance of and compliance with this
Agreement.
17.3 Further Actions. From time to time, at the request of
any Party hereto, the other parties hereto shall execute and deliver
such instruments and take such action as may be reasonably requested to
evidence the transactions contemplated hereby.
17.4 Dispute Resolution. Except for the provisions of
Articles 7.4, 9 and 13 of this Agreement dealing with restrictive
covenants and non-disclosure of confidential information and other
disputes with respect to which the remedy of injunctive relief is
sought as provided for in this Agreement, with respect to which
Purchaser and Rush expressly reserve the right to immediately and
without any negotiation or mediation as provided herein, petition a
court directly for injunctive and other relief, the parties agree that
each will attempt to resolve through negotiation any dispute, claim or
controversy arising out of or relating to this Agreement prior to
proceeding to arbitration as provided herein. Either party may initiate
this agreement prior to filing for arbitration as provided herein.
Either party may initiate negotiations by providing written notice in
letter form to the other party, setting forth the subject of the
dispute and the relief requested. The recipient of such notice will
respond in writing within five
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days with a statement of its position on and recommended solution to
the dispute. If the dispute is not resolved by this exchange of
correspondence, then representatives of each party with full settlement
authority will meet at a mutually agreeable time and place within ten
days of the date of the initial notice in order to exchange relevant
information and perspectives, and to attempt to resolve the dispute. If
the dispute is not resolved by these negotiations, the matter will be
submitted to a J.A.M.S., or its successor, for mediation. If the matter
is not resolved by such mediation within 30 days of the initiation of
negotiations, then either party may proceed with arbitration in
accordance with this Agreement.
Except for the provisions of Articles 7.4, 9 and 13 of this Agreement
dealing with restrictive covenants and non-disclosure of confidential
information and other disputes with respect to which the remedy of
injunctive relief is sought as provided for in this Agreement, with
respect to which Purchaser and Rush expressly reserve the right to
petition a court directly for injunctive and other relief, any
controversy of any nature whatsoever, including, but not limited to,
tort claims or contract disputes, between the parties to this Agreement
or their respective heirs, executors, administrators, legal
representatives, successors and assigns, as applicable, arising out of
or related to this Agreement, including the implementation,
applicability and interpretation thereof, shall, upon the written
request of one party served upon the other, be submitted to and settled
by arbitration in accordance with the provisions of the Federal
Arbitration Act, 9 U.S.C. ss. ss. 1-15, as amended. The terms of the
commercial arbitration rules of the American Arbitration Association
(the "AAA") shall apply except to the extent they conflict with the
provisions of this paragraph. If the amount in controversy in the
arbitration exceeds Two Hundred Fifty Thousand Dollars ($250,000),
exclusive of interest, attorneys' fees and costs, the arbitration shall
be conducted by a single independent arbitrator. The parties shall
endeavor to select independent arbitrators by mutual agreement. If such
agreement cannot be reached within 30 calendar days after a dispute has
arisen which is to be decided by arbitration, the selection of the
arbitrator(s) shall be made in accordance with Rule 13 of the Rules as
presently in effect. If three arbitrators are selected, the arbitrators
shall elect a chairperson to preside at all meetings and hearings. If a
dispute is to be resolved by a sole arbitrator in accordance with the
terms hereof, or if the dispute is to be resolved by a panel of three
arbitrators as provided hereinabove, then each such arbitrator shall be
a member of a state bar engaged in the practice of law in the United
States or a retired member of a state or the federal judiciary in the
United States. The award of the arbitrator(s) shall require a majority
of the arbitrators in the case of a panel of arbitrators, shall be
based on the evidence admitted and the substantive law of the State of
Texas and shall contain an award for each issue and counterclaim. The
award shall be made 30 days following the close of the final hearing
and the filing of any post-hearing briefs authorized by the
arbitrator(s). The award of the arbitrator(s) shall be final and
binding on the parties hereto. Each party shall be entitled to inspect
and obtain a copy of non-privileged relevant documents in the
possession or control of the other party. All such discovery shall be
in accordance with procedures approved by the arbitrator(s). Unless
otherwise provided in the award, each party shall bear its own costs of
discovery.
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Each party shall be entitled to take one deposition. Each party shall
be entitled to submit one set of interrogatories which require no more
than 30 answers. All discovery shall be expedited, consistent with the
nature and complexity of the claim or dispute and consistent with
fairness and justice. The arbitrator(s) shall have the power to compel
any party to comply with discovery requests of the other parties and to
issue binding orders relating to any discovery dispute which shall be
enforceable in the same manner as awards. The arbitrator(s) also shall
have the power to impose sanctions for abuse or frustration of the
arbitration process, including, without limitation, the refusal to
comply with orders of the arbitrator(s) relating to discovery and
compliance with subpoenas. Each Seller, Purchaser and Rush hereby
irrevocably waives and releases any right to recover such damages in
excess of those damages authorized by this Section 17.4. The
arbitrator(s) may require the non-prevailing party to pay the
prevailing party's attorneys' fees and costs incurred in connection
with the arbitration. It is further agreed that any of the parties
hereto may petition the United States District Court for the Western
District of Texas, San Antonio Division, for a judgment to be entered
upon any award entered through such arbitration proceedings.
17.5 Effect of Due Diligence. No investigation by or on
behalf of Purchaser into the business, operations, prospects, assets or
condition (financial or otherwise) of the Company shall diminish in any
way the effect of any representations or warranties made by Seller and
the Company in this Agreement or shall relieve Seller or the Company of
any of its obligations under this Agreement.
17.6 Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement relating
to the subject matter of this Agreement prior to the Closing without
the prior written approval of Purchaser and Seller; provided, however,
that any Party may make any public disclosure it believes in good faith
is required by applicable law (in which case the disclosing Party will
use its reasonable best efforts to advise the other Parties prior to
making the disclosure).
17.7 No Third Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
17.8 Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among
the Parties and supersedes any prior understandings, agreements or
representations by or among the Parties, written or oral, to the extent
they related in any way to the subject matter hereof, including without
limitation that certain letter agreement dated November 10, 1997.
17.9 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party may assign
either this Agreement or any of her or its rights, interests, or
obligations hereunder without the prior
59
<PAGE> 66
written approval of Purchaser and Seller; provided, however, that
Purchaser may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or
all of which cases Purchaser nonetheless shall remain responsible for
the performance of all of its obligations hereunder).
17.10 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all
of which together will constitute one and the same instrument.
17.11 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
17.12 Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim or other communication hereunder shall be deemed duly
given (a) on the date of delivery, if delivered to the persons
identified below, (b) two Business Days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Seller: Georgette Hawkins
P.O. Box 1837
Seguin, Texas 78155
Copy to: Duncan, Ulman, Weakley & Bressler, Inc.
603 Navarro Street, Suite 1000
South Texas Building
San Antonio, Texas 78205-1838
Attn: Edgar M. Duncan
If to Purchaser: Rush Enterprises, Inc.
P.O. Box 34630
San Antonio, Texas 78265
Attention: W. Marvin Rush and
Martin A. Naegelin, Jr.
Copy to: Fulbright & Jaworski L.L.P.
300 Convent, Suite 2200
San Antonio, Texas 78205
Attn: Phillip M. Renfro
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any
60
<PAGE> 67
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which
notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Parties notice in the manner
herein set forth.
17.13 Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of
Texas without giving effect to any choice or conflict of law provision
or rule (whether of the State of Texas or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than
the State of Texas.
17.14 Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing
and signed by Purchaser and Seller. No waiver by any Party of any
default, misrepresentation or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
17.15 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms
and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other
jurisdiction.
17.16 Expenses. Each of Purchaser and Seller will bear her
own costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby. Seller agrees that the Company
has not borne or will bear any of Seller's costs and expenses in
connection with this Agreement or any of the transactions contemplated
hereby, other than her attorneys' fees, the fees of her accountants,
the title policy, survey, environmental studies, inventory audit and
appraisal of the Real Property, which shall be paid by the Company as
provided in this Agreement.
17.17 Construction. The Parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and
no presumption or burden of proof shall arise favoring or disfavoring
any Party by virtue of the authorship of any of the provisions of this
Agreement. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without
limitation. The Parties intend that each representation, warranty and
covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists
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<PAGE> 68
another representation, warranty or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which
the Party has not breached shall not detract from or mitigate the fact
that the Party is in breach of the first representation, warranty or
covenant.
17.18 Incorporation of Exhibits, Annexes, and Schedules.
The Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
17.19 Specific Performance. Each of the Parties
acknowledges and agrees that the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that the other
Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter, in
addition to any other remedy to which they may be entitled, at law or
in equity.
62
<PAGE> 69
IN WITNESS WHEREOF, the undersigned have duly executed this
Stock Purchase Agreement as of the date set forth above.
RUSH RETAIL CENTERS, INC.
By:
----------------------------------
Title:
-------------------------------
RUSH ENTERPRISES, INC.
By:
----------------------------------
Title:
-------------------------------
D&D FARM & RANCH SUPERMARKET, INC.
By:
----------------------------------
Title:
-------------------------------
-------------------------------------
GEORGETTE HAWKINS
63
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSH ENTERPRISES, INC FOR THE THREE MONTHS ENDED MARCH
31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,984
<SECURITIES> 0
<RECEIVABLES> 25,870
<ALLOWANCES> 0
<INVENTORY> 88,206
<CURRENT-ASSETS> 132,383
<PP&E> 47,456
<DEPRECIATION> (7,852)
<TOTAL-ASSETS> 186,110
<CURRENT-LIABILITIES> 110,503
<BONDS> 30,858
0
0
<COMMON> 66
<OTHER-SE> 43,343
<TOTAL-LIABILITY-AND-EQUITY> 186,110
<SALES> 126,075
<TOTAL-REVENUES> 126,075
<CGS> 104,363
<TOTAL-COSTS> 122,549
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,298
<INCOME-PRETAX> 2,228
<INCOME-TAX> 891
<INCOME-CONTINUING> 1,337
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,337
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
