<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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.)
555 IH 35 SOUTH, NEW BRAUNFELS, TX 78130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (830) 626-5200
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
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 PERIODS 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
--- ---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. X
---
The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 23, 2000 was approximately $23,151,750, based upon
the last sales price on March 23, 2000 on the NASDAQ National Market for the
Company's common stock. The registrant had 7,002,044 shares of Common Stock
outstanding on March 23, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE
REGISTRANT'S 2000 ANNUAL MEETING OF SHAREHOLDERS, TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION NOT LATER THAN APRIL 30, 2000, ARE
INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-K.
<PAGE> 2
RUSH ENTERPRISES, INC.
INDEX TO FORM 10-K
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PAGE NO.
--------
PART I
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 25
Item 3. Legal Proceedings 25
Item 4. Submission of Matters to a Vote of Security Holders 25
PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters 26
Item 6. Selected Consolidated Financial and Operating Data 26
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations 29
Item 7a. Quantitative and Qualitative Disclosures about Market Risk 39
Item 8. Financial Statements and Supplementary Data 40
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 64
PART III
Item 10. Directors and Executive Officers of the Registrant 64
Item 11. Executive Compensation 64
Item 12. Security Ownership of Certain Beneficial Owners and Management 64
Item 13. Certain Relationships and Related Transactions 64
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 65
</TABLE>
2
<PAGE> 3
Certain statements contained in this Form 10-K are "forward-looking
statements" within the meaning of the Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Exchange Act of 1934, as amended.
Specifically, all statements other than statements of historical fact included
in this Form 10-K 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, one time events and other factors
described herein and in the Company's Registration Statement on Form S-1 (File
No. 333-03346) 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.
PART I
ITEM 1. BUSINESS
References herein to the "Company" or "Rush Enterprises" mean Rush
Enterprises, Inc., a Texas corporation, its subsidiaries and Associated
Acceptance, Inc., the insurance agency affiliated with the Company, unless the
context requires otherwise.
GENERAL
We are a full-service, integrated retailer of premium transportation and
construction equipment and related services. As the leading supplier of
Peterbilt trucks, we accounted for approximately 20.7% of all new Peterbilt
trucks sold in the United States in 1999. In 1997, we acquired our first John
Deere construction equipment dealership in Houston, Texas and have grown to
become a major supplier of John Deere construction equipment. Through our
strategically located networks of Rush Truck Centers and Rush Equipment Centers,
we provide one-stop service for the needs of our customers, including retail
sales of new and used transportation and construction equipment, as well as
after-market parts sales, service and repair facilities and financing,
leasing/rental, and insurance services.
3
<PAGE> 4
Our Rush Truck Centers are principally located in high traffic areas along
the southwestern corridor of the United States. Our Rush Equipment Centers are
located in two of the top six construction equipment sales markets in the United
States -- Texas and Michigan. We provide leasing and rental services through our
Rush Leasing and Rental Division at our one-stop Rush Truck Centers and Rush
Equipment Centers. Retail financing of trucks and construction equipment, as
well as a full line of insurance products, are arranged through our Rush
Financial and Insurance Division. Our Rush Retail Division has developed the
one-stop shopping strategy for our farm and ranch supply business.
Our business strategy, based upon providing the customer with competitively
priced products supported with timely and reliable service, has enabled us since
1996 to increase revenues at a compounded annual growth rate of 33.0% and to
increase earnings at a compounded annual growth rate of 37.5%. We intend to
continue to implement our business strategy, reinforce customer loyalty and
remain a market leader by continuing to develop our Rush Truck Centers and Rush
Equipment Centers as we extend our geographic focus through strategic
acquisitions of new locations and expansions of our existing facilities.
All of our business operations are currently conducted through five
separate divisions: the Rush Truck Center Division, the Rush Equipment Center
Division, the Rush Leasing and Rental Division, the Rush Financial and Insurance
Division and the Rush Retail Division.
Rush Truck Center Division. Since commencing operations as a
Peterbilt heavy-duty truck dealer over 34 years ago, we have grown to
operate Rush Truck Centers at 36 locations which primarily sell
Peterbilt Class 8 heavy-duty trucks in the states of Texas, Colorado,
Oklahoma, California, Louisiana, Arizona and New Mexico. Our Rush
Truck Centers are strategically located to take advantage of increased
cross-border traffic between the United States and Mexico resulting
from implementation of NAFTA in 1994. During 1999, our Rush Truck
Center Division accounted for approximately $662.5 million, or
approximately 82.0%, of our total revenues.
Rush Equipment Center Division. Since commencing operations as a
John Deere dealer in 1997, we have grown to operate seven Rush
Equipment Centers located in Texas and Michigan. We provide a full
line of construction equipment for light to medium sized applications,
with our primary products including John Deere backhoe loaders,
hydraulic excavators, crawler dozers and four wheel drive loaders.
During 1999, our Rush Equipment Center Division accounted for
approximately $82.7 million, or approximately 10.2%, of our total
revenues.
Rush Leasing and Rental Division. We provide a broad line of
product selections for lease or rent, including Class 8, Class 7 and
Class 6 Peterbilt trucks, a full array of John Deere construction
equipment products, including a variety of construction equipment
trailers and heavy-duty cranes. Our lease and rental fleets are
offered
4
<PAGE> 5
primarily through our Rush Truck Centers and Rush Equipment Centers on
a daily, monthly or long-term basis. During 1999, our Rush Leasing and
Rental Division accounted for approximately $31.0 million, or
approximately 3.8%, of our total revenues.
Rush Financial and Insurance Division. We offer third-party
financing to assist customers in purchasing a new or used truck or
piece of construction equipment. Additionally, we sell a complete line
of property and casualty insurance, including collision and liability
insurance on trucks, cargo insurance, standard automobile liability
coverages, and life insurance. During 1999, our Rush Financial and
Insurance Division accounted for approximately $13.6 million, or
approximately 1.7%, of our total revenues. Finance and insurance
revenues have limited direct costs and, therefore, contribute a
disproportionate share of operating profits.
Rush Retail Division. During 1998, we created the Rush Retail
Division in connection with our acquisition of D&D Farm and Ranch
Supermarket, Inc. ("D&D"). D&D is a one-stop shopping center for farm
and ranch supplies, serving the greater San Antonio, Texas area. We
anticipate opening a second D&D store in Houston, Texas in the second
quarter of 2000. During 1999, our Rush Retail Division accounted for
approximately $18.6 million, or approximately 2.3%, of our total
revenues.
We were founded and incorporated in 1965 in Texas and our three senior
executives jointly have 63 years of experience in the industry. We currently
conduct business through 19 subsidiaries, all of which are wholly-owned,
directly or indirectly, by us. Our principal offices are at 555 IH 35 South, New
Braunfels, Texas, 78130.
INDUSTRY OVERVIEW
We currently operate in two principal markets, heavy-duty trucks and
construction equipment markets, which for new product sales have historically
shown a high correlation to the rate of change in industrial production and
gross domestic product.
Heavy-Duty Truck Market
We serve the domestic U.S. heavy-duty truck market which we estimate
exceeded $10 billion in retail sales during 1999. According to data published by
R. L. Polk, an industry research and publication firm, the overall domestic
heavy-duty truck market increased from approximately 184,989 new Class 8
(defined by the American Automobile Manufactures Association as trucks with a
minimum gross vehicle weight rating above 33,000 pounds) unit sales in 1996 to
approximately 247,908 new Class 8 unit sales in 1999 (a 34.0% increase). Within
this market, our primary product line is Peterbilt trucks, which according to
American Truck Dealers accounted for approximately 10.2% of all new heavy-duty
truck registrations in 1999. More specifically, within our primary markets,
according to R. L. Polk, 30,243 new heavy-duty trucks were registered in 1999,
4,832 of which were Peterbilts. Accordingly, within our markets, Peterbilt
trucks achieved an average 16.0% market share, substantially higher than the
national average.
5
<PAGE> 6
Within the markets we serve, our share of the heavy-duty truck market
increased from 2,871 new unit sales in 1996, or approximately 1.5% of the
overall market share in the domestic United States, to 5,366 new unit sales in
1999, for an overall domestic market share of 2.2%. This represents an 86.9%
increase in unit sales and a 47% increase in market share.
Typically, Class 8 trucks are assembled by the manufacturer utilizing
certain components manufactured by other companies, including engines,
transmissions, axles, wheels and other components. As trucks and truck
components have become increasingly complex, including the use of computerized
controls and diagnostic systems, the ability to provide state-of-the-art service
for a wide variety of truck equipment has become a competitive factor in the
industry. Such service requires a significant capital investment in advanced
equipment, parts inventory and a high level of training of service personnel.
Additionally, Environmental Protection Agency ("EPA") and Department of
Transportation ("DOT") regulatory guidelines for service processes, including
body shop, paint work and waste disposal, require sophisticated operating and
testing equipment to ensure compliance with environmental and safety standards.
Additionally, we believe that the trend towards increased lease/rental sales
will continue as fleets, particularly private ones, seek to establish
full-service leases or rental contracts under which the lessor/rental company
provides a turn-key service including equipment, maintenance, and potentially,
fuel, fuel tax reporting and other services. As a result, differentiation
between truck dealers has become less dependent on pure price competition and is
increasingly based on their ability to offer a wide variety of trucking
services. These include the ability to provide easily accessible, efficient and
sophisticated truck service and replacement parts, the ability to offer
financing for truck purchases, leasing and rental programs and the ability to
accept multiple unit trade-ins related to large fleet purchases. We believe our
one-stop concept and the size and diversity of our dealer network gives us a
competitive advantage in providing these trucking services.
6
<PAGE> 7
According to Martin Labbe Associates, a transportation research firm, the
long-term growth rates for Class 8 trucks will approximate 1.9% per year until
the year 2007. Factors, which management believes favor the continued growth in
trucking, include the:
o growth in demand for consumer and industrial goods in part as a
result of the internet which has fostered a desire by consumers
to receive a wider selection of packages sooner;
o competitive pressures for "just in time" manufacturing processes
where U.S. manufacturers are demanding faster, yet less costly,
small shipment services.
o deregulation in the trucking industry leading to a proliferation
of freight haulers;
o the rise of intermodal service which has established a symbiotic
relationship between rail and truck service; and
o the significant increase of cross-border truck traffic between
Mexico and the United States since NAFTA became effective in
January of 1994.
However, there are signs the trucking industry as a whole, in the year 2000,
will not perform up to the high standards set in 1999. Increased fuel prices and
interest rates have adversely affected truck buyers. This results in fewer new
truck sales, has a negative impact on used truck values, and a corresponding
decrease in finance and insurance revenues for the Company. While we believe we
will perform at a level above our competitors, industry factors will negatively
impact our business.
Construction Equipment Market
Through our Rush Equipment Centers, which are authorized John Deere dealers,
we serve the estimated $6.0 billion North American market for retail sales of
construction equipment targeted towards light and medium applications. According
to data compiled by John Deere, approximately 78,458 units of construction
equipment were put into use domestically in 1999 compared to 90,158 in 1998,
representing a 13% decrease. However, in the markets Rush currently serves
construction activity remains strong. John Deere has more than a 24% market
share in those product markets in which it has competitive products.
John Deere's products are sold primarily through a distribution system
composed of an estimated 73 dealers as of December 31, 1999, compared to
approximately 100 dealers as of December 31, 1998, which operate approximately
420 stores and service centers in North America. John Deere dealerships have the
exclusive right to sell new John Deere equipment and parts within their assigned
area of responsibility, which means competition within a dealer's market comes
primarily from dealers of competing manufacturers and, more recently, rental
companies.
7
<PAGE> 8
The customer base of John Deere equipment users is diverse and includes
residential and commercial construction businesses, independent rental
companies, utility companies, government agencies, and various petrochemical,
industrial and material supply businesses. Industry statistics state that
approximately 57% of all construction equipment is owned by approximately 20% of
the customer base. Accordingly, John Deere and its dealer group are aggressively
developing more sophisticated ways to serve this large fleet owner.
Management believes that the estimated size of the construction equipment
rental industry in 1999 is greater than $10 billion and is served by over 10,000
rental companies. Although equipment unit purchases are expected to slow down in
2000, we believe that this industry will continue to grow as companies
increasingly utilize rental companies as a means of outsourcing their equipment
needs so as to reduce their investment in non-core assets. We intend to
capitalize on these trends by operating full service Rush Equipment Centers
which can satisfy the needs of both our large and small customers through a full
range product offering for both sales and rentals.
Market factors affecting the construction equipment industry include:
o levels of commercial, residential, and public construction
activities;
o state and federal highway and road construction appropriations;
and
o the consolidation and growth of the rental business.
BUSINESS STRATEGY
Operating Strategy. Our strategy is to operate integrated dealer networks
that primarily market Peterbilt heavy-duty trucks or John Deere construction
equipment and provide complementary products and services, by emphasizing the
following key elements:
o One-Stop Centers. We have developed our truck and construction
equipment locations as "one-stop centers" where, at one
convenient location, our customers can purchase new or used
heavy-duty trucks or construction equipment, finance, lease
and/or rent trucks or construction equipment, purchase
after-market parts and accessories and have service performed by
factory-certified technicians. We believe that this full service
strategy also helps to mitigate cyclical economic fluctuations
because the parts and service sales at our Rush Centers generally
tend to be less volatile than our new and used truck and
construction equipment sales. We intend to continue to emphasize
this one-stop concept.
o Branding Program. We employ a branding program for our
facilities, designating each as a Rush Truck Center or Rush
Equipment Center through distinctive signage and uniform
marketing programs, in order to take advantage of our existing
name recognition and to communicate the standardized high quality
of our products and reliability of our services throughout our
dealership networks. Our
8
<PAGE> 9
branding program extends to our services as well as our
facilities. For example, we recently initiated a prepaid truck
maintenance program under the "Rush" name, intended to encourage
repeat service business at our Rush Truck Centers. We believe
that this branding strategy will increase our market recognition
and encourage our customers to utilize multiple locations
throughout our dealership networks.
o Management by Dealership Units. We measure and manage the
business operations of each of our dealerships according to the
specific business units operating at that location. At each of
our dealerships, we operate one or more of the following business
units: new sales, used sales, parts, service, leasing/rental
and/or financial services. We believe that this system minimizes
profit cannibalization across business units, thereby enhancing
the profitability of all aspects of a dealership and increasing
our overall operating margins. Operating goals are established
annually and managers are rewarded for performance accordingly.
o Integrated Management Information Systems. In order to
efficiently operate separate business units within each
dealership, we rely upon our management information systems to
determine and monitor appropriate inventory levels and product
mix at each Rush Center. Each Rush Center maintains a centralized
real-time inventory tracking system that is accessible
simultaneously by all locations. Our automated reordering system
assists each Rush Center in maintaining the proper inventory
levels and permits inventory delivery to each location, or
directly to customers, typically within 24 hours from the time
the order is placed. In addition, by actively monitoring market
conditions, assessing product and expansion strategies and
remaining abreast of changes within the market, we are able to
proactively address market-by-market changes by realigning and,
if necessary, adding product lines and models.
Growth Strategy. Through the implementation of our expansion and
acquisition initiatives, we have grown to operate a large, multi-state,
full-service dealership network in the heavy-duty truck and construction
equipment markets. We intend to continue to grow our business internally and
through acquisitions by: (1) expanding the product offerings available at, and
capabilities of, our existing Rush Truck and Rush Equipment Centers; (2) opening
new Rush Truck and Rush Equipment Centers in under-served markets within
geographic areas we currently serve; and (3) acquiring and re-branding existing
third-party dealerships within new, strategically located geographic areas.
o Expansion of Product Offerings and Capabilities. We intend to
continue to expand our product lines within our Rush Truck and
Rush Equipment Centers by adding those product categories which
are both complementary to our Peterbilt and John Deere product
lines and well-suited to the Rush operating model. Historically,
we expanded into the construction equipment industry based on a
common customer base among our heavy-duty truck and construction
equipment purchasers. More recently, we became a dealer of Dorsey
trailers and have begun to introduce trailer
9
<PAGE> 10
sales, repair and maintenance services at many of our Rush Truck
Centers. Other recent and planned product line expansions include
introducing cranes into our Rush Equipment Centers and Peterbilt
Class 6 and Class 7 medium duty trucks into our Rush Truck
Centers.
We believe that there are many additional examples of similar
product and service offerings which complement our primary
product lines. Any product category expansion we pursue must
satisfy our requirements that the (1) products are of a premium
brand, (2) products provide opportunities for incremental income
through related servicing, after-market sales or financing, and
(3) Rush operating controls can be implemented to enhance the
financial performance of the business.
o Open New Rush Truck and Equipment Centers in Existing Markets. We
believe that there are opportunities to increase our share of the
heavy-duty truck and construction equipment markets by
introducing our one-stop centers to under-served markets within
the southwest United States and within Michigan. We are currently
planning to expand existing Rush Truck Centers and/or to open new
facilities in our existing areas of responsibility in Colorado,
Texas, Oklahoma and California. Construction equipment expansion
is currently planned or underway at two of our Rush Equipment
Centers in Michigan.
Additional dealerships would enable us to enhance revenues from
our existing customer base as well as increase the awareness of
the Rush brand name for new buyers. We believe there would also
be opportunities for cost savings by integrating the inventory
management and operations of these new locations with those of
our existing networks.
o Expand into New Geographic Areas. We plan to continue to expand
our Rush Truck and Rush Equipment Center networks by acquiring
additional dealerships in geographic areas contiguous to our
current operations or otherwise strategically located along major
interstate highways. Thus far, we have successfully expanded our
presence from our Texas base into the southwest and, more
recently, into Michigan, Arizona, New Mexico and California. We
believe the geographic diversity of our networks has
significantly expanded our customer base while ameliorating the
effects of certain local economic cycles. Geographic
diversification supports the sale of heavy-duty trucks,
construction equipment and related parts by allowing us to
allocate our inventory among the geographic regions we serve
based on market demand.
In identifying new areas for expansion, we analyze the target
market's level of new heavy-duty truck registrations and
construction equipment purchases, customer buying and leasing
trends and the existence of competing franchises. We also assess
the potential performance of a parts and service center to
determine whether a market is suitable for a Rush dealership.
After a market has been strategically reviewed, we survey the
region for a well-situated location. Whether
10
<PAGE> 11
we acquire existing dealerships or open new Rush locations, we
will introduce the Rush branding program and implement our
integrated management system. Geographic expansion is a primary
means by which we intend to continue to grow our core business.
PROPERTIES
A Rush Truck Center and Rush Equipment Center may be comprised of one
or more locations, generally in close proximity, in the same city. The following
is a list of our Rush Truck and Rush Equipment Center locations as of December
31, 1999:
<TABLE>
<CAPTION>
Property Location Owned Date Description of Activity
or Acquired
Leased or
Occupied
- ------------------------------- -------------------- -------- --------- ----------------------------------
<S> <C> <C> <C> <C>
RUSH TRUCK CENTERS
Arizona:
Rush Truck Center of Phoenix Phoenix, Arizona Owned 1999 New, used, parts, service, body and
financial
Rush Truck Center of Tucson Tucson, Arizona Owned 1999 New, used, parts, service, body and
financial
Rush Truck Center of Flagstaff Flagstaff, Arizona Leased 1999 Parts and service
Rush Truck Center of Chandler Chandler, Arizona Leased 1999 Parts
California:
Rush Truck Center of Pico Rivera Pico Rivera, California Leased 1994 New, used, parts, service, body,
financial, and leasing operations for
truck center
Rush Truck Center of Fontana Fontana, California Owned 1994 New, used, parts, service, body
and financial
Rush Truck Center of Sun Valley Sun Valley, California Leased 1994(1) Parts
Rush Truck Center of Sylmar Sylmar, California Owned 1999 New, used, parts, service, and financial
Rush Truck Center of San Diego San Diego, California Leased 1999 New, used, parts, service, body and financial
San Diego, California Leased 1999 Leasing
Rush Truck Center of Escondido Escondido, California Leased 1999 New, used, parts, service, and financial
Rush Truck Center of El Centro El Centro, California Leased 1999 Parts and service
Colorado:
Rush Truck Center of Denver Denver, Colorado Owned 1997 New and used
Denver, Colorado Owned 1997 Parts and service
Denver, Colorado Leased 1998 Body
Rush Truck Center of Greeley Greeley, Colorado Leased 1997 New, used, parts, service, and financial
Louisiana:
Rush Truck Center of Bossier Bossier City, Owned 1994 New, used, parts, service, body,
City Louisiana and financial
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
New Mexico:
Rush Truck Center of Albuquerque, New Leased 1999 New, used, parts, service, body, and
Albuquerque Mexico financial
Oklahoma:
Rush Truck Center of Tulsa Tulsa, Oklahoma Leased 1998 New, used and financial
Tulsa, Oklahoma Leased (2) New, used, parts, service, body, and
financial
Tulsa, Oklahoma Owned 1995 Parts and service
Tulsa, Oklahoma Leased 1995 Body
Rush Truck Center of Oklahoma Oklahoma City, Owned 1995 New, used, parts, service, body, and
City Oklahoma financial
Rush Volvo Truck Center, Oklahoma City, Owned 1995 Volvo new, used, parts, service,
Oklahoma City Oklahoma financial and leasing operations
Texas:
Rush Truck Center of San San Antonio, Texas Owned 1973 New, used, parts, service, body, and
Antonio financial
Rush Truck Center of Houston Houston, Texas Owned 1990 New and used
Houston, Texas Owned 1989 Parts and service
Houston, Texas Owned 1985 Body
Houston, Texas Owned 1992 Leasing, parts, service, and tire store
Houston, Texas Owned (3) New, used, parts, service, body, and
financial
Rush Truck Center of Sealy Sealy, Texas Owned (4) New, used, parts, service, and
financial
Rush Truck Center of Laredo Laredo, Texas Owned 1999(5) New, used, parts, service, body
and financial
Rush Truck Center of Lufkin Lufkin, Texas Owned 1992 New, used, parts, service, body, and
financial
Rush Truck Center of Pharr Pharr, Texas Owned 1997 New, used, parts, service, body, and
financial
Rush Truck Center of Austin Austin, Texas Leased 1999 Used
Rush Truck/Equipment Center Beaumont, Texas Leased 1998 (6) New, used, parts, service and financial
of Beaumont
RUSH EQUIPMENT CENTERS
Michigan:
Rush Equipment Center of Traverse City, Leased 1998 New, used, parts, service, and financial
Traverse City Michigan
Rush Equipment Center of Ellsworth, Michigan Leased 1998 New, used, parts, service, and financial
Ellsworth
Rush Equipment Center of Grands Rapids, Leased 1998 New, used, parts, service, and financial
Grand Rapids Michigan
Rush Equipment Center of Lansing, Michigan Leased 1999 New, used, parts, service, and financial
Lansing
Rush Equipment Center of Flint Flint, Michigan Leased 1999 New, used, parts, service, and financial
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
Rush Equipment Center of Pontiac, Michigan Leased 1999 New, used, parts, service, and financial
Pontiac
Texas:
Rush Equipment Center of Houston, Texas Owned 1997 New, used, parts, service, and financial
Houston
</TABLE>
(1) Facility will be closed and relocated to new Sylmar facility by the first
quarter of 2000.
(2) Construction of new facility at this site to be completed by the third
quarter 2000 at which time the present parts and service and financial locations
may be consolidated.
(3) Site of new dealership. Construction to be completed by the second quarter
of 2000 at which time operations at other locations may be consolidated.
(4) Site of new dealership to be opened in the second quarter of 2000.
(5) Site of new dealership opened in the fall of 1999.
(6) Combined truck and construction equipment operations.
Our administrative offices are currently situated in 24,074 square feet
of leased space in New Braunfels, Texas. We also occupy 3,750 square feet of
leased space in San Antonio, Texas as administrative offices for our insurance
services. The D&D Farm and Ranch Supermarket in Seguin, Texas occupies 26,900
square feet of owned building space and we plan to open a second D&D store
occupying 66,000 square feet of owned building space in Houston, Texas in April
2000. In addition to our Rush Equipment Center in Ellsworth, Michigan, we also
operate a John Deere commercial and consumer equipment location in Ellsworth,
Michigan, occupying 6,000 square feet of leased space. We also own a ranch of
approximately 5,700 acres in Cotulla, Texas.
RUSH OPERATING DIVISIONS
We are managed and operated though five distinct divisions, which are
described below.
Rush Truck Center Division
Our Rush Truck Center Division is the operating division responsible for
sales of new and used heavy-duty trucks, as well as related parts and services.
New Truck Sales. New heavy-duty truck sales represent the largest portion of
our business, accounting for approximately $466.1 million, or approximately
57.7%, of our total revenues for 1999. Rush Truck Centers primarily sell new
Class 8 heavy-duty Peterbilt trucks, which constitute more than 98% of all new
trucks sold by us. A new Peterbilt Class 8 heavy-duty truck typically sells at a
premium, within a typical price range of $65,000 to $115,000, as compared to
other Class 8 heavy-duty trucks which typically sell within a price range of
$57,000 to $110,000. The average delivery times for custom-ordered new Peterbilt
trucks can vary between 60 days to six months. We also sell Class 7 Peterbilt
trucks, Peterbilt refuse chassis and cement mixer chassis, GMC medium-duty
trucks and, at our Oklahoma Rush Truck Centers, Volvo Class 8 heavy-duty trucks.
Our customers use heavy-duty trucks to haul virtually all materials, including
general freight, petroleum, wood products, refuse and construction materials for
both over-the road and off-road applications.
13
<PAGE> 14
Approximately 65% of our new truck sales are to fleet customers (defined as
customers who purchase more than five trucks in any single 12-month period).
Because of our large size, strong relationships with our fleet customers and
ability to handle large quantities of used truck trade-ins, we are able to
successfully market and sell to fleets nationwide. We believe that we have a
competitive advantage over most other dealers in that we can absorb multi-unit
trade-ins often associated with fleet sales of new trucks and effectively
disperse the used trucks for resale throughout our dealership network. We
believe that our attention to customer service and our broad range of trucking
services, including our ability to offer truck financing and insurance to our
customers, has resulted in a high level of customer loyalty. Management believes
that approximately 70% of our truck sales during 1999 were to repeat customers.
Used Truck Sales. Used truck sales accounted for approximately $88.4
million, or approximately 10.9%, of our total revenues for 1999. We primarily
sell used Class 8 heavy-duty trucks manufactured by the leading truck
manufacturers in the industry, including Peterbilt, Kenworth Truck Co., a
division of PACCAR, Inc. ("Kenworth"), Freightliner Corporation, a subsidiary of
Daimler Chrysler AG ("Freightliner"), Mack Trucks, Inc. ("Mack") and Navistar
International Corporation ("Navistar"). Our management believes that we are well
positioned to market used heavy-duty trucks due to our ability to recondition
used trucks for resale utilizing the parts and service departments at our Rush
Truck Centers and to reallocate our used truck inventory from one Rush Truck
Center to another in order to satisfy customer demand. Approximately 80% of our
used truck fleet is comprised of trucks taken as trade-ins from new truck
customers to be used as all or part of such customer's down payment, with the
remainder of our used truck fleet being purchased from third parties for resale.
Truck Parts and Service. Truck-related parts and service revenues accounted
for approximately $107.1 million, or approximately 13.8%, of our total revenues
for 1999. We are the sole authorized Peterbilt parts and accessories supplier in
each of the markets serviced by our Rush Truck Centers. The parts business
augments our sales and service functions and is a source of recurring revenue.
Each Rush Truck Center carries in its inventory a wide variety of Peterbilt and
other truck parts, with an average of approximately 5,000 items from over 50
suppliers at each location. Rush Truck Centers offer "menu" pricing of service
and body shop functions and offer expedited service at a premium price for
certain routine repair and maintenance functions.
Our Rush Truck Centers also feature various combinations of fully-equipped
service and body shop facilities, the configuration of which may vary by
location, capable of handling a broad range of truck repairs on most makes and
classes of trucks. Each Rush Truck Center is a Peterbilt designated warranty
service center and most are also authorized service centers for other
manufacturers, including Caterpillar, Inc., Cummins Engine, Inc., Detroit Diesel
Corporation, Eaton Corporation and Rockwell International Corporation. We have a
total of approximately 409 service bays, including 13 paint bays, throughout our
Rush Truck Center network.
14
<PAGE> 15
We perform both warranty and non-warranty service work, with the cost of the
warranty work being reimbursed by the manufacturer at retail consumer rates. We
estimate that approximately 20% of our truck service functions are performed
under manufacturers' warranties. All service performed at our Rush Truck Centers
is done by technicians who have been certified by our suppliers. We recently
initiated a multi-year prepaid program for certain truck maintenance services
under the "Rush" brand name, with guaranteed pricing and priority service at
Rush Truck Centers. We believe that this program will increase customer traffic,
customer loyalty and enhance service and parts revenue.
Rush Equipment Center Division
Our Rush Equipment Center Division is the operating division responsible for
sales of new and used construction equipment as well as related parts and
services.
New Construction Equipment Sales. New construction equipment sales accounted
for approximately $50.4 million, or approximately 6.3%, of our total revenues
for 1999. Our Rush Equipment Centers carry a complete line of John Deere
construction equipment. A new piece of John Deere construction equipment
typically ranges in price from $20,000 for a skidsteer to $500,000 for an
excavator. We augment our John Deere product line by also carrying a full line
of complementary construction equipment manufactured by other suppliers. We sell
to a diverse customer base including residential and commercial construction
businesses, utility companies, government agencies, and various petrochemical,
industrial and material supply businesses. We believe that many of our Rush
Truck Center customers also utilize construction equipment, and we aggressively
market our construction equipment product offerings to these customers as well
as to the regional truck fleets that we serve.
We believe that John Deere's reputation for manufacturing quality
construction equipment attracts new and repeat customers who value lower
maintenance and repair costs and a higher residual value at trade-in. We augment
this product loyalty with an operating strategy similar to our Rush Truck
Centers which focuses on providing fast, reliable service in a familiar setting.
As we expand our geographic presence, we believe that our operating strategy
will enable us to both increase our customer base and to generate repeat
business for all product offerings.
Used Construction Equipment Sales. Used construction equipment sales
accounted for approximately $11.6 million, or approximately 1.4%, of our total
revenues for 1999. We sell used construction equipment manufactured by several
of the leading manufacturers, including John Deere, Case Corporation ("Case"),
Caterpillar, and Komatsu, Ltd. ("Komatsu"). The majority of our used
construction equipment inventory is derived from our rental fleet, and the
remainder taken as trade-ins from our construction equipment customers, which
affords us the opportunity to use our parts and service departments for
reconditioning of used equipment.
Construction Equipment Parts and Service. Construction equipment-related
parts and service revenues accounted for approximately $19.1 million, or
approximately 2.4%, of our total revenues for 1999. Each Rush Equipment Center
carries in its inventory a wide variety of John Deere and other parts, with over
12,000 items from over 15 suppliers at most locations. We are
15
<PAGE> 16
the sole authorized John Deere parts and accessories supplier in each of our
construction equipment markets. We also maintain a fully equipped John Deere
designated warranty service operation capable of handling repairs on most types
of construction equipment at each of our Rush Equipment Centers. We augment this
presence with field service trucks and technicians who are capable of making
on-site repairs at our customers' location.
Rush Leasing and Rental Division
Our Rush Leasing and Rental Division is the operating division responsible
for the leasing and rental of heavy-duty trucks and construction equipment.
Truck Leasing and Rental. Truck leasing and rental revenues accounted for
approximately $23.3 million, or approximately 2.4%, of our total revenues for
1999. We engage in full-service Peterbilt truck leasing under the PacLease trade
name at eight of our Rush Truck Centers and are the largest PacLease dealer in
the United States. One of the benefits of our leasing and rental division is
that such customers provide an additional "captive" market for our parts and
service operations by creating additional parts sales and service work at Rush
Truck Centers for trucks leased or rented by such customers. All of our leases
require all parts sales, service and maintenance for the leased trucks to be
performed at our facilities (or at facilities outside our service area, as we
direct). Trucks subject to shorter term rentals are also generally serviced at
our facilities. We have increased our lease and rental fleet from less than 100
trucks in 1993 to approximately 845 trucks at December 31, 1999. As of December
31, 1999, we owned approximately 33.7% of our lease and rental fleet, and leased
the remaining trucks in our fleet directly from Peterbilt. Currently, the
average age of trucks in our lease and rental fleet is approximately 28 months.
Generally, we hold trucks in our lease and rental fleet for approximately five
years and then sell such used trucks to the public through our used sales
operations at our Rush Truck Centers. We have consistently realized gains on the
sale of such trucks in excess of the cost of the purchase option contained in
our leases with Peterbilt or the book value of trucks owned by the Company.
Construction Equipment Rental. Construction equipment rental revenues
accounted for approximately $7.7 million, or approximately 1.0%, of our total
revenues for 1999. Our rental contracts require that all parts sales, service
and maintenance for our rental construction equipment be performed at our
facilities or at other facilities as we direct. Thus, construction equipment
rental customers create additional parts sales and service work at our Rush
Equipment Centers. Our construction equipment rental fleet consisted of
approximately 266 pieces of equipment as of December 31, 1999. Currently, the
average age of the construction equipment in our rental fleet is approximately
thirteen months.
We offer our customers both long-term and short-term rentals, as well as
rental purchase options. We believe that our rental operations will continue to
benefit from the current trend among our construction equipment customers to
outsource operations, including construction equipment ownership, in order to
minimize their capital investment in construction equipment, as well as reducing
or eliminating the down-time, maintenance, repair and storage costs associated
with construction equipment ownership. We believe that the availability of a
well-maintained rental fleet allows our customers to more effectively manage
their business operations and assets by obtaining construction equipment on an
as-needed basis.
16
<PAGE> 17
Rush Financial and Insurance Division
Our Rush Financial and Insurance Division is the operating division
responsible for arranging third-party financing and insurance for both our
heavy-duty truck and construction equipment product offerings.
We offer our customers products which assist them in purchasing new or used
trucks and construction equipment. This division accounted for approximately
$13.6 million, or approximately 1.7%, of our total revenues for 1999. Finance
and insurance revenues have limited direct costs and, therefore, contribute a
disproportionate share of operating profits.
New and Used Truck and Construction Equipment Financing. Through Associates
Commercial Corporation, the largest third-party provider of heavy-duty truck
financing in North America ("Associates"), and PACCAR Financial, we arranged
customer financing for approximately $254.4 million, or 45.9%, of our total new
and used truck sales in 1999, an increase of 38.6% from approximately $183.6
million in 1998. Approximately 64% of these truck financings related to new
truck sales and the remainder related to used truck sales. Generally, truck
financings are memorialized through the use of installment contracts, which are
secured by the trucks financed, and generally require a down payment of 10% to
30% of the value of the financed truck, with the remaining balance financed over
a two-to five-year period.
In addition, through The CIT Group, Associates, John Deere Credit and
others, we arranged customer financing for approximately $29.2 million, or
approximately 47.1%, of our total new and used construction equipment sales in
1999. Approximately 70% of these construction equipment financings related to
new construction equipment sales and the remainder related to used construction
equipment sales. Generally, construction equipment financings are memorialized
through the use of installment or lease contracts, which are secured by the
construction equipment financed, and generally require a down payment of 0% to
10% of the value of the financed piece of construction equipment, with the
remaining balance being financed over a three-to five-year period. All finance
contracts for construction equipment are assigned without recourse.
Over the last five years, the default rate on the truck financings that we
originated has averaged less than 0.5% per year. Our aggregate liability for
repossession losses resulting from defaults is limited to $500,000 per year for
contracts sold to Associates and $200,000 per year for contracts sold to PACCAR
Financial. Historically, our losses have been significantly less than the amount
of our total maximum recourse liability. We experience no repossession loss on
construction equipment financings that we originate because such financings are
sold to third parties without recourse.
Insurance Agency Services. We sell a complete line of property and casualty
insurance, including collision and liability insurance on trucks, cargo
insurance, standard automobile
17
<PAGE> 18
liability coverages, life insurance, credit life insurance and health insurance,
workers' compensation coverages and homeowners' insurance. Our agents are
licensed in the states of Texas, Colorado, California, Oklahoma, Louisiana,
Arkansas, New Mexico and Alabama to sell insurance for various insurance
companies, including Associates Insurance and Motors Insurance Corporation, a
subsidiary of GMC. While our focus is on trucking-related insurance products
marketed to our customers, we also sell non-trucking related insurance products
to our customers as well as to the general public. We experienced an average
renewal rate of 79% during 1999.
Rush Retail Division
Our Rush Retail Division is the operating division responsible for our
investments in retail stores, which offer a broad range of supplies for farm and
ranch owners.
Our Rush Retail Division operates our D&D Farm and Ranch Supermarket which
serves the greater San Antonio, Texas area. Building on our "one-stop" strategy,
our D&D Farm and Ranch Supermarket offers a wide variety of indoor and outdoor
farm and ranch supplies, clothing, tack, hardware and, among other items, horse
trailers. Our Retail Division accounted for approximately $18.6 million, or
approximately 2.3%, of our total revenues for 1999. We currently anticipate
opening a second D&D Farm and Ranch Supermarket in Houston, Texas in 2000.
SALES AND MARKETING
Our established expansion and acquisition strategy and long history of
operations in the heavy-duty truck business have resulted in a strong customer
base that is diverse in terms of geography, industry and scale of operations.
Our Rush Truck Center customers include owner-operators, regional and national
fleets, corporations and local governments. During 1999, no single Rush Truck
Center customer accounted for more than 15% of our total truck sales by dollar
volume. Our Rush Equipment Centers' customer base is similarly diverse and,
during 1999, no single Rush Equipment Center customer accounted for more than 3%
of our total construction equipment sales by dollar volume. We generally promote
our products and related services through our sales staff, trade magazine
advertisements and attendance at industry shows.
We believe that the consistently reliable service received by our customers and
our longevity and geographic diversity have resulted in increased market
recognition of the "Rush" brand name and have served to reinforce customer
loyalty and continuing customer relationships. During 1999, approximately 70% of
our truck sales were to previous or existing customers. In an effort to enhance
our name recognition and to communicate the standardized high level of quality
products and services provided at our Rush Centers, we implement our brand name
concept at each of our dealerships, such that each of our dealerships is
identified as either a Rush Truck Center or Rush Equipment Center. Currently, we
are making a concerted effort to target our products and services to existing
truck customers that are also involved in the construction business. For
example, in Houston, Texas we believe that approximately 40% of our Rush Truck
Center customers have also been customers at the Houston Rush Equipment Center.
18
<PAGE> 19
FACILITY MANAGEMENT
Personnel. Each Rush Truck and Equipment Center is managed by a general
manager who oversees the operations, personnel and the financial performance of
the location, subject to the direction of the Company's corporate office. Each
Rush Truck Center is also typically staffed by a sales manager, parts manager,
service manager, sales representatives, parts employees, and other service and
make-ready employees. The sales staff of each Rush Truck and Equipment Center is
compensated on a salary plus commission basis, with a high percentage of
compensation based on commission, while the general manager, parts manager and
service manager receive a combination of salary and performance bonus, with a
high percentage of compensation based on the performance bonus. The Company
believes that its employees are among the highest paid in their respective
industries.
General managers annually prepare detailed monthly forecasts and monthly
profit and loss statements based upon historical information and projected
trends and an element of each general manager's compensation is determined by
meeting or exceeding these operating plans. During the year, general managers
regularly review their facility's progress with senior management and make
appropriate adjustments as needed. All employees of the Company undergo annual
performance evaluations.
The Company has been successful in retaining its senior management, general
managers and other employees. The average tenure of the Company's current senior
management is 12 years, and the average tenure of its current truck centers'
general managers is approximately 8 years. To promote communication and
efficiency in operating standards, general managers and members of senior
management attend several Company-wide strategy sessions per year. In addition,
management personnel attend various industry-sponsored leadership and management
seminars and receive continuing education on Peterbilt products, John Deere
products, marketing strategies and management information systems.
Members of senior management regularly travel to each location to provide
on-site management and support. Each location is audited twice a year for
administrative record-keeping, human resources and environmental compliance
matters. The Company has instituted succession planning pursuant to which
employees in each Rush Truck and Equipment Center are groomed as assistant
managers to assume management responsibilities in existing and future
dealerships.
Purchasing and Suppliers. The Company believes that pricing is an important
element of its marketing strategy. Because of its size, the Rush Truck Center
Division benefits from volume purchases at favorable prices that permit it to
achieve a competitive pricing position in the industry. The Company purchases
its Peterbilt heavy-duty truck inventory and Peterbilt parts and accessories
directly from PACCAR. All other manufacturers' parts and accessories, including
those of Cummins, Detroit Diesel, Caterpillar and others are purchased through
wholesale vendors or from PACCAR, who buys such products in bulk for resale to
the Company and other Peterbilt dealers. All purchasing, volume and pricing
levels and commitments are negotiated by
19
<PAGE> 20
the Company's corporate headquarters. The Company has been able to negotiate
favorable terms, which facilitates the Company's ability to offer competitive
prices for its products.
The Company purchases all of its John Deere construction equipment inventory
and John Deere parts directly from John Deere. All other construction equipment
manufacturers' parts and accessories are purchased through wholesale vendors by
the Company. Management believes as the network of Rush Equipment Centers is
developed, the Company will be able to negotiate favorable price terms through
volume purchasing, thereby achieve a competitive pricing position in the
industry.
Management Information Systems. Each Rush Truck and Equipment Center
maintains a centralized real-time inventory tracking system which is accessible
simultaneously by all locations and by the Company's corporate office. The
Company utilizes the information assimilated from its management information
systems to determine and monitor the appropriate inventory level at each
facility. From this information, management has developed a model reflecting
historic sales levels of different product lines. This information identifies
the appropriate level and mix of inventory and forms the basis of the Company's
operating plan. The Company's management information systems and databases are
also used to monitor market conditions, sales information and assess product and
expansion strategies. Information received from state and regulatory agencies,
manufacturers and industry contacts allows the Company to determine market share
statistics and gross volume sales numbers for its products as well as those of
competitors. This information impacts ongoing operations by allowing the Company
to remain abreast of changes within the market and allows management to react
accordingly by realigning product lines and by adding new product lines and
models.
Distribution and Inventory Management. The Company utilizes its real-time
inventory management tracking system to maintain a close link between each Rush
Truck Center. This link allows for a timely and cost-effective sharing of
managerial and sales information as well as the prompt transfer of inventory
among various locations. The transfer of inventory reduces delays in delivery,
helps maximize inventory turns and assists in controlling problems created by
overstock and understock situations. The Company is linked directly to its major
suppliers, including PACCAR, GMC, and John Deere via real-time satellite or
frame relay communication links for purposes of ordering and inventory
management. These automated reordering and satellite communication systems allow
the Company to maintain proper inventory levels and permit the Company to have
inventory delivered to its locations, or directly to customers, typically within
24 hours of an order being placed.
RECENT ACQUISITIONS
In December 1999, the Company purchased substantially all the assets of
Norm Pressley's Truck Center, ("Pressley"), which consisted of three dealership
locations in San Diego, Escondido and El Centro, California. The transaction was
valued at approximately $4.5 million with the purchase price paid in cash. An
additional $700,000 consideration may be paid based on a performance based
objective.
20
<PAGE> 21
In October 1999, the Company purchased substantially all the assets of
Southwest Peterbilt, Inc., Southwest Truck Center, Inc., and New Mexico
Peterbilt, Inc., ("Southwest") a Peterbilt truck dealer, which consisted of five
dealership locations in Arizona and New Mexico. The transaction was valued at
$23.9 million with the purchase price paid in a combination of cash and the
Company's common stock. An additional $4.0 million may be paid based on a
performance based objective.
In September 1999, the Company acquired substantially all the assets of
Calvert Sales, Inc., (Calvert), a John Deere construction equipment dealership.
The acquisition encompasses 13 counties in eastern Michigan, including two
full-service dealerships located in the Detroit and Flint areas. The transaction
was valued at $11.1 million with the purchase price paid in a combination of
cash and notes payable.
In September 1998, the Company purchased substantially all of the assets of
Klooster Equipment, Inc. which consisted of three full-service construction
equipment dealerships and one retail only location covering 54 counties in
western Michigan. The purchase price was approximately $13.1 million funded by
(i) $2.5 million of cash, (ii) $9.8 million of borrowings under the Company's
floor plan financing arrangements with Associates Commercial Corporation and
John Deere Inc., and (iii) $836,000 of borrowings from John Deere Credit Corp.
In March 1998, the Company purchased all of the outstanding stock of D&D
Farm and Ranch Supermarket, Inc. for approximately $10.5 million, with the
purchase price being a combination of cash, notes payable and options to
purchase common stock. The Company accounted for the acquisition as a purchase.
In October 1997, the Company purchased certain assets and assumed certain
liabilities of C. Jim Stewart & Stevenson, Inc., and Stewart & Stevenson Realty
Corp., which primarily consisted of one full-service John Deere dealership in
Houston, Texas. The purchase price was approximately $30.2 million, funded by
(i) $4 million of cash, (ii) $21.1 million of borrowings under the Company's
floor plan financing arrangement with Associates Commercial Corporation and John
Deere Inc., (iii) $3,080,000 in real estate borrowings from Frost National Bank,
and (iv) a $2,062,500 promissory note payable to the seller.
In March 1997, the Company purchased 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 (i) $6.5
million of cash and (ii) $1.4 million of borrowings under the Company's floor
plan financing arrangement with GMAC to purchase new and used truck and parts
inventory. The Company also agreed to pay the principal of Denver Peterbilt,
Inc. additional amounts based on future sales of new Peterbilt trucks at the
Colorado locations. The Company paid the principal of Denver Peterbilt, Inc.
$2.0 million in March 1999 satisfying all terms of the agreement.
21
<PAGE> 22
COMPETITION
There is, and will continue to be, significant competition both within our
current markets and in the new markets which we may enter. We anticipate that
competition between us and other dealers will continue to increase in both our
current markets and on a national level, based on:
o the accessibility of dealership locations;
o the number of dealership locations;
o price, value, quality and design of the products sold; and
o attention to customer service (including technical service).
Our heavy-duty truck products compete with Class 8 and Class 7 trucks made
by other manufacturers and sold through competing independent and factory-owned
truck dealerships, including trucks manufactured by Navistar, Mack,
Freightliner, Kenworth, Volvo, Ford Motor Company, Western Star Truck Holdings,
Ltd., and other manufacturers. Kenworth heavy-duty trucks, which are distributed
through a different, competing dealer network, are also manufactured by PACCAR,
Peterbilt's parent company. Our construction equipment products compete with
construction equipment manufactured by Case, Caterpillar and Komatsu, as well as
other manufacturers. We believe that we are competitive in all of the dealer
categories identified above, and that we are able to compete with
manufacturer-dealers, independent dealers and wholesalers, rental service
companies and industrial auctioneers in distributing our products on the basis
of overall product quality and reputation; "Rush" name recognition and
reputation for reliability; and our ability to provide comprehensive full parts
and service support, as well as financing, insurance and other customer
services.
DEALERSHIP AGREEMENTS
Peterbilt. We have entered into non-exclusive dealership agreements with
Peterbilt which authorize us to act as a dealer of Peterbilt heavy-duty trucks.
Our areas of responsibility currently encompass 36 locations in the states of
California, Colorado, Texas, Oklahoma, Louisiana, Arizona and New Mexico. These
dealership agreements have current terms expiring between March 2000 and
December 2002 and impose certain operational obligations and financial
requirements upon us and our dealerships. These agreements are terminable by
Peterbilt upon a change of control of the Company, as such term is described in
each agreement, and grant Peterbilt certain rights of first refusal relating to
any sale or transfer by us of our dealership locations or if certain Rush family
members desire to sell more than 100,000 shares of our voting common stock
within a 12 month period to anyone other than family members or certain other
specified persons. Any termination or non-renewal of these dealership agreements
by Peterbilt must follow certain guidelines established by both state and
federal legislation designed to protect dealers, such as us, from arbitrary
termination or non-renewal of franchise agreements. The Automobile Dealers Day
in Court Act and other similar state laws provide that the
22
<PAGE> 23
termination or non-renewal of a dealership agreement must be done in "good
faith" and upon a showing of "good cause" by the manufacturer for such
termination or non-renewal, as such terms have been defined by statute and case
law.
John Deere. We have entered into non-exclusive dealership agreements with
John Deere which authorize us to act as a dealer of John Deere construction,
utility and forestry equipment. These John Deere dealership agreements have no
specified term or duration. Our current areas of responsibility for the sale of
John Deere construction equipment encompass seven locations in the states of
Texas and Michigan. The John Deere dealership agreements impose operational
obligations and financial requirements upon us and our dealerships. Like the
dealership agreements with Peterbilt, the dealership agreements with John Deere
are terminable upon change of control, grant certain rights of first refusal and
impose certain financial requirements.
Other Truck Suppliers. In addition to our truck dealership agreements with
Peterbilt, we are also an authorized dealer for Volvo at our Rush Truck Centers
in Oklahoma City and Tulsa, Oklahoma, and have non-exclusive dealership
agreements with GMC for the sale of GMC medium-duty trucks at our Rush Truck
Centers in San Antonio, Texas, and Oklahoma City and Tulsa, Oklahoma. Sales of
Volvo and GMC trucks accounted for approximately 1.0% of our total revenues for
1999. The Volvo dealership agreement is effective through March 31, 2000 and is
renewable annually unless terminated by Volvo as a result of a material breach
of the agreement by us. The GMC dealership agreement is effective through
October 31, 2000. Both the GMC and Volvo agreements impose operating
requirements upon us and require consent from the affected supplier for sale or
transfer of either such agreement.
Other Construction Equipment Suppliers. In addition to John Deere, we are
an authorized dealer for suppliers of other construction equipment. The terms of
such arrangements vary, but most of these dealership agreements contain
termination provisions allowing the supplier to terminate the agreement after a
specified notice period (usually 180 days).
FLOOR PLAN FINANCING
Heavy-Duty Trucks. We finance substantially all of our new truck inventory
and 75% of the loan value of our used truck inventory, under a floor plan
arrangement with GMAC. As of December 31, 1999, we had approximately $104.5
million outstanding under our GMAC floor plan arrangement. Our GMAC floor plan
facility has no expiration date and generally is renegotiated annually. The
current interest rate is the prime rate less one-half percent.
Construction Equipment. We finance substantially all our new construction
equipment inventory under floor plan facilities with John Deere and with
Associates. Our John Deere facility expires September 2000 and the current
interest rate is the prime rate less three-quarters of one percent. Our
Associates facility expires September 2000 and the current interest rate is the
prime rate less three-quarters of one percent. As of December 31, 1999, we had
$36.3 million and $10.1 million, respectively, outstanding under the floor plan
arrangements with John Deere and Associates. See "Management's Discussion and
Analysis -- Liquidity and Capital Resources."
23
<PAGE> 24
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,
including small and large fleets, governments, corporations and owner operators.
However, trucks and parts and service operations historically have experienced
higher volumes of sales in the third and fourth 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.
Seasonal effects in the construction equipment business are primarily
driven by the weather. 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.
BACKLOG
At December 31, 1999 and 1998, the Company's backlog of truck orders was
approximately $180.0 million. The Company includes in backlog only confirmed
orders. It takes between 60 days and six months for the Company to receive
delivery from PACCAR once an order is placed. The Company expects to fill at
least 90% of these orders by the end of 2000. The Company sells approximately
75% of its new heavy-duty trucks by customer special order, with the remainder
sold out of inventory. Included in the Company's backlog as of December 31, 1999
are orders from a number of the Company's major fleet customers.
ENVIRONMENTAL STANDARDS AND OTHER GOVERNMENTAL REGULATIONS
Our operations are subject to numerous federal, state and local laws and
regulations, including laws and regulations designed to protect the environment
and to regulate the discharge of materials into the environment, primarily
relating to our service operations.
PRODUCT WARRANTIES
Both Peterbilt and John Deere provide the retail purchasers of their
products with a limited warranty against defects in materials and workmanship,
excluding certain specified components which are separately warranted by the
suppliers of such components. We do not undertake to provide any warranty to our
customers.
We generally sell our used trucks and construction equipment "as is" and
without manufacturer's warranty, although manufacturers sometimes will provide a
limited warranty on
24
<PAGE> 25
their used products if they have been properly reconditioned prior to resale or
if the manufacturer's warranty on such product is transferable and has not yet
expired. We do not undertake to provide any warranty to our used truck or
construction equipment customers.
TRADEMARKS
The Peterbilt, John Deere, Volvo and GMC trademarks and trade names, which
are used in connection with our marketing and sales efforts, are subject to a
limited license by us from each of the respective manufacturers. These names are
recognized internationally and are important in the marketing of our products.
Each licensor engages in a continuous program of trademark and trade name
protection in its marketing areas. We hold a registered trademark with the U. S.
Patent and Trademark Office for the name "Rush."
EMPLOYEES
At December 31, 1999, we employed approximately 1,704 people. We have no
contracts or collective bargaining agreements with labor unions and have never
experienced work stoppages. We consider our relations with our employees to be
good.
ITEM 2. PROPERTIES
See PROPERTIES section in ITEM 1 on page 11 hereof.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are involved in certain litigation arising out of our
operations in the ordinary course of business. We maintain liability insurance,
including product liability coverage, in amounts deemed adequate by management.
To date, aggregate costs to us for claims, including product liability actions,
have not been material. However, an uninsured or partially insured claim, or
claim for which indemnification is not available, could have a material adverse
effect on our financial condition. We believe that there are no claims or
litigation pending the outcome of which could have a material adverse effect on
our 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 our
results of operations for the fiscal period in which such resolution occurred.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of the fiscal year ended December 31, 1999.
25
<PAGE> 26
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's common stock, $0.01 par value ("Common Stock"), has been
listed for quotation on the Nasdaq National Market ("NASDAQ/NMS") under the
symbol "RUSH." since June 7, 1996, the date of the Company's initial public
offering. The following table sets forth the high and low closing sales prices
for the Common Stock for the fiscal periods indicated, as reported by the
Nasdaq/NMS. The quotations represent prices in the over-the-counter market
between dealers in securities, do not include retail markup, markdown or
commissions and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
High Low
-------- --------
<S> <C> <C>
Fiscal 1999:
First quarter ............................... $ 12.88 $ 10.44
Second quarter .............................. $ 17.38 $ 10.50
Third quarter ............................... $ 19.50 $ 14.25
Fourth quarter .............................. $ 16.25 $ 13.75
Fiscal 1998:
First quarter ............................... $ 11.50 $ 7.63
Second quarter .............................. $ 13.75 $ 10.38
Third quarter ............................... $ 12.63 $ 8.63
Fourth quarter .............................. $ 12.00 $ 7.38
</TABLE>
As of March 23, 2000, there were approximately 66 record holders of Common
Stock and approximately 1,566 beneficial holders of Common Stock.
The Board of Directors intends to retain any earnings of the Company to
support operations and to finance expansion and does not intend to pay cash
dividends on the Common Stock in the foreseeable future. Any future
determination as to the payment of dividends will be at the discretion of the
Board of Directors of the Company and will depend on the Company's financial
condition, results of operations, capital requirements and such other factors as
the Board of Directors deems relevant.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following Selected Consolidated Financial and Operating Data relating
to the Company has been taken or derived from the Consolidated Financial
Statements and other records of the Company. The consolidated statements of
income and consolidated balance sheets for each of the five years in the period
ended December 31, 1999, have been audited by Arthur Andersen LLP,
26
<PAGE> 27
independent public accountants. The Consolidated Financial and Operating Data
presented below may not be comparable between periods in all material respects
or indicative of the Company's future financial position or results of
operations due primarily to acquisitions which occurred during the periods
presented, including the acquisition of the Company's Oklahoma (December 1995),
Colorado (March 1997), Arizona and New Mexico (October 1999) and California
(December 1999) heavy-duty truck operations, and the Company's acquisitions of
the Houston, Texas (October 1997), western Michigan (September 1998) and eastern
Michigan (September 1999) John Deere construction equipment centers and the
acquisition of the Rush retail center in March of 1998 . See Note 15 to the
Company's Consolidated Financial Statements for a discussion of such
acquisitions. The Selected Consolidated Financial and Operating Data should be
read in conjunction with the Company's Historical Consolidated Financial
Statements and related notes and other financial information included elsewhere
herein. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF INCOME
STATEMENT DATA
Revenues
New and used truck sales $ 192,949 $ 258,613 $ 290,495 $ 422,754 $ 554,571
Parts and service 53,368 64,505 78,665 108,024 130,548
Construction equipment
sales -- -- 7,518 35,402 62,042
Lease and rental 10,058 13,426 14,761 18,594 25,375
Finance and insurance 3,980 5,855 6,026 11,432 13,581
Retail sales -- -- -- 13,895 18,573
Other 1,279 1,262 1,904 2,684 3,665
---------- ---------- ---------- ---------- ----------
Total revenues 261,634 343,661 399,369 612,785 808,355
Cost of products sold 219,059 289,143 334,583 508,242 673,563
---------- ---------- ---------- ---------- ----------
Gross profit 42,575 54,518 64,786 104,543 134,792
Selling, general and
administrative 31,238 40,552 50,618 75,849 93,502
Depreciation and amortization
1,846 2,416 2,977 4,813 6,162
---------- ---------- ---------- ---------- ----------
Operating income 9,491 11,550 11,191 23,881 35,128
Interest expense, net 2,886 3,053 2,513 5,884 8,185
Minority interest 162 -- -- -- --
---------- ---------- ---------- ---------- ----------
Income from continuing
operations before income taxes
6,443 8,497 8,678 17,997 26,943
Income tax expense -- 2,295 3,298 7,200 10,777
---------- ---------- ---------- ---------- ----------
Income from continuing
operations 6,443 6,202 5,380 10,797 16,166
Discontinued operations --
Operating income (loss) (224) -- -- -- --
Gain on disposal 1,785 -- -- -- --
---------- ---------- ---------- ---------- ----------
Income from discontinued
operations 1,561 -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income $ 8,004 $ 6,202 $ 5,380 $ 10,797 $ 16,166
========== ========== ========== ========== ==========
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
-------- --------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C>
PRO FORMA INCOME
STATEMENT DATA (Unaudited)
Income from continuing operations
before taxes ............................................... $ 6,443 $ 8,497
Pro forma adjustments to reflect federal and
state income taxes(1) ...................................... 2,448 3,229
-------- --------
Pro forma income from continuing operations after
provision for income taxes ................................. $ 3,995 $ 5,268
======== ========
Pro forma basic and diluted income from continuing
operations per share(2) .................................... $ .93 $ .94
======== ========
Weighted average shares outstanding used in the pro forma
basic and diluted income from continuing operations
per share calculation ...................................... 4,297 5,590
======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Number of locations -- ................. 14 14 17 28 43
Unit truck sales --
New trucks ........................... 2,263 2,871 3,040 4,315 5,366
Used trucks .......................... 1,135 1,349 1,952 2,087 2,156
---------- ---------- ---------- ---------- ----------
Total unit trucks sales ............ 3,398 4,220 4,992 6,402 7,522
Construction equipment unit
sales --
New units ............................ -- -- 90 227 646
Used units ........................... -- -- 35 120 337
---------- ---------- ---------- ---------- ----------
Total construction
equipment unit sales ................ -- -- 125 347 983
Total finance contracts sold
(in thousands) ......................... $ 53,165 $ 76,390 $ 94,849 $ 204,400 $ 283,569
Truck lease and rental units ........... 521 559 628 667 845
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital ........................ $ 626 $ 24,676 $ 18,364 $ 15,712 $ 2,843
Inventories ............................ 36,517 36,688 66,757 107,140 173,565
---------- ---------- ---------- ---------- ----------
Total assets ........................... 76,079 109,217 155,478 220,700 365,696
Floor plan financing ................... 34,294 42,228 63,268 89,212 150,862
Line-of-credit
borrowings ........................... 10 20 20 10 10,953
Long-term debt, including
current portion ...................... 17,287 15,547 25,181 39,259 73,877
Shareholders' equity ................... 7,685 36,692 42,072 52,869 74,852
</TABLE>
(1) For all periods presented prior to the Company's public offering on June 7,
1996, the Company was an S corporation and was not generally subject to
corporate income taxes. The pro forma income tax provision has been
computed as if the Company were subject to corporate income taxes for all
periods presented based on the tax laws in effect during the respective
periods. See Note 13 to the Consolidated Financial Statements.
(2) Pro forma basic and diluted income from continuing operations per share was
computed by dividing pro forma income from continuing operations by the
weighted average number of common shares outstanding, as adjusted for the
stock split of the Common Stock and giving pro forma effect for the
issuance of 547,400 shares of Common Stock, at an initial public offering
price of $12.00 per share, to repay the line-of-credit borrowings made to
fund the approximately $6.0 million distribution to the Company's sole
shareholder of the undistributed taxable S corporation earnings. See Note 1
to the Consolidated Financial Statements.
28
<PAGE> 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Certain statements contained in this Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" of the Form 10-K
are "forward-looking statements" within the meaning of the Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934,
as amended. Specifically, all statements other than statements of historical
fact included in this Form 10-K 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. 333-03346) 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.
We are a full-service, integrated retailer of premium transportation and
construction equipment and related services. As the leading supplier of
Peterbilt trucks, we accounted for approximately 20.7% of all new Peterbilt
trucks sold in the United States in 1999. In 1997, we acquired our first John
Deere construction equipment dealership in Houston, Texas and have grown to
become a major supplier of John Deere construction equipment. Through our
strategically located networks of Rush Truck Centers and Rush Equipment Centers,
we provide one-stop service for the needs of our customers, including retail
sales of new and used transportation and construction equipment, as well as
after-market parts sales, service and repair facilities and financing,
leasing/rental, and insurance services.
29
<PAGE> 30
Our Rush Truck Centers are principally located in high traffic areas along
the southwestern corridor of the United States. Our Rush Equipment Centers are
located in two of the top six construction equipment sales markets in the United
States -- Texas and Michigan. We provide leasing and rental services through our
Rush Leasing and Rental Division at our one-stop Rush Truck Centers and Rush
Equipment Centers. Retail financing of trucks and construction equipment, as
well as a full line of insurance products, are arranged through our Rush
Financial and Insurance Division. Our Rush Retail Division has developed the
one-stop shopping strategy for our farm and ranch supply business.
Our business strategy, based upon providing the customer with competitively
priced products supported with timely and reliable service, has enabled us since
1996 to increase revenues at a compounded annual growth rate of 33.0% and to
increase earnings at a compounded annual growth rate of 37.5%. We intend to
continue to implement our business strategy, reinforce customer loyalty and
remain a market leader by continuing to develop our Rush Truck Centers and Rush
Equipment Centers as we extend our geographic focus through strategic
acquisitions of new locations and expansions of our existing facilities.
All of our business operations are currently conducted through five
separate divisions: the Rush Truck Center Division, the Rush Equipment Center
Division, the Rush Leasing and Rental Division, the Rush Financial and Insurance
Division and the Rush Retail Division.
Rush Truck Center Division. Since commencing operations as a Peterbilt
heavy-duty truck dealer over 34 years ago, we have grown to operate Rush Truck
Centers at 36 locations which primarily sell Peterbilt Class 8 heavy-duty trucks
in the states of Texas, Colorado, Oklahoma, California, Louisiana, Arizona and
New Mexico. Our Rush Truck Centers are strategically located to take advantage
of increased cross-border traffic between the United States and Mexico resulting
from implementation of NAFTA in 1994. During 1999, our Rush Truck Center
Division accounted for approximately $662.5 million, or approximately 82.0%, of
our total revenues.
Rush Equipment Center Division. Since commencing operations as a John Deere
dealer in 1997, we have grown to operate nine Rush Equipment Centers located in
Texas and Michigan. We provide a full line of construction equipment for light
to medium sized applications, with our primary products including John Deere
backhoe loaders, hydraulic excavators, crawler dozers and four wheel drive
loaders. During 1999, our Rush Equipment Center Division accounted for
approximately $82.7 million, or approximately 10.2%, of our total revenues.
Rush Leasing and Rental Division. We provide a broad line of product
selections for lease or rent, including Class 8, Class 7 and Class 6 Peterbilt
trucks, a full array of John Deere construction equipment products, including a
variety of construction equipment trailers and heavy-duty cranes. Our lease and
rental fleets are offered primarily through our Rush Truck Centers and Rush
Equipment Centers on a daily, monthly or long-term basis. During 1999, our Rush
Leasing and Rental Division accounted for approximately $31.0 million, or
approximately 3.8%, of our total revenues.
30
<PAGE> 31
Rush Financial and Insurance Division. We offer third-party financing to
assist customers in purchasing a new or used truck or piece of construction
equipment. Additionally, we sell a complete line of property and casualty
insurance, including collision and liability insurance on trucks, cargo
insurance, standard automobile liability coverages, and life insurance. During
1999, our Rush Financial and Insurance Division accounted for approximately
$13.6 million, or approximately 1.7%, of our total revenues.
Rush Retail Division. During 1998, we created the Rush Retail Division in
connection with our acquisition of D&D Farm and Ranch Supermarket, Inc. ("D&D").
D&D is a one-stop shopping center for farm and ranch supplies, serving the
greater San Antonio, Texas area. We anticipate opening a second D&D store in
Houston, Texas in 2000. During 1999, our Rush Retail Division accounted for
approximately $18.6 million, or approximately 2.3%, of our total revenues.
RESULTS OF OPERATIONS
The following discussion and analysis includes the Company's historical results
of operations for 1997, 1998, and 1999.
The following table sets forth for the years indicated certain financial
data as a percentage of total revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
New and used truck sales 72.7% 69.0% 68.6%
Parts and service 19.7 17.6 16.1
Construction equipment sales 1.9 5.8 7.7
Lease and rental 3.7 3.0 3.1
Finance and insurance 1.5 1.9 1.7
Retail sales -- 2.3 2.3
Other 0.5 0.4 0.5
-------- -------- --------
Total revenues 100.0 100.0 100.0
Cost of products sold 83.8 82.9 83.3
-------- -------- --------
Gross profit 16.2 17.1 16.7
Selling, general and administrative 12.7 12.4 11.6
Depreciation and amortization 0.7 0.8 0.8
-------- -------- --------
Operating income 2.8 3.9 4.3
Interest expense, net 0.6 1.0 1.0
-------- -------- --------
Income before income taxes 2.2% 2.9% 3.3%
======== ======== ========
</TABLE>
31
<PAGE> 32
FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED WITH FISCAL YEAR ENDED DECEMBER 31,
1998.
Revenues
Revenues increased by approximately $195.6 million, or 31.9%, from $612.8
million to $808.4 million from 1998 to 1999. This increase was attributable to
gains achieved from each of the Company's revenue categories, primarily as a
result of improved operations, increased market demand, and revenues generated
from acquisitions and new store openings.
Sales of new and used trucks increased by approximately $131.8 million, or
31.2%, from $422.8 million to $554.6 million from 1998 to 1999. Unit sales of
new and used trucks increased by 24.4% and 3.3%, respectively. The increase in
new truck sales was mainly due to increasing fleet sales, acquisitions and an
overall strong new truck market in 1999. The moderate growth rate in used truck
sales is a result of a shortage of desirable used truck inventory during 1999
caused by fewer used truck trade-ins. The average selling price of new trucks
increased by 9.6% while used truck average selling prices increased by 5.9%. New
truck and used truck prices increased due to product mix and increased market
demand.
Parts and service sales increased by approximately $22.5 million, or 20.8%,
from $108.0 million to $130.5 million from 1998 to 1999, with the inclusion of a
full year of operations in the Rush equipment center in western Michigan,
compared to only four months of operations in western Michigan in 1998, and the
1999 additions of the equipment center in eastern Michigan, and the truck
centers in Arizona, New Mexico and California accounting for approximately $13.4
million or 60.4% of the increase and the remainder being attributed to growth at
existing locations.
Sales of new and used construction equipment increased approximately $26.6
million or 75.1%, from $35.4 million to $62.0 million from 1998 to 1999. The
increase is due to the construction equipment segment only having four months of
western Michigan operations in 1998 and the addition of the eastern Michigan
construction equipment dealership in September of 1999. New and used equipment
unit sales were 247 and 120, respectively, for the year ended 1998 compared to
646 and 337 new and used units, respectively, in 1999.
Lease and rental revenues increased by approximately $6.8 million, or 36.6%,
from $18.6 million to $25.4 million from 1998 to 1999, primarily due to the
inclusion of a full year of operations at the Rush equipment center in western
Michigan and the acquisition of the equipment center in eastern Michigan, and
the remainder being attributed to growth at existing locations.
Finance and insurance revenues increased by approximately $2.2 million, or
19.3%, from $11.4 million to $13.6 million from 1998 to 1999. The growth
resulted from increased truck sales coupled with lower borrowing costs during
1999 compared to 1998. Finance and insurance revenues have limited direct costs
and, therefore, contribute a disproportionate share of operating profits.
32
<PAGE> 33
Retail sales revenue, generated by D&D, increased $4.7 million or 33.8%
from 1998 to 1999. The growth in 1999 was favorably impacted as the results for
1998 reflect only 10 months of operations due to the acquisition of D&D in
February 1998.
Other income increased approximately $1.0 million or 37.0%, from $2.7
million to $3.7 million from 1998 to 1999, primarily due to the increase in
truck sales by the leasing operations.
Gross Profit
Gross profit increased by approximately $30.3 million, or 29.0%, from
$104.5 million to $134.8 million from 1998 to 1999. Approximately $10.3 million
or 34.0% of the increase is attributable to the inclusion in the results of
operations of retail locations either acquired in 1999 or conducting their first
full year of operations in 1999. The remaining gross profit increase of $20.0
million or 66.0% is attributable to growth at existing locations. Gross profit
as a percentage of sales decreased from 17.1% during 1998 to 16.7% during 1999.
The decrease in gross margins was due to a slight decrease in gross margins on
the sale of new trucks due to increased fleet sales in 1999, and decreases in
the higher margin parts and service, and finance and insurance sales, as a
percentage of total sales, from 1998 to 1999.
Selling, General and Administrative
Selling, general and administrative expenses increased by approximately
$17.7 million, or 23.4%, from $75.8 million to $93.5 million from 1998 to 1999.
The increase includes $8.7 million or 49.2%, attributable to the operations of
new truck and equipment locations either acquired in 1999 or conducting their
first full year of operations in 1999. The remaining increase resulted primarily
from an increase in salaries and sales commissions due to increases in revenues
and gross profit in 1999 compared to 1998. Selling, general and administrative
expenses as a percent of revenue were 12.4% and 11.6% in 1998 and 1999,
respectively.
Interest Expense, Net
Net interest expense increased by approximately $2.3 million, or 39.0%,
from approximately $5.9 million to $8.2 million, from 1998 to 1999. Interest
expense increased primarily as a result of increased levels of indebtedness due
to higher floor plan liability levels and the debt financing of certain real
property purchased or improved during 1999.
Income Before Income Taxes
Income before income taxes increased by $8.9 million, or 49.4%, from $18.0
million to $26.9 million, from 1998 to 1999, as a result of the factors
described above.
33
<PAGE> 34
Income Taxes
Income taxes increased by $3.6 million, or 50.0%, from $7.2 million to
$10.8 million, from 1998 to 1999. The Company has provided for taxes at the 40%
effective rate.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED WITH FISCAL YEAR ENDED DECEMBER 31,
1997.
Revenues
Revenues increased by approximately $213.4 million, or 53.4%, from $399.4
million to $612.8 million from 1997 to 1998. This increase was attributable to
gains achieved from each of the Company's revenue categories, primarily as a
result of improved operations, increased market demand, and revenues generated
from acquisitions and new store openings.
Sales of new and used trucks increased by approximately $132.3 million, or
45.5%, from $290.5 million to $422.8 million from 1997 to 1998. Unit sales of
new and used trucks increased by 41.9% and 6.9%, respectively. The large
increase in new truck sales was mainly due to increasing fleet sales and an
overall strong new truck market in 1998. The moderate growth rate in used truck
sales is a result of a shortage of desirable used truck inventory during 1998
caused by fewer used truck trade-ins. The average selling price of new trucks
increased by 5.9% while used truck average selling prices increased by 13.8%.
New truck and used truck prices increased due to product mix and increased
market demand.
Parts and service sales increased by approximately $29.3 million, or 37.2%,
from $78.7 million to $108.0 million from 1997 to 1998, with the inclusion of a
full year of operations in Colorado, Pharr and at the Rush equipment center in
Houston, Texas, and the 1998 additions of the Rush retail center and the
equipment center in Michigan accounting for approximately $14.4 million or 49.1%
of the increase and the remainder being attributed to growth at existing
locations.
Sales of new and used construction equipment increased approximately $27.9
million or 372%, from $7.5 million to $35.4 million from 1997 to 1998. The
increase is due to the construction equipment segment only having three months
of operations in 1997 and the addition of the Michigan construction equipment
dealership in September of 1998. New and used equipment unit sales were 247 and
120, respectively, for the year ended 1998.
Lease and rental revenues increased by approximately $3.8 million, or
25.7%, from $14.8 million to $18.6 million from 1997 to 1998, with the inclusion
of a full year of operations at the Rush equipment center in Houston, Texas and
the acquisition of the equipment center in Michigan accounting for approximately
$2.4 million or 63.2% of the increase, and the remainder being attributed to
growth at existing locations.
34
<PAGE> 35
Finance and insurance revenues increased by approximately $5.4 million, or
90%, from $6.0 million to $11.4 million from 1997 to 1998. The growth resulted
from increased truck sales coupled with lower borrowing costs during 1998
compared to 1997. Finance and insurance revenues have limited direct costs and,
therefore, contribute a disproportionate share of operating profits.
Retail sales revenue totaled $13.9 million during 1998 and was generated
entirely by D&D in its first year with the Company.
Other income increased approximately $0.8 million or 42.1%, from $1.9
million to $2.7 million from 1997 to 1998, primarily due to the increase in
truck sales by the leasing operations.
Gross Profit
Gross profit increased by approximately $39.7 million, or 61.3%, from $64.8
million to $104.5 million from 1997 to 1998. Approximately $17.4 million or
43.8% of the increase is attributable to the operations of new truck, equipment
and retail locations previously described, either acquired in 1998 or conducting
their first full year of operations in 1998. The remaining gross profit increase
of $22.3 million or 56.2% is attributable to growth at existing locations. Gross
profit as a percentage of sales increased from 16.2% during 1997 to 17.1% during
1998. The increase in gross margins was due to a .22% increase in gross margins
on the sale of new and used trucks, a 1% increase in gross margins on heavy-duty
truck parts, service and body shop sales, and the inclusion of a full year of
construction equipment store operations which had a gross margin of 23.4% on
approximately $51.3 million in revenue in 1998 compared to a gross margin of
20.6% on approximately $10.2 million in sales in 1997.
Selling, General and Administrative
Selling, general and administrative expenses increased by approximately
$25.2 million, or 49.8%, from $50.6 million to $75.8 million from 1997 to 1998.
The increase includes $12.9 million or 51.2%, attributable to the operations of
new truck, equipment and retail locations previously described, either acquired
in 1998 or conducting their first full year of operations in 1998. The remaining
increase resulted from an increase in salaries and sales commissions due to
increases in revenues and gross profit in 1998 compared to 1997. Selling,
general and administrative expenses as a percent of revenue were 12.7% and 12.4%
in 1997 and 1998, respectively.
Interest Expense, Net
Net interest expense increased by approximately $3.4 million, or 136.0%,
from approximately $2.5 million to $5.9 million, from 1997 to 1998. Interest
expense increased primarily as a 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.
35
<PAGE> 36
Income Before Income Taxes
Income from continuing operations increased by $9.3 million, or 106.9%,
from $8.7 million to $18.0 million, from 1997 to 1998, as a result of the
factors described above.
Income Taxes
Income taxes increased by $3.9 million, or 118.2%, from $3.3 million to
$7.2 million, from 1997 to 1998. The Company has provided for taxes at the 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
acquisitions of new facilities. These short-term cash needs have historically
been financed with retention of profits and borrowings under credit facilities
available to the Company.
At December 31, 1999, the Company had working capital of approximately $2.8
million, including $20.0 million in cash, $29.8 million in accounts receivable,
$173.6 million in inventories, and $0.7 million in prepaid expenses and other
offset by $150.9 million outstanding under floor plan notes payable, $8.5
million in current maturities of long-term debt, $11.0 million in advances
outstanding under lines of credit, $9.7 million of trade accounts payable, $20.5
million in accrued expenses, and $20.7 million in a note payable to shareholder.
The aggregate maximum borrowing limits under working capital lines of credit
with its primary truck lender are approximately $12.0 million. The Company has a
separate unsecured line-of-credit agreement with a financial institution that
provides for an aggregate maximum borrowing of $10,000,000.
The Company's floor plan agreements with its primary truck lender limit the
aggregate amount of borrowings based on the number of new and used trucks. As of
December 31, 1999, the Company's floor plan arrangements permit the financing of
up to 1,777 new trucks and 710 used trucks, and the availability for new and
used trucks is 703 and 321, respectively. The Company's floor plan agreement
with its primary construction equipment lender is based on the book value of the
Company's construction equipment inventory. As of December 31, 1999, the
aggregate amount of borrowing capacity was $25 million, with approximately $10.1
million outstanding. Additional amounts are available under the Company's John
Deere dealership and credit agreements. At December 31, 1999, approximately
$36.3 million was outstanding pursuant to the John Deere agreements.
During 1999, the Company used $27.8 million of net cash in operating
activities. Net income of $16.2 million and increases in depreciation and
amortization, deferred income tax expense and trade accounts payable of $8.4
million, $2.6 million and $2.8 million respectively, were more than offset by
increases in accounts receivable and inventories of $10.2 million and $46.7
million respectively, a decrease in accrued expenses of $0.5 million, and the
gain on sale of property and equipment of $0.2 million.
36
<PAGE> 37
During 1999, the Company used $83.3 million of net cash in investing
activities, including expenditures of $21.8 million related to business
acquisitions, and $60.3 million that was related to the expansion of various
facilities and the purchase of units placed in the Company's truck leasing
fleet. These expenditures have resulted in a net increase of $49.0 million in
property and equipment from 1998 to 1999.
Net cash provided by financing activities in 1999 amounted to $108.6
million. Cash flows from financing activities included proceeds of $58.4 million
from notes payable due to the financing of expansion projects and the purchase
of units placed in the Company's truck leasing fleet, a net increase of $49.5
million in floor plan notes payable, draws on lines of credit of $10.9 million,
and principal payments on notes payable of $10.2 million.
During 1999, the Company arranged customer financing for approximately
45.9% of its total new and used truck sales, and derived approximately 64% and
36% of its finance revenues from the sale of new and used trucks, respectively.
The Company's new and used truck financing is typically provided through
Associates and PACCAR Financial. The Company financed approximately $254.4
million of new and used truck purchases in 1999. The Company's contracts with
Associates and PACCAR Financial provide for payment to the Company of all
finance charges in excess of a negotiated discount rate within 30 days of the
date of financing, with such payments subject to offsets resulting from the
early pay-off or defaults under installment contracts previously sold to
Associates and PACCAR Financial by the Company. The Company's agreements with
Associates and PACCAR Financial limit the aggregate liability of the Company for
repossession losses resulting from defaults under the installment contracts sold
to Associates and PACCAR Financial to $500,000 and $200,000 per year,
respectively.
In addition, through The CIT Group, Associates, John Deere Credit and
others, the Company arranged customer financing for approximately $29.2 million,
or approximately 47.1%, of our total new and used construction equipment sales
in 1999. Approximately 70% of these construction equipment financings related to
new construction equipment sales and the remainder related to used construction
equipment sales. Generally, construction equipment financings are memorialized
through the use of installment or lease contracts, which are secured by the
construction equipment financed, and generally require a down payment of 0% to
10% of the value of the financed piece of construction equipment, with the
remaining balance being financed over a three-to five-year period. The Company
experiences no repossession loss on construction equipment financings because
such financings are sold to third parties without recourse.
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 of the
trucks 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 prior to sale on new vehicles to GMAC for a period of 12
37
<PAGE> 38
months and for used vehicles for a period of three months. At December 31, 1999,
the Company had approximately $104.2 million outstanding under its floor plan
financing arrangement with GMAC. GMAC permits the Company to earn, for up to
50.0% of the amount borrowed under its floor plan financing arrangement with
GMAC, interest at the prime rate, less three-quarters of a percent, on overnight
funds deposited by the Company with GMAC.
Substantially all of the Company's new equipment purchases are financed by
John Deere and Associates Commercial Corporation. The Company finances all, or
substantially all, of the purchase price of its new equipment inventory, under
its floor plan facilities. The agreement with John Deere provides interest free
financing for four months after which time the amount financed is required to be
paid in full, or an immediate 2.25% discount with payment due in 30 days. When
the equipment is sold prior to the expiration of the four month period, the
Company is required to repay the principal within approximately 10 days of the
sale. Should the equipment financed by John Deere not be sold within the four
month period, it is transferred to the Associates Commercial Corporation. floor
plan arrangement. The Company makes principal payments to Associates Commercial
Corporation, for sold 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 Corporation. 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 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 December 31, 1999, the Company's
floor plan arrangement with Associates Commercial Corporation permits the
financing of up to $25 million in construction equipment. At December 31, 1999,
the Company had $36.3 million and $10.1 million outstanding under its floor plan
financing arrangements with John Deere and Associates Commercial Corporation,
respectively.
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.
Seasonal effects in the construction equipment business are primarily driven
by the weather. 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.
38
<PAGE> 39
Cyclicality
The Company's business, as well as the entire retail heavy-duty truck
industry, is 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
have historically been subject to substantial cyclical variation based on such
general economic conditions. According to R.L. Polk, industry-wide domestic
retail sales of heavy-duty trucks exceeded 200,000 units for only the third
time, recording approximately 247,000 new truck registrations in 1999. The
industry forecasts a decrease ranging from 15% to 20% in heavy-duty new truck
sales in 2000. Although the Company believes that its geographic expansion and
diversification into truck-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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the financial
position, results of operations, or cash flows of the Company due to adverse
changes in financial market prices, including interest rate risk, and other
relevant market rate or price risks.
The Company is exposed to some market risk through interest rates,
related to its floor plan borrowing arrangements, variable rate debt and
discount rates related to finance sales. Floor plan borrowings are based on the
prime rate of interest and are used to meet working capital needs. As of
December 31, 1999, the Company had floor plan borrowings of approximately
$150,862,000. Assuming an increase in the prime rate of interest of 100 basis
points, future cash flows would be effected by $1,508,000. The interest rate
variability on all other debt would not have a material adverse effect on the
Company's financial statements. The Company provides all customer financing
opportunities to various finance providers. The Company receives all finance
charges, in excess of a negotiated discount rate, from the finance providers
within 30 days. The negotiated discount rate is variable, thus subject to
interest rate fluctuations. This interest rate risk is mitigated by the
Company's ability to pass discount rate increases to customers through higher
financing rates.
39
<PAGE> 40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<S> <C>
Report of Independent Public Accountants. 41
Consolidated Balance Sheets as of December 31, 1998 and 1999. 42
Consolidated Statements of Income for the Years ended December 31, 1997, 1998 and 1999. 43
Consolidated Statements of Shareholders' Equity for the Years ended December 31, 1997, 1998 and 1999. 44
Consolidated Statements of Cash Flows for the Years ended December 31, 1997, 1998 and 1999. 45
Notes to Consolidated Financial Statements. 46
</TABLE>
40
<PAGE> 41
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Rush Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of Rush
Enterprises, Inc. (a Texas corporation), and subsidiaries as of December 31,
1998 and 1999, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rush Enterprises,
Inc., and subsidiaries as of December 31, 1998 and 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/ARTHUR ANDERSEN LLP
San Antonio, Texas
February 18, 2000
41
<PAGE> 42
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
(In Thousands, Except Shares and Per Share Amounts)
<TABLE>
<CAPTION>
1998 1999
-------- --------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 22,516 $ 20,004
Accounts receivable, net 19,478 29,767
Inventories 107,140 173,565
Prepaid expenses and other 607 736
-------- --------
Total current assets 149,741 224,072
PROPERTY AND EQUIPMENT, net 54,448 103,426
OTHER ASSETS, net 16,511 38,198
-------- --------
Total assets $220,700 $365,696
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable $ 89,212 $150,862
Current maturities of long-term debt 7,095 8,463
Advances outstanding under lines of credit 10 10,953
Trade accounts payable 6,926 9,710
Accrued expenses 20,086 20,516
Note payable to shareholder 10,700 20,725
-------- --------
Total current liabilities 134,029 221,229
LONG-TERM DEBT, net of current maturities 32,164 65,414
DEFERRED INCOME TAXES, net 1,638 4,201
COMMITMENTS AND CONTINGENCIES (Note 14)
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares
outstanding in 1998 and 1999 -- --
Common stock, par value $.01 per share; 25,000,000 shares authorized; 6,643,730
shares outstanding - 1998 and 7,002,044 shares outstanding - 1999 66 70
Additional paid-in capital 33,342 39,155
Retained earnings 19,461 35,627
-------- --------
Total shareholders' equity 52,869 74,852
-------- --------
Total liabilities and shareholders' equity $220,700 $365,696
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
42
<PAGE> 43
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
New and used truck sales $ 290,495 $ 422,754 $ 554,571
Parts and service 78,665 108,024 130,548
Construction equipment sales 7,518 35,402 62,042
Lease and rental 14,761 18,594 25,375
Finance and insurance 6,026 11,432 13,581
Retail sales -- 13,895 18,573
Other 1,904 2,684 3,665
--------- --------- ---------
Total revenues 399,369 612,785 808,355
COST OF PRODUCTS SOLD 334,583 508,242 673,563
--------- --------- ---------
GROSS PROFIT 64,786 104,543 134,792
SELLING, GENERAL AND ADMINISTRATIVE 50,618 75,849 93,502
DEPRECIATION AND AMORTIZATION 2,977 4,813 6,162
--------- --------- ---------
OPERATING INCOME 11,191 23,881 35,128
--------- --------- ---------
INTEREST INCOME (EXPENSE):
Interest income 1,155 982 807
Interest expense (3,668) (6,866) (8,992)
--------- --------- ---------
Total interest expense, net (2,513) (5,884) (8,185)
--------- --------- ---------
INCOME BEFORE INCOME TAXES 8,678 17,997 26,943
--------- --------- ---------
PROVISION FOR INCOME TAXES 3,298 7,200 10,777
--------- --------- ---------
NET INCOME $ 5,380 $ 10,797 $ 16,166
========= ========= =========
EARNINGS PER SHARE (Note 12):
Basic income per common share $ .81 $ 1.62 $ 2.40
========= ========= =========
Diluted income per common share and common share equivalents $ .81 $ 1.62 $ 2.34
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
43
<PAGE> 44
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(In Thousands)
<TABLE>
<CAPTION>
Common Stock
-------------------------
Shares Additional
Issued and $.01 Paid-In Retained
Outstanding Par Value Capital Earnings
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996 6,644 $ 66 $33,342 $ 3,284
NET INCOME -- -- -- 5,380
------- ------- ------- -------
BALANCE, December 31, 1997 6,644 66 33,342 8,664
NET INCOME -- -- -- 10,797
------- ------- ------- -------
BALANCE, December 31, 1998 6,644 66 33,342 19,461
ISSUANCE OF COMMON STOCK 358 4 5,813 --
NET INCOME -- -- -- 16,166
------- ------- ------- -------
BALANCE, December 31, 1999 7,002 $ 70 $39,155 $35,627
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
44
<PAGE> 45
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(In Thousands)
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,380 $ 10,797 $ 16,166
Adjustments to reconcile net income to net cash provided by operating
activities- net of acquisitions
Depreciation and amortization 2,977 4,813 8,380
Gain on sale of property and equipment (305) (195) (166)
Provision for deferred income tax expense 153 458 2,563
Change in accounts receivable, net 2,170 2,141 (10,236)
Change in inventories (6,658) (25,006) (46,739)
Change in prepaid expenses and other, net 1,122 (174) (64)
Change in trade accounts payable 594 1,007 2,784
Change in accrued expenses 3,872 6,786 (521)
--------- --------- ---------
Net cash provided by (used in) operating activities 9,305 627 (27,833)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (10,194) (22,907) (60,325)
Proceeds from the sale of property and equipment 581 638 1,637
Business acquisitions (36,068) (8,625) (21,756)
Change in other assets (457) (283) (2,824)
--------- --------- ---------
Net cash used in investing activities (46,138) (31,177) (83,268)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 21,053 22,624 58,358
Payments on long-term debt (6,951) (5,892) (10,179)
Draws on floor plan notes payable, net 21,040 16,518 49,467
Draws on lines of credit, net -- -- 10,943
--------- --------- ---------
Net cash provided by financing activities 35,142 33,250 108,589
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,691) 2,700 (2,512)
CASH AND CASH EQUIVALENTS, beginning of year 21,507 19,816 22,516
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 19,816 $ 22,516 $ 20,004
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 3,378 $ 6,574 $ 9,323
========= ========= =========
Income taxes $ 1,572 $ 4,478 $ 8,394
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
45
<PAGE> 46
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS:
Rush Enterprises, Inc. (the Company), was incorporated in June 1996 under the
laws of the State of Texas. The Company, founded in 1965, now operates a
Heavy-duty Truck segment and a Construction Equipment segment. The Heavy-duty
Truck segment operates a regional network of 36 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; parts, service and
body shop facilities; and financial services, including assisting in the
financing of new and used truck purchases, insurance products and truck leasing
and rentals. The Company's truck centers are located in areas on or near major
highways in Texas, California, Colorado, Oklahoma, Louisiana, Arizona and New
Mexico. The Construction Equipment segment, formed during 1997, operates a
network of seven John Deere equipment centers in Texas and Michigan. Dealership
operations include the retail sale of new and used equipment, after-market parts
and service facilities, equipment rentals, and the financing of new and used
equipment (see note 17).
In March 1998, the Company developed a new retail division, Rush Retail Centers,
and acquired all of the issued and outstanding capital stock of D & D Farm and
Ranch Supermarket Inc. Rush Retail Centers' primary line of business is the
retail sale of farm and ranch supplies including fencing, horse and cattle
trailers, veterinarian supplies and western wear (see note 15).
In September 1998, the Company acquired all of the assets and assumed certain
liabilities of Klooster Equipment, Inc. and began operations of Rush Equipment
Centers Michigan. Klooster Equipment Inc.'s primary line of business is the sale
and rental of new John Deere and used construction equipment, parts and service
(see note 15).
In September 1999, the Company acquired substantially all the assets of Calvert
Sales, Inc., (Calvert), a John Deere construction equipment dealership. The
acquisition encompasses 13 counties in eastern Michigan, including two
full-service dealerships located in the Detroit and Flint areas. Calvert's
primary line of business is the sale and rental of new John Deere and used
construction equipment, parts and service (see note 15).
In October 1999, the Company purchased substantially all the assets of Southwest
Peterbilt, Inc., Southwest Truck Center, Inc., and New Mexico Peterbilt, Inc.,
(Southwest) a Peterbilt truck dealer, which consisted of five dealership
locations in Arizona and New Mexico. Southwest's primary line of business is the
sale of new Peterbilt and used heavy-duty trucks, parts and service (see note
15).
In December 1999, the Company purchased substantially all the assets of Norm
Pressley's Truck Center, (Pressley), which consisted of three dealership
locations in San Diego, Escondido and El Centro, California. Pressley's primary
line of business is the sale of new Peterbilt and used heavy-duty trucks, parts,
leasing and service (see note 15).
As part of the Company's corporate reorganization in connection with its initial
public offering (Offering) in June 1996, the Company acquired, as a wholly owned
subsidiary, a managing general agent (the MGA) to manage all of the operations
of Associated Acceptance, Inc. (AA). W. Marvin Rush, the sole shareholder of AA,
is prohibited from the sale or transfer of the capital stock of AA under the MGA
agreement, except as designated by the Company. Therefore, the financial
position and operations of AA have been included as part of the Company's
consolidated financial position and results of operations for all periods
presented.
All significant interdivision and intercompany accounts and transactions have
been eliminated in consolidation. Certain prior period balances have been
reclassified for comparative purposes.
2. SIGNIFICANT ACCOUNTING POLICIES:
46
<PAGE> 47
Estimates in Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
Inventories
Inventories are stated at the lower of cost or market value. Cost is determined
by specific identification for new and used truck and construction equipment
inventory and by utilizing the first-in, first-out methods for tires, parts and
accessories.
Property and Equipment
Property and equipment are being depreciated over their estimated useful lives.
Leasehold improvements are amortized over the useful life of the improvement, or
the term of the lease, whichever is shorter. Both the straight-line and double
declining-balance methods of depreciation are used. The Company capitalizes
interest on borrowings during the active construction period of major capital
projects. Capitalized interest is added to the cost of underlying assets and is
amortized over the estimated useful life of such assets. During 1999, the
Company capitalized approximately $165,000 in connection with various capital
projects. The cost, accumulated depreciation and amortization and estimated
useful lives are summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------- Estimated
1998 1999 Life (Years)
-------- -------- ------------
<S> <C> <C> <C>
Land $ 9,972 $ 17,311 --
Buildings and improvements 18,285 26,330 31 - 39
Leasehold improvements 4,303 5,462 7 - 15
Machinery and shop equipment 6,478 8,771 5 - 7
Furniture and fixtures 8,043 11,413 5 - 7
Transportation equipment 8,806 14,220 2 - 5
Leased vehicles 9,188 25,813 4 - 8
Construction in progress -- 10,687
Accumulated depreciation and amortization (10,627) (16,581)
-------- --------
$ 54,448 $103,426
======== ========
</TABLE>
Allowance for Doubtful Receivables
and Repossession Losses
The Company provides an allowance for doubtful receivables and repossession
losses after considering historical loss experience and other factors which
might affect the collectibility of accounts receivable and the ability of
customers to meet their obligations on finance contracts sold by the Company.
Other Assets
Other assets primarily consist of goodwill related to acquisitions of
approximately $15.1 million and $37.0 million, as of December 31, 1998 and 1999,
respectively, and long-term deposits. The goodwill is being amortized on a
straight-line basis over estimated useful lives ranging from 15 to 30 years.
Accumulated amortization of other assets, at December 31, 1998 and 1999, was
approximately $1.1 million and $2.0 million, respectively. Periodically, the
Company assesses the appropriateness of the asset valuations of goodwill and the
related amortization period.
47
<PAGE> 48
Income Taxes
Income taxes are accounted for under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in a company's
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the differences between the financial
statement and tax bases of assets and liabilities using currently enacted tax
rates in effect for the years in which the differences are expected to reverse.
Revenue Recognition Policies
Income on the sale of vehicles and construction equipment (collectively, "unit")
is recognized when the seller and customer execute a purchase contract and
delivery has occurred and there are no significant uncertainties related to
financing or collectibility. Finance income related to the sale of a unit is
recognized over the period of the respective finance contract on the effective
interest rate method if the finance contract is retained by the Company. During
1997, 1998 and 1999, no finance contracts were retained for any significant
length of time by the Company but were generally sold, with limited recourse, to
certain finance companies concurrent with the sale of the related unit. Gain or
loss is recognized by the Company upon the sale of such finance contracts to the
finance companies, net of a provision for estimated repossession losses and
early repayment penalties. Lease and rental income is recognized over the period
of the related lease or rental agreement. Parts and services revenue is earned
at the time the Company sells the parts to its customers, or at the time the
Company completes the service work order related to service provided to the
customer's unit. Payments received on pre-paid maintenance plans are deferred as
a component of accrued expenses and recognized as income when the maintenance is
performed. Retail revenue is earned at the time the Company sells the
merchandise to its customer.
Statement of Cash Flows
Cash and cash equivalents generally consist of cash and other money market
instruments. The Company considers any temporary investments that mature in
three months or less when purchased to be cash equivalents for reporting cash
flows.
Noncash activities during the periods indicated were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Liabilities incurred in connection with acquisitions of
dealerships and leasing operations $ 2,063 $ 1,750 $ --
Assignment of debt in connection with the disposal of property
and equipment $ 1,061 $ - $3,536
</TABLE>
48
<PAGE> 49
3. SUPPLIER AND CUSTOMER CONCENTRATION:
Major Suppliers and Dealership Agreements
The Company has entered into dealership agreements with various companies
(Distributors). These agreements are nonexclusive agreements that allow the
Company to stock, sell at retail and service trucks and products of the
Distributors in the Company's defined market. The agreements allow the Company
to use the Distributor's name, trade symbols and intellectual property and
expire as follows:
<TABLE>
<CAPTION>
Distributor Expiration Dates
----------- ----------------
<S> <C>
PACCAR March 2000 to December 2002
GMC October 2000
Volvo March 2000
John Deere Indefinite
</TABLE>
These agreements impose a number of restrictions and obligations on the Company,
including restrictions on a change in control of the Company and the maintenance
of certain required levels of working capital. Violation of such restrictions
could result in the loss of the Company's right to purchase the Distributor's
products and use the Distributor's trademarks. As of December 31, 1999, the
Company's management believes it was in compliance with all the restrictions of
its dealership agreements.
The Company purchases most of its new vehicles and parts from PACCAR, the maker
of Peterbilt trucks and parts, at prevailing prices charged to all franchised
dealers. Sales of new Peterbilt trucks accounted for 97 percent and 98 percent
of the Company's new vehicle sales for the years ended December 31, 1998 and
1999, respectively.
The Company purchases most of its new construction equipment and parts from John
Deere at prevailing prices charged to all franchised dealers. Sales of new John
Deere equipment accounted for 88 percent and 91 percent of the Company's new
equipment sales for the years ended December 31, 1998 and 1999, respectively.
Primary Lenders
The Company purchases its new and used truck and construction equipment
inventories with the assistance of floor plan financing programs offered by
various financial institutions and John Deere. The financial institution used
for truck inventory purchases also provides the Company with a line of credit
that allows borrowings of up to $12,000,000 and other variable interest rate
notes. The loan agreement with the financial institution, used for truck
inventory purchases, provides that such agreement may be terminated at the
option of the lender with notice of 120 days.
The loan agreement with the financial institution used primarily for
construction equipment purchases expires in September 2000. Additionally,
financing is provided by John Deere pursuant to the Company's equipment
dealership agreement. Furthermore, the agreements also provide that the
occurrence of certain events will be considered events of default. In the event
that the Company's financing becomes insufficient, or its relationship
terminates with the current primary lenders, the Company would need to obtain
similar financing from other sources. Management believes it can obtain
additional floor plan financing or alternative financing if necessary (see note
6).
Concentrations of Credit Risks
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable.
The Company places its cash and cash equivalents with what it considers to be
quality financial institutions. At December 31, 1999, the Company had deposits
in excess of federal insurance totaling approximately $5.0 million.
49
<PAGE> 50
Concentrations of credit risk with respect to trade receivables are reduced
because a large number of geographically diverse customers make up the Company's
customer base, thus, spreading the trade credit risk. A majority of the
Company's business, however, is concentrated in the United States heavy-duty
trucking and construction equipment markets and related aftermarkets. The
Company controls credit risk through credit approvals and by selling certain
trade receivables without recourse. Related to the Company's finance contracts,
after the finance contract is entered into, the Company generally sells the
contracts to a third party. The finance contracts are sold both with and without
recourse, but the annual amount of recourse losses which can be put to the
Company is contractually limited (see note 14). Historically, bad debt expense
associated with the Company's accounts receivable and finance contracts has not
been significant.
4. ACCOUNTS RECEIVABLE:
The Company's accounts receivable, net, consisted of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
1998 1999
--------- ---------
<S> <C> <C>
Trade accounts receivable from sale of vehicles and
construction equipment $13,719 $23,429
Other trade receivables 3,066 2,596
Warranty claims 1,647 2,326
Other accounts receivable 1,646 2,016
Less- Allowance for doubtful receivables and repossession
losses (600) (600)
------- -------
Total $19,478 $29,767
====== ======
</TABLE>
For the years ended December 31, 1997, 1998 and 1999, the Company had no
significant related party sales.
5. INVENTORIES:
The Company's inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1998 1999
---------- ----------
<S> <C> <C>
New vehicles $ 24,550 $ 72,340
Used vehicles 12,231 15,977
Construction equipment - new 30,780 38,494
Construction equipment - used 4,000 6,300
Construction equipment - rental 10,000 9,000
Parts and accessories 20,982 23,645
Other 4,597 7,809
-------- --------
Total $107,140 $173,565
======== ========
</TABLE>
50
<PAGE> 51
6. FLOOR PLAN NOTES PAYABLE AND LINES OF CREDIT:
Floor Plan Notes Payable
Floor plan notes are financing agreements to facilitate the Company's purchase
of new and used trucks and construction equipment. These notes are
collateralized by the inventory purchased and accounts receivable arising from
the sale thereof. The Company's floor plan notes have interest rates at prime
less a percentage rate as determined by the finance provider, as defined in the
agreements. The interest rates applicable to these agreements were 7.75 to 8.0
percent as of December 31, 1999. The amounts borrowed under these agreements are
due when the related truck or construction equipment inventory (collateral) is
sold and the sales proceeds are collected by the Company, or in the case of
construction equipment rentals, when the carrying value of the equipment is
reduced. These lines may be modified, suspended, or terminated by the lender as
described in note 3.
The Company's floor plan agreement with its primary truck lender limits the
borrowing capacity based on the number of new and used trucks that may be
financed. As of December 31, 1999, the aggregate amounts of unit capacity for
new and used trucks are 1,777 and 710, respectively, and the availability for
new and used trucks is 703 and 321, respectively.
The Company's floor plan agreement with its construction equipment lender is
based on the book value of the Company's construction equipment inventory. As of
December 31, 1999, the aggregate amount of borrowing capacity with the Company's
equipment lender was $25 million, with approximately $10.1 million outstanding.
Additional amounts are available under the Company's John Deere dealership and
credit agreements. At December 31, 1999, approximately $36.3 million was
outstanding pursuant to the John Deere agreements.
Amounts of collateral as of December 31, 1999, are as follows (in thousands):
<TABLE>
<S> <C>
Inventories, new and used vehicles and construction equipment
at cost based on specific identification $142,111
Truck and construction equipment sale related accounts
receivable 22,534
--------
Total $164,645
========
Floor plan notes payable $150,862
========
</TABLE>
Lines of Credit
The Company has a separate line-of-credit agreement with a financial institution
that provides for an aggregate maximum borrowing of $12,000,000, with advances
generally limited to 75 percent of new parts inventory. Advances bear interest
at prime less one-half of one percent. Advances under the line-of-credit
agreement are secured by new parts inventory. The line-of-credit agreement
contains financial covenants. The Company was in compliance with these covenants
at December 31, 1999. Either party may terminate the agreement with 30 days
written notice. As of December 31, 1998 and 1999, advances outstanding under
this line-of-credit agreement amounted to $10,000 and $3,010,000, respectively.
As of December 31, 1999, $7,909,000 was available for future borrowings. This
line is discretionary and may be modified, suspended or terminated at the
election of the lender.
The Company has a separate unsecured line-of-credit agreement with a financial
institution that provides for an aggregate maximum borrowing of $10,000,000.
Advances bear interest at prime or LIBOR plus 2.5%, pursuant to the election of
the Company at the time of borrowing. The line-of-credit agreement contains
financial covenants. The Company was in compliance with these covenants at
December 31, 1999. The line-of-credit agreement has a term of one year and
expires in December 2000. As of December 31, 1998 and 1999, advances outstanding
under this line-of-credit agreement amounted to $0 and $5,000,000, respectively.
As of December 31, 1999, $5,000,000 was available for future borrowings.
51
<PAGE> 52
The Company has a separate line-of-credit agreement with a financial institution
that provides for an aggregate maximum borrowing of $3,500,000, with advances
generally limited to 100 percent of the book value of the Company's service
units. Advances bear interest at prime less .75%. Advances under the
line-of-credit agreement are secured by service units. The line-of-credit
agreement contains financial covenants. The Company was in compliance with these
covenants at December 31, 1999. Either party may terminate the agreement with 30
days written notice. As of December 31, 1998 and 1999, advances outstanding
under this line-of-credit agreement amounted to $0 and $2,943,000, respectively.
As of December 31, 1999, $557,000 was available for future borrowings. This line
may be terminated at the election of the lender or the Company, for any reason,
by giving 60 days written notice.
Note payable to shareholder is a short-term note that is payable on demand and
bears interest equal to one-quarter of one percent per annum less than the rate
of interest received by the Company under its agreement to deposit overnight
funds in interest bearing accounts with one of the Company's floor plan lenders.
7. LONG-TERM DEBT:
Long-term debt is comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1998 1999
------- -------
<S> <C> <C>
Variable interest rate term notes $ 1,572 $13,175
Fixed interest rate term notes 37,687 60,702
------- -------
Total debt 39,259 73,877
Less- Current maturities (7,095) (8,463)
------- -------
$32,164 $65,414
======= =======
</TABLE>
As of December 31, 1999, debt maturities are as follows (in thousands):
<TABLE>
<S> <C>
2000 8,463
2001 8,769
2002 10,809
2003 8,384
2004 8,515
Thereafter 28,937
-------
$73,877
=======
</TABLE>
The Company's variable interest rate notes are with one of the Company's primary
lenders and have an interest rate of LIBOR plus 2.4% which was 8.78% at December
31, 1999. Monthly payments of these notes range from $4,000 to $11,333, plus
interest. These notes mature in 2014 and 2015.
The Company's fixed interest rate notes are primarily with financial
institutions and have interest rates ranging from 6.1 percent to 9.0 percent at
December 31, 1999. Payments on the notes range from $257 per month to $51,333
per quarter, plus interest. Maturities of these notes range from April 2000 to
January 2015.
The proceeds from the issuance of the variable and fixed rate notes were used
primarily to acquire land, buildings and improvements, transportation equipment
and leased vehicles. The notes are secured by the assets acquired by the
proceeds of such notes.
52
<PAGE> 53
8. DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument held by the Company:
Current assets and current liabilities - The carrying value
approximates fair value due to the short maturity of these items.
Long-term debt - The fair value of the Company's long-term debt is
based on secondary market indicators. Since the Company's debt is not
quoted, estimates are based on each obligation's characteristics,
including remaining maturities, interest rate, credit rating,
collateral, amortization schedule and liquidity. The carrying amount
approximates fair value.
9. DEFINED CONTRIBUTION PENSION PLANS:
The Company has a defined contribution pension plan (the Rush Plan) which is
available to all Company employees and the employees of certain affiliates. As
of January and July 1st of every year, each employee who has completed six
months of continuous service is entitled to enter the Rush Plan. Participating
employees may contribute from 2 percent to 10 percent of total gross
compensation. The Company, at its discretion, contributed an amount equal to 25
percent of the employees' contributions for those employees with less than five
years of service and contributed an amount equal to 50 percent of the employees'
contributions for those employees with more than 5 years of service. During the
years ended December 31, 1997, 1998 and 1999, the Company incurred expenses of
approximately $215,000, $648,000 and $1,192,000, respectively, related to the
Rush Plan.
Through March 1998, South Coast Peterbilt also had a defined contribution
pension plan (the South Coast Plan) which was available to all employees of
South Coast Peterbilt. Effective April 1, 1998, the South Coast Plan was
terminated at which time all eligible South Coast employees were permitted to
enter the Rush Plan. During the years ended December 31, 1997 and 1998, South
Coast incurred expenses of approximately $151,000 and $46,000, respectively,
related to the South Coast Plan.
The Company currently does not provide any postretirement benefits other than
pensions nor does it provide any postemployment benefits.
10. LEASES:
Vehicle Leases
The Company leases vehicles primarily over periods ranging from one to six years
under operating lease arrangements. These vehicles are subleased to customers
under various agreements in its own leasing operation. Generally, the Company is
required to incur all operating costs and pay a minimum rental and an excess
mileage charge based on maximum mileage over the term of the lease. Vehicle
lease expenses for the years ended December 31, 1997, 1998 and 1999, were
approximately $4,915,000, $5,648,000 and $5,992,600, respectively.
53
<PAGE> 54
Minimum rental commitments for noncancelable vehicle leases in effect at
December 31, 1999, are as follows (in thousands):
<TABLE>
<S> <C>
2000 5,624
2001 4,390
2002 3,400
2003 2,348
2004 1,168
Thereafter 571
---------
Total $ 17,501
========
</TABLE>
Customer Vehicle Leases
A Company division leases both owned and leased vehicles to customers primarily
over periods of one to six years under operating lease arrangements. The leases
require a minimum rental and a contingent rental based on mileage. Rental income
during the years ended December 31, 1997, 1998 and 1999, consisted of minimum
payments of approximately $7,978,000, $7,867,000 and $8,329,000, respectively,
and contingent rentals of approximately $1,940,000, $1,862,000 and $1,694,000,
respectively. Minimum lease payments to be received for noncancelable leases and
subleases in effect at December 31, 1999, are as follows (in thousands):
<TABLE>
<S> <C>
2000 $ 9,625
2001 8,097
2002 6,967
2003 5,635
2004 3,759
Thereafter 2,517
--------
Total $ 36,600
========
</TABLE>
Other Leases - Land and Buildings
The Company leases various facilities under operating leases which expire at
various times through 2023. Rental expense for the years ended December 31,
1997, 1998 and 1999 was $1,194,000, $1,423,000 and $1,460,000, respectively.
Future minimum lease payments under noncancelable leases at December 31, 1999,
are as follows (in thousands):
<TABLE>
<S> <C>
2000 $ 2,250
2001 1,789
2002 1,601
2003 1,476
2004 1,131
Thereafter 3,307
--------
Total $ 11,554
========
</TABLE>
11. STOCK OPTIONS AND STOCK PURCHASE WARRANTS:
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), was issued. SFAS 123
defines a fair value based method of accounting for employee stock options or
similar equity instruments and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. Under the fair
value based method, compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period of the award, which
is usually the vesting period. However, SFAS 123 also allows entities to
continue to measure compensation costs for employee
54
<PAGE> 55
stock compensation plans using the intrinsic value method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25). Because the Company has elected to continue to follow APB 25, SFAS 123
requires disclosure of pro forma net income and earnings per share as if the new
fair value accounting method was adopted. The Company has presented the pro
forma information required by SFAS 123.
In April 1996, the Board of Directors and shareholders adopted the Rush
Enterprises, Inc. Long-Term Incentive Plan (the Incentive Plan). The Incentive
Plan provides for the grant of stock options (which may be nonqualified stock
options or incentive stock options for tax purposes), stock appreciation rights
issued independent of or in tandem with such options (SARs), restricted stock
awards and performance awards.
The aggregate number of shares of common stock subject to stock options or SARs
that may be granted to any one participant in any one year under the Incentive
Plan is 100,000 shares. The Company has 650,000 shares of common stock reserved
for issuance upon exercise of any awards granted under the Company's Incentive
Plan.
In connection with the Offering, the Company agreed to issue to the
representatives of the underwriters and their designees, for their own accounts,
warrants to purchase an aggregate of 250,000 shares of common stock. The
warrants are exercisable during the four-year period commencing June 12, 1997,
at an exercise price equal to $14.40 per share.
On April 8, 1996, the Board of Directors of the Company declared a dividend of
one common share purchase right (a Right) for each share of common stock
outstanding. Each Right entitles the registered holder to purchase from the
Company one share of common stock at a price of $35.00 per share (the Purchase
Price). The Rights are not exercisable until the distribution date, as defined.
The Rights will expire on April 7, 2006 (the Final Expiration Date), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company.
In March 1997, 1998 and 1999 the Company granted options under the Incentive
Plan to purchase an aggregate of 103,013, 168,140 and 117,150 shares,
respectively, of common stock to employees. Each option granted shall become
exercisable in three annual installments beginning on the third anniversary of
the date of grant. The options are exercisable at a price equal to the fair
value of the Company's common stock at the date of grant.
During 1997, the Board of Directors and shareholders adopted the Rush
Enterprises, Inc. 1997 Non-Employee Director Stock Option Plan (the Director
Plan). The Director Plan is designed to attract and retain highly qualified
non-employee directors, reserving 100,000 shares of common stock for issuance
upon exercise of any awards granted under the Plan. Under the terms of this
plan, each non-employee director received options to purchase 10,000 shares as
of the date of adoption or on their respective date of election, all of which
are fully vested and are exercisable immediately, and expire ten years from the
date of grant. During each of the years ended December 31, 1997, 1998 and 1999,
30,000 options were granted and exercisable at a price equal to the fair values
of the Company's common stock at the dates of grant. 20,000 of these options
have been exercised as of December 31, 1999.
55
<PAGE> 56
A summary of the Company's stock option activity, and related information for
the years ended December 31, 1997, 1998 and 1999 follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning of year -- $ -- 130,388 $ 8.51 317,728 $ 10.10
Granted 133,013 8.52 198,140 11.15 147,150 12.47
Exercised -- -- -- -- (20,000) 10.31
Forfeited (2,625) 8.63 (10,800) 10.18 (7,675) 11.29
-------- -------- -------- -------- -------- --------
Outstanding - end of year 130,388 $ 8.51 317,728 $ 10.10 437,203 $ 10.87
-------- -------- -------- -------- -------- --------
Exercisable at end of year 30,000 $ 8.13 60,000 $ 10.06 70,000 $ 12.64
Weighted average fair value of
options granted during the year -- $ 3.67 -- $ 5.84 -- $ 5.47
</TABLE>
The following table summarizes the information about the Company's options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- --------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
-------------- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
$ 7.13 - 8.63 116,638 7.2 $ 8.50 20,000 $ 7.88
$11.00- 12.00 290 565 8.6 $11.26 20,000 $12.00
$ 16.25 30,000 9.4 $16.25 30,000 $16.25
</TABLE>
If the Company had adopted the fair value accounting method under SFAS 123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Net income:
As Reported $ 5,380 $ 10,797 $ 16,166
Pro forma 5,265 $ 10,575 $ 15,853
Basic earnings per share:
As Reported $ .81 $ 1.62 $ 2.40
Pro forma $ .79 $ 1.59 $ 2.35
Diluted earnings per share:
As Reported $ .81 $ 1.62 $ 2.34
Pro forma $ .79 $ 1.59 $ 2.30
</TABLE>
56
<PAGE> 57
The fair value of these options was estimated using a Black-Scholes option
pricing model with a risk-free interest rate of 5.5% for 1997 and 1998 and 6.0%
for 1999, a volatility factor of .133, .422 and .510 for 1997, 1998 and 1999,
respectively, a dividend yield of 0%, and an expected option life of seven years
for 1997 and 1998 and five years for 1999.
In October 1997, the Company issued warrants to purchase an aggregate of 171,875
shares of common stock to C. Jim Stewart & Stevenson in connection with the
purchase of the assets of the John Deere construction equipment store. The
warrants are exercisable during the five-year period commencing October 6, 1998,
at an exercise price equal to $12.00 per share. None of these warrants have been
exercised as of December 31, 1999.
In March 1998, the Company issued options to purchase an aggregate of 109,793
shares of common stock to the seller in connection with the purchase of the
stock of D & D Farm and Ranch Supermarket, Inc. The options are exercisable in
four annual installments beginning on the second anniversary of the date of
grant, at exercise prices equal to $9.38, $14.38 and $19.38 per share. None of
these options have been exercised as of December 31, 1999.
12. EARNINGS PER SHARE:
Earnings per share for all periods have been restated to reflect the adoption of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share," (SFAS
128) which established standards for computing and presenting earnings per share
("EPS") for entities with publicly held common stock or potential common stock.
This statement requires dual presentation of basic and diluted EPS on the face
of the income statement for all entities with complex capital structures. Basic
EPS were computed by dividing net income by the weighted average number of
shares of common stock outstanding during the period. Diluted EPS differs from
basic EPS due to the assumed conversions of potentially dilutive options and
warrants that were outstanding during the period. The following is a
reconciliation of the numerators and the denominators of the basic and diluted
per-share computations for net income.
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Numerator:
Numerator for basic and diluted earnings per share-
Net income available to common shareholders $10,797,000 $16,166,000
=========== ===========
Denominator:
Denominator for basic earnings per share-
weighted-average shares 6,643,730 6,735,360
Effect of dilutive securities:
Stock options 25,324 117,974
Warrants 925 33,791
----------- -----------
Dilutive potential common shares 26,249 151,765
Denominator for diluted earnings per share--adjusted
weighted-average shares and assumed conversions 6,669,979 6,887,125
=========== ===========
Basic earnings per share $ 1.62 $ 2.40
=========== ===========
Diluted earnings per share $ 1.62 $ 2.34
=========== ===========
</TABLE>
57
<PAGE> 58
Warrants and options to purchase shares of common stock that were outstanding
for the years ended December 31, 1997, 1998 and 1999, that were not included in
the computation of diluted earnings per share because the exercise prices were
greater than the average market prices of the common shares, are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Warrants 421,875 421,875 --
Options 123,313 283,113 89,793
-------- -------- --------
Total anti-dilutive securities 545,188 704,988 89,793
======== ======== ========
</TABLE>
13. INCOME TAXES:
Prior to the Offering of the Company's common stock, the Company maintained the
status of S corporation for federal and state income tax purposes. As an S
corporation, the Company was generally not responsible for income taxes. Upon
the closing of the Offering, the Company's S corporation election terminated and
the Company was reorganized. Accordingly, the Company became subject to federal
and state income taxes from that date forward.
Upon the Company's termination of its S corporation status, the Company provided
deferred income taxes for cumulative temporary differences between the tax basis
and financial reporting basis of its assets and liabilities at the date of
termination.
Provision for Income Taxes
The tax provision for the years ended December 31, 1997, 1998 and 1999, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current provision-
Federal $ 2,738 $ 5,652 $ 6,744
State 407 1,090 968
-------- -------- --------
3,145 6,742 7,712
-------- -------- --------
Deferred provision-
Federal 132 424 2,598
State 21 34 467
-------- -------- --------
153 458 3,065
-------- -------- --------
Provision for income taxes $ 3,298 $ 7,200 $ 10,777
======== ======== ========
</TABLE>
The following summarizes the tax effect of significant cumulative temporary
differences that are included in the net deferred income tax liability as of
December 31, 1998 and 1999 (in thousands):
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Differences in depreciation and amortization $ 2,661 $ 5,384
Accruals and reserves not deducted for tax purposes until paid (990) (1,108)
Other, net (33) (75)
-------- --------
$ 1,638 $ 4,201
======== ========
</TABLE>
58
<PAGE> 59
A reconciliation of taxes based on the federal statutory rates and the
provisions for income taxes for the years ended December 31, 1997, 1998 and
1999, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Income taxes at the federal statutory rate $ 2,951 $ 6,288 $ 9,430
State income taxes, net of federal benefit 286 719 933
Other, net 61 193 414
-------- -------- --------
Provision for income taxes $ 3,298 $ 7,200 $ 10,777
======== ======== ========
</TABLE>
14. COMMITMENTS AND CONTINGENCIES:
The Company is contingently liable to finance companies for the notes sold to
such finance companies related to the sale of trucks and construction equipment.
The Company's recourse liability related to sold finance contracts is limited to
15 to 25 percent of the outstanding amount of each note sold to the finance
company with the aggregate recourse liability for 1999 being limited to
$700,000. The Company provides an allowance for repossession losses and early
repayment penalties.
Finance contracts sold during the years ended December 31, 1997, 1998 and 1999,
were $94,849,000, $204,400,000 and $283,569,000, respectively.
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 the 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 individuals for an aggregate monthly
payment of $37,786. The agreements expire in 2000 through 2001.
15. ACQUISITIONS:
In March 1998, the Company caused its wholly owned subsidiary, Rush Retail
Centers of Texas, Inc., to acquire the stock of D & D Farm and Ranch
Supermarket, Inc. for approximately $10.5 million, with the purchase price being
a combination of cash, notes payable and options to purchase an aggregate of
109,973 shares of common stock to the seller. The options are exercisable during
the four-year period commencing March 2, 2000, at exercise prices ranging from
$9.38 to $19.38 per share.
In September 1998, the Company purchased substantially all of the assets of
Klooster Equipment, Inc. which consisted of three full-service John Deere
construction equipment dealerships and one retail only location covering 54
counties in western Michigan. The purchase price was approximately $13.1 million
funded by (i) $2.5 million of cash, (ii) $9.8 million of borrowings under the
Company's floor plan financing arrangements with Associates Commercial
Corporation and John Deere Inc., and (iii) $836,000 of borrowings from John
Deere Credit Corp.
In September 1999, the Company acquired substantially all the assets of Calvert
Sales, Inc., (Calvert), a John Deere construction equipment dealership. The
acquisition encompasses 13 counties in eastern Michigan, including two
full-service dealerships located in the Detroit and Flint areas. The transaction
was valued at $11.1 million with the purchase price paid in a combination of
cash and notes payable.
59
<PAGE> 60
The acquisition has been accounted for as a purchase; operations of the business
acquired have been included in the accompanying consolidated financial
statements from the respective date of acquisition. The purchase price has been
allocated based on the fair values of the assets at the date of acquisition as
follows (in thousands):
<TABLE>
<S> <C>
Inventories $ 10,711
Property and equipment 365
Accrued expenses (52)
Goodwill 37
--------
Total $ 11,061
========
</TABLE>
In October 1999, the Company purchased substantially all the assets of Southwest
Peterbilt, Inc., Southwest Truck Center, Inc., and New Mexico Peterbilt, Inc.,
(Southwest) a Peterbilt truck dealer, which consisted of five dealership
locations in Arizona and New Mexico. The transaction was valued at $23.9 million
with the purchase price paid in a combination of cash and 355,556 shares of the
Company's common stock. An additional $4.0 million may be paid based on a
performance based objective.
The acquisition has been accounted for as a purchase; operations of the business
acquired have been included in the accompanying consolidated financial
statements from the respective date of acquisition. The purchase price has been
allocated based on the fair values of the assets at the date of acquisition as
follows (in thousands):
<TABLE>
<S> <C>
Inventories $ 7,517
Property and equipment 352
Accrued expenses (570)
Prepaid expenses and other 33
Goodwill 16,556
--------
Total $ 23,888
========
</TABLE>
In December 1999, the Company purchased substantially all the assets of Norm
Pressley's Truck Center, (Pressley), which consisted of three dealership
locations in San Diego, Escondido and El Centro, California. The transaction was
valued at approximately $4.5 million with the purchase price paid in cash. An
additional $700,000 may be paid based on a performance based objective.
The acquisition has been accounted for as a purchase; operations of the business
acquired have been included in the accompanying consolidated financial
statements from the respective date of acquisition. The purchase price has been
allocated based on the fair values of the assets at the date of acquisition as
follows (in thousands):
<TABLE>
<S> <C>
Inventories $ 1,458
Property and equipment 406
Accrued expenses (329)
Prepaid expenses and other 85
Goodwill 2,926
--------
Total $ 4,546
========
</TABLE>
60
<PAGE> 61
The following unaudited pro forma summary presents information as if the D & D
Farm and Ranch Supermarket, Inc. and the Klooster Equipment, Inc. acquisitions
had taken place at the beginning of fiscal year 1997 and the Calvert, Southwest
and Pressley acquisitions had taken place at the beginning of 1998. The pro
forma information is provided for information purposes only. It is based on
historical information and does not necessarily reflect the actual results that
would have occurred nor is it necessarily indicative of future results of
operations of the Company. The following summary is for the years ended December
31, 1997, 1998 and 1999 (unaudited) (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 473,805 $ 763,762 $ 921,481
============ ============ ============
Income after pro forma provision for income taxes $ 6,150 $ 12,671 $ 17,594
============ ============ ============
Basic income per share $ .93 $ 1.81 $ 2.51
============ ============ ============
Diluted income per share $ .93 $ 1.80 $ 2.46
============ ============ ============
</TABLE>
16. UNAUDITED QUARTERLY FINANCIAL DATA:
(In thousands, except per share amounts.)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1998
Operating revenues $126,075 $165,983 $153,540 $167,187
Operating income 3,526 6,121 6,245 7,989
Income before income taxes 2,228 4,551 4,778 6,440
Net income 1,337 2,730 2,868 3,862
Basic and diluted earnings per share $ .20 $ .41 $ .43 $ .58
1999
Operating revenues $177,843 $189,412 $214,844 $226,256
Operating income 7,016 8,358 8,953 10,801
Income before income taxes 5,532 6,476 6,976 7,959
Net income 3,319 3,886 4,186 4,775
Basic earnings per share $ .50 $ .58 $ .63 $ .68
Diluted earnings per share $ .50 $ .57 $ .61 $ .66
</TABLE>
17. SEGMENTS:
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.
61
<PAGE> 62
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 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
Construction Equipment segment, formed during 1997, operates full-service John
Deere dealerships that serve the Houston, Texas Metropolitan and surrounding
areas and 67 counties in Michigan. Dealership operations include the retail sale
of new and used equipment, after-market parts and service facilities, equipment
rentals, and the financing of new and used equipment.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on income before income taxes not including extraordinary items.
The Company accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, that is, at current market prices. There were
no material intersegment sales during the years ended December 31, 1997, 1998
and 1999.
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 years ended December 31, 1997, 1998 and 1999 (in thousands):
<TABLE>
<CAPTION>
HEAVY-DUTY CONSTRUCTION
TRUCK EQUIPMENT
SEGMENT SEGMENT ALL OTHER TOTALS
---------- ------------ --------- --------
<S> <C> <C> <C> <C>
1997
Revenues from external customers $381,959 $ 10,166 $ 7,244 $399,369
Interest income 1,155 -- -- 1,155
Interest expense 3,043 408 217 3,668
Depreciation and amortization 2,555 77 345 2,977
Segment profit before income tax 8,136 116 426 8,678
Segment assets 107,688 39,320 8,470 155,478
Expenditures for segment assets 8,622 242 1,330 10,194
1998
Revenues from external customers $538,209 $ 51,273 $ 23,303 $612,785
Interest income 982 -- -- 982
Interest expense 4,163 1,912 791 6,866
Depreciation and amortization 3,665 623 525 4,813
Segment profit before income tax 17,219 562 216 17,997
Segment assets 133,100 65,419 22,181 220,700
Expenditures for segment assets 16,084 1,586 5,237 22,907
1999
Revenues from external customers $689,109 $ 91,209 $ 28,037 $808,355
Interest income 807 -- -- 807
Interest expense 6,004 2,381 607 8,992
Depreciation and amortization 4,554 1,149 459 6,162
Segment profit before income tax 22,856 2,362 1,725 26,943
Segment assets 267,926 73,779 23,991 365,696
Expenditures for segment assets 51,935 1,229 7,161 60,325
</TABLE>
62
<PAGE> 63
Revenues from segments below the quantitative thresholds are attributable to
four operating segments of the Company. Those segments include a farm and ranch
retail center, a tire company, an insurance company, and a hunting lease
operation. None of those segments has ever met any of the quantitative
thresholds for determining reportable segments.
63
<PAGE> 64
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by item 10 of Form 10-K is incorporated herein
by reference to such information included in the Company's Proxy Statement for
the 2000 Annual Meeting of Shareholders, under the captions "Election of
Directors" and "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
The information called for by item 11 of Form 10-K is incorporated herein
by reference to such information included in the Company's Proxy Statement for
the 2000 Annual Meeting of Shareholders, under the caption "Compensation of
Executive Officers."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by item 12 of Form 10-K is incorporated herein
by reference to such information included in the Company's Proxy Statement for
the 2000 Annual Meeting of Shareholders, under the caption "Principal
Shareholders and Stock Ownership of Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by item 13 of Form 10-K is incorporated herein
by reference to such information included in the Company's Proxy Statement for
the 2000 Annual Meeting of Shareholders, under the caption "Certain
Transactions."
64
<PAGE> 65
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Index to Financial Statements
(a) The following documents are filed as part of this Annual Report or are
incorporated by reference as indicated:
1. The following financial statements are included under Item 8:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1998 and 1999
Consolidated Statements of Income for the years ended December 31, 1997,
1998 and 1999
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1997, 1998 and 1999
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999
Notes to Consolidated Financial Statements.
2. The following financial statement schedules are included under Item
14: None.
3. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
<S> <C>
2.1 Dealership Purchase Contract dated December 9, 1996 by and
among Rush Truck Centers of Colorado, Inc., Rush Enterprises,
Inc., Denver Peterbilt, Inc., and Greg Lessing. (incorporated
herein by reference to Exhibit 10.78 of the Company's Annual
Report on Form 10 K filed March 31, 1998)
2.2 Asset Purchase Agreement effective October 6, 1997, among Rush
Equipment Centers of Texas, Inc., Rush Enterprises, Inc., C.
Jim Stewart and Stevenson, Inc., and Stewart and Stevenson
Realty Corp. (incorporated by reference herein to Exhibit 2.1
to the Company's Current Report on Form 8-K filed October 21,
1997)
</TABLE>
65
<PAGE> 66
<TABLE>
<S> <C>
2.3 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. (incorporated
herein by reference to Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998)
*2.4 Asset Purchase Agreement effective September 1, 1998, among
Rush Equipment Centers of Michigan, Inc., Rush Enterprises,
Inc., Klooster Equipment Inc., Mark Pirie, Conrad Klooster and
James Craig Klooster.
*2.5 Asset Purchase Agreement effective September 1, 1999, among
Rush Equipment Centers of Michigan, Inc., Rush Enterprises,
Inc., Calvert Sales Inc. and Thomas B. Calvert, Trustee.
2.6 Asset Purchase Agreement dated September 22, 1999 by and among
Rush Truck Centers of Arizona, Inc., Southwest Peterbilt, Inc.,
Southwest Truck Center, Inc., and Edward Donahue, Sr.
(incorporated herein by reference to Exhibit 2.1 of the
Company's Current Report on Form 8-K filed on October 19, 1999)
2.7 Asset Purchase Agreement dated September 22, 1999 by and among
Rush Truck Centers of New Mexico Peterbilt, Inc. and Edward
Donahue, Sr. (incorporated herein by reference to Exhibit 2.1
of the Company's Report on Form 8-K filed on October 19, 1999)
*2.8 Asset Purchase Agreement dated December 1, 1999 by and among
Rush Truck Centers of California, Inc., Norm Pressley's Truck
Center and Scott Pressley.
3.1. Amended and Restated Articles of Incorporation of the
Registrant (incorporated herein by reference to Exhibit 3.1 of
the Company's Registration Statement No. 333-03346 on Form S-1
filed April 10, 1996).
3.2. Bylaws of the Registrant, as amended (incorporated herein by
reference to Exhibit 3.2 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
4.1. Specimen of certificate representing Common Stock, $.01 par
value, of the Registrant (incorporated herein by reference to
Exhibit 4.1 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
4.2. Form of Representatives' Warrant Agreement, including form of
Representatives' Warrant (incorporated herein by reference to
Exhibit 4.2 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
4.3. Rights Agreement dated April 8, 1996 between Rush Enterprises,
Inc. and American Stock Transfer & Trust Company, Trustee
(incorporated herein by reference to Exhibit 4.3 of the
Company's Registration Statement No. 333-03346 on Form S-1
filed April 10, 1996).
</TABLE>
66
<PAGE> 67
<TABLE>
<S> <C>
10.01. Lease Modification Agreement dated February 1, 1994 between
Richard R. Shade and Barbara S. Lateer, Trustees of the Ruth R.
Shade Trust, et al, Engs Motor Truck Company and South Coast
Peterbilt (incorporated herein by reference to Exhibit 10.66 of
the Company's Registration Statement No. 333-03346 on Form S-1
filed April 10, 1996).
10.02. Lease Modification Agreement dated February 1, 1994 between
Angelus Block Company, Inc., Engs Motor Truck Company and South
Coast Peterbilt (incorporated herein by reference to Exhibit
10.67 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.03. Lease Modification Agreement dated February 1, 1994 between
Angelus Block Company, Inc., Engs Motor Truck Company and South
Coast Peterbilt (incorporated herein by reference to Exhibit
10.68 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.04. Lease dated February 1, 1994 between Engs Motor Truck Company
and South Coast Peterbilt (incorporated herein by reference to
Exhibit 10.70 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.05. Right of First Refusal dated April 1, 1996 between Peterbilt
Motors Company and W. Marvin Rush (incorporated herein by
reference to Exhibit 10.76 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.06. Right of First Refusal dated April 1, 1996 between Peterbilt
Motors Company and Barbara Rush (incorporated herein by
reference to Exhibit 10.77 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.07. Right of First Refusal dated April 1, 1996 between Peterbilt
Motors Company and W. M. "Rusty" Rush (incorporated herein by
reference to Exhibit 10.78 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.08. Right of First Refusal dated April 1, 1996 between Peterbilt
Motors Company and Robin Rush (incorporated herein by reference
to Exhibit 10.79 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.09. Form of Indemnity Agreement between Rush Enterprises, Inc. and
the members of its Board of Directors (incorporated herein by
reference to Exhibit 10.80 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.10. Form of Employment Agreement between W. Marvin Rush, W.M.
"Rusty" Rush and Robin M. Rush (incorporated herein by
reference to Exhibit 10.81 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.11. Form of Employment Agreement between Rush Enterprises, Inc.,
and certain of its Vice Presidents. (incorporated herein by
reference to Exhibit 10.82 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.12. Tax Indemnification Agreement between Rush Enterprises, Inc.,
Associated Acceptance, Inc. and W. Marvin Rush (incorporated
herein by reference to Exhibit 10.83 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April
10, 1996).
10.13. Rush Enterprises, Inc. Long-Term Incentive Plan (incorporated
herein by reference to Exhibit 10.84 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April
10, 1996).
</TABLE>
67
<PAGE> 68
<TABLE>
<S> <C>
10.14. Form of Rush Enterprises, Inc. Long-Term Incentive Plan Stock
Option Agreement (incorporated herein by reference to Exhibit
10.85 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.15. Master Loan Agreement between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dated July 28, 1997.
(incorporated herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998)
*10.16 Interest Rate Allowances Agreement dated February 1, 1999
between General Motors Acceptance Corporation and Rush
Enterprises, Inc.
10.17 Registration Rights Agreement dated October 1, 1999 by and
among Rush Enterprises, Inc., Southwest Truck Center, Inc. and
New Mexico Peterbilt, Inc. (incorporated herein by reference to
Exhibit 2.1 of the Company's Report on Form 8-K filed on
October 19, 1999)
*10.18 Form of dealer agreement between Peterbilt Motors Company and
Rush Truck Centers.
*10.19 Letter Agreement between Paccar Financial Corp. and Rush
Enterprises, Inc. dated January 17, 2000.
*11.1 Computation of pro forma earnings per share.
21.1 Subsidiaries of the Company.
</TABLE>
<TABLE>
<CAPTION>
Names Under
State of Which Subsidiary
Name Incorporation Does Business
- --------------------- ------------- ---------------------------------------
<S> <C> <C>
Rush Truck Centers of
Texas, L.P. Delaware Rush Truck Center
World Wide Tires
Rush Truck Center, Pharr
Rush Peterbilt Truck Center, Beaumont
Rush Truck Center, Beaumont
Rush Peterbilt Truck Center,
San Antonio
Rush Truck Center, San Antonio
Rush Peterbilt Truck Center, Houston
Rush Truck Center, Houston
Rush Peterbilt Truck Center, Laredo
Rush Truck Center, Laredo
Rush Peterbilt Truck Center, Lufkin
Rush Truck Center, Lufkin
Rush Peterbilt Truck Center, Pharr
Rush Used Truck Center, Austin
Rush Truck Center, Sealy
Rush Peterbilt Truck Center, Sealy
</TABLE>
68
<PAGE> 69
<TABLE>
<S> <C> <C>
Rush Truck Centers
of Oklahoma, Inc. Delaware Oklahoma Trucks, Inc.
Translease
Tulsa Trucks, Inc.
Rush Peterbilt Truck Center,
Oklahoma City
Rush Truck Center, Oklahoma City
Rush Peterbilt Truck Center,
Tulsa
Rush Truck Center, Tulsa
Rush Volvo Truck Center,
Oklahoma City
Rush Volvo Truck Center, Tulsa
Rush Used Truck Center, Tulsa
Rush Truck Centers of
California, Inc. Delaware South Coast Peterbilt
Translease
World Wide Tires
Rush Peterbilt Truck Center,
Pico Rivera
Rush Truck Center, Pico Rivera
Rush Peterbilt Truck Center,
Fontana
Rush Truck Center, Fontana
Rush Peterbilt Truck Center,
Sun Valley
Rush Truck Center, Sun Valley
Rush Truck Center, Sylmar
Rush Peterbilt Truck Center,
Sylmar
Rush Truck Center, Escondido
Rush Peterbilt Truck Center,
Escondido
Rush Truck Center, San Diego
Rush Peterbilt Truck Center,
San Diego
Rush Truck Centers of
Louisiana, Inc. Delaware Ark-La-Tex Peterbilt, Inc.
Translease
Rush Peterbilt Truck Center,
Bossier City
Rush Truck Center, Bossier City
Los Cuernos, Inc. Delaware Los Cuernos Ranch
Rush Administrative
Services, Inc. Delaware None
AiRush, Inc. Delaware None
Rush Truck Leasing, Inc. Delaware Rush Crane Systems
Rush Truck Centers of
Colorado, Inc. Delaware Rush Truck Centers, Inc.
Rush Peterbilt Truck Center,
Denver
Rush Truck Center, Denver
Rush Peterbilt Truck Center,
Greeley
Rush Truck Center, Greeley
</TABLE>
69
<PAGE> 70
<TABLE>
<S> <C> <C>
Rush Truck Centers of Arizona, Inc. Delaware Rush Truck Center, Phoenix
Rush Peterbilt Truck Center, Phoenix
Rush Truck Center, Chandler
Rush Peterbilt Truck Center, Chandler
Rush Truck Center, Flagstaff
Rush Peterbilt Truck Center, Flagstaff
Rush Truck Center, Tucson
Rush Peterbilt Truck Center, Tucson
Rush Truck Center of New Mexico, Inc. Delaware
Rush GMC Truck Center of Phoenix, Inc. Delaware
Rush GMC Truck Center of San Diego, Inc. Delaware
Rush GMC Truck Center of Tucson, Inc. Delaware
Rush Equipment Centers of Texas, Inc. Delaware Rush Equipment Center, Houston
Rush Equipment Center, Beaumont
Rush Equipment Rental Center, San Antonio
Rush Retail Centers, Inc. Delaware D & D Farm & Ranch Supermarket, Inc.
Rushtex, Inc. Delaware
Rushco, Inc. Delaware
Rush Equipment Centers of Michigan, Delaware Rush Equipment Center, Ellsworth
Inc. Rush Equipment Center, Traverse City
Rush Equipment Center, Grand Rapids
Work `N Play Shop
Rush Equipment Center, Lansing
</TABLE>
*23.1 Consent of Arthur Andersen LLP
*27.1 Financial Data Schedule.
* filed herewith
(b) Reports on Form 8-K:
None
70
<PAGE> 71
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RUSH ENTERPRISES, INC.
By: /s/ W. MARVIN RUSH Date: March 26, 2000
------------------------------------
W. Marvin Rush
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ W. MARVIN RUSH Chairman and Chief Executive Officer, March 26, 2000
- ------------------ Director (Principal Executive Officer)
W. Marvin Rush
/s/ W. M. "RUSTY" RUSH President, Director March 26, 2000
- ----------------------
W. M. "Rusty" Rush
/s/ ROBIN M. RUSH Executive Vice President, Secretary, March 26, 2000
- ----------------- Treasurer and Director
Robin M. Rush
/s/ RONALD J. KRAUSE Director March 26, 2000
- --------------------
Ronald J. Krause
/s/JOHN D. ROCK Director March 26, 2000
- ---------------
John D. Rock
/s/HAROLD D. MARSHALL Director March 26, 2000
- ---------------------
Harold D. Marshall
/s/MARTIN A. NAEGELIN, JR. Vice President and March 26, 2000
- ------------------------- Chief Financial Officer
Martin A. Naegelin, Jr. (Principal Financial and
Accounting Officer)
</TABLE>
71
<PAGE> 1
EXHIBIT 2.4
ASSET PURCHASE AGREEMENT
DATED JULY 12, 1998
BY AND AMONG
RUSH ENTERPRISES, INC.
RUSH EQUIPMENT CENTERS OF MICHIGAN, INC.
KLOOSTER EQUIPMENT, INC.
AND
MARK R. PIRIE, CONRAD L. KLOOSTER, JR.
AND
JAMES CRAIG KLOOSTER
COVERING THE PURCHASE
OF SPECIFIED ASSETS OF
KLOOSTER EQUIPMENT, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. GENERAL DEFINITIONS................................................................ 1
1.1 "Assets".................................................................. 1
1.2 "Affiliate"............................................................... 1
1.3 "Balance Sheet Date"...................................................... 1
1.4 "Best Knowledge".......................................................... 1
1.5 "Business"................................................................ 2
1.6 "Business Day"............................................................ 2
1.7 "Closing"................................................................. 2
1.8 "Closing Date"............................................................ 2
1.9 "Code".................................................................... 2
1.10 "Contracts"............................................................... 2
1.11 "Control"................................................................. 2
1.12 "Damages"................................................................. 2
1.13 "Deposits"................................................................ 2
1.14 "Ellsworth Landlord"...................................................... 2
1.15 "Ellsworth Lease"......................................................... 2
1.16 "Ellsworth Property"...................................................... 2
1.17 "Encumbrance"............................................................. 2
1.18 "Environmental Conditions"................................................ 2
1.19 "Environmental Laws"...................................................... 2
1.20 "Environmental Liabilities................................................ 3
1.21 "Environmental Permits"................................................... 3
1.22 "ERISA"................................................................... 3
1.23 "Exchange Act"............................................................ 3
1.24 "Governmental Authority".................................................. 3
1.25 "Governmental Requirement"................................................ 3
1.26 "Grand Rapids Landlord"................................................... 4
1.27 "Grand Rapids Lease"...................................................... 4
1.28 "Grand Rapids Property"................................................... 4
1.29 "Hazardous Materials"..................................................... 4
1.30 "HSR Act"................................................................. 4
1.31 "Improvements"............................................................ 4
1.32 "Indemnification Event"................................................... 4
1.33 "Indemnitee".............................................................. 4
1.34 "Indemnitor".............................................................. 4
1.35 "IRS"..................................................................... 4
1.36 "John Deere".............................................................. 4
1.37 "Land".................................................................... 4
1.38 "Landlord's Consent and Estoppel"......................................... 4
1.39 "Leases".................................................................. 4
1.40 "Losses".................................................................. 4
1.41 "New Contracts"........................................................... 5
1.42 "New Ellsworth Lease"..................................................... 5
1.43 .......................................................................... 5
1.44 "PBGC".................................................................... 5
1.45 "Permitted Exceptions".................................................... 5
1.46 "Person".................................................................. 5
</TABLE>
-i
<PAGE> 3
<TABLE>
<S> <C>
1.47 "Purchase Price".......................................................... 5
1.48 "Real Property"........................................................... 5
1.49 "Reference Balance Sheet.................................................. 5
1.50 "Retained Liabilities..................................................... 5
1.51 "Schedule................................................................. 5
1.52 "SEC" or "Commission"..................................................... 6
1.53 "Section.................................................................. 6
1.54 "Securities Act".......................................................... 6
1.55 "Subsidiary".............................................................. 6
1.56 "Tax Returns.............................................................. 6
1.57 "Taxes"................................................................... 6
1.58 "Territory"............................................................... 6
1.59 "Third-Party Claims"...................................................... 6
1.60 "Title Company"........................................................... 6
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE...................................... 6
2.1 Assets to be Purchased.................................................... 6
2.2 Purchase and Sale......................................................... 8
2.3 Delivery of Assets and Transfer Documents................................. 8
2.4 UCC Reports............................................................... 8
2.5 Closing; Closing Date..................................................... 8
2.6 Excluded Assets........................................................... 8
3. PURCHASE PRICE..................................................................... 9
3.1 Price and Payment......................................................... 9
3.2 Assumed Obligations....................................................... 10
3.3 Allocation................................................................ 11
4. REPRESENTATIONS AND WARRANTIES OF SELLER........................................... 11
4.1 Incorporation; Capitalization............................................. 12
4.2 Employee Benefits......................................................... 12
4.3 Financial Statements...................................................... 13
4.4 Events Since the Balance Sheet Date....................................... 13
4.5 Customer List............................................................. 14
4.6 Taxes..................................................................... 14
4.7 Employee Matters.......................................................... 15
4.8 Contracts and Agreements.................................................. 15
4.9 Effect of Agreement....................................................... 16
4.10 Properties, Assets and Leasehold Estates.................................. 17
4.11 Intangible Property....................................................... 18
4.12 Suits, Actions and Claims................................................. 18
4.13 Licenses and Permits; Compliance With Governmental Requirements........... 18
4.14 Authorization............................................................. 18
4.15 Records................................................................... 19
4.16 Environmental Protection Laws............................................. 19
4.17 Brokers and Finders....................................................... 20
4.18 Deposits.................................................................. 20
4.19 Work Orders............................................................... 20
4.20 Telephone Numbers......................................................... 21
4.21 No Royalties.............................................................. 21
4.22 Insurance................................................................. 21
4.23 Warranties and Product Liability.......................................... 21
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
4.24 No Untrue Statements...................................................... 21
4.25 Shareholders' Representations............................................. 22
5. REPRESENTATIONS AND WARRANTIES OF THE RUSH PARTIES................................. 22
5.1 Incorporation............................................................. 22
5.2 Authorization............................................................. 22
5.3 Brokers and Finders....................................................... 23
5.4 No Violation of Laws of Agreements........................................ 23
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS,
GUARANTEES, REPRESENTATIONS AND WARRANTIES OF THE PARTIES.......................... 23
7. CONTRACTS PRIOR TO THE CLOSING DATE................................................ 23
7.1 Approval of Contracts..................................................... 23
7.2 Contracts Included in Assets.............................................. 23
8. COVENANTS OF SELLER PRIOR TO CLOSING DATE.......................................... 23
8.1 Access to Information..................................................... 23
8.2 General Affirmative Covenants............................................. 24
8.3 General Negative Covenants................................................ 25
8.4 Disclosure of Misrepresentations and Breaches............................. 25
8.5 Government Filings........................................................ 25
8.6 Access to and Inspection of Premises, Facilities and Equipment............ 26
9. COVENANTS REGARDING THE CLOSING.................................................... 26
9.1 Covenants of Seller....................................................... 26
9.2 Covenants of Shareholders................................................. 26
9.3 Covenants of the Rush Parties............................................. 27
9.4 HSR Act................................................................... 27
9.5 Inventory Audit........................................................... 27
10. CONDITIONS TO OBLIGATIONS OF THE RUSH PARTIES...................................... 27
10.1 Accuracy of Representations and Warranties and Fulfillment of Covenants... 27
10.2 Financial Information..................................................... 28
10.3 No Governmental Actions................................................... 28
10.4 No Adverse Change......................................................... 28
10.5 Update of Contracts....................................................... 28
10.6 Approval of Counsel....................................................... 28
10.7 No Material Adverse Information........................................... 28
10.8 Notices and Consents...................................................... 28
10.9 Lease Arrangements........................................................ 29
10.10 Corporate Approval........................................................ 29
10.11 Transfer and Assignment Documents......................................... 29
10.12 Liens Released............................................................ 29
10.13 Ordinary Course of Business............................................... 30
10.14 Other Documents........................................................... 30
10.15 Dealer License............................................................ 30
10.16 Inventory Audit........................................................... 30
10.17 Other Records............................................................. 30
10.18 Keys...................................................................... 30
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
10.19 Government Approvals...................................................... 30
10.20 Employment Agreements..................................................... 30
10.21 Non-Competition Agreements................................................ 30
10.22 Assignment/Termination of Leases.......................................... 30
10.23 Leasehold Policies........................................................ 31
10.24 Dealership Agreement...................................................... 31
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND
SHAREHOLDERS....................................................................... 31
11.1 Accuracy of Representations and Warranties and Fulfillment of Covenants... 31
11.2 Delivery of Purchase Price................................................ 31
11.3 Approval of Counsel....................................................... 31
11.4 Governmental Approvals.................................................... 31
11.5 Lease Arrangements........................................................ 31
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS......................................... 31
12.1 Change of Name............................................................ 31
12.2 Exchange Act Filing; Cooperation.......................................... 31
13. INDEMNITY BY SELLER................................................................ 32
13.1 Indemnification by Seller................................................. 32
13.2 Indemnification by Shareholders........................................... 32
13.3 Environmental Indemnification............................................. 32
13.4 Tax Indemnification....................................................... 33
13.5 Products Liability and Warranty Indemnification........................... 33
13.6 Maximum Loss.............................................................. 33
13.7 Indemnification by the Rush Parties....................................... 33
13.8 Procedure................................................................. 33
13.9 Payment................................................................... 34
13.10 Failure to Pay Indemnification............................................ 34
13.11 Cooperation............................................................... 35
14. LEASES............................................................................. 35
15. NON-COMPETITION AGREEMENTS......................................................... 35
15.1 (a) Non-Competition................................................. 35
(b) Permitted Competition........................................... 35
15.2 Judicial Reformation...................................................... 35
15.3 Customer Lists; Non-Solicitation.......................................... 36
15.4 Covenants Independent..................................................... 36
15.5 Remedies.................................................................. 36
16. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.......................................... 36
17. DAMAGE TO ASSETS................................................................... 37
18. TERMINATION........................................................................ 37
18.1 Mutual Consent............................................................ 37
18.2 Failure of Conditions..................................................... 38
18.3 Failure to Close.......................................................... 38
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C>
19. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER................................... 38
19.1 New Employees of Purchaser................................................ 38
19.2 No Hiring Commitment...................................................... 38
19.3 Vacation, Sick Pay, Health Insurance, etc................................. 38
19.4 Severance Benefits; Employment Termination................................ 39
19.5 Employee Benefit Plans.................................................... 39
19.6 Reporting of Data......................................................... 39
19.7 Employment Related Claims................................................. 40
20. ACCESS TO INFORMATION.............................................................. 40
21. ADJUSTMENT OF PURCHASE PRICE....................................................... 40
22. SURVEYS; TITLE COMMITMENT AND CONDITION OF TITLE................................... 41
22.1 Surveys................................................................... 41
22.2 Title Commitment.......................................................... 41
22.3 Disclosure of Exceptions by Title Commitments and UCC Report.............. 41
23. ENVIRONMENTAL STUDIES AND REMEDIATION ACTIVITIES................................... 42
23.1 Environmental Studies..................................................... 42
23.2 Remediation............................................................... 42
24. GENERAL PROVISIONS................................................................. 42
24.1 Governing Law; Interpretation; Section Headings........................... 42
24.2 Severability.............................................................. 43
24.3 Entire Agreement.......................................................... 43
24.4 Binding Effect............................................................ 43
24.5 Assignment................................................................ 43
24.6 Amendment; Waiver......................................................... 43
24.7 Gender; Numbers........................................................... 43
24.8 Counterparts.............................................................. 44
24.9 Telecopy Execution and Delivery........................................... 44
24.10 Press Releases............................................................ 44
24.11 Expenses.................................................................. 44
24.12 Arbitration............................................................... 44
24.13 Assignment of Contracts................................................... 45
24.14 Further Actions........................................................... 46
24.15 Bulk Transfer Laws........................................................ 46
24.16 Notices................................................................... 46
24.17 Risk of Loss.............................................................. 47
APPENDIX A
DISPUTE RESOLUTION PROCEDURES............................................. A-1
</TABLE>
Exhibits
Exhibit A Real Property
Exhibit B General Warranty Bill of Sale and Assignment of Contract Rights
Exhibit C Employment Agreements
-v-
<PAGE> 7
Exhibit D-1 Lease Forms, Form of Lease Guaranty Agreement, Form of
Subordination, Nondisturbance and Attornment Agreement
Exhibit D-2 Lease Terms
Exhibit E Landlord's Consent and Estoppel
-vi-
<PAGE> 8
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), made this 12th day of July,
1998, by and among (i) KLOOSTER EQUIPMENT, INC., a Michigan corporation
("Seller"), (ii) MARK R. PIRIE, CONRAD L. KLOOSTER, JR., and JAMES CRAIG
KLOOSTER (the "Shareholders"), and (iii) RUSH EQUIPMENT CENTERS OF MICHIGAN,
INC., a Delaware corporation ("Purchaser"), and RUSH ENTERPRISES, INC., a Texas
corporation ("Rush").
W I T N E S S E T H :
WHEREAS, Seller is the owner of all right, title and interest in and to
the Assets (as herein defined) described herein, with such assets being the
assets currently used in the conduct of the operation of the John Deere
Construction Equipment Company, John Deere Commercial and Consumer Equipment
Division and John Deere Commercial Worksite Products, Inc. ("John Deere") sales
and service dealership business operated by Seller;
WHEREAS, Purchaser is a wholly-owned subsidiary of Rush (Rush and
Purchaser are sometimes referred to herein as the "Rush Parties");
WHEREAS, the Shareholders collectively own and control a majority of
Seller's issued and outstanding shares of stock;
WHEREAS, Seller desires to sell the Assets to Purchaser and Purchaser
desires to acquire the Assets from Seller, all pursuant to this Agreement as
hereinafter provided; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the execution and delivery of this Agreement, and to set forth
certain additional agreements related to the transactions contemplated hereby;
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the following
terms shall have the respective meanings set forth below:
1.1 "Assets" shall have the meaning assigned to it in Section 2.1.
1.2 "Affiliate" of any Person shall mean any Person Controlling,
Controlled by or under common Control with such Person.
1.3 "Balance Sheet Date" shall have the meaning assigned to it in
Section 4.3(a).
1.4 "Best Knowledge" shall mean, with respect to Seller, only the
actual current knowledge of Mark R. Pirie, Conrad L. Klooster, Jr. and James
Craig Klooster and, with respect to the Rush Parties, only the actual current
knowledge of W. Marvin Rush, Robin M. Rush and Martin A. Naegelin, Jr.
1
<PAGE> 9
1.5 "Business" shall have the meaning assigned to it in Section 2.1.
1.6 "Business Day" shall mean any day other than Saturday, Sunday or
other day on which federally chartered commercial banks in San Antonio, Texas
are authorized or required by law to close.
1.7 "Closing" shall have the meaning assigned to it in Section 2.5.
1.8 "Closing Date" shall have the meaning assigned to it in Section
2.5.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.10 "Contracts" shall have the meaning assigned to it in Section 4.8.
1.11 "Control" and all derivations thereof shall mean the ability to
either (i) vote (or direct the vote of) 50% or more of the voting interests in
any Person or (ii) direct the affairs of another, whether through voting power,
contract or otherwise.
1.12 "Damages" shall mean any and all liabilities, losses, damages,
demands, assessments, punitive damages, loss of profits, refund obligations
(including, without limitation, interest and penalties thereon) claims of any
and every kind whatsoever, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, costs of remediation, diminutions in
value, costs and expenses incurred in connection with investigating, prosecuting
and defending any claims or causes of action (including, without limitation,
reasonable attorneys' fees and reasonable expenses and all reasonable fees and
reasonable expenses of consultants and other professionals)).
1.13 "Deposits" shall have the meaning assigned to it in Section 4.18.
1.14 "Ellsworth Landlord" shall mean Klooster Properties, Inc., a
Michigan corporation.
1.15 "Ellsworth Lease" shall mean the current lease agreement between
Klooster Properties, Inc. (as landlord) and Seller (as tenant) for the Ellsworth
property.
1.16 "Ellsworth Property" shall mean the real property and improvements
comprising Seller's Ellsworth facility located at 9914 U.S. 31, Ellsworth,
Michigan 49729.
1.17 "Encumbrance" shall mean any security interest, mortgage, pledge,
trust, claim, lien, charge, option, defect, restriction, encumbrance or other
right or interest of any third Person of any nature whatsoever.
1.18 "Environmental Conditions" means any and all acts, omissions,
events, circumstances, and conditions on or in connection with the Real
Property, the Grand Rapids Property or the other Assets that constitute a
violation of, or require remediation under, any Environmental Laws, including
any pollution, contamination, degradation, damage, or injury caused by, related
to, or arising from or in connection with the generation, use, handling,
treatment, storage, disposal, discharge, emission or release of Hazardous
Materials.
1.19 "Environmental Laws" shall mean all applicable federal, state,
local or municipal laws, rules, regulations, statutes, ordinances or orders of
any Governmental Authority, relating
2
<PAGE> 10
to (a) the control of any potential pollutant, or protection of health or the
air, water or land, (b) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal, discharge, release, emission or transportation,
(c) exposure to hazardous, toxic or other substances alleged to be harmful, (d)
the protection of any endangered or at-risk plant or animal life, or (e) the
emission, control or abatement of noise. "Environmental Laws" shall include, but
not be limited to, the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean
Water Act, 33 U.S.C. Section 1251 et seq., the Resource Conservation Recovery
Act ("RCRA"), 42 U.S.C. Section 6901 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., the Endangered Species Act, 16 U.S.C. Section
1531 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., and
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., including the Superfund Amendments
and Reauthorization Act, 42 U.S.C. Section 11001, et seq. The term
"Environmental Laws" shall also include all applicable state, local and
municipal laws, rules, regulations, statutes, ordinances and orders dealing with
the subject matter of the above listed federal statutes or promulgated by any
governmental or quasi-governmental agency thereunder in order to carry out the
purposes of any federal, state, local or municipal law.
1.20 "Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remedial, removal,
response, abatement, clean-up, investigative and/or monitoring costs and any
other related costs and expenses), 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, attorneys' fees and
other legal costs incurred or imposed (a) pursuant to any agreement, order,
notice of responsibility, directive (including directives embodied in
Environmental Laws), injunction, judgment or similar documents (including
settlements) arising out of, in connection with, or under Environmental Laws,
(b) pursuant to any claim by a Governmental Authority or any other person or
entity for personal injury, property damage, damage to natural resources,
remediation, or payment or reimbursement of response costs incurred or expended
by such Governmental Authority, person or entity pursuant to common law or
statute and related to the use or release of Hazardous Materials, or (c) as a
result of Environmental Conditions.
1.21 "Environmental Permits" shall mean any permits, licenses,
approvals, consents, registrations, identification numbers or other
authorizations with respect to the Assets, the Businesses, the Real Property or
the Grand Rapids Property or the ownership or operation thereof required under
any applicable Environmental Law.
1.22 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.23 "Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended.
1.24 "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 panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted or existing.
1.25 "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
3
<PAGE> 11
or similar items or pronouncements, promulgated, issued, passed or set forth by
any Governmental Authority.
1.26 "Grand Rapids Landlord" shall mean 5770 Investors, L.L.C., a
Michigan limited liability company.
1.27 "Grand Rapids Lease" shall mean the Lease dated September 9, 1994
between 5770 Investors, L.L.C. (as landlord) and Seller (as tenant) for the
Grand Rapids Property.
1.28 "Grand Rapids Property" shall mean the real property and
improvements located at 5770 Clyde Park, S.W., City of Wyoming, Kent County,
Michigan, as more particularly described in the Grand Rapids Lease.
1.29 "Hazardous Materials" means any (a) petroleum or petroleum
products, (b) asbestos or asbestos containing materials, (c) hazardous
substances as defined by Section 101(14) of CERCLA and (d) any other chemical,
substance or waste that is regulated by any Governmental Authority under any
Environmental Law.
1.30 "HSR Act" shall have the meaning assigned to it in Section 8.5.
1.31 "Improvements" shall have the meaning assigned to it in Section
1.48.
1.32 "Indemnification Event" shall have the meaning assigned to it in
Section 13.8.
1.33 "Indemnitee" shall mean the Rush Parties and each of their
respective Affiliates, officers, directors, employees, agents, consultants,
representatives, shareholders and controlling Persons and their respective
successors and assigns, on the one hand, and the Seller and its Affiliates,
officers, directors, employees, agents, consultants, representatives,
shareholders and controlling Persons and their respective successors and
assigns, on the other hand, whether indemnified, or entitled, or claiming to be
entitled to be indemnified or receive property, pursuant to the provisions of
Article 13 hereof.
1.34 "Indemnitor" shall mean the Person or Persons having the
obligation to indemnify or make payment pursuant to the provisions of Article 13
hereof.
1.35 "IRS" shall mean the Internal Revenue Service.
1.36 "John Deere" shall mean John Deere Construction Equipment Company
and its Affiliates.
1.37 "Land" shall have the meaning assigned to it in Section 1.48.
1.38 "Landlord's Consent and Estoppel" shall mean an instrument,
executed by the Grand Rapids Landlord in substantially the form attached hereto
as Exhibit E and made a part hereof.
1.39 "Leases" shall have the meaning assigned to it in Article 14.
1.40 "Losses" shall mean General Losses, Environmental Losses, Tax
Losses and Product Losses (each as defined in Article 13 hereof), as the case
may be.
4
<PAGE> 12
1.41 "New Contracts" shall have the meaning assigned to it in Section
10.5.
1.42 "New Ellsworth Lease" shall have the meaning assigned to it in
Section 10.9.
1.43 [Intentionally deleted]
1.44 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
1.45 "Permitted Exceptions" shall have the meaning assigned to it in
Section 22.3.
1.46 "Person" shall mean any natural person, any Governmental Authority
and any entity the separate existence of which is recognized by any Governmental
Authority or Governmental Requirement, including, but not limited to,
corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or otherwise.
1.47 "Purchase Price" hall have the meaning assigned it in Article 3.
1.48 "Real Property" shall mean all those certain tracts, pieces or
parcels of land where Seller's Traverse City and Work-N-Play dealerships are
located, as more particularly described in Exhibit A attached hereto and made a
part hereof for all purposes (herein referred to as the "Land"), together with
the buildings, structures, plants, fixtures, paving, curbing, trees, shrubs,
plants, and other improvements of every kind and nature presently situated on,
in, or under, or hereafter erected or installed or used in, on, or about or in
connection with the ownership, use and operation of the Land (herein
collectively referred to as the "Improvements"), and all rights and
appurtenances pertaining thereto, including, but not limited to: (a) all right,
title and interest, if any, of the owner(s) of the Land, in and to any land in
the bed of any street, road or avenue open or proposed in front of or adjoining
the Land; (b) all right, title and interest, if any, of the owner(s) of the
Land, in and to any rights-of-way, rights of ingress or egress or other
interests in, on, or to, any land, highway, street, road, or avenue, open or
proposed, in, on, or across, in front of, abutting or adjoining the Land, and
any awards made, or to be made in lieu thereof, and in and to any unpaid awards
for damage thereto by reason of a change of grade of any such highway, street,
road, or avenue; (c) any easement across, adjacent or appurtenant to the Land,
existing or abandoned; (d) all sanitary sewer capacity (if any), water capacity
and other utility capacity to serve the Land and Improvements; (e) all oil, gas,
and other minerals in, on, or under, and that may be produced from the Land; (f)
all water in, under or that may be produced from the Land, and all wells, water
rights, permits and historical water usage pertaining to or associated with the
Land; (g) all right, title and interest, if any, of the owner(s) of the Land, in
and to any land adjacent or contiguous to, or a part of the Land, whether those
lands are owned or claimed by deed, limitations, or otherwise, and whether or
not they are located inside or outside the description given herein, or whether
or not they are held under fence by the owner(s) of the Land, or whether or not
they are located on any survey; and (h) any reversionary rights attributable to
the Land.
1.49 "Reference Balance Sheet" shall have the meaning assigned it in
Section 4.3(a).
1.50 "Retained Liabilities" shall have the meaning assigned it in
Section 3.2.
1.51 "Schedule" shall mean the Schedules to this Agreement, unless
otherwise stated. The Schedules to this Agreement may be attached to this
Agreement or may be set forth in a separate document denoted as the Schedules to
this Agreement, or both.
5
<PAGE> 13
1.52 "SEC" or "Commission" shall mean the United States Securities and
Exchange Commission.
1.53 "Section" shall mean the Section of this Agreement, unless
otherwise stated.
1.54 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.55 "Subsidiary" shall mean, with respect to any Person (the
"parent"), (a) any corporation, association, joint venture, partnership or other
business entity of which securities or other ownership interests representing
more than 50% of the ordinary voting power or beneficial interest are, at the
time as of which any determination is being made, owned or controlled by the
parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent and (b) any joint venture or partnership of
which the parent or any Subsidiary of the parent is a general partner or has
responsibility for its management.
1.56 "Tax Returns" shall mean all Tax returns and reports (including,
without limitation, income, franchise, sales and use, unemployment compensation,
excise, severance, property, gross receipts, profits, payroll and withholding
Tax returns and information returns).
1.57 "Taxes" shall mean any foreign, federal, state or local tax,
assessment, levy, impost, duty, withholding, estimated payment or other similar
governmental charge, together with any penalties, additions to Tax, fines,
interest and similar charges thereon or related thereto.
1.58 "Territory" shall mean the States of Texas and Michigan.
1.59 "Third-Party Claims" shall have the meaning such term is given in
Section 13.8(b) hereof.
1.60 "Title Company" shall mean Northern Michigan Title Company,
Commonwealth Land Title Insurance Company, Lawyers Title Insurance Company or
any other similar title insurance company mutually agreed upon by Seller and
Purchaser.
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE.
2.1 Assets to be Purchased. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall sell, convey, assign, transfer and
deliver to Purchaser, and Purchaser shall purchase and acquire from company, all
of Seller's right, title and interest in and to the Assets, in each case, free
and clear of any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal or restriction of any kind, including any restriction on use, voting (in
the case of any security), transfer, receipt of income, or exercise of any other
attribute of ownership. The "Assets" shall mean all of Seller's property and
assets, real, personal or mixed, tangible and intangible, of every kind and
description, wherever located, belonging to Seller at the close of business on
the Closing Date and which relate to the business currently conducted by Seller
as a John Deere dealership as well as any and all goodwill associated therewith
(the "Business"), other than the Excluded Assets (as defined in Section 2.6),
including the following:
(a) all new construction machinery equipment and attachments,
consumer equipment, worksite products and trailers except for new
construction
6
<PAGE> 14
machinery equipment and attachments, consumer equipment, worksite
products and trailers manufactured by John Deere, which will be
returned by the Seller to John Deere,
(b) all new parts and accessories inventory, except for John
Deere new, current and returnable parts and accessories, which will be
returned by the Seller to John Deere,
(c) all miscellaneous inventories, including gas, diesel fuel,
oil, grease, paint and body shop materials,
(d) all work in progress and sublet repairs on equipment in
Seller's parts and service departments,
(e) all of Seller's furniture, fixtures and office equipment
(including related software),
(f) all shop equipment and special tools, and all parts and
accessories equipment other than new attachment inventory,
(g) all of Seller's vehicles,
(h) all signs, and all promotional, advertising and training
materials used in the Business except for signs and materials owned by
John Deere, which will be returned by Seller to John Deere,
(i) all sales files and customer lists, and all warranty and
service and customer service and repair files, excluding any files that
support receivables retained by Seller,
(j) all intangible assets of Seller required to do business as
a John Deere dealer and a Stihl dealer, including any other permits or
licenses issued by any department or agency for Seller's dealership,
other than any and all existing dealer sales and service center
agreements, and any ancillary or related agreements between Seller and
John Deere, which agreements will be terminated by Seller and John
Deere,
(k) all used parts listed on Schedule 2.1(k) hereto, which
used parts listed on Schedule 2.1(k), as of the Closing Date, shall not
be less than 90% of the parts listed thereon as of the date hereof,
(l) all used, rental, leased and "rent to own" construction
machinery equipment, and all used attachment inventory,
(m) all customer deposits and agreements to sell construction
machinery equipment ordered but not delivered to the customer at the
time of Closing,
(n) All of Seller's leasehold interest under the Grand Rapids
Lease and a leasehold interest in the Ellsworth Property pursuant to
the terms of the New Ellsworth Lease,
(o) all new attachment inventory, and
7
<PAGE> 15
(p) all the leases or subleases of real property, customer
contracts, purchase orders, equipment repurchase agreements, and other
contracts, agreements and undertakings set forth on Schedule 2.1(p).
2.2 Purchase and Sale. Subject to the terms and conditions herein
contained, Seller agrees to sell, assign, transfer and deliver the Assets to
Purchaser at the Closing (as hereinafter defined), free and clear of any liens
or encumbrances of any nature whatsoever (except for liens, encumbrances or
obligations, if any, expressly assumed by Purchaser hereunder). Subject to the
terms and conditions herein contained, Purchaser agrees to purchase from Seller
the Assets in consideration for the Purchase Price (as hereinafter defined)
payable as set forth in Article 3.
2.3 Delivery of Assets and Transfer Documents. At the Closing, Seller
shall take all steps necessary to put Purchaser in possession of the Assets,
free and clear of any liens or encumbrances of any nature whatsoever (except for
liens, encumbrances or obligations, if any, expressly assumed by Purchaser
hereunder), and shall deliver to Purchaser (a) a duly executed bill of sale
covering the Assets, in the form of and containing substantially the same terms
and provisions as the Bill of Sale and Assignment of Contract Rights included in
Exhibit B, (b) duly executed title and transfer documents covering any assets
for which there exists a certificate of title, (c) the Leases, duly executed by
the respective owner(s) of each of the locations comprising the Real Property,
together with memoranda thereof, in form required for recording in the
appropriate public records of the counties where each parcel of Real Property is
located, (d) an assignment of Seller's interest in the Grand Rapids Lease and
the Ellsworth Lease, duly executed by Seller, the Grand Rapids Landlord and the
Ellsworth Landlord, as applicable, (e) the leasehold policies of title insurance
described in Section 22.2 hereof and (f) such other duly executed transfer and
release documents as Purchaser shall reasonably request to evidence the transfer
of the Assets to Purchaser free and clear of any liens or encumbrances of any
nature whatsoever (except for liens, encumbrances or obligations, if any,
expressly assumed by Purchaser hereunder).
2.4 UCC Reports. Within ten days prior to the Closing, Seller, at its
sole cost and expense, shall furnish to Purchaser a report (the "UCC Report") of
searches made of the Uniform Commercial Code Records of each county where the
Real Property, the Ellsworth Property and the Grand Rapids Property are located
and of the Office of the Secretary of State, State of Michigan, or the proper
offices in the State of Michigan where Uniform Commercial Code records are
maintained, which searches shall show that none of the Assets are subject to any
lien or security interest (other than liens and security interests which are to
be released at the Closing or are permitted hereunder). 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 Seller's
sole cost and expense.
2.5 Closing; Closing Date. Subject to the terms and conditions herein
contained, the consummation of the transactions referenced above shall take
place (the "Closing") on or before August 3, 1998, at 10:00 a.m., local time, at
the offices of Honigman, Miller Schwartz and Cohn in Lansing, Michigan, or at
such other time, date and place as Purchaser and Seller shall in writing
designate; provided, however, that Purchaser shall have the right to delay the
Closing up to and including October 31, 1998,in accordance with Section 8.6. The
date of the Closing is referred to herein as the "Closing Date".
2.6 Excluded Assets. Notwithstanding anything to the contrary contained
in Section 2.1 or elsewhere in this Agreement, the following items
(collectively, the "Excluded Assets") are
8
<PAGE> 16
not part of the sale and purchase contemplated hereunder, are excluded from the
Assets being conveyed hereunder, and shall remain the property of Seller:
(a) all accounts receivable, pre-paid items, cash and cash
equivalents and all securities and short term investments listed on
Schedule 2.6(a);
(b) all Seller's insurance policies cash surrender values, and
all other contracts listed in Schedule 2.6(b);
(c) all rights and funds in connection with retirement,
employee benefit and similar plans;
(d) any assets expressly designated in Schedule 2.6(d) as
Excluded Assets;
(e) any and all other assets designated by Purchaser, in its
sole discretion, as being Excluded Assets. Purchaser shall advise
Seller in writing at least five days prior to Closing of those other
items which Purchaser does not intend to purchase. The exclusion of any
such items shall not reduce the Purchase Price; and
(f) Seller's interest in Maple Creek Golf Course, LLC,
including the names "Maple Creek," "Maple Creek Golf Course," the
"Emerald," and the "Emerald at Maple Creek," alone or in connection
with any product identification, and all logos, trademarks, trade
names, and copyrights which include the same.
3. PURCHASE PRICE.
3.1 Price and Payment. Subject to adjustment as provided in Section
19.3 and Article 21 with respect to prorations, deposits and certain other
items, the aggregate consideration to be paid by Purchaser for the Assets is as
follows (the "Purchase Price"):
(a) $2,000,000, plus
(b) an amount equal to Seller's actual cost, taking into
account for each piece of construction machinery equipment of Seller
described in Section 2.1(a), (i) all manufacturer's rebates, allowances
and other reductions paid or credited to Seller on such equipment
purchased by the Purchaser, and (ii) all previously invoiced freight
and pre-delivery expenses, plus
(c) an amount equal to all of the previously invoiced freight
and pre-delivery expenses paid by Seller for each piece of construction
machinery equipment not purchased by Purchaser and returned by Seller
to John Deere, plus
(d) an amount equal to the actual cost of the items described
in Sections 2.1(b) and (c), plus
(e) an amount equal to the Seller's actual cost plus Seller's
internal burdened labor rate (determined in accordance with generally
accepted accounting principles, consistently applied) of the work in
process and sublet repairs described in Section 2.1(d), plus
9
<PAGE> 17
(f) an amount equal to the net book value (determined in
accordance with generally accepted accounting principles, consistently
applied) at Closing of the items described in Sections 2.1(e), (f) and
(g), plus
(g) zero for the items described in Section 2.1(k), plus
(h) an amount equal to Seller's actual cost for items
described in Section 2.1(o) that have been held by Seller for less than
three years, and an amount to be agreed upon for any such items held by
Seller for three years or longer (provided that if Purchaser and Seller
cannot agree on an amount to be paid for any Asset described in this
Section, such Asset shall be an Excluded Asset), plus
(i) an amount equal to the lesser of (i) the net book value
(determined in accordance with generally accepted accounting
principles, consistently applied) and (ii) the Appraised Value (as
hereafter defined), for each piece of used, rental, leased or "rent to
own" construction machinery equipment and used attachment inventory
described in Section 2.1(l).
The Purchase Price shall be payable by payment of all amounts specified
in Sections 3.1(a) - (i) above in cash or cashier's check at Closing.
3.2 Assumed Obligations. At the Closing, Purchaser shall assume and
agree to timely discharge the obligations of Seller under all contracts and
agreements transferred by Seller to Purchaser under this Agreement that are
listed and described on Schedule 2.1(p) or that are (a) listed and described on
Schedule 4.8 or on the updated list of contracts required by Section 10.5 and
(b) accepted in writing by Purchaser pursuant to the provisions of Section 4.8
or Section 10.5; provided that Purchaser specifically does not assume any
liabilities of Seller under any contracts or agreements with respect to any
breaches of such contracts or agreements occurring on or before the Closing Date
or any damages to third parties resulting from acts, events or omissions
occurring on or before the Closing Date. Except for the obligations expressly
assumed by Purchaser pursuant to this Agreement, Seller shall take full and
complete responsibility for all of its respective liabilities, debts and
obligations, whether known or unknown, now existing or hereafter arising,
contingent or liquidated (the "Retained Liabilities"), and Purchaser shall not
assume, or in any way be liable or responsible for, any of the Retained
Liabilities. The Retained Liabilities shall include, without limitation, the
following:
(a) the responsibility for contributions to, or any liability
in connection with, any employee pension benefit plan, any employee
welfare benefit plan, or other employee benefit agreement or
arrangement maintained by Seller for its employees, former employees,
retirees, their beneficiaries or any other person, and any continuation
coverage (including any penalties, excise taxes or interest resulting
from the failure to provide continuation coverage) required by Section
4980B of the Code due to qualifying events which occur on or before
Closing Date;
(b) any liability or obligation of Seller, or any consolidated
group of which Seller is a member, for any federal income tax or state
franchise tax, or for any foreign, federal, state, commonwealth, county
or local taxes of any kind or nature, or any taxes levied by any other
legitimate taxing authority, or any interest or penalties thereon,
except for any proration and assumption thereof by Purchaser pursuant
to Article 21 hereof;
10
<PAGE> 18
(c) any liability to which any of the parties may become
subject as a result of the fact that the transactions contemplated by
this Agreement are being effected without compliance with the bulk
sales provisions of the Uniform Commercial Code as in effect in the
State of Michigan;
(d) any liability with respect to any claims, suits, actions
or causes of action arising out of the conduct of the Business on or
prior to the Closing Date;
(e) notwithstanding any disclosures or representations by
Seller, any dispute, litigation, settlement, negotiation,
administrative or other proceeding, any related or subsequent
litigation, appeal or administrative action and any debt, obligation or
liability arising out of or in connection with any facts existing prior
to the Closing Date;
(f) any noncompliance by Seller with any applicable laws,
rules and regulations relating to employment and labor management
relations, including without limitation any provisions thereof relating
to wages and the payment thereof, hours of work, collective bargaining
agreements, workers' compensation laws and the withholding and payment
of Social Security and similar taxes;
(g) any failure by Seller to withhold all amounts required by
law or agreement to be withheld from the wages or salaries of its
employees, and any liability for any wage arrearages, taxes or
penalties for failure to comply with any of the foregoing;
(h) any liability arising out of any controversies between
Seller and its employees or former employees or any union or other
collective bargaining unit that has been certified or recognized by any
Seller as representing any of its employees;
(i) accounts payable of Seller;
(j) any and all contracts, agreements or other obligations of
Seller to repurchase any equipment, parts or other items previously
sold by Seller; and
(k) any liability arising out of any breach or default by
Seller under the Grand Rapids Lease or the Ellsworth Lease and all
obligations of Seller under the Grand Rapids Lease and the Ellsworth
Lease arising during or attributable to any period prior to Closing
hereunder.
3.3 Allocation. The Purchase Price payable by Purchaser for the Assets
shall be allocated as set forth in Schedule 3.3 hereto. The Rush Parties and
Seller shall, at Closing; complete Internal Revenue Service Form 8594 (Asset
Acquisition Statement under I.R.C. Section 1060) and otherwise report the
federal, state and local income and other tax consequences of the transactions
contemplated hereby in a manner consistent with such allocation and shall not
take any position or action inconsistent with such allocation in the filing of
any federal or state income or other tax returns.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Except as set forth in
a schedule hereto referring to the applicable Section herein, Seller represents
and warrants to the Rush Parties as follows:
11
<PAGE> 19
4.1 Incorporation; Capitalization.
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Michigan, and is
duly authorized, qualified and licensed under all applicable
Governmental Requirements to carry on its business in the places and in
the manner as now conducted and to own, operate and lease the Assets it
now owns, operates or holds under lease. There has not been any claim
by any other jurisdiction to the effect that Seller is required to
qualify or otherwise be authorized to do business as a foreign
corporation therein in order to carry on any of its businesses as now
conducted or to own, lease or operate the Assets. Seller has not, to
Seller's Best Knowledge, taken any action, or failed to take any action
which such action or such failure will preclude or prevent Seller's
Business from being conducted in substantially the same manner in which
Seller has heretofore conducted the same.
4.2 Employee Benefits. As used in this Section, the "Company" shall
include the Seller and any member of a controlled group or affiliated service
group (as defined in Sections 414(b), (c), (m), and (o) of the Code) of which
the Seller is a member.
(a) List of All Benefit Plans and Compensation Agreements.
Schedule 4.2(a) includes a complete and accurate list of all employee
welfare benefit and employee pension benefit plans as defined in
Sections 3(1), 3(2), and 3(3) of ERISA and all other employee benefit
agreements or arrangements, including but not limited to deferred
compensation plans, incentive plans, bonus plans or arrangements, stock
option plans, stock purchase plans, golden parachute agreements,
severance pay plans, dependent care plans, cafeteria plans, employee
assistance programs, scholarship programs, employment contracts and
other similar plans, agreements and arrangements that are currently in
effect or were maintained within three years of the Closing Date, or
have been approved before this date but are not yet effective, for the
benefit of directors, officers, employees, or former employees (or
beneficiaries of them) of the Seller.
(b) Representations. The consummation of this Agreement (and
the employment by the Purchaser of former employees of the Seller) will
not result in any carryover liability to the Purchaser for taxes,
penalties, interest or any other claims resulting from any employee
pension benefit plan, employee welfare benefit plan, or other employee
benefit agreement or arrangement set out in Schedule 4.2(a). In
addition, the Seller makes the following representations (i) as to
employee pension benefit plans of the Company: (a) no Company has
become liable to the PBGC under Section 4062, 4063 or 4064 of ERISA
under which a lien could attach to the assets of the Seller under
Section 4068 of ERISA; (b) the Company has not ceased operations at a
facility so as to become subject to the provisions of Section 4062(e)
of ERISA; and (c) the Company has not made a complete or partial
withdrawal from a multiemployer plan (as defined in Section 3(37) of
ERISA) so as to incur withdrawal liability as defined in Section 4201
of ERISA, and (ii) all group health plans maintained by the Company
have been operated in compliance with Section 4980B(f) of the Code.
(c) Non-assumption of Seller's Plans. The parties agree that
the Purchaser does not and will not assume the sponsorship of, or the
responsibility for contributions to, or any liability in connection
with, any employee pension benefit plan, any employee welfare benefit
plan, or other employee benefit agreement or arrangement maintained by
Seller for its employees, former employees, retirees, their
beneficiaries or any other person. In addition and not as a limitation
of the foregoing covenant the parties agree that the Seller shall be
liable for any continuation coverage (including any penalties, excise
taxes or interest resulting from the failure to provide continuation
coverage)
12
<PAGE> 20
required by Section 4980B of the Code due to qualifying events which
occur on or before Closing Date.
4.3 Financial Statements. Seller has delivered to Purchaser copies of
the following financial statements of the Business, all of which financial
statements are included in Schedule 4.3 hereto:
(a) Unaudited Balance Sheet (the "Reference Balance Sheet") as
of May 31, 1998 (the "Balance Sheet Date") and Unaudited Income
Statement for the two-month period ended on the Balance Sheet Date; and
(b) Unaudited Balance Sheet and Income Statement for the
fiscal year ending on March 31, 1998, and Audited Balance Sheets,
Income Statements and Statements of Changes in Financial Position for
the two fiscal years ending on March 31, 1996 and March 31, 1997.
All financial statements supplied to Purchaser by Seller, whether or not
included in Schedule 4.3 hereto, are and will be true and accurate in all
respects, have been and will be prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, and will present fairly the financial condition of the Business as of
the dates and for the periods indicated thereon. The Reference Balance Sheet
reflects, as of the Balance Sheet Date, all liabilities, debts and obligations
of any nature of the Business, whether accrued, absolute, contingent or
otherwise, and whether due, or to become due, including, but not limited to,
liabilities, debts or obligations on account of Taxes to the extent such items
are required to be reflected on such balance sheet under generally acceptable
accounting principles consistently applied.
4.4 Events Since the Balance Sheet Date. Since the Balance Sheet
Date, there has not been:
(a) any change in the condition (financial or otherwise) or in
the properties, assets, liabilities, business or prospects of the
Business, except normal and usual changes in the ordinary course of
business, none of which has been adverse and all of which in the
aggregate have not been adverse;
(b) any labor trouble, strike or any other occurrence, event
or condition affecting the employees of Seller that adversely affects
the condition (financial or otherwise) of the Assets or the Business;
(c) any breach or default by Seller or, to the Best Knowledge
of Seller, by any other party, under any agreement or obligation
included in the Assets or by which any of the Assets are bound;
(d) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Assets, the Business, the Real
Property, the Ellsworth Property, or the Grand Rapids Property;
(e) to the Best Knowledge of Seller, any legislative or
regulatory change adversely affecting the Assets, the Business, the
Real Property, the Ellsworth Property, or the Grand Rapids Property;
13
<PAGE> 21
(f) any change in the types, nature, composition or quality of
the services of the Business, any adverse change in the contributions
of any of the service lines of the Business to the revenues or net
income of such Business, or any adverse change in the sales, revenue or
net income of the Business;
(g) any transaction related to or affecting the Assets, the
Business, the Real Property, the Ellsworth Property, or the Grand
Rapids Property other than transactions in the ordinary course of
business of Seller; or
(h) any other occurrence, event or condition that has
adversely affected (or can reasonably be expected to adversely affect)
the Assets, the Business, the Real Property, the Ellsworth Property, or
the Grand Rapids Property.
4.5 Customer List. Schedule 4.5 sets forth a true, correct and complete
list of all customers of the Business to which Seller has sold or provided
products or services during the fiscal year ended March 31, 1998, and an
accurate statement of the gross revenues received from each such customer by the
Business during such period.
4.6 Taxes.
(a) all Tax Returns of or relating to any Taxes that are
required to be filed on or before the Closing Date, subject to any
allowable extension periods, for, by, on behalf of or with respect to
Seller, including, but not limited to, those relating to the income,
business, operations or property of Seller (whether on a separate,
consolidated, affiliated, combined, unitary or any other basis), have
been timely filed with the appropriate foreign, federal, state and
local authorities, and all Taxes shown to be due and payable on such
Tax Returns or related to such Tax Returns have been paid in full on or
before the Closing Date except Taxes which have not yet accrued or
otherwise become due, all of which are reflected in the Reference
Balance Sheet;
(b) all such Tax Returns and the information and data
contained therein have been properly and accurately compiled and
completed in all material respects, fairly present the information
purported to be shown therein, and reflect, to the Best Knowledge of
Seller, all liabilities for Taxes for the periods covered by such Tax
Returns, net of any applicable reserves;
(c) Seller has not received notice that any of such Tax
Returns are under audit or examination by any foreign, federal, state
or local authority and there are no agreements, waivers or other
arrangements providing for an extension of time with respect to the
assessment or collection of any Tax or deficiency of any nature against
Seller or with respect to any such Tax Return, or any suits or other
actions, proceedings, investigations or claims now pending or, to the
Best Knowledge of Seller, threatened against Seller with respect to any
Tax, or any matters under discussion with any foreign, federal, state
or local authority relating to any Tax, or any claims for any
additional Tax asserted by any such authority;
(d) all Taxes assessed and due and owing from or against
Seller on or before the Closing Date (including, but not limited to, ad
valorem Taxes relating to any property of Seller) have been timely paid
in full on or before the Closing Date;
14
<PAGE> 22
(e) all withholding Tax, Tax deposit and estimated Tax payment
requirements imposed on Seller for any and all periods ending on or
before the Closing Date, or through and including the Closing Date for
periods that have not ended on or before the Closing Date, have been
satisfied in full on or before the Closing Date or reserves adequate
for the payment of such withholding, deposit and estimated Taxes have
been established in the financial statements of Seller on or before the
Closing Date; and
(f) the financial statements reflect and include adequate
charges, accruals, reserves and provisions for the payment in full of
any and all Taxes payable with respect to any and all periods ending on
or before the respective dates thereof.
4.7 Employee Matters. Schedule 4.7 sets forth a true and complete list
of the names of, and current annual compensation paid by Seller to each employee
of Seller utilized in connection with the operation of the Business. Seller has
not, within the last five years, had or been threatened with any union
activities, work stoppages or other labor trouble with respect to its employees.
There are no collective bargaining or other labor union agreements to which
Seller is a party or by which it is bound. To the best of Seller's knowledge, at
the date hereof, there are no disputes with employees in general to which Seller
is a party. At the date hereof, there are no strikes, slowdowns or picketing
against Seller. At the date hereof, Seller has not 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.
Other than wage increases in the ordinary course of business and except as set
forth on Schedule 4.7, since the Balance Sheet Date Seller has not made any
commitment or agreement to increase the wages or modify the conditions or terms
of employment of any of the employees of Seller.
4.8 Contracts and Agreements. Schedule 4.8, together with Schedule
2.1(p), sets forth a true and complete list of and briefly describes all of the
following contracts, agreements, leases, licenses, plans, arrangements or
commitments, written or oral, that relate to the Assets, the Real Property, the
Grand Rapids Property, the Ellsworth Property and the Business (including all
amendments, supplements and modifications thereto):
(a) all contracts, agreements or commitments in respect of the
sale of products or services or the purchase of raw materials, supplies
or other products or utilities;
(b) all offers, tenders or the like outstanding and capable of
being converted into an obligation of Seller by the passage of time or
by an acceptance or other act of some other person or entity or both;
(c) all sales, agency or distributorship agreements or
franchises or legally enforceable commitments or obligations with
respect thereto;
(d) all collective bargaining agreements, union agreements,
employment agreements, consulting agreements or agreements providing
for the services of an independent contractor;
(e) all profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health
insurance or other employee benefit plans, agreements, arrangements or
commitments of any nature whatsoever, whether or not legally binding,
and all agreements with any present or former officer, director or
shareholder of Seller;
15
<PAGE> 23
(f) all loan or credit agreements, indentures, guarantees
(other than endorsements made for collection), mortgages, pledges,
conditional sales or other title retention agreements, and all
equipment financing obligations, lease and lease-purchase agreements
relating to or affecting the Assets or the Business;
(g) all leases related to the Assets, the Business, the Real
Property, the Ellsworth Property, or the Grand Rapids Property;
(h) all performance bonds, bid bonds, surety bonds and the
like, all contracts and bids covered by such bonds, and all letters of
credit and guaranties;
(i) all consent decrees and other judgments, decrees or
orders, settlement agreements and agreements relating to competitive
activities, requiring or prohibiting any future action;
(j) all contracts or agreements of any nature with Seller, or
any Affiliate of Seller or Shareholders; and
(k) all contracts, commitments and agreements entered into
outside the ordinary course of the operation of the Business.
All of such contracts, agreements, leases, licenses, plans, arrangements, and
commitments and all other such items included in the Assets but not specifically
described above (collectively, the "Contracts") are valid, binding and in full
force and effect in accordance with their terms and conditions and there is no
existing default thereunder or breach thereof by Seller, or, to the Best
Knowledge of Seller, by any other party to the Contracts, or any conditions
which, with the passage of time or the giving of notice or both, might
constitute such a default by Seller, or, to the Best Knowledge of Seller, by any
other party to the Contracts, and the Contracts will not be breached by or give
any other party a right of termination as a result of the transactions
contemplated by this Agreement. Seller is not obligated to pay any liquidated
damages under any of the contracts, agreements, indentures, leases or other
instruments described in Schedule 4.8 hereto and Seller is not aware of any
facts or circumstances that could reasonably be expected to result in an
obligation of Seller to pay any such liquidated damages. To the Best Knowledge
of Seller there is no reason why any of the Contracts (i) will result in a loss
to Purchaser on completion by performance or (ii) cannot readily be fulfilled or
performed by Purchaser with the Assets on time without undue or unusual
expenditure of money or effort. Copies of all of the documents (or in the case
of oral commitments, descriptions of the material terms thereof) relevant to the
Contracts listed in Schedule 4.8 have been delivered by Seller to Purchaser, and
such copies and/or descriptions are true, complete and accurate and include all
amendments, supplements or modifications thereto. After reviewing the Contracts
described on Schedule 4.8, the Purchaser may, at its sole option, choose to
assume one or more of such Contracts, and, within twenty (20) days of receipt by
Purchaser of all information reasonably requested by Purchaser with respect to
such Contracts, Purchaser shall notify Seller of which Contracts, if any,
Purchaser intends to assume hereunder. Except for Contracts, if any, that
Purchaser notifies Seller (in writing) that it will assume, all of the Contracts
described on Schedule 4.8 (but not including any other Contracts, including the
Contracts on Schedule 2.1(p)) shall remain the sole obligation of Seller and
shall not be assumed by Purchaser, and Purchaser shall have no obligation or
liability with respect thereto.
4.9 Effect of Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not (a)
violate any provision of the
16
<PAGE> 24
Articles of Incorporation or other charter documents or bylaws of Seller; (b)
result in any violation of any Governmental Requirement applicable to Seller,
the Assets or the Business; (c) conflict with, or result in any breach of, or
default or loss of any right under (or an event or circumstance that, with
notice or the lapse of time, or both, would result in a default), or the
creation of an Encumbrance pursuant to, or cause or permit the acceleration
prior to maturity or "put" right with respect to, any obligation under, any
contract, indenture, mortgage, deed of trust, lease, loan agreement or other
agreement or instrument to which Seller is a party or to which any of the Assets
are subject; (d) relieve any Person of any obligation (whether contractual or
otherwise) or enable any Person to accelerate or terminate any such obligation
or any right or benefit enjoyed by Seller or to exercise any right under any
agreement in respect of the Assets or the Business; and (e) require (to the Best
of Seller's Knowledge) notice to or the consent, authorization, approval,
clearance, waiver or order of any Person (except as may be contemplated by the
last sentence of Section 4.8). To the Best Knowledge of Seller, the business
relationships of clients, customers and suppliers of the Business will not be
adversely affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. To the Best of Seller's
Knowledge, the execution, delivery and performance of this Agreement by Seller
will not result in the loss of any material governmental license, franchise or
permit possessed by Seller.
4.10 Properties, Assets and Leasehold Estates. Seller owns or has the
right to use (pursuant to a valid lease or license disclosed on Schedule 4.8)
all operating assets and properties necessary for Seller to conduct the Business
in the manner presently conducted by Seller, and all of such operating assets
and properties (or, in the case of leased assets, the leases covering such
assets) are included in the Assets. Seller has good, marketable title to all the
Assets, free and clear of all mortgages, liens, pledges, conditional sales
agreements, charges, easements, covenants, assessments, options, restrictions
and encumbrances of any nature whatsoever and, with respect to the Real
Property, each of the owners thereof identified on Schedule 4.10 has good,
marketable and indefeasible title in fee simple, free and clear of all
restrictions, liens, leases, encumbrances, rights-of-way, easements,
encroachments, exceptions, and other matters affecting title, except for the
Permitted Exceptions. Neither Seller nor (to the Best of Seller's Knowledge) the
Grand Rapids Landlord nor the Ellsworth Landlord are currently in default of any
of their respective obligations under the Grand Rapids Lease and the Ellsworth
Lease, and each such lease is now and at Closing will be in full force and
effect in accordance with its terms. The plants, structures, equipment, vehicles
and other tangible properties included in the Assets, the Real Property and the
tangible property leased by Seller under the Grand Rapids Lease and the
Ellsworth Lease and other leases included in the Assets, are in good operating
condition and repair, normal wear and tear excepted, and are capable of being
used for their intended purpose in the Business as now conducted. The Assets
include all existing warranties and service contracts with respect to any of the
Assets, the Real Property, the Ellsworth Property and the Grand Rapids Property
to the extent the same are capable of being assigned to Purchaser. During the
past two years, there has not been any significant interruption of the Business
due to the breakdown or inadequate maintenance of any of the Assets. To the Best
of Seller's Knowledge, all plants, structures, equipment, vehicles and other
tangible properties included in the Assets, the Real Property, the Ellsworth
Property and the Grand Rapids Property and the present use of all such items,
conform to all applicable Governmental Requirements, and no notice of any
violation of any such Governmental Requirements relating to such assets or their
use has been received by Seller. The Assets include all easements, rights of
ingress and egress, and utilities and services necessary for the conduct of the
Business.
17
<PAGE> 25
4.11 Intangible Property. Schedule 4.11 is a list and description of
all material patents, trademarks, service marks, trade names, and copyrights and
applications therefor owned by or registered in the name of Seller or in which
Seller has any right, license or interest. Except for Seller's agreements with
John Deere and the agreements listed on Schedule 4.11, Seller is not a party to
any license agreements, either as licensor or licensee, with respect to any
patents, trademarks, service marks, trade names, or copyrights or applications
therefor. To the Best of Seller's Knowledge, Seller has good and indefeasible
title to or the right to use such assets and all inventions, processes, designs,
formulae, trade secrets, and know-how necessary for the conduct of its business,
without the payment of any royalty or similar payment. To the Best of Seller's
Knowledge, Seller is not infringing any patent, trademark, service mark, trade
name, or copyright of others, and Seller is not aware of any infringement by
others of any such rights owned by Seller.
4.12 Suits, Actions and Claims. Except as set forth in Schedule 4.12,
(a) there are no suits, actions, claims, inquiries or investigations by any
Person, or any legal, administrative or arbitration proceedings in which Seller
is engaged or which are pending or, to the Best Knowledge of Seller, threatened
against or affecting Seller or any of its properties, assets or business, or to
which Seller is or might become a party, or which question the validity or
legality of the transactions contemplated hereby, (b) no basis or grounds for
any such suit, action, claim, inquiry, investigation or proceeding exists, and
(c) there is no outstanding order, writ, injunction or decree of any
Governmental Authority against or affecting Seller or any of its properties,
assets or business. Without limiting the foregoing, Seller does not have any
Best Knowledge of any state of facts or the occurrence of any event forming the
basis of any present or potential claim against Seller.
4.13 Licenses and Permits; Compliance With Governmental Requirements.
To the Best of Seller's Knowledge and except as set forth in Schedule 4.13
hereto, Seller has all material federal, state, local and foreign governmental
licenses and permits necessary to the conduct of the operations of Seller's
Business as currently conducted, such licenses and permits are in full force and
effect, no material violations currently exist in respect of any thereof and no
proceeding is pending or, threatened to revoke or limit any thereof. Schedule
4.13 hereto contains a true, complete and accurate list of (a) all such
governmental licenses and permits, (b) all consents, orders, decrees and other
compliance agreements under which Seller is operating or bound, copies of all of
which have been furnished to Purchaser, and (c) all material governmental
licenses and permits applied for but not yet received by Seller. Seller has not
received and is not aware of any reports of inspections under the United States
Occupational Safety and Health Act, or under any other applicable federal, state
or local health and safety laws and regulations relating to Seller, the Assets
or the operation of Seller's Business. Seller has not received any notice that
there are safety, health, anti-competitive or discrimination claims that have
been made or are pending or, to the Best Knowledge of Seller, that are
threatened relating to the business or employment practices of Seller. To the
Best Knowledge of Seller, Seller has complied with all Governmental Requirements
applicable to its business and all Governmental Requirements with respect to the
distribution and sale of products and services by it.
4.14 Authorization. As of the Closing, the Seller shall have full legal
right, power, and authority to enter into and deliver this Agreement and to
consummate the transactions set forth herein and to perform all the terms and
conditions hereof to be performed by them. As of the Closing, the execution and
delivery of this Agreement by Seller and each of the Shareholders and the
performance by Seller and each of the Shareholders of the transactions
contemplated herein shall have been duly and validly authorized by all requisite
corporate action of Seller and
18
<PAGE> 26
by each Shareholder, and this Agreement shall have been duly and validly
executed and delivered by Seller and by each Shareholder and shall be the legal,
valid and binding obligation of each of them, enforceable against Seller and
each of the Shareholders in accordance with its terms, except as limited by
applicable bankruptcy, moratorium, insolvency or other similar laws affecting
principles of equity.
4.15 Records. To the Best of Seller's Knowledge, the books, records and
minutes kept by Seller with respect to the Assets and the Business, including,
but not limited to, all customer files, service agreements, quotations,
correspondence, route sheets and historic revenue data of Seller, have been kept
properly and contain records of all matters required to be included therein by
any Governmental Requirement or by generally accepted accounting principles, and
such books, records and minutes are true, accurate and complete and (except for
corporate minute books and stock records) are included in the Assets.
4.16 Environmental Protection Laws. Except as described on Schedule
4.16:
(a) To the Best Knowledge of Seller, Seller and each of the
respective owners of the Real Property, as applicable, have at all
times operated the Real Property, Grand Rapids Property, Ellsworth
Property, Assets and 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 Authority, and are not currently
operating or required to be operating the Assets, the Business, the
Real Property, the Ellsworth Property, or the Grand Rapids Property
under any compliance order, decree or agreement; any consent decree,
order or agreement; and/or any corrective action decree, order or
agreement issued by or entered into with any Governmental Authority
under any Environmental Law.
(b) There are no existing, pending or, to the Best Knowledge
of Seller, threatened actions, suits, claims, or to the Best Knowledge
of Seller, investigations, inquiries or proceedings by or before any
court or any other Governmental Authority directed against the Real
Property, Grand Rapids Property, Ellsworth Property, Assets or Business
which pertain or relate to (i) any remedial obligations under any
applicable Environmental Law, (ii) violations of any Environmental Law,
(iii) personal injury or property damage claims relating to the release
of chemicals or Hazardous Materials or (iv) response, removal or
remedial costs under CERCLA or any similar state law, and there is not
any Environmental Condition on or at the Real Property, Grand Rapids
Property, Ellsworth Property, or any other matter on or connected with
the Assets that would cause the imposition on Purchaser of
Environmental Liabilities if such Environmental Condition or other
matter were disclosed to Governmental Authorities.
(c) To the Best of Seller's Knowledge, all notices,
Environmental Permits, licenses or similar authorizations required to
be obtained or filed by Seller under all applicable Environmental Laws
in connection with its current and previous operation or use of the
Real Property, Grand Rapids Property, Ellsworth Property and Assets, or
the current and previous conduct of the Business have been duly
obtained or filed and are in full force and effect.
(d) Seller has not received notice that any Environmental
Permit, license or similar authorization is to be revoked or suspended
by any Governmental Authority.
19
<PAGE> 27
(e) There are no underground storage tanks on the Real
Property, the Ellsworth Property or the Grand Rapids Property. To the
best knowledge of Seller and each of the Shareholders, there have never
been any underground storage tanks on the Real Property, the Ellsworth
Property or the Grand Rapids Property.
(f) To the Best Knowledge of Seller, no portion of the Real
Property, the Ellsworth Property or Grand Rapids Property is part of a
Superfund site under CERCLA or any similar ranking or listing under any
similar state law.
(g) To the Best Knowledge of Seller and each of the
Shareholders, all Hazardous Materials generated in connection with the
operation of the Business have been transported, stored, treated and
disposed of by carriers, storage, treatment and disposal facilities
authorized and maintaining valid permits under all applicable
Environmental Laws, and no Hazardous Materials have been dumped,
landfilled, stored, located or disposed of on the Real Property, the
Ellsworth Property or the Grand Rapids Property.
(h) To the Best Knowledge of Seller and each of the
Shareholders, no Person has disposed or released any Hazardous
Materials on or under the Real Property, the Ellsworth Property or the
Grand Rapids Property and Seller has not disposed or released Hazardous
Materials on or under the Real Property, Ellsworth Property, Grand
Rapids Property, Assets or Business except in compliance with all
Environmental Laws, and there has not been, in respect to the Assets,
any emission (other than steam or water vapor) into the atmosphere or
any discharge, direct or indirect, of any pollutants into the waters of
the State of Michigan or the United States of America other than
domestic sewage discharged into a publicly owned treatment facility.
(i) To the Best Knowledge of Seller, no facts or circumstances
exist which could reasonably be expected to result in any liability to
any Person with respect to the Real Property, Grand Rapids Property,
Ellsworth Property, Business or Assets in connection with (i) any
release, transportation or disposal of any Hazardous Materials,
hazardous substance or solid waste or (ii) action taken or omitted that
was not in full compliance with or was in violation of, any applicable
Environmental Law.
4.17 Brokers and Finders. No broker or finder has acted for Seller or
any of the Shareholders in connection with this Agreement or the transactions
contemplated by this Agreement and no broker or finder is entitled to any
brokerage or finder's fee or to any commission in respect thereof based in any
way on agreements, arrangements or understandings made by or on behalf of Seller
or any of the Shareholders.
4.18 Deposits. Seller does not now hold any deposits or prepayments by
third parties with respect to any of the Assets or the Business ("Deposits")
which are not reflected as liabilities on the Reference Balance Sheet or on
Schedule 4.18. If Seller holds any Deposits as of the Closing Date, Purchaser
will be given credit against the Purchase Price for the amount of any such
Deposits pursuant to Article 21 hereof.
4.19 Work Orders. There are no outstanding work orders or contracts
relating to any portion of the Assets, Real Property, Ellsworth Property, or
Grand Rapids Property from or required by any policy of insurance, fire
department, sanitation department, health authority or other governmental
authority nor, to the Best of Seller's Knowledge, is there any matter under
discussion with any such parties or authorities relating to work orders or
contracts.
20
<PAGE> 28
4.20 Telephone Numbers. Seller will use its best efforts to transfer
all telephone numbers used by Seller in connection with the Business to
Purchaser.
4.21 No Royalties. No royalty or similar item or amount is being paid
or, to the Best of Seller's Knowledge, is owing by Seller, nor is any such item
accruing, with respect to the operation, ownership or use of the Business or the
Assets.
4.22 Insurance. Schedule 4.22 hereto sets forth all existing insurance
policies held by Seller relating to the Business, the Assets, the Real Property,
the Ellsworth Property, the Grand Rapids Property, the Improvements and all
employees or agents of Seller. Each such policy is in full force and effect and
is with insurance carriers believed by Seller to be responsible. To the Best of
Seller's Knowledge, there is no dispute with respect to such policies, and all
claims arising from events or circumstances occurring prior to the date hereof
have been paid in full or adequate reserves therefor are recorded in the
Reference Balance Sheet. To the Best of Seller's Knowledge, all retroactive
premium adjustments for any period ended on or before June 1, 1997, under any
worker's compensation policy or any other insurance policies of Seller have been
recorded in accordance with generally accepted accounting principles and are
reflected in the Reference Balance Sheet. To the Best of Seller's Knowledge and
except for such policies which are identified as such on Schedule 4.22, none of
such policies will terminate as a result of the transactions contemplated by
this Agreement.
4.23 Warranties and Product Liability.
(a) Except for warranties implied by law, Seller has not given or
made any warranties in connection with the sale or rental of goods or services
in connection with the operation of the Business, including, without limitation,
warranties covering the customer's consequential damages. To the Best of
Seller's Knowledge, there is no state of facts or occurrence of any event
forming the reasonable basis of any present claim against Seller with respect to
warranties in connection with the operation of the Business relating to
products, sold or distributed by Seller or services performed by or on behalf of
Seller in connection with the operation of the Business that could reasonably be
expected to materially exceed the reserves therefor.
(b) To the Best of Seller's Knowledge, there is no state of facts
or any event forming the reasonable basis of any present claim against Seller in
connection with the operation of the Business not fully covered by insurance,
except for deductibles and self-insurance retentions, for personal injury or
property damage alleged to be caused by products shipped or services rendered by
or on behalf of Seller in connection with the operation of the Business.
4.24 No Untrue Statements. To the Best of Seller's Knowledge, the
statements, representations and warranties of Seller set forth in this Agreement
and the Schedules and in all other documents and information furnished to
Purchaser and its representatives in connection herewith do not include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements, representations and warranties made not misleading. To
the Best Knowledge of Seller, there is no fact or matter that is not disclosed
to Purchaser in this Agreement or the Schedules that materially and adversely
affects or, so far as Seller can now reasonably foresee, could materially and
adversely affect the condition (financial or otherwise) of any of the Assets or
the Business or the ability of Seller or any of the Shareholders to perform
their respective obligations under this Agreement.
21
<PAGE> 29
4.25 Shareholders' Representations and Warranties. The
Shareholders hereby jointly and severally represent and warrant to the Rush
Parties as follows:
(a) Due Authorization. Each Shareholder has full power and
authority to execute and deliver this Agreement and the agreement
contemplated herein and to perform his obligations hereunder and
thereunder. Each Shareholder has duly executed this Agreement, and this
Agreement is, and each other agreement contemplated hereby to which he
will be a party will be, upon execution and delivery thereof by him,
his legal, valid and binding obligation, enforceable against him 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).
(b) No Conflict. Neither Shareholders' execution and delivery
of this Agreement or the agreements contemplated herein nor the
consummation of the transactions contemplated hereby or thereby by him
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 he is a party
or by which he (or any of his assets or properties) is bound; or (ii)
require him to obtain any authorization, consent, approval or waiver
from, to give notification to, or to make any filing with, any
Governmental Authority, or to obtain the approval or consent of any
other Person.
(c) Brokers. Neither Shareholder 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.
(d) Seller's authorized capital stock consists of 250,000
shares of Common Stock, of which 54,796 shares are issued and
outstanding and are owned of record and beneficially as set forth on
Schedule 4.25, free and clear of all liens, Encumbrances or other
obligations. All of the outstanding shares of capital stock of Seller
have been duly authorized and validly issued and are fully paid and
non-assessable. There are no outstanding options, warrants, convertible
securities, calls, rights, commitments, preemptive rights, agreements,
arrangements or understandings of any character obligating Seller (a)
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of Seller or any securities or
obligations convertible into or exchangeable for such shares or (b) to
grant, extend or enter into any such option, warrant, convertible
security, call, right, commitment, preemptive right, agreement,
arrangement or understanding described in clause (a) above.
5. REPRESENTATIONS AND WARRANTIES OF THE RUSH PARTIES. The Rush
Parties represent and warrant to Seller and the Shareholders as follows:
5.1 Incorporation. Each of the Rush Parties is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation.
5.2 Authorization. Each of the Rush Parties has full legal right and
corporate power to enter into and deliver this Agreement and to consummate the
transactions set forth herein and to perform all the terms and conditions hereof
to be performed by it. This Agreement has been duly executed and delivered by
each of the Rush Parties and is a legal, valid and binding obligation of each of
them enforceable in accordance with its terms, except as limited by
22
<PAGE> 30
applicable bankruptcy, moratorium, insolvency or other laws affecting generally
the rights of creditors or by principles of equity.
5.3 Brokers and Finders. No broker or finder has acted for either of
the Rush Parties in connection with this Agreement or the transactions
contemplated by this Agreement and no broker or finder is entitled to any
brokerage or finder's fee or to any commission in respect thereof based in any
way on agreements, arrangements or understandings made by or on behalf of the
Rush Parties.
5.4 No Violation of Laws of Agreements. The execution, delivery and
performance of this Agreement and/or the transactions contemplated by this
Agreement by each of the Rush Parties does not (a) violate any provision of
applicable law, (b) violate any judgment, order, writ or decree of any court or
other tribunal applicable to either or both of the Rush Parties, (c) violate any
of the provisions of the Articles of Incorporation or the By-Laws of the Rush
Parties, of (d) constitute a default under any material agreement, bond, note or
indenture by which the Rush Parties or any of their properties or assets are
bound.
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES,
REPRESENTATIONS AND WARRANTIES OF THE PARTIES. All statements of fact contained
in this Agreement or in any written statement (including financial statements),
certificate, schedule or other document delivered by or on behalf of Seller, any
of the Shareholders or the Rush Parties, as the case may be, pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
deemed representations and warranties hereunder of Seller, each Shareholder or
the Rush Parties, as the case may be. All indemnifications, guarantees,
covenants, agreements, representations and warranties made by any party
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the Closing regardless of any investigation at any time
made by or on behalf of any other party.
7. CONTRACTS PRIOR TO THE CLOSING DATE.
7.1 Approval of Contracts. Other than contracts entered into in the
ordinary course of business, none of which are materially adverse to the
transaction to which it relates, Seller shall not enter into or amend any
contracts related to the Business, the Assets, the Real Property, the Ellsworth
Property or the Grand Rapids Property between the date hereof and the Closing
Date unless approved in writing by Purchaser. Seller will provide all
information requested by Purchaser relating to each such contract or amendment
to enable Purchaser to make an informed decision regarding approval of such
contract or amendment.
7.2 Contracts Included in Assets. Any contracts, agreements or
commitments (or amendments to such items) related to the Business, the Assets,
the Real Property, the Ellsworth Property or the Grand Rapids Property that are
entered into by Seller between the date hereof and the Closing Date and are
approved in writing by Purchaser (after review of true, correct and accurate
copies of such items) shall be included in the Assets (with no addition to the
Purchase Price) and shall be assumed by Purchaser pursuant to Section 3.2.
8. COVENANTS OF SELLER PRIOR TO CLOSING DATE. Seller hereby covenants
and agrees that between the date of this Agreement and the Closing Date:
8.1 Access to Information. Seller shall afford to the officers and
authorized representatives of the Rush Parties access to the facilities,
properties, books and records of
23
<PAGE> 31
Seller related to the Assets, the Business, the Real Property, the Ellsworth
Property and the Grand Rapids Property and shall furnish the Rush Parties with
such financial and operating data and other information regarding the Assets,
the Business, the Real Property and the Grand Rapids Property and as Purchaser
may from time to time reasonably request.
8.2 General Affirmative Covenants. Seller shall:
(a) conduct the Business only in the ordinary course;
(b) maintain the Assets and the Improvements in good working
order and condition, ordinary wear and tear excepted;
(c) perform all its obligations under agreements relating to
or affecting the Assets the Real Property, the Grand Rapids Property,
the Ellsworth Property or the Business (including, without limitation,
the Grand Rapids Lease and the Ellsworth Lease);
(d) keep in full force and effect adequate insurance coverage
on the Assets the Improvements and the operation of the Business;
(e) use its best efforts to maintain and preserve the
Business, and retain its present employees, customers, suppliers and
others having business relations with it;
(f) duly and timely file all reports or returns required to be
filed with any Governmental Authority, and promptly pay all Taxes
levied or assessed upon it or its properties, upon any part thereof or
upon its Shareholders as the result of the Seller's election to be
taxed as an "S" corporation under the Code;
(g) duly observe and conform to all Governmental Requirements
relating to the Assets or its properties, the Real Property, the
Ellsworth Property and the Grand Rapids Property or to the operation
and conduct of its Business and all covenants, terms and conditions
upon or under which any of its properties are held;
(h) remove and have released, by payment or otherwise, all
liens and encumbrances of any nature whatsoever on the Assets, the Real
Property, the Ellsworth Property and the Grand Rapids Property (except
for liens and encumbrances, if any, specifically assumed by Purchaser
pursuant to this Agreement or permitted under the Leases, the New
Ellsworth Lease or the Grand Rapids Lease, as applicable);
(i) duly and timely take all actions necessary to carry out
the transactions contemplated hereby;
(j) deliver to Purchaser on or before the 15th day of each
month true and correct unaudited monthly balance sheets and statements
of income for the Business for the immediately preceding month;
(k) deliver to Purchaser on or before the Closing Date a true
and correct audited annual balance sheet, statement of income and
statement of changes in financial position for the year ended March 31,
1998, together with any additional financial information reasonably
requested by Purchaser to allow Purchaser to timely comply with
24
<PAGE> 32
its reporting requirements under the Exchange Act, all in form and
substance sufficient to allow Purchaser to timely comply with such
reporting requirements;
(l) preserve and maintain the goodwill of the Business; and
(m) cause the book value of the used, rental, leased and "rent
to own" construction machinery equipment, and all used attachment
inventory of Seller to be at least $2,300,000 and to purchase and sell
such equipment and inventory only in accordance with past practice.
8.3 General Negative Covenants. Seller shall not take any of the
following actions without the prior written consent of Purchaser:
(a) entering into or amending or assuming any contract,
agreement, obligation, lease, license or commitment related to the
Business, the Real Property, the Ellsworth Property, the Grand Rapids
Property or the Assets (or of a type included in the Assets) other than
in accordance with the provisions of Section 7.1;
(b) entering into or amending or assuming any mortgage,
pledge, conditional sale or other title retention agreement, lien,
encumbrance or charge of any kind upon any of the Assets, the Real
Property, the Ellsworth Property, the Grand Rapids Property, or
selling, leasing, abandoning or otherwise disposing of any of the
Assets, the Real Property, the Ellsworth Property, or the Grand Rapids
Property, including, but not limited to, real property, machinery,
equipment or other operating properties;
(c) engaging in any activities or transactions that might
adversely affect the Assets, the Real Property, the Ellsworth Property,
the Grand Rapids Property or the Business; or
(d) increasing the compensation of any officer or employee of
Seller, other than normal compensation adjustments in the ordinary
course of the Business consistent with past practice.
8.4 Disclosure of Misrepresentations and Breaches. If any of the
representations or warranties of Seller or any of the Shareholders hereunder are
determined by Seller or any of the Shareholders to have been incorrect when
made, or are determined by Seller or any of the Shareholders to be incorrect as
of any date subsequent to the date hereof, or if any of the covenants of Seller
and each of the Shareholders contained in this Agreement have not been complied
with timely, then Seller or the Shareholders, as the case may be, shall
immediately notify Purchaser to such effect (provided that such notice shall in
no way limit the rights of Purchaser (a) under Articles 10 and 18 to terminate
this Agreement or refuse to consummate the transactions contemplated hereby or
(b) to enforce any rights or remedies it may have hereunder).
8.5 Government Filings. Seller and the Shareholders shall cooperate
with Purchaser and their representatives in the preparation of any documents or
other material that may be required by any Governmental Authority in connection
with the Assets or the Business or the transactions contemplated hereby,
including, but not limited to, any required filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act").
25
<PAGE> 33
8.6 Access to and Inspection of Premises, Facilities and Equipment.
Seller shall afford to the officers and authorized representatives of Purchaser
access to the Real Property, the Ellsworth Property, the Grand Rapids Property
and all other premises, facilities and tangible assets included in the Assets
for the purpose of inspecting such premises, facilities and equipment in such
manner as Purchaser shall deem appropriate, including, but not limited to, an
environmental inspection and audit. To the extent the consent of any owner of
any parcel of the Real Property, the Ellsworth Landlord or the Grand Rapids
Landlord is required for such access, Seller has heretofore obtained or will
obtain the same and agrees to indemnify the Rush Parties and their agents,
officers, employees, contractors, consultants and representatives against any
and all claims, demands or suits against any of such persons by the owners of
any parcel of the Real Property, the Ellsworth Landlord or the Grand Rapids
Landlord in connection with such access or the exercise of any of Seller's or
Purchaser's rights under this agreement, except to the extent such claims,
demands or suits arise out of the negligence or intentional misconduct of the
indemnified parties. If upon completion of such inspection the Rush Parties find
any conditions which the Rush Parties, in their sole discretion, consider to be
unacceptable, the Rush Parties may, in addition to their rights to terminate
this Agreement pursuant to Articles 10 and 18, delay the Closing under Article 2
up to and including the earlier of (a) ten days after remedy of the condition to
the Rush Parties' satisfaction, or (b) October 31, 1998.
9. COVENANTS REGARDING THE CLOSING AND POST-CLOSING.
9.1 Covenants of Seller. (a) Seller and each Shareholder hereby
covenant and agree that they shall each (i) use commercially reasonable efforts
to cause all of their respective representations and warranties set forth in
this Agreement to be true on and as of the Closing Date, (ii) use commercially
reasonable efforts to cause all of their respective obligations that are to be
fulfilled on or prior to the Closing Date to be so fulfilled, (iii) use
commercially reasonable efforts to cause all conditions to the Closing set forth
in this Agreement to be satisfied on or prior to the Closing Date, and (iv)
deliver to Purchaser at the Closing the certificates, updated lists, opinion of
counsel, notices, consents, authorizations, approvals, agreements, leases,
transfer documents, receipts, and amendments contemplated by Article 10 (with
such additions or exceptions to such items as are necessary to make the
statements set forth in such items accurate, provided that if any of such
additions or exceptions cause any of the conditions to Purchaser's obligations
hereunder as set forth in Article 10 not to be fulfilled, such additions and
exceptions shall in no way limit the rights of Purchaser under Articles 10 and
18 to terminate this Agreement or refuse to consummate the transactions
contemplated hereby).
(b) To the extent Seller receives any funds or other assets in
connection with the Assets being sold to Purchaser pursuant hereto, Seller shall
immediately deliver such funds and assets to Purchaser and take all steps
necessary to vest title to such funds and assets in Purchaser. Seller hereby
designates Purchaser and its officers as Seller's true and lawful
attorney-in-fact, with full power of substitution, to execute or endorse for the
benefit of Purchaser any checks, notes or other documents included in the Assets
or received by Purchaser in payment of or in substitution or exchange for any of
the Assets. Seller hereby acknowledges and agrees that the power of attorney set
forth in the preceding sentence is coupled with an interest, and further agrees
to execute and deliver to Purchaser from time to time any documents or
instruments reasonably requested by Purchaser to evidence such power of
attorney.
9.2 Covenants of Shareholders. For a period of 18 calendar months
following the Closing Date, the Shareholders shall cause Seller to maintain cash
and prepaid amounts to the Internal Revenue Service in the aggregate amount of
at least $1.5 million and the cash
26
<PAGE> 34
surrender value of all life insurance policies currently owned by Seller, to
retain its ownership interest in Maple Creek Golf Course, LLC, and not to incur
any indebtedness from and after the Closing other than indebtedness incurred in
connection with any existing recourse obligation, guaranty or any Contract
described on Schedule 4.8.
9.3 Covenants of the Rush Parties. (a) Each of the Rush Parties hereby
covenants and agrees that it shall (a) use commercially reasonable efforts to
cause all of its representations and warranties set forth in this Agreement to
be true on and as of the Closing Date, (b) use commercially reasonable efforts
to cause all of its obligations that are to be fulfilled on or prior to the
Closing Date to be so fulfilled, (c) use commercially reasonable efforts to
cause all conditions to the Closing set forth in this Agreement to be satisfied
on or prior to the Closing Date (provided that failure by the Rush Parties to
comply with a second requirement for information under the HSR Act or to comply
with any requested divestiture of assets or to enter into any consent or similar
order or agreement shall not constitute a failure of the Rush Parties to use
commercially reasonable efforts), and (d) deliver to Seller at the Closing the
certificate contemplated by Article 11 (with such additions or exceptions to
such certificate as are necessary to make the statements set forth in such
certificate accurate, provided that if any of such additions or exceptions cause
any of the conditions to Seller's obligations hereunder as set forth in Article
11 not to be fulfilled, such additions and exceptions shall in no way limit the
rights of Seller under Articles 11 and 18 to terminate this Agreement or to
refuse to consummate the transactions contemplated hereby).
(b) In the event Seller repurchases any equipment or machinery
covered by a repurchase obligation referred to in Section 3.2(j) and listed on
Schedule 2.1(p) and thereafter elects to have repairs made to such equipment and
machinery before selling or disposing of such equipment and machinery, the Rush
Parties shall make all such repairs in consideration for the actual cost of such
repairs plus the intercompany labor rate of the Rush Parties.
9.4 HSR Act. The parties will prepare and file the notification, if
any, required to be filed by them under the HSR Act with respect to the
transactions contemplated by this Agreement, will request early termination
prior to the Closing Date of the statutory waiting period prescribed by the HSR
Act, and will use commercially reasonable efforts to respond to any inquiry made
by the Federal Trade Commission or the Antitrust Division of the Department of
Justice regarding such notification; provided that the parties will respond to
any request for information only if and to the extent requested by the Rush
Parties, in their sole discretion.
9.5 Inventory Audit. Within five days prior to Closing, Seller and the
Rush Parties shall each appoint one or more representatives knowledgeable in the
equipment business, and shall cause such representatives to conduct an audit (in
accordance with generally accepted accounting principles, consistently applied)
of the inventory of the Assets as of the Closing Date. Each party shall bear
their cost of conducting such audit.
10. CONDITIONS TO OBLIGATIONS OF THE RUSH PARTIES. The obligations of
the Rush Parties hereunder are, at the option of the Rush Parties, subject to
the satisfaction, on or prior to the Closing Date, of the following conditions
(any of which may be waived by the Rush Parties, in their sole discretion):
10.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The representations and warranties of Seller and each of the
Shareholders contained in this Agreement shall be true and correct on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date. Each and
27
<PAGE> 35
all of the agreements and covenants of Seller and each of the Shareholders,
respectively, to be performed on or before the Closing Date pursuant to the
terms hereof shall have been performed. Seller and each of the Shareholders
shall have delivered to the Rush Parties a certificate dated the Closing Date
and executed by Seller and each of the Shareholders, as the case may be, to all
such effects.
10.2 Financial Information. Seller shall have provided to the Rush
Parties at Closing all financial information of Seller in the format required in
connection with the filing of financial information of Seller with Rush's
Current Report on Form 8-K under the Exchange Act required in connection with
Purchaser's acquisition of the Business.
10.3 No Governmental Actions. No action or proceeding before any
Governmental Authority shall have been instituted or threatened to restrain or
prohibit the transactions contemplated by this Agreement, and Seller shall have
delivered to Purchaser a certificate dated the Closing Date and executed by
Seller stating it has no Best Knowledge of any such items. No Governmental
Authority shall have taken any other action as a result of which the management
of the Rush Parties reasonably deems it inadvisable to proceed with the
transactions contemplated by this Agreement.
10.4 No Adverse Change. No adverse change in the Business shall have
occurred, and no loss or damage to any of the Assets, whether or not covered by
insurance, shall have occurred since the Balance Sheet Date, and Seller shall
have delivered to Purchaser a certificate dated the Closing Date and executed by
Seller to all such effects.
10.5 Update of Contracts. Seller shall have delivered to the Rush
Parties an accurate list, as of the Closing Date, showing (a) all agreements,
contracts and commitments of the type listed on Schedule 4.8 entered into since
the date of this Agreement (including, but not limited to, amendments, if any,
to the items listed on Schedule 4.8), and (b) all other agreements, contracts
and commitments related to the Business or the Assets entered into since the
date of this Agreement, together with true, complete and accurate copies of all
documents (or in the case of oral commitments, descriptions of the material
terms thereof) relevant to the items on the list (the "New Contracts"). The Rush
Parties shall have the opportunity to review the New Contracts, and shall have
the right to delay the Closing for up to five days if the Rush Parties in their
sole discretion deem such a delay necessary to enable them to adequately review
the New Contracts. All of the New Contracts that are approved in writing by the
Rush Parties prior to the Closing, as it may be delayed, (whether such approval
by the Rush Parties is given before or after Seller executes the New Contract)
shall be included in the Assets (with no addition to the Purchase Price) and the
future obligations of Seller thereunder shall be assumed by Purchaser pursuant
to Section 3.2. Any New Contracts that are not approved in writing by the Rush
Parties prior to the Closing, as it may be delayed, shall remain the sole
obligation of Seller and shall not be assumed by Purchaser, and Purchaser shall
have no obligation or liability with respect thereto.
10.6 Approval of Counsel. 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 the Rush Parties.
10.7 No Material Adverse Information. The investigations with respect
to Seller, the Assets and the Business, performed by the Rush Parties'
professional advisors and other representatives shall not have revealed any
material adverse information concerning Seller, the
28
<PAGE> 36
Assets or the Business that has not been made known to the Rush Parties in
writing prior to the date of this Agreement.
10.8 Notices and Consents. No notice to or consent, authorization,
approval or order of any Person shall be required for the consummation of the
transactions contemplated by this Agreement (except for notices that have been
duly and timely given and consents, authorizations and approvals that have been
obtained), and Seller shall have delivered to the Rush Parties a certificate
dated the Closing Date and executed by Seller to such effect. True and correct
copies of all required notices, consents, authorizations and approvals shall
have been delivered to the Rush Parties and shall be satisfactory in form and
substance to the Rush Parties and their counsel.
10.9 Lease Arrangements. Purchaser shall have entered into Lease
Agreements with the owners of the Real Property and the Ellsworth Landlord for
each of the parcels of real property comprising the Real Property and the
Ellsworth Property, respectively, in the forms attached hereto as Exhibit D-1
and subject to the location-specific rent rates and other business terms set
forth in Exhibit D-2 attached hereto. All such lease agreements covering the
Real Property are herein referred to individually as a "Lease" and collectively
as the "Leases". Such new Lease Agreement covering the Ellsworth Property is
referred to herein as the "New Ellsworth Lease". In addition, the owners of the
Real Property, the Grand Rapids Landlord and the Ellsworth Landlord shall have
obtained the signatures of all mortgagees of the Real Property, the Grand Rapids
Property and the Ellsworth Property (as applicable) on the Subordination,
Non-disturbance and Attornment Agreements in substantially the form incorporated
into the Lease Agreement attached hereto as Exhibit D-1. In addition Rush shall
execute a Lease Guaranty Agreement in favor of each of the Landlords under the
Leases in the form attached hereto as Exhibit D-1.
10.10 Corporate Approval. Seller shall have taken or caused to be taken
all necessary or desirable actions, steps and corporate proceedings (whether by
directors, shareholders or otherwise) to approve and authorize the transfer of
the Business and the Assets by Seller to the Rush Parties and the entering into
of the Leases and the New Ellsworth Lease by the owners of the Real Property and
the Ellsworth Landlord, respectively, and to approve and authorize the execution
and delivery of this Agreement by the Seller, the Leases by the owners of the
Real Property, and the New Ellsworth Lease by the Ellsworth Landlord, and
Seller, the owners of the Real Property and the Ellsworth Landlord, as
applicable, shall have delivered to Purchaser at Closing a certificate to all
such effects.
10.11 Transfer and Assignment Documents. Seller shall have delivered to
Purchaser all documents reasonably necessary or required to effectively transfer
and assign the Business and the Assets to Purchaser (including, without
limitation, all required consents), such transfers and assignments to convey
good and marketable title to the Assets to Purchaser, free and clear of all
liens and encumbrances whatsoever (except for liens, encumbrances and
obligations, if any, specifically assumed by Purchaser pursuant to this
Agreement), and to be in form and substance reasonably satisfactory to Purchaser
and its counsel.
10.12 Liens Released. Each and every lien or encumbrance of any nature,
if any, relating to the Assets shall have been terminated and released and proof
thereof delivered to the Purchaser (except for liens and encumbrances, if any,
specifically assumed by Purchaser pursuant to this Agreement.
29
<PAGE> 37
10.13 Ordinary Course of Business. During the period from the date of
this Agreement until Closing, Seller shall have carried on the Business in the
ordinary and usual course and the Seller shall have delivered to the Rush
Parties at Closing a certificate to that effect.
10.14 Other Documents. Seller shall have delivered or caused to be
delivered all other documents, agreements, resolutions, certificates or
declarations as the Rush Parties or their attorneys may have reasonably
requested.
10.15 Dealer License. Purchaser shall have obtained written approval by
the appropriate departments or agencies of the State of Michigan to do business
as a John Deere dealer in the present territory of Seller's dealership.
10.16 Inventory Audit. The inventory audit contemplated by Section 9.5
shall have been completed and the results thereof shall be satisfactory to the
Rush Parties.
10.17 Other Records. All original licenses and permits, certificates of
occupancy, certificates of compliance, permits, architectural, mechanical, or
electrical plans and specifications and surveys relating to the Real Property,
the Grand Rapids Property, the Ellsworth Property and the Assets; all studies
with respect to the functional aspects of the Real Property, the Grand Rapids
Property, the Ellsworth Property and the Assets, including, without limitation,
environmental site assessments and reports; soil and compaction tests and
flooding studies; all extra promotional brochures, posters, signs and other
advertising materials relative to the operation of the Real Property, the Grand
Rapids Property, the Ellsworth Property and the Assets; and copies of all other
books and records relating to the ownership and operation of the Real Property,
the Grand Rapids Property, the Ellsworth Property and the Assets.
10.18 Keys. Keys to the Improvements shall be delivered to the
Purchaser.
10.19 Government Approvals. All necessary government and regulatory
approvals have been obtained, including all necessary approvals under the HSR
Act and all waiting periods under the HSR Act shall have expired or been
terminated.
10.20 Employment Agreements. Each of Mark Pirie and Conrad Klooster,
Jr., shall have entered into and delivered a fully executed Employment Agreement
in substantially the form attached hereto as Exhibit C.
10.21 Non-Competition Agreements. Each of Mark Pirie, Conrad Klooster,
Conrad Klooster, Jr., and James Craig Klooster shall either be subject to the
non-competition agreement in Article 15 hereof, or shall have entered into and
delivered a fully-executed Non-Competition Agreement in substantially the form
of Article 15 hereof.
10.22 Assignment/Termination of Leases. Seller shall have delivered to
Purchaser an executed assignment of Seller's interest in the Grand Rapids Lease
and a Landlord's Consent and Estoppel executed by the Grand Rapids Landlord, in
form and substance reasonably acceptable to Seller and Purchaser and their
respective counsel, and an instrument terminating the Ellsworth Lease executed
by Purchaser and the Ellsworth Landlord in form and substance reasonably
acceptable to Seller and Purchaser and their respective counsel, wherein the
Ellsworth Landlord shall represent and agree that there are no existing defaults
or further obligations or liabilities on the part of Sellers in connection with
or as a result of the Ellsworth Lease.
30
<PAGE> 38
10.23 Leasehold Policies. Seller shall have delivered to Purchaser
leasehold policies of title insurance in the form contemplated by Section 22.2
hereof insuring the Purchaser with respect to leasehold interests under the
Leases, the Ellsworth Lease and the Grand Rapids Lease.
10.24 Dealership Agreement. Purchaser and John Deere shall have
executed and delivered a dealer sales and service agreement, and ancillary or
related agreements, in form and substance satisfactory to Purchaser.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SHAREHOLDERS. The
obligations of Seller and the Shareholders hereunder are, at their option,
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions (any of which may be waived by Seller and the Shareholders in their
sole discretion):
11.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The representations and warranties of the Rush Parties contained in
this Agreement shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date. Each of the agreements and covenants of the Rush Parties to be
performed on or before the Closing Date shall have been performed. The Rush
Parties shall have delivered to Seller a certificate dated the Closing Date and
executed by the Rush Parties to all such effects.
11.2 Delivery of Purchase Price. Purchaser shall have paid to Seller
the Purchase Price as required by this Agreement, subject in all respects to the
provisions of Article 21 below.
11.3 Approval of Counsel. 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 Seller and the
Shareholders.
11.4 Governmental Approvals. All necessary government and regulatory
approvals have been obtained, including all necessary approvals under the HSR
Act, and required waiting periods under the HSR Act shall have expired or been
terminated.
11.5 Lease Arrangements. Seller and Purchaser shall have entered into
the Leases and the New Ellsworth Lease.
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
12.1 Change of Name. Immediately upon the occurrence of the Closing,
Seller and the Shareholders shall cease using the name "John Deere," "Klooster,"
"Klooster Equipment," and "Stihl" and all derivations thereof. Seller covenants
and agrees that after the Closing they will not, directly or indirectly, use the
name "John Deere," "Klooster," "Klooster Equipment," "Stihl" or any derivation
thereof in connection with any business enterprise.
12.2 Exchange Act Filing; Cooperation. After the Closing, Seller shall
reasonably cooperate with and provide information to the Rush Parties as is
necessary for the Rush Parties to comply with its reporting obligations under
the Exchange Act.
31
<PAGE> 39
13. INDEMNITY BY SELLER AND THE SHAREHOLDERS.
13.1 Indemnification by Seller. Seller agrees to indemnify, defend and
hold harmless the Rush Parties and each of their respective Affiliates,
officers, directors, employees, agents, consultants, representatives,
shareholders and controlling Persons and their respective successors and assigns
from and against and in respect of any and all Damages which may now or in the
future be paid, incurred or suffered by or asserted against such party
(collectively, "General Losses"), arising out of or resulting from or relating
to any misrepresentation, breach of warranty, representation or breach of any
covenant, commitment or agreement made or undertaken by Seller.
13.2 Indemnification by Shareholders. The Shareholders, agree to
jointly and severally indemnify, defend and hold harmless the Rush Parties and
each of their respective Affiliates, officers, directors, employees, agents,
consultants, representatives, shareholders and controlling persons and their
respective successors and assigns from and against and in respect of any and all
Damages which may now or in the future be paid, incurred or suffered by or
asserted against such party, arising out of or resulting from or relating to any
misrepresentation, breach of warranty or breach of any covenant, commitment or
agreement made or undertaken by any of the Shareholders in this Agreement.
13.3 Environmental Indemnification. Seller agrees to indemnify, defend
and hold harmless the Rush Parties and each of their respective Affiliates,
officers, directors, employees, agents, consultants, representatives,
shareholders and controlling Persons and their respective successors and assigns
from and against and in respect of any and all Environmental Liabilities which
may now or in the future be paid, incurred or suffered by or asserted against
such party, arising out of or resulting from or relating to or in connection
with (a) the acts or omissions of Seller, any of the Shareholders or other
person or entity on or prior to the Closing Date relating to the Real Property,
the Grand Rapids Property, the Ellsworth Property, the Assets or any operations
conducted by Seller or on the Real Property, the Ellsworth Property, or the
Grand Rapids Property; (b) any violation of Environmental Law occurring or
commencing on or prior to the Closing Date and resulting from or related to the
Real Property, the Grand Rapids Property, the Ellsworth Property, the Assets or
the operations conducted on or with respect to the Real Property, the Ellsworth
Property, the Grand Rapids Property, or the Assets; (c) the management,
treatment or disposal of any wastes at or from the Real Property, the Ellsworth
Property or the Grand Rapids Property on or prior to the Closing Date; (d) the
presence or use of any Hazardous Materials at, on or under the Real Property,
the Grand Rapids Property or the Ellsworth Property on or prior to the Closing
Date; (e) any Environmental Condition existing at or with respect to the Assets,
the Real Property, the Ellsworth Property, or the Grand Rapids Property as of
the Closing Date; (f) any acts or omissions of Seller or any of the
Shareholders, relating to the Real Property, the Ellsworth Property, the Grand
Rapids Property, the Assets or the Businesses or any operations conducted on or
with the Real Property, the Grand Rapids Property, the Ellsworth Property or the
Assets; or (g) any breach by Seller of a representation or warranty contained in
Section 4.16 hereof (collectively, "Environmental Losses"). In clarification of
this Section 13.3, and not in limitation thereof, Seller's indemnity of
Purchaser hereunder shall include (y) any capital or other expenditures
necessary to comply with Environmental Laws, provided such expenditures relate
to any Environmental Condition that existed as of the Closing Date, and (z) all
fines, penalties and other costs and expenses that arise from or relate to an
Environmental Condition that existed as of the Closing Date, including fines,
penalties and other costs and expenses that arise from or relate to the
continued existence of such Environmental Condition after the Closing Date.
32
<PAGE> 40
13.4 Tax Indemnification. Seller agrees to indemnify, defend and hold
harmless the Rush Parties and each of their respective Affiliates, officers,
directors, employees, agents, consultants, representatives, shareholders and
controlling Persons and their respective successors and assigns from and against
and in respect of any and all Damages which may now or in the future be paid,
incurred or suffered by or asserted against such party arising out of or
resulting from or relating to any Taxes or Tax Returns of Seller for any period,
or portion thereof, up to and including the Closing Date (collectively, "Tax
Losses").
13.5 Products Liability and Warranty Indemnification. Seller agrees to
indemnify, defend and hold harmless the Rush Parties and each of their
respective Affiliates, officers, directors, employees, agents, consultants,
representatives, shareholders and controlling Persons and their respective
successors and assigns from and against and in respect of any and all Damages
which may now or in the future be paid, incurred or suffered by or asserted
against such party arising out of or resulting from or relating to any products
manufactured, sold or distributed or services provided by or on behalf of Seller
in connection with the Business or Assets on or prior to the Closing Date or
with respect to any claims made pursuant to warranties to third Persons in
connection with products manufactured, sold or distributed or services provided
by or on behalf of Seller in connection with the Business or Assets on or prior
to the Closing Date (collectively, "Product Losses").
13.6 Maximum Loss. Seller shall not have any liability under this
Article 13 in the event that the aggregate amount of General Losses,
Environmental Losses, Tax Losses and Product Losses do not exceed $50,000.
13.7 Indemnification by the Rush Parties. The Rush Parties jointly and
severally agree to indemnify, defend and hold harmless Seller and the
Shareholders and Seller's Affiliates, officers, directors, employees, agents,
consultants, representatives, shareholders and controlling Persons and their
respective successors and assigns from and against and in respect of any and all
Damages which may now or in the future be paid, incurred or suffered by or
asserted against any such party, arising out of or resulting from or relating to
any misrepresentation, breach of warranty or breach of any covenant, commitment
or agreement made or undertaken by the Rush Parties in this Agreement.
13.8 Procedure. All claims for indemnification or payment under this
Article 13 shall be asserted and resolved as follows:
(a) An Indemnitee shall promptly give the Indemnitor written
notice of any matter which an Indemnitee has determined has given or
could give rise to a right of indemnification under this Agreement (an
"Indemnification Event"), stating the amount of the Loss, if known, and
method of computation thereof, all with reasonable particularity, and
stating with particularity the nature of such matter. Failure to
provide such written notice shall not affect the right of the
Indemnitee to indemnification except to the extent such failure shall
have resulted in liability to the Indemnitor that could have been
actually avoided had such notice been provided within such required
time period and except that an Indemnitor shall not have any liability
under this Article 13 in the event such written notice is not given
under within 18 months following the Closing Date.
(b) The obligations and liabilities of an Indemnitor under
this Article 13 with respect to Losses arising from claims of any third
party that are subject to the indemnification provided for in this
Article 13 ("Third-Party Claims") shall be governed
33
<PAGE> 41
by and contingent upon the following additional terms and conditions:
if an Indemnitee shall receive notice of any Third-Party Claim, the
Indemnitee shall give the Indemnitor prompt notice of such Third-Party
Claim and the Indemnitor may, at its option, assume and control the
defense of such Third-Party Claim at the Indemnitor's expense and
through counsel of the Indemnitor's choice reasonably acceptable to
Indemnitee. Subject to the condition that written notice be delivered
prior to the expiration of one year after the Closing Date, failure to
provide such written notice shall not affect the right of the
Indemnitee to indemnification except to the extent such failure shall
have resulted in liability to the Indemnitor that could have been
actually avoided had such notice been provided within such required
time period. In the event the Indemnitor assumes the defense against
any such Third-Party Claim as provided above, the Indemnitee shall have
the right to participate at its own expense in the defense of such
asserted liability, shall cooperate with the Indemnitor in such defense
and will attempt to make available on a reasonable basis to the
Indemnitor all witnesses, pertinent records, materials and information
in its possession or under its control relating thereto as is
reasonably required by the Indemnitor. In the event the Indemnitor does
not elect to conduct the defense against any such Third-Party Claim,
the Indemnitor shall cooperate with the Indemnitee (and be entitled to
participate) in such defense and attempt to make available to it on a
reasonable basis all such witnesses, records, materials and information
in its possession or under its control relating thereto as is
reasonably required by the Indemnitee. The Indemnitor understands that
if such Third-Party Claim results in an obligation to indemnify
hereunder, Damages shall include all reasonable costs and expenses of
such defense. Except for the settlement of a Third-Party Claim that
involves the payment of money only and for which the Indemnitor has
provided written objection to Indemnitee under Section 13.8(c), no
Third-Party Claim may be settled without the written consent of the
Indemnitee. Written notice of any proposed settlement of any such claim
and the material terms thereof shall be delivered by Indemnitee to
Indemnitor at least five Business Days prior to any settlement of any
such claim.
(c) If a claim for indemnity is provided pursuant to this
Article 13 by an Indemnitee and the Indemnitor does not pay such claim
or object to such claim within 20 Business Days after written notice is
received by the Indemnitor, such claim shall be deemed agreed to by the
Indemnitor. If the Indemnitor shall object to such claim, a written
notice of such objection setting forth in reasonable detail the basis
for such objection shall be provided to the Indemnitee and such dispute
shall be resolved in accordance with Section 24.12 hereof. In addition,
if the claim shall have been determined to have been a valid claim,
Damages shall include interest at the prime rate as quoted from time to
time by The Frost National Bank from the date the claim is first made
until fully paid.
13.9 Payment. Payment of any amounts due pursuant to this Article 13
shall be made within ten Business Days after final adjudication of such claim
and after written notice is sent by the Indemnitee.
13.10 Failure to Pay Indemnification. If and to the extent the
Indemnitee shall make written demand upon the Indemnitor for indemnification
pursuant to this Article 13 and the Indemnitor shall refuse or fail to pay in
full within 20 Business Days of such written demand the amounts demanded
pursuant hereto and in accordance herewith, then the Indemnitee shall proceed in
accordance with the arbitration provisions of Section 24.12 hereof; provided,
however,
34
<PAGE> 42
that in the case of indemnification for a Third-Party Claim, such matter need
not be resolved by arbitration until the underlying Third-Party Claim is finally
resolved.
13.11 Cooperation. The Indemnitor and the Indemnitee shall cooperate
with each other with regard to any indemnification obligation under this Article
13 and each shall attempt to make available to the other on a reasonable basis
all personnel records, materials and information in its possession or under its
control as is reasonably requested by the other.
14. LEASES. On the Closing Date, Seller shall cause the appropriate
owner(s) of the Real Property to enter into the Leases described in Exhibit D
with Purchaser.
15. NON-COMPETITION AGREEMENTS.
15.1 (a) Non-Competition. In consideration of the benefits of this
Agreement to Seller and as a material inducement to the Rush Parties to enter
into this Agreement and pay the Purchase Price, Seller and the Shareholders
hereby covenant and agree that, commencing on the Closing Date and ending on the
second anniversary of the Closing Date, Seller and the Shareholders shall not,
and Seller will cause their Affiliates, officers, directors and representatives,
as applicable, 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 in the sales, service and/or rental of construction
equipment and machinery and any similar business activity in Michigan and/or
Texas; provided, however, the foregoing shall not prohibit Seller and the
Shareholders, and their Associates, Affiliates and representatives from
purchasing and holding as an investment not more than 5% of any class of
publicly traded securities of any entity which conducts a business in
competition with the business of the Rush Parties, so long as Seller and each of
the Shareholders, and their Affiliates and representatives do not participate in
any way in the management, operation or control of such entity.
(b) Permitted Competition. Notwithstanding anything to the
contrary in this Section 15, in the event that the Rush Parties do not assume
any contract, repurchase agreement, recourse retail installment contracts,
guaranteed buyback contracts, or similar undertaking, including the repurchase
obligations set forth on Schedule 15.1(b), then Seller, after repurchasing such
equipment or machinery from a customer, shall be entitled to re-sell or
otherwise dispose of such equipment or machinery to any customer, person or
buyer in Michigan, Texas or elsewhere, on such terms as Seller may deem
appropriate and Seller shall retain 100% of the proceeds from the sale or
disposition of such equipment and machinery.
15.2 Judicial Reformation. Seller and each of the Shareholders
acknowledge that, given the nature of the Rush Parties' business, the covenants
contained in Section 15.1 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 the Rush Parties' business and to protect their legitimate business
interests. If, however, Section 15.1 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.
35
<PAGE> 43
15.3 Customer Lists; Non-Solicitation. Seller and each of the
Shareholders hereby further covenant and agree that they shall not, and Seller
and each of the Shareholders will cause their Affiliates and representatives not
to, directly or indirectly, (a) use or make known to any person or entity the
names or addresses of any clients or customers of Seller or the Rush Parties 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 and any of the Shareholders, its Affiliates and 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 Seller or the Rush Parties, nor (c) solicit
for employment, recruit, hire or attempt to recruit or hire any employees of
Seller or the Rush Parties.
15.4 Covenants Independent. The covenants of each of Seller and each of
the Shareholders contained in this Section 15 will be construed as independent
of any other provision in this Agreement, and the existence of any claim or
cause of action by Seller or any of Shareholders against the Rush Parties will
not constitute a defense to the enforcement by the Rush Parties of said
provisions. Seller and each of the Shareholders understand that the provisions
contained in Sections 15.1, 15.2 and 15.3 are essential elements of the
transactions contemplated by this Agreement and, but for the agreement of Seller
and each of the Shareholders to Sections 15.1, 15.2 and 15.3, the Rush Parties
would not have agreed to enter into this Agreement and the transactions
contemplated herein. Seller and each of the Shareholders have been advised to
consult with counsel in order to be informed in all respects concerning the
reasonableness and propriety of Sections 15.1, 15.2 and 15.3 with specific
regard to the nature of the business conducted by Seller and the Rush Parties
and Seller and each of the Shareholders acknowledge that Sections 15.1, 15.2 and
15.3 are reasonable in all respects.
15.5 Remedies. In the event of a breach or a threatened breach by
Seller or any of the Shareholders of any of the provisions contained in Sections
15.1, 15.2 or 15.3 of this Agreement, Seller and each of the Shareholders
acknowledge that the Rush Parties 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, the Rush Parties 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 Rush Parties may have under this Agreement, at law or in equity, including,
without limitation, the right to sue for damages.
16. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Seller and each of the
Shareholders recognize and acknowledge that they have and will have access to
certain confidential information of Seller that is included in the Assets
(including, but not limited to, lists of customers, trade secrets, costs and
financial information) that after the consummation of the transactions
contemplated hereby will be valuable, special and unique property of the Rush
Parties. Seller and each of the Shareholders agree that Seller and each of the
Shareholders will, and will cause their Affiliates and representatives to, keep
confidential and not disclose to any other Person or use for his or its own
benefit or for the benefit of any other Person, and Seller and each of the
Shareholders will use their 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 the Rush Parties;
provided, however, such limitation shall not apply to any information which (a)
is then generally known to the public, (b) become or becomes generally known to
the public through no fault of Seller or any of
36
<PAGE> 44
the Shareholders, or their respective Affiliates and representatives, and (c) 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 or any
of the Shareholders of any of the provisions contained in this Article 16,
Seller and each of the Shareholders acknowledge that the Rush Parties 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, the Rush Parties 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 Rush Parties may have under this
Agreement, at law or in equity, including, without limitation, the right to sue
for damages.
17. DAMAGE TO ASSETS. If, on or before the Closing Date, any of the
Assets are damaged or destroyed, Seller will immediately notify the Rush Parties
of such damage or destruction. In the event of any such damage or destruction,
the Purchaser shall (a) remove any or all of the damaged or destroyed asset or
assets it does not desire to purchase from the Assets to be purchased hereunder
and reduce the Purchase Price by an amount equal to the portion of the Purchase
Price attributable to the damaged or destroyed asset or assets so removed and
(b) complete the purchase of the remainder of the Assets and reduce the Purchase
Price by the loss in fair market value of any damaged or destroyed Assets that
are purchased by Purchaser. If, on or before the Closing Date, all or any
portion of the Real Property or the Grand Rapids Property (including, without
limitation, any of the buildings or other improvements thereon) is damaged or
destroyed by fire or other casualty or wholly or partially taken by condemnation
or eminent domain or action in lieu thereof, then Seller shall immediately
notify the Rush Parties thereof, whereupon the Rush Parties shall have the
option of (i) requiring Seller to repair and restore the damaged parcel to the
condition it was in as of the date hereof, immediately upon Seller's receipt of
the casualty insurance proceeds or condemnation award therefor (as applicable),
in which event the Closing hereunder (as to either the entirety of this
transaction or just the parcel so affected, at the Rush Parties' election) shall
be delayed until such repairs are complete, (ii) proceeding to Closing upon
Seller's assignment to Purchaser of all casualty insurance proceeds or
condemnation awards associated with such damage, destruction or taking, (iii)
electing not to enter into a Lease with respect to any parcel of Real Property
so damaged, destroyed or taken, (iv) electing to enter into a Lease with respect
to any such parcel so damaged, destroyed or taken, but with a fair and equitable
reduction in the rental rate therefor determined by mutual agreement of the
owner thereof and the Rush Parties, or (v) if such damage, destruction or taking
affects the Grand Rapids Property, electing not to take assignment of the Grand
Rapids Lease or, at the Rush Parties' option, postponing acceptance of such
assignment until such time as the results of the damage, destruction or taking
of the Grand Rapids Property have been repaired or otherwise resolved in
accordance with the terms of the Grand Rapids Lease), or (vi) if such damage,
destruction or taking affects the Ellsworth Property, electing not to enter into
the New Ellsworth Lease or, at the Rush Parties' option, postponing the entering
into of the New Ellsworth Lease until such time as the results of the damage,
destruction or taking of the Ellsworth Property have been repaired or otherwise
resolved in accordance with the terms of the Ellsworth Lease).
18. TERMINATION. This Agreement may be terminated without further
obligation of the parties, as follows:
18.1 Mutual Consent. This Agreement may be terminated at any time prior
to Closing by mutual written consent of the parties hereto.
37
<PAGE> 45
18.2 Failure of Conditions. This Agreement may be terminated by either
party hereto, if the conditions, as set forth in this Agreement, to such party's
obligations under this Agreement are not fulfilled on or prior to the Closing
Date; provided that any such termination shall not limit the remedies otherwise
available to such party as a result of misrepresentations of or breaches by the
other party.
18.3 Failure to Close. This Agreement will automatically terminate on
October 31, 1998, if the Closing shall not have occurred on or before such date,
unless the parties shall have otherwise agreed in writing prior to such date. No
party will be liable in damages to any other party as a result of termination
pursuant to this Section 18.3 unless the failure of the Closing was due to the
failure of such party to comply with the terms of this Agreement.
19. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER.
19.1 New Employees of Purchaser. It is the intention of Purchaser, and
Seller hereby acknowledges and agrees with such position, that any employees of
Seller that Purchaser hires will be new employees of Purchaser as of the Closing
Date or the date of hire, whichever is later. Such new employees shall be
entitled only to such compensation and employee benefits as are agreed to by
such employees and Purchaser, or as are otherwise provided by Purchaser, in its
sole discretion.
19.2 No Hiring Commitment. Purchaser specifically does not commit to
hire any of the employees of the Business, and Seller specifically understands
and acknowledges this fact. However, notwithstanding Purchaser's position,
Purchaser will review its needs in anticipation of the purchase of the Assets
with a view to hiring certain of the employees of Seller as of the Closing Date.
In its review, Purchaser expects to be able to review employee records and
conduct employee interviews. Seller agrees that after the date hereof it will
make, on a confidential basis, its employee records available to Purchaser and
permit Purchaser to contact its employees for the purpose of conducting employee
interviews. Seller further agrees to make employees designated by Purchaser
available to Purchaser for such purpose.
19.3 Vacation, Sick Pay, Health Insurance, etc.
(a) Notwithstanding Purchaser's decision to hire any or all of
such employees after the Closing Date, Purchaser shall not be liable
under any bonus plan or other plan described in Schedule 4.2(a) or
under any other similar plan that may have been established by Seller
or for any health insurance benefits that may have accrued to such
employees prior to the Closing Date, and Seller expressly acknowledges
that it has sole liability for all such employee benefit costs accrued
as of the Closing Date whether or not any or all of such employees are
subsequently hired by Purchaser pursuant to Section 19.1.
Notwithstanding the foregoing, Purchase shall assume at the Closing
Seller's obligations to employees of Seller actually hired by Purchaser
for accrued but unused vacation and sick leave, which shall include (i)
accrued vacation and sick leave through each employee's previous
anniversary date and (ii) the pro rata portion of vacation and sick
leave earned by each employee since the last anniversary date through
the Closing Date, which such vacation and sick leave will be available
to employee following his next anniversary, and the Purchase Price
shall be reduced by the dollar value of such obligation; provided,
however, Purchaser shall only assume up to the number of accrued but
unused vacation and sick leave days that each employee of Seller
actually hired by Purchaser would be entitled to under Purchaser's
vacation day and sick leave policy. Except for vacation and sick leave
time assumed by Purchaser as set forth above,
38
<PAGE> 46
Purchaser shall have no obligation after the Closing to continue any
pension plans or work benefit plans currently offered by Seller to its
employees.
(b) With respect to employees actually employed by Purchaser,
Seller will remain responsible for medical expenses covered under its
plans (i) actually incurred prior to the Closing Date or (ii) actually
incurred with respect to any hospitalization that begins prior to the
Closing Date until such hospitalization ends (as required under such
plans), and Purchaser will be responsible for all other medical
expenses incurred on or after the Closing Date to the extent covered
under its plans; provided, however, the employees will be treated as
newly hired employees of Purchaser beginning on the Closing Date
insofar as medical expenses paid under Purchaser's plans affects the
time or amount of coverage. Seller shall cooperate with Purchaser to
provide continuity of such insurance coverage to such employees. Seller
shall be solely responsible for any obligations under the Consolidated
Omnibus Budget Reconciliation Act, as amended, with respect to its
employees.
19.4 Severance Benefits; Employment Termination. Purchaser shall have
no obligation whatsoever to pay all or any part of any severance benefits that
Seller is or may be obligated to pay in connection with the termination of
employment by Seller of any of its employees.
19.5 Employee Benefit Plans. Purchaser shall not and does not hereby
assume, continue or maintain any pension, retirement or welfare plans, severance
or vacation policies or benefits, or other employee compensation or benefit
arrangements or policies or plans maintained by Seller for its employees. It is
intended that Purchaser shall not at any time be a successor employer for
purposes of Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Seller hereby represents and warrants to Purchaser that the
consummation of this Agreement (and the employment by the Purchaser of former
employees of the Seller) will not result in any carryover liability to the
Purchaser for taxes, penalties, interest or any other claims resulting from any
employee pension benefit plan, employee welfare benefit plan, or other employee
benefit agreement or arrangement maintained by Seller. In addition, the Seller
makes the following representations (a) as to employee pension benefit plans of
Seller: (i) Seller has not become liable to the PBGC under Section 4062, 4063 or
4064 of ERISA under which a lien could attach to the assets of the Seller under
Section 4068 of ERISA; (ii) Seller has not ceased operations at a facility so as
to become subject to the provisions of Section 4062(e) of ERISA; and (iii)
Seller has not made a complete or partial withdrawal from a multiemployer plan
(as defined in Section 3(37) of ERISA) so as to incur withdrawal liability as
defined in Section 4201 of ERISA, and (b) all group health plans maintained by
Seller have been operated in compliance with Section 4980B(f) of the Code. In
addition, the parties agree that the Purchaser does not and will not assume the
sponsorship of, or the responsibility for contributions to, or any liability in
connection with, any employee pension benefit plan, any employee welfare benefit
plan, or other employee benefit agreement or arrangement maintained by Seller
for its employees, former employees, retirees, their beneficiaries or any other
person. In addition and not as a limitation of the foregoing covenant, the
parties agree that the Seller shall be liable for any continuation coverage
(including any penalties, excise taxes or interest resulting from the failure to
provide continuation coverage) required by Section 4980B of the Code due to
qualifying events which occur on or before Closing Date.
19.6 Reporting of Data. Purchaser and Seller shall complete and furnish
to each other such other employee data as shall be reasonably required from time
to time for each party to perform and fulfill its obligations under this Article
19.
39
<PAGE> 47
19.7 Employment Related Claims. Seller agrees that it, and not
Purchaser, shall be solely responsible for, and Seller hereby agrees to
indemnify, defend and hold harmless Purchaser from and against, all liability,
costs and expenses (including reasonable attorneys' fees) for all existing
employment claims that have been filed by any employee or former employee of
Seller prior to the Closing Date relating to arbitrations, unfair labor practice
charges, employment discrimination charges, wrongful termination claims,
workers' compensation claims, any employment-related tort claim or other claims
or charges of or by employees of Seller, or any thereof filed after the Closing
Date but arising as a result of conditions, actions or events or series of
actions or events which occurred prior to the Closing Date. Schedule 19.7 hereto
sets forth a brief description of any of such claims that have been filed or, to
Seller's knowledge, threatened. Without in any way limiting the foregoing,
Seller shall defend and hold harmless Purchaser from and against any and all
claims, demands, actions, judgments, costs and expenses, including without
limitation, attorney fees and settlement costs and other reasonable expenses,
related to all liabilities and obligations in connection with Seller's qualified
pension, retirement or welfare plans, severance or vacation policies or
benefits, or other employee compensation or benefit arrangements or policies.
20. ACCESS TO INFORMATION. Seller, Shareholders and the Rush Parties
shall reasonably cooperate with each other after the Closing so that (subject to
any limitations that are reasonably required to preserve any applicable
attorney-client privilege) each party has access to the employees, files, books,
business records, contracts and other information existing at the Closing and
relating to the Assets and the Business as is reasonably necessary for (a) any
customer inquiry or audit, (b) the preparation for or the prosecution or defense
of any suit, action, litigation or administrative, arbitration or other
proceeding or investigation by or against Seller, the Shareholders or the Rush
Parties (other than one by or on behalf of a party to this Agreement), (c) the
preparation and filing of any tax return or election relating the Assets or the
Business or any audit by any taxing authority of any returns of the Rush
Parties, Seller or the Shareholders relating thereto, (d) the preparation and
filing of any other documents required by any Governmental Authority or (e) any
other valid business purpose. The party requesting such information and
assistance shall reimburse the other party for all out-of-pocket costs and
expenses incurred by such party in providing such information and in rendering
such assistance other than attorney fees. The access to the employees, files,
books, records, contracts and other information contemplated herein shall be
during normal business hours and upon not less than five (5) business days'
prior written request, shall be subject to such reasonable limitations as the
party having custody or control thereof may impose to preserve the
confidentiality of information contained therein, and shall not extend to
material subject to a valid claim of privilege unless expressly waived by the
party entitled to claim the same.
21. ADJUSTMENT OF PURCHASE PRICE. The Purchase Price shall be adjusted
on the Closing Date (a) to reduce the Purchase Price by the amount allocated to
any damaged or destroyed Assets as contemplated by Article 17; (b) to reduce the
Purchase Price by the amount to be credited to Purchaser as described on the
first page of Schedule 2.1(p); (c) to account for a proration of real and
personal property taxes on the Assets, lease deposits, lease payments, utilities
and other items commonly prorated; and (d) to account for any Deposits held by
Seller on the Closing Date. Three days prior to the Closing Date, Seller will
provide the Rush Parties with a statement of adjustments showing all proposed
adjustments to the Purchase Price, such statement of adjustments having all
reasonable backup documentation for such suggested adjustments. The Rush Parties
and Seller will work to finalize all required adjustments prior to the Closing
Date.
40
<PAGE> 48
22. SURVEYS; TITLE COMMITMENT AND CONDITION OF TITLE.
22.1 Surveys. Within twenty (20) days from and after the date hereof,
the Rush Parties shall have the right, at their sole option and at their sole
cost and expense, to obtain an ALTA or equivalent boundary and improvements
surveys of all or any portion of the Real Property, the Ellsworth Property and
the Grand Rapids Property (whether one or more, the "Surveys"), prepared by a
professional engineer or land surveyor licensed by the State of Michigan and in
form and substance satisfactory to the Rush Parties. Should the Rush Parties
elect to obtain a survey of the Grand Rapids Property or the Ellsworth Property,
Seller agrees to use its best efforts to obtain the consent of the Grand Rapids
Landlord or the Ellsworth Landlord, as the case may be, to the performance of
such survey, if required under the Grand Rapids Lease or the Ellsworth Lease,
and the twenty day time period provided for in this Section 23.1 shall not begin
running until such time as such consent is obtained.
22.2 Title Commitment. Within ten days from and after the date hereof,
at Seller's sole cost and expense, Seller agrees to cause the Title Company to
furnish Purchaser and its counsel Commitments for Leasehold Policy of Title
Insurance (each, a "Title Commitment" and collectively, the "Title Commitments")
prepared and issued by the Title Company describing and covering the Real
Property, the Ellsworth Property and the Grand Rapids Property, listing
Purchaser as the prospective named insured and showing as the policy amounts the
amounts set forth in Schedule 22.2 hereto. The Title Commitments shall
constitute the commitment of the Title Company to insure, by title insurance in
the standard form promulgated in the State of Michigan, Purchaser's leasehold
interests in the Real Property, the Ellsworth Property and the Grand Rapids
Property, subject to the standard printed exceptions on such promulgated form,
except as modified below. 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 Commitments shall contain no exception for "rights of
parties in possession" (other than Purchaser). Further, the Title Commitments
shall incorporate the Title Company's commitment to provide (i) an ALTA Form 9
or CLTA Form 100 endorsement (or the closest equivalent thereto available in the
State of Michigan) and (ii) an ALTA Form 3 or CLTA Form 123 endorsement (or the
closest equivalent thereto available in the State of Michigan), to each of the
policies of title insurance to be issued pursuant thereto.
22.3 Disclosure of Exceptions by Title Commitments and UCC Report.
Purchaser shall have a period of 15 days from the last to be delivered to
Purchaser and its counsel of each of the Surveys, UCC Report, Title Commitments
and the documents referred to therein as conditions or exceptions to title 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 Surveys, UCC
Report, Title Commitments or title exception documents. Any items to which
Purchaser does not object within such period shall be deemed to be permitted
exceptions hereunder and under the applicable Leases and the Grand Rapids Lease
or the New Ellsworth Lease, as applicable ("Permitted Exceptions"). In the event
the Rush Parties timely object to any matter contained in the Surveys, UCC
Report, Title Commitments or title exception documents, Seller shall have a
reasonable time, not to exceed fifteen 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 its
sole cost and expense, within such 15-day period. If Seller cannot cure the
objections within such fifteen-day period, Purchaser shall have the option to
(a) cancel this Agreement, in which event the parties shall have no further
obligations hereunder; or (b) waive the objections, and proceed to close the
transaction contemplated hereby in which event such objections shall be included
as exceptions in the Leases, the Grand Rapids Lease, or the New Ellsworth Lease
as applicable.
41
<PAGE> 49
23. ENVIRONMENTAL STUDIES AND REMEDIATION ACTIVITIES.
23.1 Environmental Studies. Seller has heretofore provided to the Rush
Parties copies of (a) all existing Environmental Site Assessments (whether Phase
I, Phase II or otherwise) covering all or any portion of the Real Property, the
Ellsworth Property and the Grand Rapids Property, to the extent the same are in
Seller's possession or Seller has 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, the Ellsworth Property and the Grand Rapids
Property, to the extent the same are in Seller's possession or Seller has access
to them (all of the foregoing information, whether obtained by the Rush Parties
or provided by Seller, being hereinafter referred to as "Environmental
Information"). Without in any way limiting the provisions of the preceding
sentence, the Rush Parties and their contractors and representatives, at the
Rush Parties' expense, shall have at least 45 days from the date hereof, but in
no event less than 30 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,
the Ellsworth Property and its Grand Rapids Property which the Rush Parties, in
their sole discretion, deem necessary to determine whether the Real Property,
the Ellsworth Property and the Grand Rapids Property are environmentally,
engineeringly and economically suitable for the Rush Parties' intended use. In
accordance with Section 8.6 hereof, Seller has granted and hereby grants to the
Rush Parties and their contractors and representatives access to the Real
Property, the Ellsworth Property and the Grand Rapids 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 Business, and,
upon completion of their activities on the Real Property, the Ellsworth Property
and the Grand Rapids Property, shall restore the Real Property, the Ellsworth
Property and the Grand Rapids Property as nearly as is reasonably possible to
the condition they were in immediately prior to such activities.
23.2 Remediation. In the event that any of the Environmental
Information or any studies or tests performed or commissioned by the Rush
Parties indicate the existence of any Environmental Conditions on the Real
Property, the Ellsworth Property or the Grand Rapids 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, the Ellsworth Property or the Grand Rapids
Property and Seller fails or refuses to remediate or otherwise cure 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 notice thereof given to Seller prior to the
Closing Date, in which event the parties hereto shall have no further
obligations hereunder, (b) to postpone the leasing of all or any portion of the
Real Property or the assumption of the Grand Rapids Lease or the Ellsworth
Lease, as the case may be, for a reasonable period pending Seller's remediation
of such Environmental Condition, or (c) waive in writing the remediation or cure
of such Environmental Condition and proceed to close the sale and other
transactions contemplated by this Agreement.
24. GENERAL PROVISIONS.
24.1 Governing Law; Interpretation; Section Headings. This Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Texas, without regard to conflict-of-laws rules as applied in
Texas. The section headings contained
42
<PAGE> 50
herein are for purposes of convenience only, and shall not be deemed to
constitute a part of this Agreement or to affect the meaning or interpretation
of this Agreement in any way.
24.2 Severability. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or the
State of Texas, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intention of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of this
Agreement shall not be affected by any such modification or severance, except
that if any severance materially alters the intentions of the parties hereto as
expressed herein (a modification being permitted only if there is no material
alteration), then the parties hereto shall use commercially reasonable efforts
to agree to appropriate equitable amendments to this Agreement in light of such
severance, and if no such agreement can be reached within a reasonable time, any
party hereto may initiate arbitration under the then current commercial
arbitration rules of the American Arbitration Association to determine and
effect such appropriate equitable amendments.
24.3 Entire Agreement. This Agreement, the Schedules and the documents
and agreements referenced herein set forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersede all prior agreements, arrangements and
understandings related to the subject matter hereof. No representation, promise,
inducement or statement of intention has been made by any party hereto which is
not embodied or referenced in this Agreement, the Schedules or the documents or
agreements referenced herein, and no party hereto shall be bound by or liable
for any alleged representation, promise, inducement or statement of intention
not so set forth.
24.4 Binding Effect. All the terms, provisions, covenants and
conditions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
24.5 Assignment. This Agreement and the rights and obligations of the
parties hereto shall not be assigned or delegated by any party hereto without
the prior written consent of the other parties hereto.
24.6 Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms, provisions, representations,
warranties, covenants or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provision, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach of
any other term, provision, representation, warranty or covenant.
24.7 Gender; Numbers. All references in this Agreement to the
masculine, feminine or neuter genders shall, where appropriate, be deemed to
include all other genders. All plurals used in this Agreement shall, where
appropriate, be deemed to be singular, and vice versa.
43
<PAGE> 51
24.8 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall be binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the parties reflected hereon as
signatories.
24.9 Telecopy Execution and Delivery. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties hereto agree to
execute an original of this Agreement as well as any facsimile, telecopy or
other reproduction hereof.
24.10 Press Releases. No press releases or other public announcement
with respect to this Agreement or the transactions contemplated herein shall be
made prior to the Closing Date without the joint approval of Purchaser and
Seller, except as required by law.
24.11 Expenses. Whether or not the transactions contemplated hereby are
consummated, each of the parties will pay all costs and expenses of its or his
performance of and compliance with this Agreement.
24.12 Arbitration. Except for the provisions of Articles 15 and 16 of
this Agreement dealing with restrictive covenants and nondisclosure of
confidential information, with respect to which the Rush Parties 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. Sections 1-15, as amended. The terms of the commercial
arbitration rules of the American Arbitration Association 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 and Fifty Thousand Dollars
($250,000), exclusive of interest, attorneys' fees and costs, the arbitration
shall be conducted by a panel of three independent arbitrators. Otherwise, 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
44
<PAGE> 52
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. 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. Without limiting the scope of the parties' obligation
to arbitrate disputes pursuant to this Section 24.12, the arbitrator(s) are not
empowered to award damages including, without limitation, punitive damages and
multiple damages under applicable Texas statutes, in excess of compensatory
damages; provided that in no event shall consequential damages be awarded. Each
of Rush, Purchaser and Seller hereby irrevocably waives and releases any right
to recover such damages in excess of those damages authorized by this Section
24.12. 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.
In the event that any of the Shareholders is required to travel to
Texas to attend any hearing or deposition in connection with arbitration
proceedings pursuant to this Section 24.12, the Rush Parties shall reimburse
each such Shareholder for his coach air fare and shall pay to such Shareholder a
per diem travel allowance equal to the per diem travel allowance then paid by
Rush to its employees.
24.13 Assignment of Contracts. Notwithstanding any other provision of
this Agreement, nothing in this Agreement or any related document shall be
construed as an attempt to assign (a) any Contract which, as a matter of law or
by its terms, is nonassignable without the consent of the other parties thereto
unless such consent has been given, or (b) any Contract or claim as to which all
of the remedies for the enforcement thereof enjoyed by Seller would not, as a
matter of law or by its terms, pass to Purchaser as an incident of the transfers
and assignments to be made under this Agreement. In order, however, that the
full value of every Contract and claim of the character described in clauses (a)
and (b) above and all claims and demands on such Contracts may be realized for
the benefit of Purchaser, Seller, at the request and expense and under the
direction of Purchaser, shall take all such action and do or cause to be done
all such things as will, in the opinion of Purchaser, be necessary or proper in
order that the obligations of Seller under such Contracts may be performed in
such manner that the value of such Contract will be preserved and will inure to
the benefit of Purchaser, and for, and to facilitate, the collection of the
moneys due and payable and to become due and payable thereunder to Purchaser in
and under every such contract and claim. Seller shall promptly pay over to
Purchaser all moneys collected by or paid to it in respect of every such
contract, claim or demand. Nothing in this Section 24.13 shall relieve Seller of
its obligations to obtain any consents required for the transfer of the Assets
and all rights thereunder to Purchaser, or shall relieve Seller from any
liability to Purchaser for failure to obtain such consents.
45
<PAGE> 53
24.14 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.
24.15 Bulk Transfer Laws. Seller, the Shareholders and the Rush Parties
hereby waive compliance by the other parties with the provisions of any bulk
sales or similar law in any applicable jurisdiction, if and to the extent
applicable to this transaction. Seller shall indemnify the Rush Parties from,
and hold them harmless against, any liabilities, damages, costs and expenses
resulting from or arising out of (i) Seller's failure to comply with any of such
laws in respect of the transactions contemplated by this Agreement, or (ii) any
action brought or levy made as a result thereof, other than Seller's Obligations
which are assumed by the Rush Parties. The Rush Parties shall indemnify Seller
and the Shareholders from, and hold them harmless against, any liabilities,
damages, costs and expenses resulting from or arising out of (i) the Rush
Parties' failure to comply with any of such laws in respect of the transactions
contemplated by this Agreement, or (ii) any action brought or levy made as a
result thereof.
24.16 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid telex
or telegram or by facsimile or other similar instantaneous electronic
transmission device or mailed first class, postage prepaid, certified United
States mail, return receipt requested, as follows:
(a) IF TO SELLER:
Mark Pirie
04175 Lake Shore Drive
Charlevoix, Michigan 49720
with a copy to:
Alan M. Valade, Esq.
Honigman Miller Schwartz and Cohn
222 N. Washington Square, Suite. 400
Lansing, Michigan 48933-1800
Facsimile No.: (517) 484-8286
(b) IF TO PURCHASER:
Rush Equipment Centers of Michigan, Inc.
P. O. Box 34630
San Antonio, Texas 78265
Attention: W. Marvin Rush
Facsimile No.: (210) 662-8017
46
<PAGE> 54
With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro, Esq.
Facsimile No.: (210) 270-7205
IF TO RUSH, AT:
Rush Enterprises, Inc.
P. O. Box 34630
San Antonio, Texas 78265
Attention: W. Marvin Rush
Facsimile No.: (210) 662-8017
With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro, Esq.
Facsimile No.: (210) 270-7205
provided that any party may change its address for notice by giving to the other
party written notice of such change. Any notice given under this Section 24.16
shall be effective when received at the address for notice for the party to
which the notice is given.
24.17 Risk of Loss. Seller shall bear all risk of loss to the Assets until such
time as the Closing has occurred and title to the Assets has passed to the
Purchaser.
IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first above written.
RUSH:
RUSH ENTERPRISES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
-----------------------------
47
<PAGE> 55
PURCHASER:
RUSH EQUIPMENT CENTERS
OF MICHIGAN, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
-----------------------------
SELLER:
KLOOSTER EQUIPMENT, INC.
By:
---------------------------------
Name: Mark R. Pirie
Title: President
SHAREHOLDERS:
------------------------------------
Mark R. Pirie
------------------------------------
Conrad L. Klooster, Jr.
------------------------------------
James Craig Klooster
48
<PAGE> 56
APPENDIX A
DISPUTE RESOLUTION PROCEDURES
Re: Employment Agreement dated _______ ___, 1998 (including any
amendments, the "Agreement"), between Rush Equipment Centers of Michigan, Inc.,
a Delaware corporation (the "Company"), and __________________________
("Employee"). Unless otherwise defined in this Appendix A, terms defined in the
Agreement and used herein shall have the meanings set forth therein.
A. Negotiations. If any claim, dispute or controversy described in
Article 7 of the Agreement (collectively, the "Dispute") arises, either party
may, by written notice to the party, have the Dispute referred to the persons
designated below for attempted resolution by good faith negotiations within 45
days after such written notice is received. Such designated persons are as
follows:
1. Company. The Chairman of the Board and Chief Executive Officer or
his designee; and
2. Employee. Employee or his designee.
Any settlement reached by the parties under this paragraph A shall not be
binding until reduced to writing and signed by both parties. When reduced to
writing, such settlement agreement shall supersede all other agreements, written
or oral, to the extent such agreements specifically pertain to the matters so
settled. If the above-designated persons are unable to resolve such dispute
within such 45-day period, either party may invoke the provisions of paragraph B
below.
B. Arbitration. All Disputes shall be settled by negotiation among the
parties as described in paragraph A above or, if such negotiation is
unsuccessful, by binding arbitration in accordance with procedures set forth in
paragraphs C and D below.
C. Notice. Notice of demand for binding arbitration by one party shall
be given in writing to the other party pursuant to the Agreement. In no event
may a notice of demand of any kind be filed more than one (1) year after the
date the Dispute is first asserted in writing to the other party pursuant to
paragraph A above, and if such demand is not timely filed, the Dispute
referenced in the notice given pursuant to paragraph A above shall be deemed
released, waived, barred and unenforceable for all time, and barred as if by
statute of limitations.
D. Binding Arbitration. Upon filing of a notice of demand for binding
arbitration by either party, arbitration shall be commenced and conducted as
follows:
1. Arbitrators. All Disputes and related matters in question shall
be referred to and decided and settled by a panel of three arbitrators, one
selected by the Company, one selected by Employee and the third selected by the
two arbitrators so selected. Selection of the arbitrators to be selected the
Company and Employee shall be made within ten (10) business days after the date
of giving of a notice of demand for arbitration, and the two arbitrators so
appointed shall appoint the third within 10 business days following their
appointment.
A-1
<PAGE> 57
2. Cost of Arbitration. The cost of arbitration proceedings,
including without limitation the arbitrators' compensation and expenses, hearing
room charges, court reporter transcript charges etc., shall be borne by the
parties equally or otherwise as the arbitrators may determine. The arbitrators
may award the prevailing party its reasonable attorneys' fees and costs incurred
in connection with the arbitration. The arbitrators are specifically instructed
to award attorneys' fees for instances of abuse in the discovery process.
3. Location of Proceedings. The arbitration proceedings shall be
held in Southfield, Michigan, unless the parties agree otherwise.
4. Pre-hearing Discovery. The parties shall have the right to
conduct and enforce pre- hearing discovery in accordance with the then current
Federal Rules of Civil Procedure, subject to these limitations:
(a) Each party may serve no more than one set of
interrogatories limited to 30 questions, including sub-parts;
(b) Each party may depose the other party's expert witnesses
who will be called to testify at the hearing, plus two fact witnesses
without regard to whether they will be called to testify (each party
will be entitled to a total of no more than 24 hours of deposition time
of the other party's witnesses), provided however, that the arbitrators
may provide for additional depositions upon showing of good cause; and
(c) Document discovery and other discovery shall be under the
control of and enforceable by the arbitrators.
5. Discovery disputes. All discovery disputes shall be decided by
the arbitrators. The arbitrators are empowered;
(a) to issue subpoenas to compel pre-hearing document or
deposition discovery;
(b) to enforce the discovery rights and obligations of the
parties; and
(c) to otherwise to control the scheduling and conduct of the
proceedings.
Notwithstanding any contrary foregoing provisions, the arbitrators shall have
the power and authority to, and to the fullest extent practicable shall,
abbreviate arbitration discovery in a manner which is fair to all parties in
order to expedite the conclusion of each alternative dispute resolution
proceeding.
6. Pre-hearing Conference. Within fifteen (15) days after selection
of the third arbitrator, or as soon thereafter as is mutually convenient to the
arbitrators, the arbitrators shall hold a pre- hearing conference to establish
schedules for completion of discovery, for exchange of exhibit and witness
lists, for arbitration briefs and for the hearing, and to decide procedural
matters and address all other questions that may be presented.
7. Hearing Procedures. The hearing shall be conducted to preserve
its privacy and to allow reasonable procedural due process. Rules of evidence
need not be strictly followed, and the hearing shall be streamlined as follows:
A-2
<PAGE> 58
(a) Documents shall be self-authenticating, subject to valid
objection by the opposing party;
(b) Expert reports, witness biographies, depositions and
affidavits may be utilized, subject to the opponent's right of a live
cross-examination of the witness in person;
(c) Charts, graphs and summaries shall be utilized to present
voluminous data, provided (i) that the underlying data is made
available to the opposing party thirty (30) days prior to the hearing,
and (ii) that the preparer of each chart, graph or summary is available
for explanation and live cross-examination in person;
(d) The hearing should be held on consecutive business days
without interruption to the maximum extent practicable; and
(e) The arbitrators shall establish all other procedural rules
for the conduct of the arbitration in accordance with the rules of
arbitration of the Center for Public Resources.
8. Governing Law. This arbitration provision shall be governed by,
and all rights and obligations specifically enforceable under and pursuant to,
the Federal Arbitration Act (9 U.S.C. Section 1, et seq.)
9. Consolidation. No arbitration shall include, by consolidation,
joinder or in any other manner, any additional person not a party to the
Agreement, except by written consent of both parties containing a specific
reference to these provisions.
10. Award. The arbitrators are empowered to render an award of
general compensatory damages and equitable relief (including, without
limitations, injunctive relief), but are not empowered to award exemplary,
special or punitive damages. The award rendered by the arbitrators (a) shall be
final, (b) shall not constitute a basis for collateral estoppel as to any issue
and (c) shall not be subject to vacation or modification.
11. Confidentiality. The parties hereto will maintain the
substance of any proceedings hereunder in confidence and the arbitrators, prior
to any proceedings hereunder, will sign an agreement whereby the arbitrators
agree to keep the substance of any proceedings hereunder in confidence.
A-3
<PAGE> 59
EXHIBIT A
(ATTACH PROPERTY DESCRIPTIONS)
1
<PAGE> 60
EXHIBIT B
GENERAL WARRANTY BILL OF SALE AND ASSIGNMENT
OF CONTRACT RIGHTS
THIS GENERAL WARRANTY BILL OF SALE AND ASSIGNMENT OF CONTRACT RIGHTS is
made and executed by KLOOSTER EQUIPMENT, INC., a Michigan corporation
("Assignor"), to RUSH EQUIPMENT CENTERS OF MICHIGAN, INC., a Delaware
corporation ("Assignee").
RECITALS
A. Assignor and Assignee have heretofore entered into that certain Asset
Purchase Agreement dated July 12, 1998 (the "Purchase Agreement").
B. Pursuant to the terms of the Purchase Agreement, Assignor wishes to
sell, transfer and convey to Assignee all of the Assets (as defined in the
Purchase Agreement) owned or held by Assignor, as well as all other properties,
rights and interests which Assignor has agreed to convey to Assignee under the
Purchase Agreement.
AGREEMENTS
NOW THEREFORE, for and in consideration of the foregoing, Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, Assignor and
Assignee hereby agree as follows:
1. The foregoing recitals are incorporated herein for all purposes.
Unless otherwise required by context, capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the
Purchase Agreement.
2. Assignor hereby GRANTS, BARGAINS, SELLS, CONVEYS, ASSIGNS, TRANSFERS,
SETS OVER, and DELIVERS unto Assignee, its successors and assigns forever, all
of the Assets described in Section 2.1 of the Purchase Agreement including,
without limitation, the Assets described on Exhibit A attached hereto and made a
part hereof for all purposes.
Assignor hereby binds Assignor, and Assignor's successors and assigns, to
warrant and forever defend the title to the Assets, unto Assignee, its
successors and assigns, against every person whomsoever lawfully claiming or to
claim the same or any part thereof.
3. Assignor hereby TRANSFERS, ASSIGNS and SETS OVER unto Assignee, its
successors and assigns forever, all of Assignor's right, title and interest in
and to and under the following, to the extent that Assignor's right, title and
interest in and to and under the same is assignable to Assignee:
a. all governmental permits or approvals or licenses heretofore
granted with respect to the ownership, management and operation of the
Business and the Assets; and
1
<PAGE> 61
b. all goodwill of Assignor associated with the Business, the Assets
and Assignor's operations thereof and Assignor's sales therefrom.
4. Assignor hereby TRANSFERS, ASSIGNS and SETS OVER unto Assignee, its
successors and assigns forever, all of Assignor's right, title and interest in
and to and under each of the contracts, agreements, arrangements and commitments
of Assignor (the "Contracts") set forth on Exhibit B attached hereto and made a
part hereof for all purposes.
5. Assignor agrees to perform, execute and/or deliver or cause to be
performed, executed and/or delivered any and all such further acts and
assurances as Assignee may reasonably require to perfect Assignee's interest in
and to the Assets, properties, rights and interests herein conveyed, transferred
and assigned from Assignor to Assignee.
(Signatures Begin on Next Page)
2
<PAGE> 62
IN WITNESS WHEREOF, the parties have executed this General Warranty Bill
of Sale and Assignment of Contract Rights as of the day of , 1998.
ASSIGNOR:
KLOOSTER EQUIPMENT, INC.,
a Michigan corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ASSIGNEE:
RUSH EQUIPMENT CENTERS
OF MICHIGAN, INC.,
a Delaware corporation
By:
-------------------------------------
W. Marvin Rush
Chief Executive Officer
3
<PAGE> 63
EXHIBIT A
(TO GENERAL WARRANTY BILL OF SALE ASSIGNMENT OF CONTRACT RIGHTS)
LIST OF ASSETS
[to come (will be same as Schedules 2.1, except
Schedule 2.1(p), to Purchase Agreement)]
4
<PAGE> 64
EXHIBIT B
(TO GENERAL WARRANTY BILL OF SALE ASSIGNMENT OF CONTRACT RIGHTS)
LIST OF CONTRACTS
[to come (will be same as Schedule 2.1(p) to Purchase Agreement)]
5
<PAGE> 65
EXHIBIT C
DISPUTES RELATING TO THIS AGREEMENT ARE REQUIRED TO BE SETTLED PURSUANT
TO CERTAIN DISPUTE RESOLUTION PROCEDURES AS PROVIDED IN ARTICLE 7 AND
APPENDIX A OF THIS AGREEMENT.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into effective
as of the ____ day of ________, 1998, between ____________ ("Employee"), and
Rush Equipment Centers of Michigan, Inc., a Delaware corporation (the
"Company"), whose principal executive offices are located in San Antonio, Texas.
WHEREAS, the Company desires to employ Employee, and Employee desires
to be employed by the Company, on terms hereinafter set forth;
NOW, THEREFORE, in consideration for the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DUTIES
1.1 Employment. During the term of this Agreement, the Company agrees
to employ Employee, and Employee accepts such employment, on the terms and
conditions set forth in this Agreement.
1.2 Extent of Service. During the term of this Agreement, Employee
shall devote his full- time business time, energy and skill to the affairs of
the Company and its affiliated companies, and Employee shall not be engaged in
any other substantial business or consulting activity pursued for gain, profit
or other pecuniary advantage. The foregoing shall not prevent Employee from
making monetary investments in businesses, provided that such investments do not
involve any substantial services on the part of Employee in the operation or
affairs of such businesses.
1.3 Duties. Employee's duties hereunder shall include such duties as
may be prescribed from time to time by Employee's supervisors or the Board of
Directors of the Company (the "Board"). Employee shall also perform, without
additional compensation, such duties for the Company's affiliated companies.
1.4 Access to and Use of Proprietary Information. Employee recognizes
and the Company agrees that, to assist Employee in the performance of his duties
hereunder, Employee will be provided access to and limited use of proprietary
and confidential information of the Company. Employee further recognizes that,
as a part of his employment with the Company, Employee will benefit from and
Employee's qualifications will be enhanced by additional training, education and
experience which will be provided to Employee by the Company directly
<PAGE> 66
and/or as a result of work projects assigned by the Company in which proprietary
and confidential information of the Company is utilized by Employee.
2
<PAGE> 67
ARTICLE 2
TERM OF EMPLOYMENT
Subject to earlier termination pursuant to Article 4 hereof, this
Agreement shall have a term commencing as of the date hereof and ending upon the
expiration of 36 calendar months.
ARTICLE 3
COMPENSATION
3.1 Monthly Base Salary. As compensation for services rendered under
this Agreement, Employee shall be entitled to receive from the Company a monthly
base salary (before standard deductions) equal to $10,833, subject to periodic
review and upward adjustment by the Board in its sole discretion (downward
adjustment shall not be permitted). Employee's monthly base salary shall be
payable at regular intervals (at least semi-monthly) in accordance with the
prevailing practice and policy of the Company.
3.2 Discretionary Performance Bonus. As additional compensation for
services rendered under this Agreement, Employee shall also be eligible to
receive a discretionary performance bonus if, as and when declared by the Board
in its sole discretion.
3.3 Benefits. Employee shall, in addition to the compensation provided
for herein, be entitled to the following additional benefits:
(a) Medical, Health and Disability Benefits. Employee shall be
entitled to receive all medical, health and disability benefits that
may, from time to time, be provided by Rush Enterprises, Inc., a Texas
corporation ("Rush"), to its executive officers as a group.
(b) Other Benefits. Employee shall also be entitled to receive
any other benefits that may, from time to time, be provided by Rush to
its executive officers as a group.
(c) Vacation. Employee shall be entitled to an annual vacation
as determined in accordance with the prevailing practice and policy of
the Company and Rush.
(d) Holidays. Employee shall be entitled to holidays in
accordance with the prevailing practice and policy of the Company and
Rush.
(e) Reimbursement of Expenses. The Company shall reimburse
Employee for all expenses reasonably incurred by Employee in
conjunction with the rendering of services at the Company's request,
including expenses incurred for continuing professional education and
training, provided that such expenses are incurred in accordance with
the prevailing practice and policy of the Company and are properly
deductible by the Company for federal income tax purposes. As a
condition to such reimbursement, Employee shall submit an itemized
accounting of such expenses in reasonable detail, including receipts
where required under federal income tax laws.
3
<PAGE> 68
(f) Car Allowance. The Company shall pay to Employee $500 per
month as an automobile allowance, and such amount shall be in lieu of
any other benefit relating to the use of an automobile to which
Employee may otherwise be entitled.
(g) Compensation Program. Employee shall be entitled to
participate in all current and deferred executive compensation programs
offered by Rush to its executive officers as a group.
ARTICLE 4
TERMINATION
4.1 Termination With Notice. This Agreement may be terminated by the
Company or Employee, without cause, upon 30 days' prior written notice thereof
given by one party to the other party. In the event of termination effected by
the Employee giving notice pursuant to this Section 4.1, the Company shall pay
Employee his monthly base salary (subject to standard deductions) earned pro
rata to the date of such termination and the Company shall have no further
obligations to Employee hereunder. In the event of termination effected by the
Company giving notice pursuant to this Section 4.1, the Company shall pay
Employee, within 15 days of such termination, a lump-sum payment equal to his
base salary under Section 3.1 hereof for the remaining portion of his 36-month
term of employment pursuant to this Agreement. Payment by the Company in
accordance with this Section shall constitute Employee's full severance pay and
the Company shall have no further obligation to Employee arising out of such
termination.
4.2 Termination For Cause. This Agreement may be terminated by the
Company for "Cause" (hereinafter defined) upon written notice thereof given by
the Company to Employee. In the event of termination pursuant to this Section
4.2, the Company shall pay Employee his monthly base salary (subject to standard
deductions) earned pro rata to the date of such termination and the Company
shall have no further obligations to Employee hereunder. The term "Cause" shall
include only the following: (i) Employee breaches any of the terms of this
Agreement; (ii) Employee is convicted of a felony; (iii) Employee fails, after
at least two written warnings, to perform duties assigned under this Agreement
(other than a failure due to death or physical or mental disability); (iv)
Employee intentionally engages in conduct which is injurious to the Company or
its affiliates, monetarily or otherwise; (v) Employee commits fraud or theft of
personal or Company property from Company premises; (vi) Employee falsifies
Company documents or records; (vii) Employee engages in acts of gross
carelessness or willful negligence to endanger life or property on Company
premises; (viii) Employee uses, distributes or is under the influence of illegal
drugs, alcohol or any other intoxicant on Company premises; (ix) Employee
possesses or stores lethal weapons on Company premises; or (x) Employee
intentionally violates state, federal or local laws and regulations.
4.3 Termination Upon Death or Disability. In the event that Employee
dies, this Agreement shall terminate upon Employee's death. Likewise, if
Employee becomes unable to perform the essential functions of his duties
hereunder, with or without reasonable accommodation, on account of illness,
disability or other reason whatsoever for a period of more than 180 consecutive
or nonconsecutive days in any 12-month period, the Company may, upon notice to
Employee, terminate this Agreement. In the event of termination pursuant to this
Section 4.3, Employee (or his legal representatives) shall be entitled only to
his monthly base salary earned pro rata for services actually rendered prior to
the date of such termination;
4
<PAGE> 69
provided, however, Employee shall not be entitled to his monthly base salary for
any period with respect to which Employee has received short- term or long-term
disability benefits under employee benefit plans maintained from time to time by
the Company.
4.4 Survival of Provisions. The covenants and provisions of Articles 5,
6 and 7 hereof shall survive any termination of this Agreement and continue for
the periods indicated, regardless of how such termination may be brought about.
ARTICLE 5
PROPRIETARY PROPERTY; CONFIDENTIAL INFORMATION
5.1 Proprietary Property; Confidential Information. Employee
acknowledges that in and as a result of Employee's employment hereunder,
Employee will be making use of, acquiring and/or adding to confidential
information and proprietary property of a special and unique nature and value
relating to such matters as the Company's trade secrets, systems, procedures,
manuals, confidential reports and lists of customers ("Confidential
Information"). As a material inducement to the Company to enter into this
Agreement and to pay to Employee the compensation and benefits stated herein,
the Employee covenants and agrees that Employee shall not, at any time during or
following the term of Employee's employment, directly or indirectly, divulge or
disclose for any purpose whatsoever any Confidential Information or proprietary
information of the Company. Upon termination of this Agreement, regardless of
how such termination may be brought about, Employee shall deliver to the Company
any and all documents, instruments, notes, papers or other expressions or
embodiments of confidential information which are in Employee's possession or
control.
5.2 Publicity. During the term of this Agreement and for a period of
ten years thereafter, Employee shall not, directly or indirectly, originate or
participate in the origination of any publicity, news release or other public
announcements, written or oral, whether to the public press or otherwise,
relating to this Agreement, to any amendment hereto, to Employee's employment
hereunder or to the Company, without the prior written approval of the Company.
ARTICLE 6
RESTRICTIVE COVENANTS
6.1 Non-Competition. Except as otherwise provided in that certain Asset
Purchase Agreement dated July 12, 1998, between Employee, the Company, Rush and
other parties, in consideration of the benefits of this Agreement, including
Employee's access to and limited use of proprietary and confidential information
of the Company, as well as training, education and experience provided to
Employee by the Company directly and/or as a result of work projects assigned by
the Company with respect thereto, Employee hereby covenants and agrees that
during the term of this Agreement and for a period equal to the longer of (i)
five years from the date hereof, and (ii) two years following termination of
this Agreement, regardless of how such termination may be brought about,
Employee shall not, and the Employee will cause his associates, affiliates and
representatives not to, directly or indirectly, as proprietor, partner,
stockholder, director, 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 in the sales, service and/or rental of construction equipment and
machinery or any similar business activity in Michigan and/or Texas; provided,
however, the foregoing shall not, prohibit Employee and his associates,
affiliates and representatives from purchasing and holding as an investment not
more than 5%
5
<PAGE> 70
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 Employee
does not participate in any way in the management, operation or control of such
entity.
6.2 Reformation. Employee acknowledges that, given the nature of the
Company's business, the covenants contained in Section 6.1 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 the Company's business and to protect its
legitimate business interests. If, however, Section 6.1 is determined by any
tribunal 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 tribunal.
6.3 Customer Lists; Non-Solicitation. In consideration of the benefits
of this Agreement, including Employee's access to and limited use of proprietary
and confidential information of the Company, as well as training, education and
experience provided to Employee by the Company directly and/or as a result of
work projects assigned by the Company with respect thereto, Employee hereby
further covenants and agrees that following the termination of this Agreement,
regardless of how such termination may be brought about, Employee shall not,
directly or indirectly, (a) use or make known to any person or entity the names
or addresses of any clients or customers of the Company or any other information
pertaining to them, (b) call on, solicit, take away or attempt to call on,
solicit or take away any clients or customers of the Company on whom Employee
called or with whom he or she became acquainted during his employment with the
Company, nor (c) recruit, hire or attempt to recruit or hire any employees of
the Company.
ARTICLE 7
ARBITRATION
Except for the provisions of Articles 5 and 6 of this Agreement dealing
with proprietary property, confidential information and restrictive covenants,
with respect to which the Company expressly reserves the right to petition a
court directly for injunctive and other relief, any claim, dispute or
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 Employee's employment or the terms
and conditions of this Agreement, including the implementation, applicability or
interpretation thereof, shall be resolved in accordance with the dispute
resolution procedures set forth in Appendix A attached hereto and made a part
hereof.
ARTICLE 8
MISCELLANEOUS
8.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by an overnight
delivery service with tracking procedures or by facsimile to the parties at the
following addresses or at such other addresses as shall be specified by the
parties by like notice: If to Employee, at the address set forth below his name
on the signature page hereof; and if to the Company, by mail at P. O. Box 34630,
San Antonio,
6
<PAGE> 71
Texas 78265, or by delivery at 8810 I.H. 10 East, San Antonio, Texas 78219,
Attention: Chairman of the Board and Chief Executive Officer.
8.2 Equitable Relief. In the event of a breach or a threatened breach
by Employee of any of the provisions contained in Article 5 or 6 of this
Agreement, Employee acknowledges that the Company will suffer irreparable injury
not fully compensable by money damages and, therefore, will not have an adequate
remedy available at law. Accordingly, the Company shall be entitled to obtain
such injunctive relief or other equitable remedy 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 Company may have under this Agreement, at
law or in equity, including, without limitation, the right to sue for damages.
8.3 No Rights in Contracts. Employee acknowledges and agrees that he or
she shall not have any rights in or to any contracts entered into with clients
or customers of the Company in connection with services provided by Employee
hereunder (including those in which Employee may be specifically named with the
Company), unless otherwise agreed to in writing by the Company.
8.4 Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. Employee's rights under this Agreement are not
assignable and any attempted assignment thereof shall be null and void.
8.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without giving effect to the
conflict of law provisions thereof.
8.6 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the parties and supersedes all other agreements between the
parties which may relate to the subject matter contained in this Agreement. This
Agreement may not be amended or modified except by an agreement in writing which
refers to this Agreement and is signed by both parties.
8.7 Headings. The headings of sections and subsections of this
Agreement are for convenience only and shall not in any way affect the
interpretation of any provision of this Agreement or of the Agreement itself.
8.8 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
8.9 Waiver. The waiver by any party of a breach of any provision hereof
shall not be deemed to constitute the waiver of any prior or subsequent breach
of the same provision or any other provisions hereof. Further, the failure of
any party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement unless such party expressly waives such provision pursuant to
a written instrument which refers to this Agreement and is signed by such party.
7
<PAGE> 72
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RUSH EQUIPMENT CENTERS
OF MICHIGAN, INC.
By:
--------------------------------
W. Marvin Rush,
Chief Executive Officer
EMPLOYEE:
-----------------------------------
-----------------------------------
Address:
--------------------------
8
<PAGE> 73
EXHIBIT D-1
LEASE FORMS; FORM OF LEASE GUARANTY AGREEMENT;
FORM OF SUBORDINATION, NONDISTURBANCE AND
ATTORNMENT AGREEMENT
This Exhibit D-1 is comprised of the following five (5) documents, each
of which is attached hereto and made a part hereof:
Exhibit D-1-a Lease Agreement With Option to Purchase (Ellsworth, Michigan
Facility), between Three-K Company, as Landlord, and Rush
Equipment Centers of Michigan, Inc., as Tenant
Exhibit D-1-b Lease Agreement With Option to Purchase (Work-N-Play;
Ellsworth, Michigan Facility), between Klooster Properties,
Inc., as Landlord, and Rush Equipment Centers of Michigan,
Inc., as Tenant
Exhibit D-1-c Lease Agreement With Option to Purchase (Traverse City,
Michigan Facility), between Klooster Properties, Inc., as
Landlord, and Rush Equipment Centers of Michigan, Inc., as
Tenant
Exhibit D-1-d Form of Lease Guaranty Agreement
Exhibit D-1-e Form of Subordination, Nondisturbance and Attornment Agreement
1
<PAGE> 74
EXHIBIT D-1-d
LEASE GUARANTY AGREEMENT
THIS LEASE GUARANTY AGREEMENT (this "Agreement") is dated as of
______________________________, 19__, between ____________________________, a
__________________________ ("Landlord"), having its principal offices at
__________________________, and RUSH ENTERPRISES, INC., a Texas corporation
("Guarantor"), having its principal offices at 8810 I.H. 10 East, San Antonio,
Texas 78219.
W I T N E S S E T H:
Contemporaneously herewith, Landlord, as landlord, is entering into a
certain Lease Agreement With Option to Purchase (the "Lease") for real property
located in the City of , County of , and State of Michigan, which property is
more particularly described in Exhibit A attached to the Lease, with Rush
Equipment Centers of Michigan, Inc., a Delaware corporation ("Tenant"), as
tenant. Guarantor owns a controlling interest in the capital stock of Tenant and
is executing this Agreement as an inducement to Landlord to enter into the
Lease.
NOW THEREFORE, in consideration of the premises, Guarantor agrees as
follows:
1. Guarantor hereby absolutely and unconditionally guarantees to Landlord the
full and punctual payment by Tenant, its successors and assigns of all rent
required to be paid by Tenant under the Lease. This is a guaranty of payment
(and not merely collectability) only, and not a guaranty of the performance or
observance of any of the other covenants, obligations or duties of Tenant under
the Lease (other than Tenant's obligations to pay rent thereunder).
2. Guarantor hereby waives demand, protest, notice of any indulgences or
extensions granted to Tenant, any requirements of diligence or promptness on the
part of Landlord in the enforcement of the Lease and any notice thereof, and any
other notice whereby to charge Guarantor; provided however, Guarantor shall be
furnished with a copy of any notice of or relating to default under or
termination of the Lease to which Tenant is entitled or which is served upon
Tenant at the time the same is sent to or served upon Tenant.
3. The liability of Guarantor hereunder shall in no way be affected by: (a) the
release or discharge of Tenant in any creditors', receivership or bankruptcy
proceeding; (b) any alteration of or amendment to the Lease which alteration or
amendment has been consented to in writing by Guarantor; (c) any permitted sale,
assignment, or sublease, (unless Tenant is released by Landlord pursuant to any
such sale, assignment, or sublease), pledge or mortgage of the rights of Tenant
under the Lease; or (d) any application or release of any security or other
guaranty given for the performance and observance of the covenants and
conditions in the Lease on Tenant's part to be performed and observed.
4. This Agreement, and any obligations of Guarantor hereunder, shall terminate
upon the earlier of (a) the expiration of the primary term of the Lease
(including any extension or renewal periods) or (b) the termination of the Lease
for any reason other than a default by Tenant thereunder.
1
<PAGE> 75
5. This Agreement shall inure to the benefit of Landlord and its successors and
assigns and any assignee of Landlord's interest in the Lease, and shall be
binding upon Guarantor and its successors and assigns.
6. This Agreement may not be changed or terminated orally, but only by a written
amendment hereto signed by a duly authorized representative of Guarantor.
7. Any notice required hereunder to be sent to Guarantor shall be sufficiently
given by mailing by certified or registered mail, postage prepaid, addressed as
follows:
Rush Enterprises, Inc.
P.O. Box 34630
San Antonio, Texas 78265
Attention: President
IN WITNESS WHEREOF, Guarantor has duly executed this Agreement by its
duly authorized officer as of the day and year first above written.
RUSH ENTERPRISES, INC.
By:
-----------------------------
Name:
--------------------------
Title:
-------------------------
2
<PAGE> 76
EXHIBIT D-1-e
STATE OF MICHIGAN )
)
COUNTY OF ____________ )
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is entered into by and between
_______________________________, a ________________________________ ("Lender"),
____________________________________, a ________________________________
("Landlord"), and Rush Equipment Centers of Michigan, Inc., a Delaware
corporation ("Tenant").
Recitals
Lender is the mortgagee under that certain ______________________
("Mortgage") dated ____________________, executed by Landlord, as grantor,
mortgaging certain real property ("Premises") located in ______________ County,
Michigan, more particularly described on EXHIBIT A attached hereto and made a
part hereof for all purposes.
Tenant has a leasehold estate in and to the Premises pursuant to the
Lease Agreement ("Lease") of even date herewith, executed by Tenant and
Landlord.
Lender, Landlord, and Tenant desire to enter into this Agreement to set
forth their agreement concerning the Lease and the Premises.
Agreement
In consideration of the covenants and agreements contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. The Lease, and the rights of Tenant in, to and under the Lease and
the Premises, are hereby subjected and subordinated to the lien of the Mortgage.
2. So long as Tenant is not in default of any material terms or
provisions of the Lease (beyond any and all notice periods and periods given to
Tenant to cure any such defaults), Lender shall not disturb Tenant's possession
of the Premises or any of Tenant's other rights and privileges under the Lease,
and the Lease shall not be terminated (except as permitted by the provisions of
the Lease) or otherwise be diminished or adversely affected by the enforcement
of any rights given to Lender in the Mortgage, in the note secured thereby, or
in any other documents held by Lender or by the enforcement of any rights given
to Lender as a matter of law.
3. Tenant shall attorn to Lender or to any person who acquires title to
the Premises through a foreclosure of the lien created by the Mortgage or by a
transfer in lieu of such foreclosure ("Purchaser"). Upon acquisition of title to
the Premises, Purchaser shall succeed to the interest of Landlord under the
Lease, and upon Tenant's receipt of notice from Purchaser,
1
<PAGE> 77
together with a copy of the instrument of conveyance, Tenant shall accept
Purchaser as Tenant's new landlord, and the Lease shall continue in full force
and effect, after any such foreclosure or other transfer of title, as a direct
lease between Tenant and Purchaser, upon all the terms, covenants, conditions,
and agreements set forth in the Lease.
4. Tenant acknowledges and consents to the assignment of Landlord's
rights under the Lease to Lender pursuant to the Mortgage which contains a
provision assigning to Lender all Leases, rents and other income from the
Premises.
5. If the Mortgage is foreclosed and Lender succeeds to the interest of
Landlord under the Lease, Lender shall be bound to Tenant under all the terms,
covenants and conditions of the Lease. Notwithstanding the foregoing, however,
Lender shall not be (a) liable for any act or omission of Landlord or any prior
lessor, except to the extent the same constitutes a default existing and
continuing during Lender's ownership of the Premises; (b) subject to any offsets
or defenses that Tenant may have against Landlord or any prior lessor or subject
to any claim for damages or counterclaims against Landlord or any prior lessor;
(c) bound by any rent or additional rent that Tenant may have paid more than one
month in advance to Landlord or any prior lessor; (d) bound by any amendment or
modification of the Lease or any consent, approval or waiver by Landlord with
respect to the Lease or the Premises made after the date hereof without Lender's
prior written consent; (e) liable for any security deposit except to the extent
Lender does hold such security deposit; (f) liable to Tenant under the Lease or
otherwise for matters first arising after Lender ceases to own the Premises; (g)
liable for any covenant or agreement to undertake or complete construction or
installation of improvements on the Premises or any part thereof; (h) liable for
any payment to Tenant of any sums, or granting to Tenant of any credit, in the
nature of a contribution towards the cost of preparing, furnishing or moving in
to the Premises or any part thereof; or (i) liable for any other obligation
under the Lease which shall have accrued prior to the date Lender acquires title
to the Premises; provided, however, Lender shall be obligated to cure any
existing and continuing defaults of Landlord or any prior lessor with respect to
the maintenance or repair of the Premises. If Lender becomes liable to Tenant
under this paragraph for any claim, loss or damage, Tenant shall look solely to
the Premises for recovery of any judgment or damages from Lender, and Lender
shall have no personal liability, directly or indirectly, under or in connection
with the Lease. Nothing in this Agreement shall impose any obligation on Lender
for the management, control or condition of the Premises prior to the time
Lender succeeds to the interest of Landlord under the Lease.
6. Landlord and Tenant will not, without the prior written consent of
Lender (which shall not be unreasonably withheld or delayed), (i) amend the
Lease, (ii) assign or sublet all or any part of the Premises unless permitted
under the express provisions of the Lease, or (iii) subordinate the Lease to any
other lien.
7. In the event of the occurrence of any act or omission of Landlord
that would give Tenant the right to terminate the Lease, to claim a partial or
total eviction, or to exercise any other remedy under the Lease or other
applicable law, Tenant shall give to Lender copies of all written notices of
such act or omission that Tenant is required to give to Landlord pursuant to the
terms of the Lease, and Lender shall have the same period for remedying such act
or omission as granted to Landlord under the Lease.
2
<PAGE> 78
8. Tenant hereby represents and warrants to Lender that as of the date
hereof:
a. the Lease is in full force and effect;
b. the Lease has not been modified or amended;
c. all rents, additional rents and other sums due and payable under
the Lease have been paid in full and no rent due under the Lease
has been paid more than one (1) month in advance; and
d. Tenant has not assigned, sublet, transferred or hypothecated its
interest in the Lease.
9. Tenant agrees, from time to time, upon ten (10) days' prior written
notice from Lender, to execute, acknowledge and deliver to Lender an estoppel
certificate in form reasonably satisfactory to Lender stating that the Lease is
then in effect, the rental then prevailing under the Lease and any defaults by
Landlord under the Lease of which Tenant is then aware.
10. The foregoing provisions shall be self-operative and effective
without the execution of any further instruments on the part of any party
hereto. The parties, however, agree to execute and deliver to each other such
other instrument as shall be necessary to effectuate the provisions of this
Agreement.
11. Any notice, request, demand, or other instrument which may be
required or permitted to be furnished to or served upon the parties shall be in
writing, shall be sent by United States mail, registered or certified, return
receipt requested, and shall be deemed given when postmarked and addressed to
such party at the address set forth below. Unless later changed by notices to
all parties hereof in the manner provided herein, the parties' addresses for
purposes of notices are as follows:
LENDER:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
Attention:
----------------------------------------
LANDLORD:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
Attention:
----------------------------------------
TENANT: Rush Equipment Centers of Michigan, Inc.
P.O. Box 34630
San Antonio, Texas 78265
Attention: President
3
<PAGE> 79
with a copy to: Rush Enterprises, Inc.
P.O. Box 34630
San Antonio, Texas 78265
Attention: President
12. This Agreement shall be binding upon and inure to the benefit of
Lender, Landlord, Tenant, and their respective representatives, successors and
assigns; provided, however, this Agreement shall not be binding upon or inure to
the benefit of any assignee from Tenant other than an assignee that is a
wholly-owned subsidiary of Rush Enterprises, Inc., a Texas corporation.
13. The term "Lender" as used herein shall include the successors and
assigns of Lender and any person, party or entity which shall become the owner
of the premises by reason of foreclosure, the power of sale or the acceptance of
a deed or assignment or otherwise. The term "Landlord" as used herein shall mean
and include the present Landlord under the Lease and such Landlord's
predecessors and successors in interest under the Lease, unless context requires
otherwise. The term "Premises" as used herein shall mean the Premises, the
improvements now or hereafter located thereon and the estates therein encumbered
by the Mortgage. The term "Tenant" as used herein shall include the successors
and assigns of Tenant.
14. This Agreement may not be modified or amended except pursuant to a
written document executed by Lender, Landlord and Tenant.
15. This Agreement shall be governed by and construed under the laws of
the State of Michigan.
[Signatures Begin on Next Page]
4
<PAGE> 80
IN WITNESS WHEREOF, the parties have executed this Agreement on the
______ day of _____________________________, 19__.
Attest: Lender:
- ------- -------
,
- ----------------------------------- ----------------------------------
Printed Name: a
---------------------- ---------------------------------
By:
- ----------------------------------- -------------------------------
Printed Name: Name:
--------------------- -----------------------------
Title:
----------------------------
Attest: Landlord:
- ------ --------
,
- ----------------------------------- ----------------------------------
Printed Name: a
---------------------- ---------------------------------
By:
- ----------------------------------- -------------------------------
Printed Name: Name:
---------------------- -----------------------------
Title:
----------------------------
Attest: Tenant:
- ------ ------
- ----------------------------------- RUSH EQUIPMENT CENTERS OF MICHIGAN,
Printed Name: INC., a Delaware corporation
----------------------
By:
- ----------------------------------- -------------------------------
Printed Name: Name:
---------------------- -----------------------------
Title:
----------------------------
5
<PAGE> 81
THE STATE OF _______________ )
)
COUNTY OF __________________ )
This instrument was acknowledged before me on the ____________ day of
_____________ , 19__ by _________________, ____________________ of
________________________________________, a corporation, on behalf of said
corporation.
(SEAL)
--------------------------------------
Notary Public in and for
the State of ____________
--------------------------------------
(Printed Name of Notary)
My commission expires:
----------------
THE STATE OF _______________ )
)
COUNTY OF __________________ )
This instrument was acknowledged before me on the ____________ day of
_____________ , 19__ by _________________, ____________________ of
________________________________________, a corporation, on behalf of said
corporation.
(SEAL)
--------------------------------------
Notary Public in and for
the State of ____________
--------------------------------------
(Printed Name of Notary)
My commission expires:
----------------
6
<PAGE> 82
THE STATE OF _______________ )
)
COUNTY OF __________________ )
This instrument was acknowledged before me on the ____________ day of
_____________ , 19__ by _________________, ____________________ of Rush
Equipment Centers of Michigan, Inc., a Delaware corporation, on behalf of said
corporation.
(SEAL)
--------------------------------------
Notary Public in and for
the State of ____________
--------------------------------------
(Printed Name of Notary)
My commission expires:
----------------
AFTER RECORDING PLEASE RETURN TO:
- --------------------------------
Mr. Les Caldwell
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
7
<PAGE> 83
EXHIBIT A
(To Subordination, Nondisturbance and Attornment Agreement)
[Attach Legal Description for Premises]
8
<PAGE> 84
EXHIBIT D-2
Location Specific Lease Provisions
Ellsworth:
- ---------
Term: Initial five (5) year term with two (2) renewal
options of five (5) years each
Monthly Rent: $ 8,500 during initial 5-year term; increases each
renewal term in proportion to the corresponding
increase in the Consumer Price Index
Deposit: $ 8,500
Purchase Option:
At end of first five years of term: $ 890,000
At end of first five year renewal term: Appraised Value
At end of second five year renewal term: Appraised Value
1
<PAGE> 85
EXHIBIT E
LANDLORD'S CONSENT AND ESTOPPEL
Klooster Equipment, Inc.
- -------------------------------------
- -------------------------------------
- -------------------------------------
- -------------------------------------
Rush Equipment Centers of Michigan, Inc.
P.O. Box 34630
San Antonio, Texas 78265
Re: Lease between 5770 Investors, L.L.C. and Klooster Equipment, Inc. covering
the premises located at 5770 Clyde Park, S.W., City of Wyoming, Kent
County, Michigan
To each of the above addressees:
5770 Investors, L.L.C. , a ____________________ limited liability company
("Landlord"), is the landlord under that certain Lease dated September 9, 1994,
between Klooster Equipment, Inc., a Michigan corporation ("Tenant") and
Landlord. A true copy of such lease, together with all amendments and
modifications thereto (collectively, the "Lease"), is attached hereto as Exhibit
A. In connection with Tenant's assignment of all of its interest under the Lease
to Rush Equipment Centers of Michigan, Inc., a Delaware corporation ("Rush"),
Landlord does hereby certify and agree as follows:
1. The Lease is presently in full force and effect and is unmodified except as
may be evidenced by a written instrument attached as a part of Exhibit A.
2. The Lease term has commenced and full rental is now accruing thereunder.
The primary term of the Lease is ten (10) years, beginning March 1, 1995,
and ending February 28, 2005, with one (1) option to extend the primary
term of the
E-1
<PAGE> 86
Lease for five (5) years, unless sooner terminated or extended pursuant to
the provisions of the Lease.
3. There is no construction completed, ongoing or planned for which Tenant is
obligated to reimburse Landlord (other than through payment of the base
monthly rent herein disclosed) or for which Landlord is obligated to
reimburse Tenant.
4. Tenant has accepted possession of the leased premises under the Lease and,
to the best of Landlord's knowledge, any improvements required by the terms
of the Lease to be made by Landlord have been completed to the satisfaction
of Tenant.
5. Tenant is currently paying $ , on a monthly basis, to Landlord as rent
under the Lease. Such amount is subject to increase on March 1 of each year
during the term of the Lease in a amount proportionate to the corresponding
increase in the Consumer Price Index over the previous 12 months. In
addition, Tenant is currently paying the following amounts due under the
Lease:
a. Real property taxes and special assessments levied against the leased
premises;
b. Personal property taxes on all personal property at the leased
premises; and
c. All utility charges with respect to the leased premises.
6. No rent under the Lease has been paid more than thirty (30) days in advance
of its due date.
7. Tenant is not in monetary default under the terms and provisions of the
Lease nor, to the best knowledge of Landlord, is Tenant in default of any
of its other covenants, agreements, duties or obligations under the Lease.
8. Tenant has deposited the sum of $________________ with Landlord as a
security deposit under the Lease (the "Security Deposit").
9. Landlord hereby consents to the assignment by Tenant of all of its rights,
title and interests under the Lease to Rush and to the assumption by Rush
of all of the rights, duties and obligations of Tenant as "Tenant" under
the Lease from and after the date of such assignment. Landlord agrees that
(i) Tenant shall not be liable for breaches or defaults by Rush under the
Lease, and (ii) Rush shall
E-2
<PAGE> 87
not be liable for breaches or defaults by Tenant under the Lease. Landlord
understands that Tenant has assigned all of its rights with respect to the
Security Deposit (including the right, subject to the terms of the Lease,
to receive a return thereof at the end of the Lease term) to Rush.
5770 INVESTORS, L.L.C.
By:
------------------------------------
- ---------------------------
Name:
----------------------------------
Title:
- ---------------------------
Date:
----------------------------
, 1998
- -----------
E-3
<PAGE> 1
EXHIBIT 2.5
ASSET PURCHASE AGREEMENT
DATED AUGUST 23, 1999
BY AND AMONG
RUSH ENTERPRISES, INC.
RUSH EQUIPMENT CENTERS OF MICHIGAN, INC.
CALVERT SALES, INC.
AND
THOMAS B. CALVERT,
TRUSTEE OF THOMAS B. CALVERT TRUST
(Sole Shareholder of Calvert Sales, Inc.)
COVERING THE PURCHASE
OF SPECIFIED ASSETS OF
CALVERT SALES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. GENERAL DEFINITIONS.................................................................. 1
1.1 "Assets".................................................................... 1
1.2 "Affiliate"................................................................. 1
1.3 "Balance Sheet Date"........................................................ 1
1.4 "Best Knowledge"............................................................ 1
1.5 "Business".................................................................. 2
1.6 "Business Day".............................................................. 2
1.7 "Closing"................................................................... 2
1.8 "Closing Date".............................................................. 2
1.9 "Code"...................................................................... 2
1.10 "Contracts"................................................................. 2
1.11 "Control"................................................................... 2
1.12 "Damages"................................................................... 2
1.13 "Deposits".................................................................. 2
1.14 "Encumbrance"............................................................... 2
1.15 "Environmental Conditions".................................................. 2
1.16 "Environmental Laws"........................................................ 2
1.17 "Environmental Liabilities"................................................. 3
1.18 "Environmental Permits"..................................................... 3
1.19 "ERISA"..................................................................... 3
1.20 "Escrow Agent".............................................................. 3
1.21 "Exchange Act".............................................................. 3
1.22 "Excluded Assets"........................................................... 3
1.23 "Governmental Authority".................................................... 3
1.24 "Governmental Requirement".................................................. 4
1.25 "Hazardous Materials"....................................................... 4
1.26 "Indemnification Event"..................................................... 4
1.27 "Indemnitee"................................................................ 4
1.28 "Indemnitor"................................................................ 4
1.29 "John Deere"................................................................ 4
1.30 "Losses".................................................................... 4
1.31 "Mt. Morris Improvements"................................................... 4
1.32 "Mt. Morris Land"........................................................... 4
1.33 "Mt. Morris Lease".......................................................... 4
1.34 "Mt. Morris Property"....................................................... 4
1.35 "New Contracts"............................................................. 5
1.36 "New Pontiac Location"...................................................... 5
1.37 "Old Pontiac Location"...................................................... 5
1.38 "Overstocked Item".......................................................... 5
1.39 "PBGC"...................................................................... 5
1.40 "Permitted Exceptions"...................................................... 5
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
1.41 "Person".................................................................... 5
1.42 "Pontiac Relocation"........................................................ 5
1.43 "Purchase Price"............................................................ 5
1.44 "Reference Balance Sheet"................................................... 5
1.45 "Retained Liabilities"...................................................... 6
1.46 "Schedule".................................................................. 6
1.47 "SEC" or "Commission"....................................................... 6
1.48 "Section"................................................................... 6
1.49 "Securities Act"............................................................ 6
1.50 "Slow-Moving Item".......................................................... 6
1.51 "Subsidiary"................................................................ 6
1.52 "Tax Returns"............................................................... 6
1.53 "Taxes"..................................................................... 6
1.54 "Territory"................................................................. 6
1.55 "Third-Party Claims"........................................................ 6
1.56 "Title Company"............................................................. 6
1.57 "UCC Report"................................................................ 6
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE........................................ 7
2.1 Assets to be Purchased...................................................... 7
2.2 Purchase and Sale........................................................... 8
2.3 Delivery of Assets and Transfer Documents................................... 8
2.4 UCC Reports................................................................. 8
2.5 Closing; Closing Date....................................................... 9
2.6 Excluded Assets............................................................. 9
2.7 Escrowed Funds.............................................................. 10
3. PURCHASE PRICE....................................................................... 10
3.1 Price and Payment........................................................... 10
3.2 Assumed Obligations......................................................... 11
4. REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE SHAREHOLDER.................................................................. 12
4.1 Incorporation; Capitalization............................................... 13
4.2 Employee Benefits........................................................... 13
4.3 Financial Statements........................................................ 14
4.4 Events Since the Balance Sheet Date......................................... 14
4.5 Customer List............................................................... 15
4.6 Taxes....................................................................... 15
4.7 Employee Matters............................................................ 16
4.8 Contracts and Agreements.................................................... 17
4.9 Effect of Agreement......................................................... 18
4.10 Properties, Assets and Leasehold Estates.................................... 19
4.11 Intangible Property......................................................... 19
4.12 Suits, Actions and Claims................................................... 20
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
4.13 Licenses and Permits; Compliance With Governmental Requirements............. 20
4.14 Authorization............................................................... 20
4.15 Records..................................................................... 20
4.16 Environmental Protection Laws............................................... 21
4.17 Brokers and Finders......................................................... 22
4.18 Deposits.................................................................... 22
4.19 Work Orders................................................................. 22
4.20 Telephone Numbers........................................................... 22
4.21 No Royalties................................................................ 22
4.22 Insurance................................................................... 23
4.23 Great Lakes Sales and Rental, Inc........................................... 23
4.24 Warranties and Product Liability............................................ 23
4.25 No Untrue Statements........................................................ 23
5. REPRESENTATIONS AND WARRANTIES OF THE RUSH PARTIES................................... 24
5.1 Incorporation............................................................... 24
5.2 Authorization............................................................... 24
5.3 Brokers and Finders......................................................... 24
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS,
GUARANTEES, REPRESENTATIONS AND WARRANTIES OF SELLER AND,
WHERE APPLICABLE, OF SHAREHOLDER..................................................... 24
7. CONTRACTS PRIOR TO THE CLOSING DATE.................................................. 24
7.1 Approval of Contracts....................................................... 24
7.2 Contracts Included in Assets................................................ 24
8. COVENANTS OF SELLER AND SHAREHOLDER PRIOR TO CLOSING DATE............................ 25
8.1 Access to Information....................................................... 25
8.2 General Affirmative Covenants............................................... 25
8.3 General Negative Covenants.................................................. 26
8.4 Disclosure of Misrepresentations and Breaches............................... 27
8.5 Government Filings.......................................................... 27
8.6 Access to and Inspection of Premises, Facilities and Equipment.............. 27
9. COVENANTS REGARDING THE CLOSING...................................................... 27
9.1 Covenants of Seller......................................................... 27
9.2 Covenants of Purchaser...................................................... 28
9.3 Inventory Audit............................................................. 28
10. CONDITIONS TO OBLIGATIONS OF PURCHASER............................................... 28
10.1 Accuracy of Representations and Warranties and Fulfillment of Covenants..... 28
10.2 Financial Information....................................................... 28
10.3 No Governmental Actions..................................................... 29
10.4 No Adverse Change........................................................... 29
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
10.5 Update of Contracts......................................................... 29
10.6 Approval of Counsel......................................................... 29
10.7 No Material Adverse Information............................................. 29
10.8 Notices and Consents........................................................ 29
10.9 Mt. Morris Lease............................................................ 30
10.10 Corporate Approval.......................................................... 30
10.11 Insurance Coverage.......................................................... 30
10.12 Transfer and Assignment Documents........................................... 30
10.13 Liens Released.............................................................. 30
10.14 UCC Matters................................................................. 30
10.15 Telephone Transfer.......................................................... 30
10.16 Ordinary Course of Business................................................. 30
10.17 Other Documents............................................................. 31
10.18 Dealer License.............................................................. 31
10.19 John Deere Approval......................................................... 31
10.20 Inventory Audit............................................................. 31
10.21 Other Records............................................................... 31
10.22 Government Approvals........................................................ 31
10.23 Receivables Guarantee....................................................... 31
10.24 Leasehold Policy............................................................ 31
10.25 Environmental Reports or Assessments........................................ 31
10.26 MESA Form 1027.............................................................. 32
10.27 Fair Market Value........................................................... 32
10.28 Pontiac Relocation.......................................................... 32
10.29 Seller's Obligation to Hire Additional Employees............................ 32
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER........................................ 32
11.1 Accuracy of Representations and Warranties and Fulfillment of Covenants..... 32
11.2 Delivery of Purchase Price.................................................. 32
11.3 Approval of Counsel......................................................... 32
11.4 Governmental Approvals...................................................... 32
11.5 Mt. Morris Lease............................................................ 32
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS........................................... 32
12.1 Change of Name.............................................................. 32
12.2 Exchange Act Filing; Cooperation............................................ 33
13. INDEMNITY BY SELLER.................................................................. 33
13.1 Indemnification by Seller................................................... 33
13.2 Environmental Indemnification............................................... 33
13.3 Tax Indemnification......................................................... 34
13.4 Products Liability and Warranty Indemnification............................. 34
13.5 Indemnification by the Rush Parties......................................... 34
13.6 Procedure................................................................... 34
13.7 Payment..................................................................... 36
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C> <C>
13.8 Failure to Pay Indemnification.............................................. 36
13.9 Cooperation................................................................. 36
13.10 Time Limitations............................................................ 36
13.11 Special Provisions Concerning New Pontiac Location.......................... 36
13.12 Limitation on Indemnification............................................... 36
14. NON-COMPETITION AGREEMENTS........................................................... 36
14.1 Non-Competition............................................................. 36
14.2 Judicial Reformation........................................................ 37
14.3 Customer Lists; Non-Solicitation............................................ 37
14.4 Covenants Independent....................................................... 37
14.5 Remedies.................................................................... 38
15. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION........................................... 38
15.1 Covenant of Seller and Shareholder.......................................... 38
15.2 Covenant of Rush Parties.................................................... 38
16. DAMAGE TO ASSETS..................................................................... 39
17. TERMINATION.......................................................................... 39
17.1 Mutual Consent.............................................................. 39
17.2 Failure of Conditions....................................................... 39
17.3 Failure to Close............................................................ 39
17.4 Liquidated Damages.......................................................... 40
18. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER..................................... 40
18.1 New Employees of Purchaser.................................................. 40
18.2 No Hiring Commitment........................................................ 40
18.3 Vacation, Sick Pay, Health Insurance, etc................................... 40
18.4 Severance Benefits; Employment Termination.................................. 41
18.5 Employee Benefit Plans...................................................... 41
18.6 Reporting of Data........................................................... 42
18.7 Employment Related Claims................................................... 42
19. OFFSET PROVISIONS.................................................................... 42
20. ADJUSTMENT OF PURCHASE PRICE......................................................... 42
21. SURVEY............................................................................... 42
21.1 Survey...................................................................... 42
21.2 Remedies for Failure to Deliver Survey...................................... 43
22. TITLE COMMITMENT AND CONDITION OF TITLE.............................................. 43
22.1 Title Commitment............................................................ 43
22.2 Disclosure of Exceptions by Title Commitment and UCC Report................. 44
23. ENVIRONMENTAL STUDIES AND REMEDIATION ACTIVITIES..................................... 44
23.1 Environmental Studies....................................................... 44
</TABLE>
-v-
<PAGE> 7
<TABLE>
<S> <C> <C>
23.2 Remediation................................................................. 45
24. GENERAL PROVISIONS................................................................... 45
24.1 Governing Law; Interpretation; Section Headings............................. 45
24.2 Severability................................................................ 46
24.3 Entire Agreement............................................................ 46
24.4 Binding Effect.............................................................. 46
24.5 Assignment.................................................................. 46
24.6 Amendment; Waiver........................................................... 46
24.7 Gender; Numbers............................................................. 47
24.8 Counterparts................................................................ 47
24.9 Telecopy Execution and Delivery............................................. 47
24.10 Press Releases.............................................................. 47
24.11 Expenses.................................................................... 47
24.12 Arbitration................................................................. 47
24.13 Assignment of Contracts..................................................... 48
24.14 Further Actions............................................................. 49
24.15 Notices..................................................................... 49
24.16 Risk of Loss................................................................ 50
</TABLE>
Exhibits
Exhibit A Escrow Agreement
Exhibit B Mt. Morris Lease Agreement
Exhibit C Mt. Morris Property
Exhibit D General Warranty Bill of Sale and Assignment of Contract Rights
Schedules
Schedule 2.1 Purchased Assets Items
Schedule 2.6 Excluded Items
Schedule 2.6(a) Exclusions: Cash, Securities & Short Term Investments
Schedule 2.6(b) Insurance Policies & Other Contracts
Schedule 2.6(d) Expressly Designated Assets
Schedule 2.6(e) Thomas Calvert Items
Schedule 4.2(a) Benefit Plans & Compensation Agreements
Schedule 4.23 Great Lakes Sales & Rental, Inc. Information
Schedule 4.3 Financial Statements of Seller
Schedule 4.5 Customer List of the Business
Schedule 4.6 Schedule of Unpaid Taxes
Schedule 4.7 Names of Employees & Compensation
Schedule 4.8 Contracts & Agreements of Seller
Schedule 4.11 List of Intangible Property
Schedule 4.12 List of Pending Claims
Schedule 4.13 List of Licenses & Permits; Exceptions
Schedule 4.16 Exceptions to Environmental Laws
Schedule 4.22 List of Insurance Policies that Terminate
Schedule 4.23 List of Warranties Made by Seller
-vi-
<PAGE> 8
Schedule 4.24 Warranties and Product Liability
Schedule 18.7 Employment Related Claims
-vii-
<PAGE> 9
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
this 23rd day of August, 1999 by and among (i) Calvert Sales, Inc., a Michigan
corporation ("Seller"), (ii) Thomas B. Calvert, Trustee of Thomas B. Calvert
Trust (a revocable inter-vivos grantor trust and the owner of 100% of the
capital stock of Seller (referred to herein as the "Shareholder")), and (iii)
Rush Equipment Centers of Michigan, Inc., a Delaware corporation ("Purchaser").
Rush Enterprises, Inc., a Texas corporation ("Rush" and, together with
Purchaser, the "Rush Parties"), joins this Agreement for the limited purposes
expressly set forth in this Agreement. Shareholder joins this Agreement for the
limited purposes expressly set forth in this Agreement.
WITNESSETH:
WHEREAS, Seller is the owner of all right, title and interest in and to the
Assets (as herein defined) described herein, with such assets being the assets
currently used in the conduct of the operation of two John Deere dealership
businesses operated by Seller;
WHEREAS, Purchaser is a wholly-owned subsidiary of Rush;
WHEREAS, Seller desires to sell the Assets to Purchaser and Purchaser
desires to acquire the Assets from Seller, all pursuant to this Agreement as
hereinafter provided; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement, and to set forth certain additional
agreements related to the transactions contemplated hereby;
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the following terms
shall have the respective meanings set forth below:
1.1 "Assets" shall have the meaning assigned to it in Section 2.1.
1.2 "Affiliate" of any Person shall mean any Person Controlling, Controlled
by or under common Control with such Person.
1.3 "Balance Sheet Date" shall have the meaning assigned to it in Section
4.3(a).
1.4 "Best Knowledge" shall mean both what a Person knew as well as what the
Person should have known had the person exercised reasonable diligence. When
used with respect to a Person other than a natural person, the term "Best
Knowledge" shall include matters that are known to the directors, officers, and
key employees of the Person. When used with respect to Seller, the
1
<PAGE> 10
term "Best Knowledge" shall include only those matters known to Walter Rose and
Thomas B. Calvert.
1.5 "Business" shall have the meaning assigned to it in Section 2.1.
1.6 "Business Day" shall mean any day other than Saturday, Sunday or other
day on which federally chartered commercial banks in San Antonio, Texas are
authorized or required by law to close.
1.7 "Closing" shall have the meaning assigned to it in Section 2.5.
1.8 "Closing Date" shall have the meaning assigned to it in Section 2.5.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.10 "Contracts" shall have the meaning assigned to it in Section 4.8.
1.11 "Control" and all derivations thereof shall mean the ability to either
(i) vote (or direct the vote of) 50% or more of the voting interests in any
Person or (ii) direct the affairs of another, whether through voting power,
contract or otherwise.
1.12 "Damages" shall mean any and all liabilities, losses, damages,
demands, assessments, punitive damages, loss of profits, refund obligations
(including, without limitation, interest and penalties thereon) claims of any
and every kind whatsoever, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, costs of remediation, diminutions in
value, costs and expenses incurred in connection with investigating, prosecuting
and defending any claims or causes of action (including, without limitation,
reasonable attorneys' fees and reasonable expenses and all reasonable fees and
reasonable expenses of consultants and other professionals).
1.13 "Deposits" shall have the meaning assigned to it in Section 4.18.
1.14 "Encumbrance" shall mean any security interest, mortgage, pledge,
trust, claim, lien, charge, option, defect, restriction, encumbrance or other
right or interest of any third Person of any nature whatsoever.
1.15 "Environmental Conditions" means any and all acts, omissions, events,
circumstances, and conditions on or in connection with the Mt. Morris Land, the
old Pontiac Location, the New Pontiac Location, or the other Assets that
constitute a violation of, or require remediation under, any Environmental Laws,
including any pollution, contamination, degradation, damage, or injury caused
by, related to, or arising from or in connection with the generation, use,
handling, treatment, storage, disposal, discharge, emission or release of
Hazardous Materials.
1.16 "Environmental Laws" shall mean all applicable federal, state, local
or municipal laws, rules, regulations, statutes, ordinances or orders of any
Governmental Authority, including all laws, rules, regulations, statutes,
ordinances or orders of the State of Michigan and any political subdivision or
instrumentality thereof (irrespective of the provisions of Section 24.1 hereof),
relating to (a) the
2
<PAGE> 11
control of any potential pollutant, or protection of health or the air, water or
land, (b) solid, gaseous or liquid waste generation, handling, treatment,
storage, disposal, discharge, release, emission or transportation, (c) exposure
to hazardous, toxic or other substances alleged to be harmful, (d) the
protection of any endangered or at-risk plant or animal life, or (e) the
emission, control or abatement of noise. "Environmental Laws" shall include, but
not be limited to, the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean
Water Act, 33 U.S.C. Section 1251 et seq., the Resource Conservation Recovery
Act ("RCRA"), 42 U.S.C. Section 6901 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., the Endangered Species Act, 16 U.S.C. Section
1531 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., and
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., including the Superfund Amendments
and Reauthorization Act, 42 U.S.C. Section 11001, et seq. The term
"Environmental Laws" shall also include all applicable state, local and
municipal laws, rules, regulations, statutes, ordinances and orders dealing with
the subject matter of the above listed federal statutes or promulgated by any
governmental or quasi-governmental agency thereunder in order to carry out the
purposes of any federal, state, local or municipal law.
1.17 "Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remedial, removal,
response, abatement, clean-up, investigative and/or monitoring costs and any
other related costs and expenses), 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, attorneys' fees and
other legal costs incurred or imposed (a) pursuant to any agreement, order,
notice of responsibility, directive (including directives embodied in
Environmental Laws), injunction, judgment or similar documents (including
settlements) arising out of, in connection with, or under Environmental Laws,
(b) pursuant to any claim by a Governmental Authority or any other person or
entity for personal injury, property damage, damage to natural resources,
remediation, or payment or reimbursement of response costs incurred or expended
by such Governmental Authority, person or entity pursuant to common law or
statute and related to the use or release of Hazardous Materials, or (c) as a
result of Environmental Conditions.
1.18 "Environmental Permits" shall mean any permits, licenses, approvals,
consents, registrations, identification numbers or other authorizations with
respect to the Assets or the Businesses or the ownership or operation thereof
required under any applicable Environmental Law.
1.19 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.20 "Escrow Agent" shall mean The Frost National Bank, N.A. whose address
is 100 West Houston Street, San Antonio, Texas 78205.
1.21 "Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
1.22 "Excluded Assets" shall have the meaning assigned to it in Section
2.6.
1.23 "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,
3
<PAGE> 12
departments, boards, bureaus, commissions, agencies, courts, administrations and
panels, and any divisions or instrumentalities thereof, whether permanent or ad
hoc and whether now or hereafter constituted or existing.
1.24 "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.
1.25 "Hazardous Materials" means any (a) petroleum or petroleum products,
(b) asbestos or asbestos containing materials, (c) hazardous substances as
defined by Section 101(14) of CERCLA and (d) any other chemical, substance or
waste that is regulated by any Governmental Authority under any Environmental
Law.
1.26 "Indemnification Event" shall have the meaning assigned to it in
Section 13.6.
1.27 "Indemnitee" shall mean (i) the Rush Parties and each of their
respective Affiliates, officers, directors, employees, agents, consultants,
representatives, shareholders and controlling Persons and their respective
successors and assigns, on the one hand, and (ii) the Seller and its Affiliates,
officers, directors, employees, agents, consultants, representatives,
shareholders and controlling Persons and their respective successors and
assigns, on the other hand, whether indemnified, or entitled, or claiming to be
entitled to be indemnified or receive property, pursuant to the provisions of
Article 13 hereof.
1.28 "Indemnitor" shall mean the Person or Persons having the obligation to
indemnify or make payment pursuant to the provisions of Article 13 hereof.
1.29 "John Deere" shall mean John Deere Construction Equipment Company and
its Affiliates.
1.30 "Losses" shall mean General Losses, Environmental Losses, Tax Losses
and Product Losses (each as defined in Article 13 hereof), as the case may be.
1.31 "Mt. Morris Improvements" shall have the meaning assigned to it in
Section 1.35.
1.32 "Mt. Morris Land" shall have the meaning assigned to it in Section
1.35.
1.33 "Mt. Morris Lease" shall mean the Lease Agreement attached hereto as
Exhibit A with such modifications as may be agreed to by Seller and Purchaser.
1.34 "Mt. Morris Property" shall mean all those certain tracts, pieces or
parcels of land where Seller's Mt. Morris, Michigan dealership is located, as
more particularly described in Exhibit A attached hereto and made a part hereof
for all purposes (herein referred to as the "Mt. Morris Land"), together with
the buildings, structures, manufacturing plants, fixtures, paving, curbing,
trees, shrubs, plants, and other improvements of every kind and nature presently
situated on, in, or under, or hereafter erected or installed or used in, on, or
about or in connection with the ownership, use and
4
<PAGE> 13
operation of the Mt. Morris Land (herein collectively referred to as the "Mt.
Morris Improvements"), and all rights and appurtenances pertaining thereto,
including, but not limited to: (a) all right, title and interest, if any, of the
owner(s) of the Mt. Morris Land, in and to any land in the bed of any street,
road or avenue open or proposed in front of or adjoining the Mt. Morris Land;
(b) all right, title and interest, if any, of the owner(s) of the Mt. Morris
Land, in and to any rights-of-way, rights of ingress or egress or other
interests in, on, or to, any land, highway, street, road, or avenue, open or
proposed, in, on, or across, in front of, abutting or adjoining the Mt. Morris
Land, and any awards made, or to be made in lieu thereof, and in and to any
unpaid awards for damage thereto by reason of a change of grade of any such
highway, street, road, or avenue; (c) any easement across, adjacent or
appurtenant to the Mt. Morris Land, existing or abandoned; (d) all sewage
treatment capacity and water capacity and other utility capacity to serve the
Mt. Morris Land and Mt. Morris Improvements; (e) all oil, gas, and other
minerals in, on, or under, and that may be produced from the Mt. Morris Land;
(f) all water in, under or that may be produced from the Mt. Morris Land, and
all wells, water rights, permits and historical water usage pertaining to or
associated with the Mt. Morris Land; (g) all right, title and interest, if any,
of the owner(s) of the Mt. Morris Land, in and to any land adjacent or
contiguous to, or a part of the Mt. Morris Land, whether those lands are owned
or claimed by deed, limitations, or otherwise, and whether or not they are
located inside or outside the description given herein, or whether or not they
are held under fence by the owner(s) of the Mt. Morris Land, or whether or not
they are located on any survey; and (h) any reversionary rights attributable to
the Mt. Morris Land.
1.35 "New Contracts" shall have the meaning assigned to it in Section 10.6.
1.36 "New Pontiac Location" shall have the meaning assigned to it in
Section 8.2(n).
1.37 "Old Pontiac Location" shall have the meaning to it in Section 3.2(j).
1.38 "Overstocked Item" shall mean any item described in Sections 2.1(b),
(c) or (k) for which there is more than an 18-month supply (based on historical
sales of such item over the last 12 months).
1.39 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
1.40 "Permitted Exceptions" shall have the meaning assigned to it in
Section 22.2.
1.41 "Person" shall mean any natural person, any Governmental Authority and
any entity the separate existence of which is recognized by any Governmental
Authority or Governmental Requirement, including, but not limited to,
corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or otherwise.
1.42 "Pontiac Relocation" shall have the meaning assigned to it in Section
8.2(n).
1.43 "Purchase Price" shall have the meaning assigned it in Article 3.
1.44 "Reference Balance Sheet" shall have the meaning assigned it in
Section 4.3(a).
5
<PAGE> 14
1.45 "Retained Liabilities" shall have the meaning assigned it in Section
3.2.
1.46 "Schedule" shall mean the Schedules to this Agreement, unless
otherwise stated. The Schedules to this Agreement may be attached to this
Agreement or may be set forth in a separate document denoted as the Schedules to
this Agreement, or both.
1.47 "SEC" or "Commission" shall mean the United States Securities and
Exchange Commission.
1.48 "Section" shall mean the Sections of this Agreement, unless otherwise
stated.
1.49 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.50 "Slow-Moving Item" shall mean any item described in Sections 2.1(b),
(c) or (k) that has not sold during the previous 12-month period.
1.51 "Subsidiary" shall mean, with respect to any Person (the "parent"),
(a) any corporation, association, joint venture, partnership or other business
entity of which securities or other ownership interests representing more than
50% of the ordinary voting power or beneficial interest are, at the time as of
which any determination is being made, owned or controlled by the parent or one
or more subsidiaries of the parent or by the parent and one or more subsidiaries
of the parent and (b) any joint venture or partnership of which the parent or
any Subsidiary of the parent is a general partner or has responsibility for its
management.
1.52 "Tax Returns" shall mean all Tax returns and reports (including,
without limitation, income, franchise, sales and use, unemployment compensation,
excise, severance, property, gross receipts, profits, payroll and withholding
Tax returns and information returns).
1.53 "Taxes" shall mean any foreign, federal, state or local tax,
assessment, levy, impost, duty, withholding, estimated payment or other similar
governmental charge, together with any penalties, additions to Tax, fines,
interest and similar charges thereon or related thereto.
1.54 "Territory" shall mean the following counties each of which is
situated in the State of Michigan: (a) Genesee, (b) Saginaw, (c) Tuscola, (d)
Sanilac, (e) Huron, (f) St. Clair, (g) Macomb, (h) Lapeer, (i) Oakland, (j)
Wayne, (k) Washtenaw, and (l) half of Livingston.
1.55 "Third-Party Claims" shall have the meaning such term is given in
Section 13.6(b) hereof.
1.56 "Title Company" shall mean Cislo Title Company, Agent for First
American Title Insurance Company, whose office is located at 1208 S. Saginaw
Street, Flint, Michigan 48502.
1.57 "UCC Report" shall have the meaning such term is given in Section 2.4
hereof.
6
<PAGE> 15
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE.
2.1 Assets to be Purchased. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall sell, convey, assign, transfer and
deliver to Purchaser, and Purchaser shall purchase and acquire from company, all
of Seller's right, title and interest in and to the Assets, in each case, free
and clear of any charge, claim, community or marital property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting (in the case of any security), transfer, receipt of income, or exercise
of any other attribute of ownership. The "Assets" shall mean all of Seller's
property and assets, personal or mixed, tangible and intangible, of every kind
and description, wherever located, belonging to Seller at the close of business
on the Closing Date and which relate to the business currently conducted by
Seller as a going concern, including its operation of a John Deere dealership as
well as any and all goodwill associated therewith (the "Business"), other than
the Excluded Assets (as defined in Section 2.6), including the following:
(a) all new construction machinery equipment, irrespective of
manufacturer, except for new construction machinery equipment manufactured
by John Deere, which will be returned by the Seller to John Deere (the
"Returned Equipment"),
(b) all new, current and returnable parts and accessories inventory,
except for John Deere new, current and returnable parts and accessories,
which will be returned by the Seller to John Deere,
(c) all miscellaneous inventories, including gas, diesel fuel, oil,
grease, paint and body shop materials,
(d) all work in progress and sublet repairs on vehicles and equipment
in Seller's parts and service departments,
(e) all of Seller's furniture, fixtures and office equipment
(including related software),
(f) all shop equipment and special tools, and all parts and
accessories equipment other than new attachment inventory,
(g) all company vehicles (the "Company Vehicles"),
(h) all signs, and all promotional, advertising and training materials
used in the Business, except for any of the foregoing items which are
required to be returned to Bob Cat or Thomas based upon the termination of
any dealer agreement with Seller upon the consummation of this transaction
with Purchaser,
(i) all sales files and customer lists, and all warranty and service
and customer service and repair files, excluding any files that support
receivables retained by Seller,
7
<PAGE> 16
(j) all intangible assets of Seller required to do business as a John
Deere dealer, including any other permits or licenses issued by any
department or agency for Seller's dealership, other than any and all
existing dealer sales and service center agreements with John Deere, which
agreements will be terminated by Seller and John Deere, together with all
intangible assets of Seller required to do business as a dealer or
distributor for other manufacturers (but only to the extent permission is
given to the assignment by Seller to Purchaser of each dealer or
distributor agreement by such other manufacturers),
(k) all new obsolete parts and accessories and all used parts,
(l) all used, rental, leased and "rent to own" construction machinery
equipment, and all used attachment inventory,
(m) all customer deposits and agreements to sell construction
machinery equipment ordered but not delivered to the customer at the time
of Closing;
(n) all of Seller's interest in the Mt. Morris Improvements;
(o) all new attachment inventory; and
(p) the items described on Schedule 2.1.
2.2 Purchase and Sale. Subject to the terms and conditions herein
contained, Seller agrees to sell, assign, transfer and deliver the Assets to
Purchaser at the Closing (as hereinafter defined), free and clear of any liens
or encumbrances of any nature whatsoever (except for liens, encumbrances or
obligations, if any, expressly assumed by Purchaser hereunder). Subject to the
terms and conditions herein contained, Purchaser agrees to purchase from Seller
the Assets in consideration for the Purchase Price (as hereinafter defined)
payable as set forth in Article 3.
2.3 Delivery of Assets and Transfer Documents. At the Closing, Seller and
the Shareholder shall take all steps necessary to put Purchaser in possession of
the Assets, free and clear of any liens or encumbrances of any nature whatsoever
(except for liens, encumbrances or obligations, if any, expressly assumed by
Purchaser hereunder), and shall deliver to Purchaser (a) a duly executed general
warranty bill of sale covering the Assets, in the form of and containing
substantially the same terms and provisions as the General Warranty Bill of Sale
and Assignment of Contract Rights included in Exhibit D, (b) duly executed title
and transfer documents covering any assets for which there exists a certificate
of title, subject to payment of sales tax by Purchaser due upon registering the
transfer of title of the Company Vehicles with the State of Michigan, (c)
delivery of the Mt. Morris Lease, duly executed by the landlord thereunder, and
(d) such other duly executed transfer and release documents as Purchaser shall
reasonably request to evidence the transfer of the Assets to Purchaser free and
clear of any liens or encumbrances of any nature whatsoever (except for liens,
encumbrances or obligations, if any, expressly assumed by Purchaser hereunder).
2.4 UCC Reports. Within seven days from and after the date hereof, Seller,
at its sole cost and expense, shall furnish to Purchaser a report (the "UCC
Report") of searches made of the Uniform Commercial Code Records of Genesee
County and Oakland County, Michigan and of the Office of
8
<PAGE> 17
the Secretary of State, State of Michigan, or the proper offices in the State of
Michigan where Uniform Commercial Code records are maintained, which searches
shall show that the Assets are not subject to any lien or security interest
(other than liens and security interests which are to be released at the
Closing). 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 Seller's sole cost and expense.
2.5 Closing; Closing Date. Subject to the terms and conditions herein
contained, the consummation of the transactions referenced above shall take
place (the "Closing") on or before October 31, 1999, at 10:00 a.m., local time,
at such location as may be agreed upon by the Parties, or at such other time,
date and place as Purchaser and Seller shall in writing designate. Each of the
Parties covenants and agrees to use its best efforts to have the Closing take
place on or before August 31, 1999. The date of the Closing is referred to
herein as the "Closing Date".
2.6 Excluded Assets. Notwithstanding anything to the contrary contained in
Section 2.1 or elsewhere in this Agreement, the following items (collectively,
the "Excluded Assets") are not part of the sale and purchase contemplated
hereunder, are excluded from the Assets being conveyed hereunder, and shall
remain the property of Seller:
(a) all cash and cash equivalents and all securities and short term
investments listed on Schedule 2.6(a);
(b) all Seller's insurance policies and all other contracts listed in
Schedule 2.6(b);
(c) all rights and funds in connection with retirement, employee
benefit and similar plans;
(d) any assets expressly designated in Schedule 2.6(d) as Excluded
Assets;
(e) the Pontiac Lease and all of Seller's right, title and interest in
and to the real property leased and demised thereby;
(f) items of personal property and possessions of Thomas Calvert,
inclusive of policy of life insurance and cash surrender value of such life
insurance upon the life of Thomas Calvert, that are not and have not been a
part of the operation of the Seller as set out in Schedule 2.6(e) attached
hereto and made a part hereof;
(g) any and all other assets reasonably designated by Purchaser, in
its sole discretion, as being Excluded Assets. Purchaser shall advise
Seller in writing at least five days prior to Closing of those other items
which Purchaser does not intend to purchase. The exclusion of any such
items shall not reduce the Purchase Price;
(h) the Mt. Morris Property (which is to be leased to the Purchaser by
the existing owner pursuant to the Mt. Morris Lease); and
9
<PAGE> 18
(i) Any items required by Bob Cat or Thomas to be returned upon
termination of dealer agreements with Seller.
2.7 Escrowed Funds. Contemporaneously with the execution of this Agreement,
Purchaser shall deposit $150,000.00 (the "Escrowed Funds") in escrow with the
Escrow Agent pursuant to the Escrow Agreement attached hereto as Exhibit A. At
Closing, the Escrowed Funds shall be distributed to Purchaser; provided,
however, in the event the Closing does not occur by October 31, 1999, for any
reason other than (i) a breach of this Agreement by either Seller or Shareholder
or (ii) a breach of any covenant, agreement, undertaking, representation or
warranty of Seller or Shareholder pursuant to this Agreement, then the Escrowed
Funds shall be distributed to the Seller as liquidated damages in accordance
with the provisions of Section 17.4 hereof.
3. PURCHASE PRICE.
3.1 Price and Payment. Subject to adjustment as provided in Article 20 with
respect to prorations, deposits and certain other items, the aggregate
consideration to be paid by Purchaser for the Assets is as follows (the
"Purchase Price"):
(a) $235,942 such amount representing the agreed upon value of the
differential between adjusted book value and estimated fair market value
and estimated fair market value of specified assets; plus
(b) an amount equal to Seller's actual cost for each piece of
construction machinery equipment of Seller described in Section 2.1(a),
reduced by the amount of all manufacturer's rebates, allowances, any dealer
marketing funds attributed to such piece of equipment and other reductions
paid or credited to Seller on such equipment; plus
(c) with respect to the items described in Sections 2.1(b) and (c), an
amount equal to (i) 100% of the replacement cost of the new and not
obsolete, not Overstocked and not Slow-Moving Items returnable to the
manufacturer; (ii) 85% of the replacement cost for new Overstocked or
Slow-Moving Items returnable to the manufacturer and that are not obsolete;
(iii) 50% of the replacement cost for new Overstocked or Slow-Moving Items
not returnable to the manufacturer and that are not obsolete; and (iv) with
respect to all obsolete and all other items, including used items, an
amount to be agreed upon by Seller and Purchaser; provided, however, in the
event that the parties cannot agree on an amount for the items referred to
in (iv) above, such items not agreed upon shall be excluded from the
Assets; plus
(d) an amount equal to the actual freight costs and predelivery costs
of Seller, less any discounts, credits, rebates or any and all other
deductions received by Seller, paid by Seller on any Returned Equipment
that is purchased from John Deere by Purchaser; plus
(e) amount equal to the Seller's actual cost plus Seller's internal
burdened labor rate of the work in process and sublet repairs described in
Section 2.1(d); plus
10
<PAGE> 19
(f) an amount equal to the net book value (determined in accordance
with generally accepted accounting principles, consistently applied) at
Closing of the items described in Sections 2.1(e), (f) and (g), plus
(g) zero for the items described in Section 2.1(h), (i) and (j) ,plus
(h) an amount equal to Seller's actual cost for items described in
Section 2.1(o) that have been held by Seller for less than two years, and
an amount to be agreed upon for any such items held by Seller for two years
or longer (provided that if Purchaser and Seller cannot agree on an amount
to be paid for any Asset described in this Section, such Asset shall be an
Excluded Asset), plus
(i) with respect to the items described in Section 2.1(k), an amount
to be agreed upon by Seller and Purchaser; provided, however, in the event
the parties cannot agree on an amount for such items, then such items shall
be excluded from the Assets, plus
(j) an amount equal to the net book value (determined in accordance
with generally accepted accounting principles, consistently applied) for
each piece of used, rental, leased or "rent to own" construction machinery
equipment and used attachment inventory, reduced by the amount of any
dealer marketing funds attributed to each piece of equipment or inventory,
described in Section 2.1(l).
The Purchase Price shall be payable by payment of all amounts specified in
Sections 3.1(a) through (i) above by wire transfer as directed by Seller.
3.2 Assumed Obligations. At the Closing, Purchaser shall assume and agree
to timely discharge the obligations of Seller under all contracts and agreements
transferred by Seller to Purchaser under this Agreement that are (a) listed and
described on Schedule 4.8 or on the updated list of contracts required by
Article 13 and (b) accepted in writing by Purchaser pursuant to the provisions
of Section 4.8 or Articles 10 or 13; provided that Purchaser specifically does
not assume any liabilities of Seller under any contracts or agreements with
respect to any breaches of such contracts or agreements occurring on or before
the Closing Date or any damages to third parties resulting from acts, events or
omissions occurring on or before the Closing Date. Except for the obligations
expressly assumed by Purchaser pursuant to this Agreement, Seller shall take
full and complete responsibility for all of its respective liabilities, debts
and obligations, whether known or unknown, now existing or hereafter arising,
contingent or liquidated (the "Retained Liabilities"), and Purchaser shall not
assume, or in any way be liable or responsible for, any of the Retained
Liabilities. The Retained Liabilities shall include, without limitation, the
following:
(a) the responsibility for contributions to, or any liability in
connection with, any employee pension benefit plan, any employee welfare
benefit plan, or other employee benefit agreement or arrangement maintained
by Seller for its employees, former employees, retirees, their
beneficiaries or any other person, and any continuation coverage (including
any penalties, excise taxes or interest resulting from the failure to
provide continuation coverage) required by Section 4980B of the Code due to
qualifying events which occur on or before Closing Date;
11
<PAGE> 20
(b) any liability or obligation of Seller, or any consolidated group
of which Seller is a member, for any federal income tax or state franchise
tax, or for any foreign, federal, state, commonwealth, county or local
taxes of any kind or nature, or any taxes levied by any other legitimate
taxing authority, or any interest or penalties thereon, except for any
proration and assumption thereof by Purchaser pursuant to Article 20
hereof;
(c) any liability to which any of the parties may become subject as a
result of the fact that the transactions contemplated by this Agreement are
being effected without compliance with the bulk sales provisions of the
Uniform Commercial Code as in effect in the State of Michigan;
(d) any liability with respect to any claims, suits, actions or causes
of action arising out of the conduct of the Business on or prior to the
Closing Date;
(e) notwithstanding any disclosures or representations by Seller, any
dispute, litigation, settlement, negotiation, administrative or other
proceeding, any related or subsequent litigation, appeal or administrative
action and any debt, obligation or liability arising out of or in
connection with any facts existing prior to the Closing Date;
(f) any non-compliance by Seller with any applicable laws, rules and
regulations relating to employment and labor management relations,
including without limitation any provisions thereof relating to wages and
the payment thereof, hours of work, collective bargaining agreements,
workers' compensation laws and the withholding and payment of Social
Security and similar taxes;
(g) any failure by Seller to withhold all amounts required by law or
agreement to be withheld from the wages or salaries of its employees, and
any liability for any wage arrearages, taxes or penalties for failure to
comply with any of the foregoing;
(h) any liability arising out of any controversies between Seller and
its employees or former employees or any union or other collective
bargaining unit that has been certified or recognized by any Seller as
representing any of its employees;
(i) accounts payable of Seller; and
(j) without limiting the generality of the foregoing provision of this
Section 3.2, all Environmental Liabilities, known or unknown, whether now
existing or hereafter arising, in, on, at, under, arising in connection
with, or related to the real property located at 921 Brown Road, Onion
Township, Michigan, at which Seller currently operates its Pontiac
dealership (the "Old Pontiac Location").
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER. Seller and
Shareholder hereby jointly and severally represent and warrant to Purchaser as
follows:
12
<PAGE> 21
4.1 Incorporation; Capitalization.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan, and is duly
authorized, qualified and licensed under all applicable Governmental
Requirements to carry on its business in the places and in the manner as
now conducted and to own, operate and lease the Assets it now owns,
operates or holds under lease. There has not been any claim by any other
jurisdiction to the effect that Seller is required to qualify or otherwise
be authorized to do business as a foreign corporation therein in order to
carry on any of its businesses as now conducted or to own, lease or operate
the Assets. Seller is qualified or otherwise authorized to do business as a
foreign corporation in each jurisdiction in order to carry on any of its
business as now conducted or to own, lease or operate the Assets in any
such jurisdiction. Seller has not, to Seller's Best Knowledge, taken any
action, or failed to take any action which such action or such failure will
preclude or prevent Seller's Business from being conducted in substantially
the same manner in which Seller has heretofore conducted the same.
(b) The Shareholder owns all of the outstanding capital stock of
Seller, and there are no options, rights or other grants currently
outstanding for the acquisition or purchase of any shares of the capital
stock of Seller.
4.2 Employee Benefits. As used in this Section, Seller shall include "Great
Lakes Sales and Rental, Inc." and/or any member of a controlled group or
affiliated service group (as defined in 414(b), (c), (m), and (o) of the Code)
of which the Seller is a member.
(a) List of All Benefit Plans and Compensation Agreements. Schedule
4.2(a) includes a complete and accurate list of all employee welfare
benefit and employee pension benefit plans as defined in Sections 3(1),
3(2), and 3(3) of ERISA and all other employee benefit agreements or
arrangements, including but not limited to deferred compensation plans,
incentive plans, bonus plans or arrangements, stock option plans, stock
purchase plans, golden parachute agreements, severance pay plans, dependent
care plans, cafeteria plans, employee assistance programs, scholarship
programs, employment contracts and other similar plans, agreements and
arrangements that are currently in effect or were maintained within three
years of the Closing Date, or have been approved before this date but are
not yet effective, for the benefit of directors, officers, employees, or
former employees (or beneficiaries of them) of the Seller.
(b) Representations. The consummation of this Agreement (and the
employment by the Purchaser of former employees of the Seller) will not
result in any carryover liability to the Purchaser for taxes, penalties,
interest or any other claims resulting from any employee pension benefit
plan, employee welfare benefit plan, or other employee benefit agreement or
arrangement set out in Schedule 4.2(a). In addition, the Seller makes the
following representations (i) as to employee pension benefit plans of
Seller: (a) no Person has become liable to the PBGC under Section 4062,
4063 or 4064 of ERISA under which a lien could attach to the assets of the
Seller under Section 4068 of ERISA; (b) Seller has not ceased operations at
a facility so as to become subject to the provisions of Section 4062(e) of
ERISA; and (c) Seller has not made a complete or partial withdrawal from a
multiemployer
13
<PAGE> 22
plan (as defined in Section 3(37) of ERISA) so as to incur withdrawal
liability as defined in Section 4201 of ERISA, and (ii) all group health
plans maintained by Seller have been operated in compliance with Section
4980B(f) of the Code.
(c) Non-assumption of Seller's Plans. The parties agree that the
Purchaser does not and will not assume the sponsorship of, or the
responsibility for contributions to, or any liability in connection with,
any employee pension benefit plan, any employee welfare benefit plan, or
other employee benefit agreement or arrangement maintained by Seller for
its employees, former employees, retirees, their beneficiaries or any other
person. In addition and not as a limitation of the foregoing covenant the
parties agree that the Seller shall be liable for any continuation coverage
(including any penalties, excise taxes or interest resulting from the
failure to provide continuation coverage) required by Section 4980B of the
Code due to qualifying events which occur on or before Closing Date.
4.3 Financial Statements. Seller has delivered to Purchaser copies of the
following financial statements of the Business, all of which financial
statements are included in Schedule 4.3 hereto:
(a) Unaudited Balance Sheet (the "Reference Balance Sheet") as of July
31, 1999 (the "Balance Sheet Date") and Unaudited Income Statement for the
seven-month period ended on the Balance Sheet Date;
(b) Reviewed Balance Sheets, Income Statements and Statements of
Changes in Financial Position for the two (2) most recent fiscal years; and
(c) Unaudited Balance Sheet, as of June 30, 1999 and Unaudited Income
Statement for the six-month period then ended.
All financial statements supplied to Purchaser by Seller, whether or not
included in Schedule 4.3 hereto, are and will be true and accurate in all
respects, have been and will be prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, and will present fairly the financial condition of the Business as of
the dates and for the periods indicated thereon. The Reference Balance Sheet
reflects, as of the Balance Sheet Date, all liabilities, debts and obligations
of any nature of the Business, whether accrued, absolute, contingent or
otherwise, and whether due, or to become due, including, but not limited to,
liabilities, debts or obligations on account of Taxes to the extent such items
are required to be reflected on such balance sheet under generally acceptable
accounting principles consistently applied.
4.4 Events Since the Balance Sheet Date. Since the Balance Sheet Date,
there has not been:
(a) any change in the condition (financial or otherwise) or in the
properties, assets, liabilities, business or prospects of the Business,
except normal and usual changes in the ordinary course of business, none of
which has been adverse and all of which in the aggregate have not been
adverse;
14
<PAGE> 23
(b) any labor trouble, strike or any other occurrence, event or
condition affecting the employees of Seller that adversely affects the
condition (financial or otherwise) of the Assets or the Business;
(c) any breach or default by Seller or, to the Best Knowledge of
Seller and Shareholder, by any other party, under any agreement or
obligation included in the Assets or by which any of the Assets are bound;
(d) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Assets or the Business;
(e) to the Best Knowledge of Seller and Shareholder, any legislative
or regulatory change adversely affecting the Assets or the Business;
(f) any change in the types, nature, composition or quality of the
services of the Business, any adverse change in the contributions of any of
the service lines of the Business to the revenues or net income of such
Business, or any adverse change in the sales, revenue or net income of the
Business;
(g) any transaction related to or affecting the Assets or the Business
other than transactions in the ordinary course of business of Seller; or
(h) any other occurrence, event or condition that has adversely
affected (or can reasonably be expected to adversely affect) the Assets or
the Business.
4.5 Customer List. Schedule 4.5 sets forth a true, correct and complete
list of all customers of the Business to which Seller has sold or provided
products or services during the two years immediately preceding the date hereof.
Such list provides an accurate statement of the gross revenues received from
each such customer by the Business during the 12-month period ended September
30, 1998. Two days prior to the Closing Date, Seller will deliver to Purchaser a
true, correct and complete update of this list as of the three days prior to the
Closing Date, and immediately prior to the Closing, Seller will deliver to
Purchaser a true, correct and complete update of this list as of the Closing
Date, in each case noting all deletions therefrom and additions thereto and
updating all information contained thereon, and conspicuously marking all
changes from the previous list or update, as the case may be.
4.6 Taxes. Except as set forth in Schedule 4.6 hereto:
(a) all Tax Returns of or relating to any Taxes that are required to
be filed on or before the Closing Date, subject to any allowable extension
periods, for, by, on behalf of or with respect to Seller, including, but
not limited to, those relating to the income, business, operations or
property of Seller (whether on a separate, consolidated, affiliated,
combined, unitary or any other basis), have been timely filed with the
appropriate foreign, federal, state and local authorities, and all Taxes
shown to be due and payable on such Tax Returns or related to such Tax
Returns have been paid in full on or before the Closing Date except Taxes
15
<PAGE> 24
which have not yet accrued or otherwise become due, all of which are
reflected in the Reference Balance Sheet;
(b) all such Tax Returns and the information and data contained
therein have been properly and accurately compiled and completed in all
material respects, fairly present the information purported to be shown
therein, and reflect, to the Best Knowledge of Seller, all liabilities for
Taxes for the periods covered by such Tax Returns, net of any applicable
reserves;
(c) Seller has not received notice that any of such Tax Returns are
under audit or examination by any foreign, federal, state or local
authority and there are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment or
collection of any Tax or deficiency of any nature against Seller or with
respect to any such Tax Return, or any suits or other actions, proceedings,
investigations or claims now pending or, to the Best Knowledge of Seller,
threatened against Seller with respect to any Tax, or any matters under
discussion with any foreign, federal, state or local authority relating to
any Tax, or any claims for any additional Tax asserted by any such
authority;
(d) all Taxes assessed and due and owing from or against Seller on or
before the Closing Date (including, but not limited to, ad valorem Taxes
relating to any property of Seller) have been timely paid in full on or
before the Closing Date;
(e) all withholding Tax, Tax deposit and estimated Tax payment
requirements imposed on Seller for any and all periods ending on or before
the Closing Date, or through and including the Closing Date for periods
that have not ended on or before the Closing Date, have been satisfied in
full on or before the Closing Date or reserves adequate for the payment of
such withholding, deposit and estimated Taxes have been established in the
financial statements of Seller on or before the Closing Date; and
(f) the financial statements reflect and include adequate charges,
accruals, reserves and provisions for the payment in full of any and all
Taxes payable with respect to any and all periods ending on or before the
respective dates thereof.
4.7 Employee Matters. Schedule 4.7 sets forth a true and complete list of
the names of, and current annual compensation paid by Seller to each employee of
Seller utilized in connection with the operation of the Business. Seller is not
a party to any collective bargaining or other union agreements. Seller has not,
within the last five years, had or been threatened with any union activities,
work stoppages or other labor trouble with respect to its employees. There are
no collective bargaining or other labor union agreements to which Seller is a
party or by which it is bound. At the date hereof, there are no disputes with
employees in general to which Seller is a party. At the date hereof, there are
no strikes, slowdowns or picketing against Seller (or, to the Best Knowledge of
Seller against any material supplier of goods or services to Seller) pending or,
to the Best Knowledge of Seller, threatened. At the date hereof, Seller has not
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. Other than wage increases in the ordinary
course of business,
16
<PAGE> 25
since the Balance Sheet Date Seller has not made any commitment or agreement to
increase the wages or modify the conditions or terms of employment of any of the
employees of Seller.
4.8 Contracts and Agreements. Schedule 4.8 sets forth a true and complete
list of and briefly describes (including termination date) all of the following
contracts, agreements, leases, licenses, plans, arrangements or commitments,
written or oral, that relate to the Assets or the Business (including all
amendments, supplements and modifications thereto):
(a) all contracts, agreements or commitments in respect of the sale of
products or services or the purchase of raw materials, supplies or other
products or utilities;
(b) all offers, tenders or the like outstanding and capable of being
converted into an obligation of Seller by the passage of time or by an
acceptance or other act of some other person or entity or both;
(c) all sales, agency or distributorship agreements or franchises or
legally enforceable commitments or obligations with respect thereto;
(d) all collective bargaining agreements, union agreements, employment
agreements, consulting agreements or agreements providing for the services
of an independent contractor;
(e) all profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance
or other employee benefit plans, agreements, arrangements or commitments of
any nature whatsoever, whether or not legally binding, and all agreements
with any present or former officer, director or shareholder of Seller;
(f) all loan or credit agreements, indentures, guarantees (other than
endorsements made for collection), mortgages, pledges, conditional sales or
other title retention agreements, and all equipment financing obligations,
lease and lease-purchase agreements relating to or affecting the Assets or
the Business;
(g) all leases related to the Assets or the Business;
(h) all performance bonds, bid bonds, surety bonds and the like, all
contracts and bids covered by such bonds, and all letters of credit and
guaranties;
(i) all consent decrees and other judgments, decrees or orders,
settlement agreements and agreements relating to competitive activities,
requiring or prohibiting any future action;
(j) all accounts, notes and other receivables, and all security
therefor, and all documents and agreements related thereto;
17
<PAGE> 26
(k) all contracts or agreements of any nature with Seller, or any
Affiliate of Seller or Shareholder; and
(l) all contracts, commitments and agreements entered into outside the
ordinary course of the operation of the Business.
All of such contracts, agreements, leases, licenses, plans, arrangements, and
commitments and all other such items included in the Assets but not specifically
described above (collectively, the "Contracts") are valid, binding and in full
force and effect in accordance with their terms and conditions and there is no
known existing default thereunder or breach thereof by Seller, or, to the Best
Knowledge of Seller, by any other party to the Contracts, or any conditions
which, with the passage of time or the giving of notice or both, might
constitute such a default by Seller, or, to the Best Knowledge of Seller, by any
other party to the Contracts, and the Contracts will not be breached by or give
any other party a right of termination as a result of the transactions
contemplated by this Agreement. Seller is not obligated to pay any liquidated
damages under any of the contracts, agreements, indentures, leases or other
instruments described in Schedule 4.8(a) hereto and Seller is not aware of any
facts or circumstances that could reasonably be expected to result in an
obligation of Seller to pay any such liquidated damages. To the Best Knowledge
of Seller there is no reason why any of the Contracts cannot readily be
fulfilled or performed by Purchaser with the Assets on time without undue or
unusual expenditure of money or effort. Copies of all of the documents (or in
the case of oral commitments, descriptions of the material terms thereof)
relevant to the Contracts listed in Schedule 4.8 have been delivered by Seller
to Purchaser, and such copies and/or descriptions are true, complete and
accurate and include all amendments, supplements or modifications thereto. After
reviewing the Contracts, Purchaser may, at its sole option, choose not to assume
one or more of the Contracts, and, within 30 days of receipt by Purchaser of all
information reasonably requested by Purchaser with respect to the Contracts,
Purchaser shall notify Seller of which Contracts, if any, Purchaser does not
intend to assume hereunder. Except for Contracts, if any, that Purchaser
notifies Seller that it will not assume, all of the Contracts are and shall be
included in the Assets. All of the Contracts may be assigned to Purchaser
without the approval or consent of any Person, or, if such approval or consent
is required, it will be obtained by Seller and delivered to Purchaser at or
prior to the Closing.
4.9 Effect of Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not (a) violate
any provision of the Articles of Incorporation or other charter documents or
bylaws of Seller; (b) result in any violation of any Governmental Requirement
applicable to Seller, the Assets or the Business; (c) conflict with, or result
in any breach of, or default or loss of any right under (or an event or
circumstance that, with notice or the lapse of time, or both, would result in a
default), or the creation of an Encumbrance pursuant to, or cause or permit the
acceleration prior to maturity or "put" right with respect to, any obligation
under, any contract, indenture, mortgage, deed of trust, lease, loan agreement
or other agreement or instrument to which Seller is a party or to which any of
the Assets are subject; (d) relieve any Person of any obligation (whether
contractual or otherwise) or enable any Person to accelerate or terminate any
such obligation or any right or benefit enjoyed by Seller or to exercise any
right under any agreement in respect of the Assets or the Business; and (e)
require notice to or the consent, authorization, approval, clearance, waiver or
order of any Person (except as may be contemplated by the last sentence of
Section 4.8). To the Best Knowledge of Seller, the business
18
<PAGE> 27
relationships of clients, customers and suppliers of the Business will not be
adversely affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by Seller will not result in the loss of any
material governmental license, franchise or permit possessed by Seller.
Notwithstanding the foregoing, Seller and Shareholder represent that there
are various dealer/distributor agreements with third parties other than John
Deere and, upon notice of sale, any one or more of such third parties may object
to the sale contemplated by this Agreement and further may terminate such
dealer/distributor agreements. Seller shall take all reasonable steps to
encourage the assignment of any such dealer/distributor agreements from Seller
to Purchaser; however, the withholding of consent to any such assignment shall
not be the basis of any claim of default or breach by Seller under this
Agreement.
4.10 Properties, Assets and Leasehold Estates. Seller owns or has the right
to use (pursuant to a valid lease or license disclosed on Schedule 4.8) all
operating assets and properties necessary for Seller to conduct the Business in
the manner presently conducted by Seller, and all of such operating assets and
properties (or, in the case of leased assets, the leases covering such assets)
are included in the Assets. Seller has good, marketable title to all the Assets,
free and clear of all mortgages, liens, pledges, conditional sales agreements,
charges, easements, covenants, assessments, options, restrictions and
encumbrances of any nature whatsoever, and with respect to the Mt. Morris
Property, T & I Equipment World, Inc., a Michigan corporation (the "Mt. Morris
Landlord") on the Closing Date will have good, marketable and indefeasible title
in fee simple, free and clear of all restrictions, liens, leases, encumbrances,
rights-of-way, easements, encroachments, exceptions, and other matters affecting
title, except for the Permitted Exceptions. To the Best Knowledge of Seller, the
plants, structures, equipment, vehicles and other tangible properties included
in the Assets and comprising the Mt. Morris Improvements, and the tangible
property leased by Seller included in the Assets, are in good operating
condition and repair, normal wear and tear excepted, and are capable of being
used for their intended purpose in the Business as now conducted. The Assets
include all existing warranties and service contracts with respect to any of the
Assets to the extent the same are capable of being assigned to Purchaser. During
the past two years, there has not been any significant interruption of the
Business due to the breakdown or inadequate maintenance of any of the Assets.
All plants, structures, equipment, vehicles and other tangible properties
included in the Assets and comprising the Mt. Morris Improvements, and the
present use of all such items, conform to all known applicable Governmental
Requirements, and no notice of any violation of any such Governmental
Requirements relating to such assets or their use has been received by Seller.
The Assets include all easements, rights of ingress and egress, and utilities
and services necessary for the conduct of the Business.
4.11 Intangible Property. Schedule 4.11 is a list and description of all
material patents, trademarks, service marks, trade names, and copyrights and
applications therefor owned by or registered in the name of Seller or in which
Seller has any right, license or interest. Except for the agreements listed on
Schedule 4.11, Seller is not a party to any license agreements, either as
licensor or licensee, with respect to any patents, trademarks, service marks,
trade names, or copyrights or applications therefor. Seller has good and
indefeasible title to or the right to use such assets and all inventions,
processes, designs, formulae, trade secrets, and know-how necessary for the
conduct of its business, without the payment of any royalty or similar payment.
Seller is not infringing any
19
<PAGE> 28
patent, trademark, service mark, trade name, or copyright of others, and Seller
is not aware of any infringement by others of any such rights owned by Seller.
4.12 Suits, Actions and Claims. Except as set forth in Schedule 4.12, (a)
there are no suits, actions, claims, inquiries or investigations by any Person,
or any legal, administrative or arbitration proceedings in which Seller is
engaged or which are pending or, to the Best Knowledge of Seller, threatened
against or affecting Seller or any of its properties, assets or business, or to
which Seller is or might become a party, or which question the validity or
legality of the transactions contemplated hereby, (b) no basis or grounds for
any such suit, action, claim, inquiry, investigation or proceeding exists, and
(c) there is no outstanding order, writ, injunction or decree of any
Governmental Authority against or affecting Seller or any of its properties,
assets or business. Without limiting the foregoing, to the Best Knowledge of
Seller, there are no known facts or the occurrence of any event forming the
basis of any present or potential claim against Seller.
4.13 Licenses and Permits; Compliance With Governmental Requirements.
Except as set forth in Schedule 4.13 hereto, Seller has all material federal,
state, local and foreign governmental licenses and permits necessary to the
conduct of the operations of Seller's Business as currently conducted, such
licenses and permits are in full force and effect, no material violations
currently exist in respect of any thereof and no proceeding is pending or, to
the Best Knowledge of Seller, threatened to revoke or limit any thereof.
Schedule 4.13 hereto contains a true, complete and accurate list of (a) all such
governmental licenses and permits, (b) all consents, orders, decrees and other
compliance agreements under which Seller is operating or bound, copies of all of
which have been furnished to Purchaser, and (c) all material governmental
licenses and permits applied for but not yet received by Seller. Seller has not
received and is not aware of any reports of inspections under the United States
Occupational Safety and Health Act, or under any other applicable federal, state
or local health and safety laws and regulations relating to Seller, the Assets
or the operation of Seller's Business. Seller has not received any notice that
there are safety, health, anti-competitive or discrimination claims that have
been made or are pending or, to the Best Knowledge of Seller, that are
threatened relating to the business or employment practices of Seller. To the
Best Knowledge of Seller, Seller has complied with all Governmental Requirements
applicable to its business and all Governmental Requirements with respect to the
distribution and sale of products and services by it.
4.14 Authorization. Each of Seller and Shareholder has full legal right,
power, and authority to enter into and deliver this Agreement and to consummate
the transactions set forth herein and to perform all the terms and conditions
hereof to be performed by them. The execution and delivery of this Agreement by
Seller and Shareholder and the performance by Seller and Shareholder of the
transactions contemplated herein have been duly and validly authorized by all
requisite corporate action of Seller and by Shareholder, and this Agreement has
been duly and validly executed and delivered by Seller and by Shareholder and is
the legal, valid and binding obligation of each of them, enforceable against
Seller and Shareholder in accordance with its terms, except as limited by
applicable bankruptcy, moratorium, insolvency or other similar laws affecting
principles of equity.
4.15 Records. The books, records and minutes kept by Seller with respect to
the Assets and the Business, including, but not limited to, all customer files,
service agreements, quotations, correspondence, route sheets and historic
revenue data of Seller, have been kept properly and contain records of all
matters required to be included therein by any Governmental Requirement or by
20
<PAGE> 29
generally accepted accounting principles, and such books, records and minutes
are true, accurate and complete and (except for corporate minute books and stock
records) are included in the Assets.
4.16 Environmental Protection Laws.
(a) Except as set forth in Schedule 4.16 hereto, to the Best Knowledge
of Seller, Seller has at all times operated the Assets and the Business at
the Mt. Morris Land in substantial compliance with all applicable
limitations, restrictions, conditions, standards, prohibitions,
requirements and obligations of Environmental Laws and related orders of
any court or other Governmental Authority, and is not currently operating
or required to be operating the Assets or the Business under any compliance
order, decree or agreement; any consent decree, order or agreement; and/or
any corrective action decree, order or agreement issued by or entered into
with any Governmental Authority under any Environmental Law.
(b) Except as set forth in Schedule 4.16 hereto, there are no
existing, pending or, to the Best Knowledge of Seller, threatened actions,
suits, claims or, to the Best Knowledge of Seller, investigations,
inquiries or proceedings by or before any court or any other Governmental
Authority directed against the Mt. Morris Land, the Assets or the Business
which pertain or relate to (i) any remedial obligations under any
applicable Environmental Law, (ii) violations of any Environmental Law,
(iii) personal injury or property damage claims relating to the release of
chemicals or Hazardous Materials or (iv) response, removal or remedial
costs under CERCLA or any similar state law, and there is not any
Environmental Condition on or at the Mt. Morris Land, or any other matter
on or connected with the Assets that would cause the imposition on
Purchaser of Environmental Liabilities if such Environmental Condition or
other matter were disclosed to Governmental Authorities.
(c) Except as set forth in Schedule 4.16 hereto, all known notices,
Environmental Permits, licenses or similar authorizations required to be
obtained or filed by Seller under all applicable Environmental Laws in
connection with its current and previous operation or use of the Mr. Morris
Land and the Assets, or the current and previous conduct of the Business
have been duly obtained or filed and are in full force and effect.
(d) Seller has not received notice that any Environmental Permit,
license or similar authorization is to be revoked or suspended by any
Governmental Authority.
(e) Other than as set forth on Schedule 4.16, there are no underground
storage tanks on or under the Mt. Morris Land. To the Best Knowledge of
Seller, there were underground storage tanks, other than those set forth on
Schedule 4.16, on or under the Mt. Morris Land, but same have been removed
in accordance with applicable Environmental Laws.
(f) To the Best Knowledge of Seller, no portion of the Mt. Morris Land
is part of a Superfund site under CERCLA or any similar ranking or listing
under any similar state law.
21
<PAGE> 30
(g) To the Best Knowledge of Seller, all Hazardous Materials generated
in connection with the operation of the Business at the Mt. Morris Land
have been transported, stored, treated and disposed of by carriers,
storage, treatment and disposal facilities authorized and maintaining valid
permits under all applicable Environmental Laws, and no Hazardous Materials
have been dumped, landfilled, stored, located or disposed of on the Mt.
Morris Land by Seller or its agents, servants, employees or contractors.
(h) To the Best Knowledge of Seller, no Person has disposed or
released any Hazardous Materials on or under the Mt. Morris Land and Seller
has not disposed or released Hazardous Materials on or under the Mt. Morris
Land, the Assets or the Business except in compliance with all
Environmental Laws, and there has not been, in respect to the Assets, any
emission (other than steam or water vapor) into the atmosphere or any
discharge, direct or indirect, of any pollutants into the waters of the
State of Michigan or the United States of America other than domestic
sewage discharged into a publicly owned treatment facility.
(i) To the Best Knowledge of Seller, no facts or circumstances exist
which could reasonably be expected to result in any liability to any Person
with respect to the Mt. Morris Land, the Business or the Assets in
connection with (i) any release, transportation or disposal of any
Hazardous Materials, hazardous substance or solid waste or (ii) action
taken or omitted that was not in full compliance with or was in violation
of, any applicable Environmental Law, except as specifically described in
any environmental report commissioned by Purchaser.
4.17 Brokers and Finders. No broker or finder has acted for Seller or
Shareholder in connection with this Agreement or the transactions contemplated
by this Agreement and no broker or finder is entitled to any brokerage or
finder's fee or to any commission in respect thereof based in any way on
agreements, arrangements or understandings made by or on behalf of Seller or
Shareholder.
4.18 Deposits. Seller does not now hold any deposits or prepayments by
third parties with respect to any of the Assets or the Business ("Deposits")
which are not reflected as liabilities on the Reference Balance Sheet. If Seller
holds any Deposits as of the Closing Date, Purchaser will be given credit
against the Purchase Price for the amount of any such Deposits pursuant to
Article 20 hereof.
4.19 Work Orders. There are no outstanding work orders or contracts
relating to any portion of the Assets or the Mt. Morris Land from or required by
any policy of insurance, fire department, sanitation department, health
authority or other governmental authority nor is there any matter under
discussion with any such parties or authorities relating to work orders or
contracts.
4.20 Telephone Numbers. All telephone numbers used by Seller in connection
with the Business are included in the Assets and are believed to be fully
transferable to Purchaser.
4.21 No Royalties. No royalty or similar item or amount is being paid or is
owing by Seller, nor is any such item accruing, with respect to the operation,
ownership or use of the Business or the Assets.
22
<PAGE> 31
4.22 Insurance. Schedule 4.22 hereto sets forth all existing insurance
policies held by Seller relating to the Business, the Assets, the Mt. Morris
Improvements, or the employees or agents of Seller. Each such policy is in full
force and effect and is with insurance carriers believed by Seller to be
responsible. There is no dispute with respect to such policies, and all claims
arising from events or circumstances occurring prior to the date hereof have
been paid in full or adequate reserves therefor are recorded in the Reference
Balance Sheet. All retroactive premium adjustments for any period ended on or
before June 1, 1997, under any worker's compensation policy or any other
insurance policies of Seller have been recorded in accordance with generally
accepted accounting principles and are reflected in the Reference Balance Sheet.
Except for such policies which are identified as such on Schedule 4.22, none of
such policies will terminate as a result of the transactions contemplated by
this Agreement.
4.23 Great Lakes Sales and Rental, Inc. The personal property of Great
Lakes Sales and Rental, Inc., a Michigan corporation ("Great Lakes"), consisting
of construction equipment, previously held in the name of Seller, shall have
been re-acquired by Seller in accordance with all applicable laws. From and
after the acquisition of such personal property of Great Lakes, Seller shall
possess such property, as described on Schedule 4.23.
4.24 Warranties and Product Liability.
(a) Except for (i) warranties implied by law and (ii) warranties
disclosed on Schedule 4.24 hereto, Seller has not given or made any warranties
in connection with the sale or rental of goods or services in connection with
the operation of the Business, including, without limitation, warranties
covering the customer's consequential damages. To the Best Knowledge of Seller,
there is no known existing state of facts or occurrence of any event forming the
reasonable basis of any present claim against Seller with respect to warranties
in connection with the operation of the Business relating to products
manufactured, sold or distributed by Seller or services performed by or on
behalf of Seller in connection with the operation of the Business that could
reasonably be expected to materially exceed the reserves therefor.
(b) To the Best Knowledge of Seller, there is no known existing state
of facts or any event forming the reasonable basis of any present claim against
Seller in connection with the operation of the Business not fully covered by
insurance, except for deductibles and self-insurance retentions, for personal
injury or property damage alleged to be caused by products shipped or services
rendered by or on behalf of Seller in connection with the operation of the
Business.
4.25 No Untrue Statements. The statements, representations and warranties
of Seller and Shareholder set forth in this Agreement and the Schedules and in
all other documents and information furnished to the Rush Parties and their
representatives in connection herewith do not include any known untrue statement
of a material fact or omit to state any material fact necessary to make the
statements, representations and warranties made not misleading. To the Best
Knowledge of Seller, there is no fact or matter that is not disclosed to
Purchaser in this Agreement or the Schedules that materially and adversely
affects or, so far as Seller or Shareholder can now reasonably foresee, could
materially and adversely affect the condition (financial or otherwise) of any of
the Assets or the Business or the ability of Seller or Shareholder to perform
their respective obligations under this Agreement.
23
<PAGE> 32
5. REPRESENTATIONS AND WARRANTIES OF THE RUSH PARTIES. The Rush Parties
represent and warrant to Seller and Shareholder as follows:
5.1 Incorporation. Each of the Rush Parties is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation.
5.2 Authorization. Each of the Rush Parties has full legal right and
corporate power to enter into and deliver this Agreement and to consummate the
transactions set forth herein and to perform all the terms and conditions hereof
to be performed by it. This Agreement has been duly executed and delivered by
each of the Rush Parties and is a legal, valid and binding obligation of each of
them enforceable in accordance with its terms, except as limited by applicable
bankruptcy, moratorium, insolvency or other laws affecting generally the rights
of creditors or by principles of equity.
5.3 Brokers and Finders. No broker or finder has acted for either of the
Rush Parties in connection with this Agreement or the transactions contemplated
by this Agreement and no broker or finder is entitled to any brokerage or
finder's fee or to any commission in respect thereof based in any way on
agreements, arrangements or understandings made by or on behalf of the Rush
Parties.
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES,
REPRESENTATIONS AND WARRANTIES OF SELLER AND, WHERE APPLICABLE, OF SHAREHOLDER.
All statements of fact contained in this Agreement or in any written statement
(including financial statements), certificate, schedule or other document
delivered by or on behalf of Seller or Shareholder pursuant to this Agreement or
in connection with the transactions contemplated hereby shall be deemed
representations and warranties of Seller and Shareholder hereunder. All
indemnifications, guarantees, covenants, agreements, representations and
warranties made by Seller, in addition, by and Shareholder, where applicable,
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the Closing regardless of any investigation at any time
made by or on behalf of Purchaser.
7. CONTRACTS PRIOR TO THE CLOSING DATE.
7.1 Approval of Contracts. Seller shall not enter into or materially amend
any contracts related to the Business or the Assets between the date hereof and
the Closing Date, other than in the ordinary course of business, unless approved
in writing by Purchaser. Except for contracts entered into in the ordinary
course of business, Seller will provide all information requested by Purchaser
relating to each such contract or amendment to enable Purchaser to make an
informed decision regarding approval of such contract or amendment.
7.2 Contracts Included in Assets. Any contracts, agreements or commitments
(or amendments to such items) related to the Business or the Assets that are
entered into by Seller between the date hereof and the Closing Date and are
approved in writing by Purchaser (after review of true, correct and accurate
copies of such items) shall be included in the Assets (with no addition to the
Purchase Price) and shall be assumed by Purchaser pursuant to the provisions of
Section 3.2. Excluded from the foregoing are any Contracts that relate to the
business prior to the Closing and do not impose on Purchaser any duty or
obligation whatsoever.
24
<PAGE> 33
8. COVENANTS OF SELLER AND SHAREHOLDER PRIOR TO CLOSING DATE. Seller and
Shareholder hereby covenant and agree that between the date of this Agreement
and the Closing Date:
8.1 Access to Information. Seller shall afford to the officers and
authorized representatives of the Rush Parties access to the plants, properties,
books and records of Seller related to the Assets and the Business and shall
furnish Purchaser with such financial and operating data and other information
regarding the Assets and the Business and as Purchaser may from time to time
reasonably request.
8.2 General Affirmative Covenants. Seller shall, and each Shareholder shall
cause Seller to:
(a) conduct the Business only in the ordinary course;
(b) maintain the Assets and the Mt. Morris Improvements in good
working order and condition, ordinary wear and tear excepted;
(c) perform all its obligations under agreements relating to or
affecting the Assets, the Mt. Morris Land, the Mt. Morris Improvements or
the Business;
(d) keep in full force and effect adequate insurance coverage on the
Assets, the Mt. Morris Improvements and the operation of the Business;
(e) use its best efforts to maintain and preserve the Business, and
retain its present employees, customers, suppliers and others having
business relations with it;
(f) duly and timely file all reports or returns required to be filed
with any Governmental Authority, and promptly pay all Taxes levied or
assessed upon it or its properties or upon any part thereof;
(g) duly observe and conform to all Governmental Requirements relating
to the Assets, the Mt. Morris Land, or its properties or to the operation
and conduct of its Business and all covenants, terms and conditions upon or
under which any of its properties are held;
(h) remove and have released, by payment or otherwise, all liens and
encumbrances of any nature whatsoever on the Assets or the Mt. Morris Land
(except for liens and encumbrances, if any, specifically assumed by
Purchaser pursuant to this Agreement or liens and encumbrances, if any, on
the Mt. Morris Land that are expressly permitted pursuant to the terms and
provisions of the Mt. Morris Lease);
(i) duly and timely take all actions necessary to carry out the
transactions contemplated hereby;
25
<PAGE> 34
(j) deliver to Purchaser on or before the 15th day of each month true
and correct unaudited monthly balance sheets and statements of income for
the Business for the immediately preceding month;
(k) deliver to Purchaser on the Closing Date a true and correct
unaudited annual balance sheet, statement of income and statement of
changes in financial position for the six months ended June 30, 1999,
together with any additional financial information reasonably requested by
Purchaser to allow Purchaser to timely comply with its reporting
requirements under the Exchange Act, all in form and substance sufficient
to allow Purchaser to timely comply with such reporting requirements;
(l) preserve and maintain the goodwill of the Business;
(m) cause the net book value of the used, rental, leased and "rent to
own" construction machinery equipment, and all used attachment inventory of
Seller to be 85% of the fair market value; and
(n) relocate Seller's Pontiac, Michigan dealership to a location
designated by Purchaser (the "New Pontiac Location") and to sublease such
location from Purchaser until the earlier of October 31, 1999 or the
Closing Date under substantially identical terms as the terms of any lease
by Purchaser of such location, so long as Purchaser agrees to reimburse
Seller for all its reasonable out-of-pocket expenses from such relocation
(the "Pontiac Relocation"). Notwithstanding the foregoing, in the event the
transactions contemplated herein are not consummated by October 31, 1999,
then Seller may, at its option, continue to sublease the New Pontiac
Location under the same terms and conditions for any period of time ending
on or before October 31, 2000, after which time Seller and Purchaser may
enter into good faith negotiations for the continued leasing by Seller of
the New Pontiac Location.
8.3 General Negative Covenants. Seller shall not take, and each Shareholder
shall not permit Seller to take, any of the following actions without the prior
written consent of Purchaser:
(a) entering into or amending or assuming any contract, agreement,
obligation, lease, license or commitment related to the Business or the
Assets (or of a type included in the Assets) other than in accordance with
the provisions of Section 7.1;
(b) entering into or amending or assuming any mortgage, pledge,
conditional sale or other title retention agreement, lien, encumbrance or
charge of any kind upon any of the Assets or the Mt. Morris Land or
selling, leasing, abandoning or otherwise disposing of any of the Assets,
the Mt. Morris Land, including, but not limited to, real property,
machinery, equipment or other operating properties;
(c) engaging in any activities or transactions that might adversely
affect the Assets or the Business; or
26
<PAGE> 35
(d) increasing the compensation of any officer or employee of Seller,
other than normal compensation adjustments in the ordinary course of the
Business consistent with past practice.
8.4 Disclosure of Misrepresentations and Breaches. If any of the
representations or warranties of Seller or Shareholder hereunder are determined
by Seller or Shareholder to have been incorrect when made, or are determined by
Seller or Shareholder to be incorrect as of any date subsequent to the date
hereof, or if any of the covenants of Seller or Shareholder contained in this
Agreement have not been complied with timely, then Seller and Shareholder shall
immediately notify Purchaser to such effect (provided that such notice shall in
no way limit the rights of Purchaser (a) under Articles 10 and 17 to terminate
this Agreement or refuse to consummate the transactions contemplated hereby or
(b) to enforce any rights or remedies it may have hereunder). Notwithstanding
the foregoing, is Seller provides written Notice to Purchaser that a material
representation or warranty of Seller or Shareholder is incorrect prior to the
Closing, the sole remedy that Purchaser may have is to either terminate this
Purchase Agreement or enter into a mutual agreement with Seller and Shareholder
regarding an adjustment of the Purchase Price.
8.5 Government Filings. Seller and Shareholder shall cooperate with the
Rush Parties and their representatives in the preparation of any documents or
other material that may be required by any Governmental Authority in connection
with the Assets or the Business or the transactions contemplated hereby.
8.6 Access to and Inspection of Premises, Facilities and Equipment. Seller
shall afford to the officers and authorized representatives of Purchaser access
to the Mt. Morris Land and all other premises, facilities and tangible assets
included in the Assets for the purpose of inspecting such premises, facilities
and equipment in such manner as Purchaser shall deem appropriate.
9. COVENANTS REGARDING THE CLOSING AND POST-CLOSING.
9.1 Covenants of Seller. (a) Seller and Shareholder hereby covenant and
agree that they shall (i) use commercially reasonable efforts to cause all of
their respective representations and warranties set forth in this Agreement to
be true on and as of the Closing Date, (ii) use commercially reasonable efforts
to cause all of their respective obligations that are to be fulfilled on or
prior to the Closing Date to be so fulfilled, (iii) use commercially reasonable
efforts to cause all conditions to the Closing set forth in this Agreement to be
satisfied on or prior to the Closing Date, and (iv) deliver to Purchaser at the
Closing the certificates, updated lists, opinion of counsel, notices, consents,
authorizations, approvals, agreements, leases, transfer documents, receipts, and
amendments contemplated by Article 10 (with such additions or exceptions to such
items as are necessary to make the statements set forth in such items accurate,
provided that if any of such additions or exceptions cause any of the conditions
to Purchaser's obligations hereunder as set forth in Article 10 not to be
fulfilled, such additions and exceptions shall in no way limit the rights of
Purchaser under Articles 10 and 17 to terminate this Agreement or refuse to
consummate the transactions contemplated hereby).
(b) To the extent Seller receives any funds or other assets in payment
of receivables, or in connection with any other Assets being sold to Purchaser
pursuant hereto, Seller shall
27
<PAGE> 36
immediately deliver such funds and assets to Purchaser and take all steps
necessary to vest title to such funds and assets in Purchaser. Seller hereby
designates Purchaser and its officers as Seller's true and lawful
attorney-in-fact, with full power of substitution, to execute or endorse for the
benefit of Purchaser any checks, notes or other documents included in the Assets
or received by Purchaser in payment of or in substitution or exchange for any of
the Assets. Seller hereby acknowledges and agrees that the power of attorney set
forth in the preceding sentence is coupled with an interest, and further agrees
to execute and deliver to Purchaser from time to time any documents or
instruments reasonably requested by Purchaser to evidence such power of
attorney.
9.2 Covenants of Purchaser. Purchaser hereby covenants and agrees that it
shall (a) use commercially reasonable efforts to cause all of its
representations and warranties set forth in this Agreement to be true on and as
of the Closing Date, (b) use commercially reasonable efforts to cause all of its
obligations that are to be fulfilled on or prior to the Closing Date to be so
fulfilled, (c) use commercially reasonable efforts to cause all conditions to
the Closing set forth in this Agreement to be satisfied on or prior to the
Closing Date (provided that failure by Purchaser to comply with a second
requirement for information under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 or to comply with any requested divestiture of assets or to enter
into any consent or similar order or agreement shall not constitute a failure of
Purchaser to use commercially reasonable efforts), and (d) deliver to Seller at
the Closing the certificate contemplated by Article 11 (with such additions or
exceptions to such certificate as are necessary to make the statements set forth
in such certificate accurate, provided that if any of such additions or
exceptions cause any of the conditions to Seller's obligations hereunder as set
forth in Article 11 not to be fulfilled, such additions and exceptions shall in
no way limit the rights of Seller under Articles 11 and 17 to terminate this
Agreement or to refuse to consummate the transactions contemplated hereby).
9.3 Inventory Audit. Within five days prior to Closing, Seller and
Purchaser shall each appoint one or more representatives knowledgeable in the
equipment business, and shall cause such representatives to jointly conduct an
audit (in accordance with generally accepted accounting principles, consistently
applied) of the inventory of the Assets as of the Closing Date. Each party shall
bear their cost of conducting such audit.
10. CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of Purchaser
hereunder are, at the option of Purchaser, subject to the satisfaction, on or
prior to the Closing Date, of the following conditions (any of which may be
waived by Purchaser, in its sole discretion):
10.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The respective representations and warranties of Seller and
Shareholder contained in this Agreement shall be true and correct on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date. Each and all of the agreements
and covenants of Seller and Shareholder to be performed on or before the Closing
Date pursuant to the terms hereof shall have been performed. Seller and
Shareholder shall have delivered to Purchaser a certificate dated the Closing
Date and executed by Seller and Shareholder to all such effects.
10.2 Financial Information. Seller and Shareholder shall have provided to
Purchaser at Closing all financial information of Seller in the format required
in connection with the filing of
28
<PAGE> 37
financial information of Seller with Rush's Current Report on Form 8-K under the
Exchange Act required in connection with Purchaser's acquisition of the
Business.
10.3 No Governmental Actions. No action or proceeding before any
Governmental Authority shall have been instituted or threatened to restrain or
prohibit the transactions contemplated by this Agreement, and Seller and
Shareholder shall have delivered to Purchaser a certificate dated the Closing
Date and executed by Seller and Shareholder stating they have no Best Knowledge
of any such items. No Governmental Authority shall have taken any other action
as a result of which the management of Purchaser reasonably deems it inadvisable
to proceed with the transactions contemplated by this Agreement.
10.4 No Adverse Change. No adverse change in the Business shall have
occurred, and no loss or damage to any of the Assets, whether or not covered by
insurance, shall have occurred since the Balance Sheet Date, and Seller and
Shareholder shall have delivered to Purchaser a certificate dated the Closing
Date and executed by Seller and Shareholder to all such effects.
10.5 Update of Contracts. Seller shall have delivered to Purchaser an
accurate list, as of the Closing Date, showing (a) all agreements, contracts and
commitments of the type listed on Schedule 4.8 entered into since the date of
this Agreement (including, but not limited to, amendments, if any, to the items
listed on Schedule 4.8), and (b) all other agreements, contracts and commitments
related to the Business or the Assets entered into since the date of this
Agreement, together with true, complete and accurate copies of all documents (or
in the case of oral commitments, descriptions of the material terms thereof)
relevant to the items on the list (the "New Contracts"). Purchaser shall have
the opportunity to review the New Contracts, and shall have the reasonable right
to delay the Closing for up to five days if in its sole reasonable discretion
Purchaser deems such a delay necessary to enable it to adequately review the New
Contracts. All of the New Contracts that are approved in writing by Purchaser
prior to the Closing, as it may be delayed, (whether such approval by Purchaser
is given before or after Seller executes the New Contract) shall be included in
the Assets and the future obligations of Seller thereunder shall be assumed by
Purchaser pursuant to Section 3. Any New Contracts that are not approved in
writing by Purchaser prior to the Closing, as it may be delayed, shall remain
the sole obligation of Seller and shall not be assumed by Purchaser, and
Purchaser shall have no obligation or liability with respect thereto.
10.6 Approval of Counsel. 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.
10.7 No Material Adverse Information. The investigations with respect to
Seller, the Assets and the Business, performed by Purchaser's professional
advisors and other representatives shall not have revealed any material adverse
information concerning Seller, the Assets or the Business that has not been made
known to Purchaser in writing prior to the date of this Agreement.
10.8 Notices and Consents. No notice to or consent, authorization, approval
or order of any Person shall be required for the consummation of the
transactions contemplated by this Agreement (except for notices that have been
duly and timely given and consents, authorizations and approvals that have been
obtained), and Seller and Shareholder shall have delivered to Purchaser a
29
<PAGE> 38
certificate dated the Closing Date and executed by Seller and Shareholder to
such effect. True and correct copies of all required notices, consents,
authorizations and approvals shall have been delivered to Purchaser and shall be
satisfactory in form and substance to Purchaser and its counsel.
10.9 Mt. Morris Lease. Mt. Morris Landlord and Purchaser shall have entered
into the Mt. Morris Lease.
10.10 Corporate Approval. Seller and Shareholder shall have taken or caused
to be taken all necessary or desirable actions, steps and corporate proceedings
(whether by directors, shareholders or otherwise) to approve and authorize the
transfer of the Business and the Assets by Seller to Purchaser, and to approve
and authorize the execution and delivery of this Agreement by the Seller, and
Seller and Shareholder shall have delivered to Purchaser at Closing a
certificate to all such effects.
10.11 Insurance Coverage. Seller has obtained from Seller's current
insurers adequate "tail" insurance to provide coverage for any claims made after
the termination of Seller's existing insurance policies.
10.12 Transfer and Assignment Documents. Seller shall have delivered to
Purchaser all documents reasonably necessary or required to effectively transfer
and assign the Business and the Assets to Purchaser (including, without
limitation, all required consents), such transfers and assignments to convey
good and marketable title to the Assets to Purchaser, free and clear of all
liens and encumbrances whatsoever (except for liens, encumbrances and
obligations, if any, specifically assumed by Purchaser pursuant to this
Agreement), and to be in form and substance reasonably satisfactory to Purchaser
and its counsel.
10.13 Liens Released. Each and every lien or encumbrance of any nature, if
any, relating to the Assets shall have been terminated and released and proof
thereof delivered to the Purchaser (except for liens and encumbrances, if any,
specifically assumed by Purchaser pursuant to this Agreement).
10.14 UCC Matters. The current certificate issued by a company reasonably
acceptable to Purchaser reflecting that since the date of the searches furnished
pursuant to Section 2.4 hereof no Uniform Commercial Code filings, chattel
mortgages, assignments, pledges or other encumbrances have been filed in the
offices of the Secretary of State of the State of Michigan, in the office of the
County Clerk of Genesee County, Michigan, or in any other appropriate offices
for the filing of such documents in the State of Michigan with reference to the
Assets.
10.15 Telephone Transfer. Seller shall have transferred to Purchaser its
user rights to all telephone numbers included in the Assets.
10.16 Ordinary Course of Business. During the period from the date of this
Agreement until Closing, Seller shall have carried on the Business in the
ordinary and usual course and the Seller and Shareholder shall have delivered to
Purchaser at Closing a certificate to that effect.
30
<PAGE> 39
10.17 Other Documents. Seller shall have delivered or caused to be
delivered all other documents, agreements, resolutions, certificates or
declarations as Purchaser or its attorneys may have reasonably requested.
10.18 Dealer License. Purchaser shall have obtained written approval by the
appropriate departments or agencies of the State of Michigan to do business as a
John Deere dealer in the present territory of Seller's dealership.
10.19 John Deere Approval. Purchaser shall have received written
confirmation from each of John Deere and John Deere Commercial Worksite
Products, Inc., that the existing dealership agreements will survive the
termination of the dealership or that Purchaser will have an authorized
dealership from each of such companies in Seller's existing territory subsequent
to the Closing Date.
10.20 Inventory Audit. The inventory audit contemplated by Section 9.3
shall have been completed and the results thereof shall be satisfactory to
Purchaser.
10.21 Other Records. Seller shall have delivered or caused to be delivered
all of the following items in the possession of or under the control of Seller:
original licenses and permits, certificates of occupancy, certificates of
compliance, permits, architectural, mechanical, or electrical plans and
specifications and surveys relating to the Mt. Morris Land, the Mt. Morris
Improvements, and the Assets; all studies with respect to the functional aspects
of the Mt. Morris Land, the Mt. Morris Improvements and the Assets, including,
without limitation, environmental site assessments and reports; soil and
compaction tests and flooding studies; all extra promotional brochures, posters,
signs and other advertising materials relative to the operation of the Mt.
Morris Land and the Assets; and copies of all other books and records relating
to the ownership and operation of the Mt. Morris Land, the Mt. Morris
Improvements and the Assets.
10.22 Government Approvals. All necessary government and regulatory
approvals have been obtained.
10.23 Receivables Guarantee. Rush shall have agreed to guarantee any
recourse obligations of Seller required in connection with the sale by Seller of
accounts receivable generated with respect to the Business prior to the Closing
Date in consideration for the agreement of Seller to reimburse Rush for any
amounts paid under such guarantee.
10.24 Leasehold Policy. Seller shall have delivered to Purchaser a
leasehold policy of title insurance in the form ordinarily and customarily
utilized in the State of Michigan insuring Purchaser's leasehold interest under
the Mt. Morris Lease issued in accordance with the Title Commitment (including
the required endorsements thereto as set forth in Section 22.1 hereof, and
containing only those exceptions set forth in the Title Commitment as amended in
accordance with Section 22.1 hereof).
10.25 Environmental Reports or Assessments. Purchaser shall have received
environmental reports or assessments which show the Mt. Morris Land and the
Assets in an environmental condition reasonably satisfactory to Purchaser.
31
<PAGE> 40
10.26 MESA Form 1027. Purchaser shall have received from Seller in the time
and manner required by law Michigan Employment Security Agency (MESA) Form 1027.
Purchaser shall have two (2) days following receipt by Purchaser of such MESA
Form to agree to be bound by terms of this Agreement irrespective of any other
rights of review granted to Purchaser hereunder.
10.27 Fair Market Value. The net book value of the used, rental, leased and
"rent to own" construction machinery equipment, and all used attachment
inventory of Seller shall be 85% of fair market value.
10.28 Pontiac Relocation. Seller shall have completed the Pontiac
Relocation.
10.29 Seller's Obligation to Hire Additional Employees. Seller shall have
hired two (2) individuals designated by Purchaser to perform such duties for
Seller as Purchaser may designate; provided, however, Seller acknowledges that
such individuals are employees of Seller and not of Purchaser or Purchaser's
Affiliates and Seller is responsible for any and all employment related issues
or claims arising out of the employment relationships between Seller and such
individuals.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of
Seller hereunder are, at its option, subject to the satisfaction, on or prior to
the Closing Date, of the following conditions (any of which may be waived by
Seller in its sole discretion):
11.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The representations and warranties of Purchaser contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date. Each of the agreements and covenants of Purchaser to be performed on
or before the Closing Date shall have been performed. Purchaser shall have
delivered to Seller a certificate dated the Closing Date and executed by
Purchaser to all such effects.
11.2 Delivery of Purchase Price. Purchaser shall have paid to Seller the
Purchase Price as required by this Agreement, subject in all respects to the
provisions of Article 20 below.
11.3 Approval of Counsel. 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 Seller.
11.4 Governmental Approvals. All necessary government and regulatory
approvals have been obtained.
11.5 Mt. Morris Lease. Mt. Morris Landlord and Purchaser shall have entered
into the Mt. Morris Lease.
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
12.1 Change of Name. Immediately upon the occurrence of the Closing, Seller
and the Shareholder shall cease using the names "John Deere," "Calvert Sales,"
and all derivations thereof. Seller covenants and agrees that after the Closing
they will not, directly or indirectly, use the names
32
<PAGE> 41
"John Deere," "Calvert Sales," or any derivation thereof in connection with any
business enterprise; provided, however, Seller may make reference to "Calvert
Sales" in connection with the adoption of any plan of dissolution, liquidation
and termination of existence of Seller.
12.2 Exchange Act Filing; Cooperation. After the Closing, Seller shall
reasonably cooperate with and provide information to Purchaser as is necessary
for Purchaser to comply with its reporting obligations under the Exchange Act.
13. INDEMNITY BY SELLER AND THE SHAREHOLDERS.
13.1 Indemnification by Seller. The Seller and Shareholder agree to jointly
and severally indemnify, defend and hold harmless the Rush Parties and each of
their respective Affiliates, officers, directors, employees, agents,
consultants, representatives, shareholders and controlling Persons and their
respective successors and assigns from and against and in respect of any and all
Damages which may now or in the future be paid, incurred or suffered by or
asserted against such party (collectively, "General Losses"), arising out of or
resulting from or relating to any misrepresentation, breach of warranty or
breach of any covenant, commitment or agreement made or undertaken by Seller and
any of the Shareholders in this Agreement.
13.2 Environmental Indemnification. Seller and Shareholder agree to jointly
and severally indemnify, defend and hold harmless the Rush Parties and each of
their respective Affiliates, officers, directors, employees, agents,
consultants, representatives, shareholders and controlling Persons and their
respective successors and assigns from and against and in respect of any and all
Environmental Liabilities which may now or in the future be paid, incurred or
suffered by or asserted against such party, arising out of or resulting from or
relating to or in connection with (a) the acts or omissions of Seller or
Shareholder or other person or entity for whose actions Seller is legally
responsible on or prior to the Closing Date relating to the Mt. Morris Land, the
New Pontiac Location or the Assets or any operations conducted by Seller or on
the Mt. Morris Land; (b) any violation of Environmental Law by Seller or other
person or entity for whose actions Seller is legally responsible occurring or
commencing on or prior to the Closing Date and resulting from or related to the
Mt. Morris Land, the New Pontiac Location, the Assets or the operations
conducted on or with the Mt. Morris Land, the New Pontiac Location or the
Assets; (c) the management, treatment or disposal of any wastes at or from the
Mt. Morris Land, the New Pontiac Location on or prior to the Closing Date by
Seller or other person or entity for whose actions Seller is legally
responsible; (d) the presence or use of any Hazardous Materials at, on or under
the Mt. Morris Land or the New Pontiac Location on or prior to the Closing Date;
(e) any Environmental Condition existing at or with respect to the Assets on the
Mt. Morris Land or the New Pontiac Location as of the Closing Date attributable
to Seller or other person or entity for whose actions Seller is legally
responsible; (f) any acts or omissions of Seller or Shareholder relating to the
Mt. Morris Land, the Assets or the Businesses or any operations conducted on or
with the Mt. Morris Land, the New Pontiac Location, or the Assets; or (g) any
breach by Seller or Shareholder of a representation or warranty contained in
Section 4.16 hereof; or (h) the Old Pontiac Location (collectively,
"Environmental Losses"). In clarification of this Section, and not in limitation
thereof, Seller's or Shareholder's indemnity of Purchaser hereunder shall
include (y) any capital or other expenditures necessary to comply with
Environmental Laws, provided such expenditures relate to any Environmental
Condition that existed as of the Closing Date, and (z) all fines, penalties and
other costs and expenses that arise from or relate to an Environmental Condition
33
<PAGE> 42
that existed as of the Closing Date, including fines, penalties and other costs
and expenses that arise from or relate to the continued existence of such
Environmental Condition after the Closing Date.
13.3 Tax Indemnification. Seller and Shareholder agree to jointly and
severally indemnify, defend and hold harmless the Rush Parties and each of their
respective Affiliates, officers, directors, employees, agents, consultants,
representatives, shareholders and controlling Persons and their respective
successors and assigns from and against and in respect of any and all Damages
which may now or in the future be paid, incurred or suffered by or asserted
against such party arising out of or resulting from or relating to any Taxes or
Tax Returns of Seller for any period, or portion thereof, up to and including
the Closing Date (collectively, "Tax Losses").
13.4 Products Liability and Warranty Indemnification. Seller and
Shareholder agree to jointly and severally indemnify, defend and hold harmless
the Rush Parties and each of their respective Affiliates, officers, directors,
employees, agents, consultants, representatives, shareholders and controlling
Persons and their respective successors and assigns from and against and in
respect of any and all Damages which may now or in the future be paid, incurred
or suffered by or asserted against such party arising out of or resulting from
or relating to any products manufactured, sold or distributed or services
provided by or on behalf of Seller in connection with the Business or Assets on
or prior to the Closing Date or with respect to any claims made pursuant to
warranties to third Persons in connection with products manufactured, sold or
distributed or services provided by or on behalf of Seller in connection with
the Business or Assets on or prior to the Closing Date (collectively, "Product
Losses").
13.5 Indemnification by the Rush Parties. The Rush Parties jointly and
severally agree to indemnify, defend and hold harmless Seller and Shareholder
and Seller's Affiliates, officers, directors, employees, agents, consultants,
representatives, shareholders and controlling Persons and their respective
successors and assigns from and against and in respect of any and all Damages
which may now or in the future be paid, incurred or suffered by or asserted
against any such party, arising out of or resulting from or relating to (a) any
misrepresentation, breach of warranty or breach of any covenant, commitment or
agreement made or undertaken by the Rush Parties in this Agreement; (b) any
violation of Environmental Law by any of the Rush Parties at the New Pontiac
Location, the presence or use of Hazardous Materials at the New Pontiac
Location, or any Environmental Condition at the New Pontiac Location, first
arising after the Closing Date and not attributable to Seller, Shareholder or
Seller's affiliates or any of their respective agents, employees or
representatives.
13.6 Procedure. All claims for indemnification or payment under this
Article shall be asserted and resolved as follows:
(a) An Indemnitee shall promptly give the Indemnitor written notice of
any matter which an Indemnitee has determined has given or could give rise
to a right of indemnification under this Agreement (an "Indemnification
Event"), stating the amount of the Loss, if known, and method of
computation thereof, all with reasonable particularity, and stating with
particularity the nature of such matter. Failure to provide such written
notice shall not affect the right of the Indemnitee to indemnification
except to the extent such failure shall have
34
<PAGE> 43
resulted in liability to the Indemnitor that could have been actually
avoided had such notice been provided within such required time period.
(b) The obligations and liabilities of an Indemnitor under this
Article with respect to Losses arising from claims of any third party that
are subject to the indemnification provided for in this Article
("Third-Party Claims") shall be governed by and contingent upon the
following additional terms and conditions: if an Indemnitee shall receive
notice of any Third-Party Claim, the Indemnitee shall give the Indemnitor
prompt notice of such Third- Party Claim and the Indemnitor may, at its
option, assume and control the defense of such Third-Party Claim at the
Indemnitor's expense and through counsel of the Indemnitor's choice
reasonably acceptable to Indemnitee. Subject to the condition that written
notice be delivered prior to the expiration of one year after the Closing
Date, failure to provide such written notice shall not affect the right of
the Indemnitee to indemnification except to the extent such failure shall
have resulted in liability to the Indemnitor that could have been actually
avoided had such notice been provided within such required time period. In
the event the Indemnitor assumes the defense against any such Third-Party
Claim as provided above, the Indemnitee shall have the right to participate
at its own expense in the defense of such asserted liability, shall
cooperate with the Indemnitor in such defense and will attempt to make
available on a reasonable basis to the Indemnitor all witnesses, pertinent
records, materials and information in its possession or under its control
relating thereto as is reasonably required by the Indemnitor. In the event
the Indemnitor does not elect to conduct the defense against any such
Third-Party Claim, the Indemnitor shall cooperate with the Indemnitee (and
be entitled to participate) in such defense and attempt to make available
to it on a reasonable basis all such witnesses, records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnitee. The Indemnitor understands that if
such Third-Party Claim results in an obligation to indemnify hereunder,
Damages shall include all reasonable costs and expenses of such defense.
Except for the settlement of a Third-Party Claim that involves the payment
of money only and for which the Indemnitor has provided written objection
to Indemnitee under Section 13.6(c), no Third-Party Claim may be settled
without the written consent of the Indemnitee. Written notice of any
proposed settlement of any such claim and the material terms thereof shall
be delivered by Indemnitee to Indemnitor at least five Business Days prior
to any settlement of any such claim.
(c) If a claim for indemnity is provided pursuant to this Article by
an Indemnitee and the Indemnitor does not pay such claim or object to such
claim within 20 Business Days after written notice is received by the
Indemnitor, such claim shall be deemed agreed to by the Indemnitor. If the
Indemnitor shall object to such claim, a written notice of such objection
setting forth in reasonable detail the basis for such objection shall be
provided to the Indemnitee and such dispute shall be resolved in accordance
with Section 24.12 hereof. In addition, if the claim shall have been
determined to have been a valid claim, Damages shall include interest at
the prime rate as quoted from time to time by The Frost National Bank from
the date the claim is first made until fully paid.
35
<PAGE> 44
13.7 Payment. Payment of any amounts due pursuant to this Article shall be
made within ten Business Days after final adjudication of such claim and after
written notice is sent by the Indemnitee.
13.8 Failure to Pay Indemnification. If and to the extent the Indemnitee
shall make written demand upon the Indemnitor for indemnification pursuant to
this Article and the Indemnitor shall refuse or fail to pay in full within
thirty (30) Business Days of such written demand the amounts demanded pursuant
hereto and in accordance herewith, then the Indemnitee shall proceed in
accordance with the arbitration provisions of Section 24.12 hereof; provided,
however, that in the case of indemnification for a Third-Party Claim, such
matter need not be resolved by arbitration until the underlying Third-Party
Claim is finally resolved.
13.9 Cooperation. The Indemnitor and the Indemnitee shall cooperate with
each other with regard to any indemnification obligation under this Article and
each shall attempt to make available to the other on a reasonable basis all
personnel records, materials and information in its possession or under its
control as is reasonably requested by the other.
13.10 Time Limitations. Notwithstanding any provision contained herein to
the contrary, Shareholder will have no liability with respect to any
representation, warranty, covenant or obligation, other than those set forth in
Section 13.11, Section 14 or in which actual fraud is involved, unless on or
before one (1) year from the Closing Date, Purchaser notifies Seller of a claim
specifying the factual basis of such claim in reasonable detail to the extent
then known by Purchaser.
13.11 Special Provisions Concerning New Pontiac Location. The Rush Parties
and Seller agree to obtain a Phase I environmental site assessment of the New
Pontiac Location at the time that Purchaser enters into the lease therefor (and
Seller enters into the sublease therefor, as provided in Section 8.2(n) hereof,
and to obtain an update thereof as of the time that the sublease from Purchaser
to Seller terminates, in order to better establish the nature and extent of any
Environmental Conditions or violations of Environmental Laws occurring at or
with respect to the New Pontiac Location during Seller's occupancy thereof. Such
site assessment and the update thereof shall be prepared by a qualified
environmental consultant or firm selected and paid for by Purchaser and
reasonably acceptable to Seller. Seller agrees that one such firm is GeoConsul
of Buda, Texas. All reports prepared by such consultant or firm shall be the
property of Purchaser, but Purchaser shall provide Seller with copies thereof,
which Seller agrees to maintain in strict confidence in accordance with its
provision of Article 15 hereof. Notwithstanding anything in this Section 13.11
to the contrary, any environmental study shall be at the sole expense of the
Purchaser.
13.12 Limitation on Indemnification. Notwithstanding any provision
contained herein to the contrary, the Rush Parties shall not make any claim for
indemnification, nor shall Seller or Shareholder be responsible for paying any
indemnification obligation, in excess of the Purchase Price.
14. NON-COMPETITION AGREEMENTS.
14.1 Non-Competition. In consideration of the benefits of this Agreement to
Seller and as a material inducement to the Rush Parties to enter into this
Agreement and pay the Purchase Price, Seller and Shareholder hereby covenant and
agree that, commencing on the Closing Date and ending
36
<PAGE> 45
on the fifth anniversary of the Closing Date, Seller and Shareholder shall not,
and Seller will cause their Affiliates, officers, directors and representatives,
as applicable, 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 in the states of Michigan or Texas which engages in any business
activity which Seller or the Rush Parties or their Affiliates participates or
participated as of the Closing Date, including, but not limited to, the
construction machinery business; provided, however, the foregoing shall not
prohibit Seller and Shareholder, and their Associates, Affiliates and
representatives from purchasing and holding as an investment not more than 5% of
any class of publicly traded securities of any entity which conducts a business
in competition with the business of the Rush Parties, so long as Seller and
Shareholder, and their Affiliates and representatives do not participate in any
way in the management, operation or control of such entity.
14.2 Judicial Reformation. Seller and Shareholder acknowledge that, given
the nature of the Rush Parties' business, the covenants contained in Section
14.1 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 the Rush Parties'
business and to protect their legitimate business interests. If, however,
Section 14.1 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.
14.3 Customer Lists; Non-Solicitation. Seller and Shareholder hereby
further covenant and agree that they shall not, and Seller and Shareholder will
cause their Affiliates and representatives not to, directly or indirectly, (a)
use or make known to any person or entity the names or addresses of any clients
or customers of Seller or the Rush Parties 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 or Shareholder, its
Affiliates and 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 Seller or
the Rush Parties, nor (c) solicit for employment, recruit, hire or attempt to
recruit or hire any employees of Seller or the Rush Parties.
14.4 Covenants Independent. The covenants of Seller and Shareholder
contained in Sections 14.1, 14.2 and 14.3 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 or the Shareholder against the Rush Parties
will not constitute a defense to the enforcement by the Rush Parties of said
provisions. Seller and Shareholder understand that the provisions contained in
Sections 14.1, 14.2 and 14.3 are essential elements of the transactions
contemplated by this Agreement and, but for the agreement of Seller and
Shareholder to Sections 14.1, 14.2 and 14.3, the Rush Parties would not have
agreed to enter into this Agreement and the transactions contemplated herein.
Seller and Shareholder have been advised to consult with counsel in order to be
informed in all respects concerning the reasonableness and propriety of Sections
14.1, 14.2 and 14.3 with specific
37
<PAGE> 46
regard to the nature of the business conducted by Seller and the Rush Parties,
Seller and Shareholder acknowledge that Sections 14.1, 14.2 and 14.3 are
reasonable in all respects.
14.5 Remedies. In the event of a breach or a threatened breach by Seller or
the Shareholder of any of the provisions contained in Sections 14.1, 14.2 or
14.3 of this Agreement, Seller and Shareholder acknowledge that the Rush Parties
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, the Rush Parties
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 Rush Parties may have under this
Agreement, at law or in equity, including, without limitation, the right to sue
for damages.
15. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
15.1 Covenant of Seller and Shareholder. Seller and Shareholder recognize
and acknowledge that they have and will have access to certain confidential
information of Seller that is included in the Assets (including, but not limited
to, environmental studies and reports, lists of customers, trade secrets, costs
and financial information) that after the consummation of the transactions
contemplated hereby will be valuable, special and unique property of Purchaser.
Seller and Shareholder agree that Seller and Shareholder will, and will cause
their Affiliates and representatives to, keep confidential and not disclose to
any other Person or use for his or its own benefit or for the benefit of any
other Person, and Seller and Shareholder will use their 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 (a) is then generally known to the public, (b) become
or becomes generally known to the public through no fault of Seller or the
Shareholder, or Seller's Affiliates and representatives, and (c) 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 or the Shareholder of
any of the provisions contained in this Article, Seller and Shareholder
acknowledge that the Rush Parties 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, the Rush Parties 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 Rush Parties may have under this Agreement, at law or in equity, including,
without limitation, the right to sue for damages.
15.2 Covenant of Rush Parties. Rush and Rush Parties, their officers,
directors, agents, employees and any Affiliate of Rush and Rush Parties (for
purposes of this Section 15.2, collectively, the "Purchaser"), recognize and
acknowledge that they have and will have access to certain confidential
information of Seller that is included in the Assets (including, but not limited
to, environmental studies and reports, lists of customers, trade secrets, costs
and financial information) that is valuable, special and unique property of
Seller. In the event the transactions
38
<PAGE> 47
contemplated hereby are not consummated, Purchaser agrees that Purchaser will,
and will cause Purchaser's Affiliates and representatives to, keep confidential
and not disclose to any other Person or use for his or its own benefit or for
the benefit of any other Person, and Purchaser will use their 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 Seller; provided, however, such limitation shall not apply to
any information which (a) is then generally known to the public, (b) become or
becomes generally known to the public through no fault of Purchaser and
Purchaser's representatives, and (c) 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 Purchaser of any of the provisions contained in this
Article, Purchaser acknowledges that Seller and Shareholder 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, Seller and Shareholder 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 Seller and Shareholder may have under this
Agreement, at law or in equity, including, without limitation, the right to sue
for damages.
16. DAMAGE TO ASSETS. If, on or before the Closing Date, any of the Assets
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 (a) remove any or all of the damaged or destroyed asset or assets it does
not desire to purchase from the Assets to be purchased hereunder and reduce the
Purchase Price by an amount equal to the portion of the Purchase Price
attributable to the damaged or destroyed asset or assets so removed and (b)
complete the purchase of the remainder of the Assets and reduce the Purchase
Price by the loss in fair market value of any damaged or destroyed Assets that
are purchased by Purchaser.
17. TERMINATION. This Agreement may be terminated without further
obligation of the parties, as follows:
17.1 Mutual Consent. This Agreement may be terminated at any time prior to
Closing by mutual written consent of the parties hereto.
17.2 Failure of Conditions. This Agreement may be terminated by any party
hereto, if the conditions, as set forth in this Agreement, to such party's
obligations under this Agreement are not fulfilled on or prior to the Closing
Date; provided that any such termination shall not limit the remedies otherwise
available to such party as a result of misrepresentations of or breaches by the
other party.
17.3 Failure to Close. This Agreement will automatically terminate on
October 31, 1999, if the Closing shall not have occurred on or before such date,
unless the parties shall have otherwise agreed in writing prior to such date. No
party will be liable in damages to any other party as a result of termination
pursuant to this Section unless the failure of the Closing was due to the
failure of such party to comply with the terms of this Agreement.
39
<PAGE> 48
17.4 Liquidated Damages. The parties agree that in the event the Closing
does not occur due to the failure of Purchaser to comply with the terms of this
Agreement, the actual damages that might be sustained by Seller and Shareholder
are uncertain and difficult, if not impossible, to ascertain. Therefore, the
parties agree that upon such failure to close Purchaser shall pay to Seller the
Escrowed Funds as liquidated damages. The parties agree that the payment of such
amount as liquidated damages represents the parties' reasonable forecast of
fair, reasonable and just compensation for Purchaser's failure to comply with
the terms of this Agreement.
18. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER.
18.1 New Employees of Purchaser. It is the intention of Purchaser, and
Seller hereby acknowledges and agrees with such position, that any employees of
Seller that Purchaser hires will be new employees of Purchaser as of the Closing
Date or the date of hire, whichever is later. Such new employees shall be
entitled only to such compensation and employee benefits as are agreed to by
such employees and Purchaser, or as are otherwise provided by Purchaser, in its
sole discretion.
18.2 No Hiring Commitment. Purchaser specifically does not commit to hire
any of the employees of the Business, and Seller specifically understands and
acknowledges this fact. However, notwithstanding Purchaser's position, Purchaser
will review its needs in anticipation of the purchase of the Assets with a view
to hiring certain of the employees of Seller as of the Closing Date. In its
review, Purchaser expects to be able to review employee records and conduct
employee interviews. Seller agrees that after the date hereof it will make, on a
confidential basis, its employee records available to Purchaser and permit
Purchaser to contact its employees for the purpose of conducting employee
interviews. Seller further agrees to make employees designated by Purchaser
available to Purchaser for such purpose.
18.3 Vacation, Sick Pay, Health Insurance, etc.
(a) Notwithstanding Purchaser's decision to hire any or all of such
employees after the Closing Date, Purchaser shall not be liable under any
bonus plan or other plan described in Schedule 4.2(a) or under any other
similar plan that may have been established by Seller or for any health
insurance benefits that may have accrued to such employees prior to the
Closing Date, and Seller expressly acknowledges that it has sole liability
for all such employee benefit costs accrued as of the Closing Date whether
or not any or all of such employees are subsequently hired by Purchaser
pursuant to Section 18.1. Notwithstanding the foregoing, Purchase shall
assume at the Closing Seller's obligations to employees of Seller actually
hired by Purchaser for accrued but unused vacation and sick leave, which
shall include (i) accrued vacation and sick leave through each employee's
previous anniversary date and (ii) the pro rata portion of vacation and
sick leave earned by each employee since the last anniversary date through
the Closing Date, which such vacation and sick leave will be available to
employee following his next anniversary, and the Purchase Price shall be
reduced by the dollar value of such obligation; provided, however,
Purchaser shall only assume up to the number of accrued but unused vacation
and sick leave days that each employee of Seller actually hired by
Purchaser would be entitled to under Purchaser's vacation day and sick
leave policy. Except for vacation and sick leave time assumed by Purchaser
as set forth above, Purchaser
40
<PAGE> 49
shall have no obligation after the Closing to continue any pension plans or
work benefit plans currently offered by Seller to its employees.
(b) With respect to employees actually employed by Purchaser, Seller
will remain responsible for medical expenses covered under its plans (i)
actually incurred prior to the Closing Date or (ii) actually incurred with
respect to any hospitalization that begins prior to the Closing Date until
such hospitalization ends (as required under such plans), and Purchaser
will be responsible for all other medical expenses incurred on or after the
Closing Date to the extent covered under its plans; provided, however, the
employees will be treated as newly hired employees of Purchaser beginning
on the Closing Date insofar as medical expenses paid under Purchaser's
plans affects the time or amount of coverage. Seller shall cooperate with
Purchaser to provide continuity of such insurance coverage to such
employees. Seller shall be solely responsible for any obligations under the
Consolidated Omnibus Budget Reconciliation Act, as amended, with respect to
its employees.
18.4 Severance Benefits; Employment Termination. Purchaser shall have no
obligation whatsoever to pay all or any part of any severance benefits that
Seller is or may be obligated to pay in connection with the termination of
employment by Seller of any of its employees.
18.5 Employee Benefit Plans. Purchaser shall not and does not hereby
assume, continue or maintain any pension, retirement or welfare plans, severance
or vacation policies or benefits, or other employee compensation or benefit
arrangements or policies or plans maintained by Seller for its employees. It is
intended that Purchaser shall not at any time be a successor employer for
purposes of Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Seller hereby represents and warrants to Purchaser that the
consummation of this Agreement (and the employment by the Purchaser of former
employees of the Seller) will not result in any carryover liability to the
Purchaser for taxes, penalties, interest or any other claims resulting from any
employee pension benefit plan, employee welfare benefit plan, or other employee
benefit agreement or arrangement maintained by Seller. In addition, the Seller
makes the following representations (a) as to employee pension benefit plans of
Seller: (i) Seller has not become liable to the PBGC under Section 4062, 4063 or
4064 of ERISA under which a lien could attach to the assets of the Seller under
Section 4068 of ERISA; (ii) Seller has not ceased operations at a facility so as
to become subject to the provisions of Section 4062(e) of ERISA; and (iii)
Seller has not made a complete or partial withdrawal from a multiemployer plan
(as defined in Section 3(37) of ERISA) so as to incur withdrawal liability as
defined in Section 4201 of ERISA, and (b) all group health plans maintained by
Seller have been operated in compliance with Section 4980B(f) of the Code. In
addition, the parties agree that the Purchaser does not and will not assume the
sponsorship of, or the responsibility for contributions to, or any liability in
connection with, any employee pension benefit plan, any employee welfare benefit
plan, or other employee benefit agreement or arrangement maintained by Seller
for its employees, former employees, retirees, their beneficiaries or any other
person. In addition and not as a limitation of the foregoing covenant, the
parties agree that the Seller shall be liable for any continuation coverage
(including any penalties, excise taxes or interest resulting from the failure to
provide continuation coverage) required by Section 4980B of the Code due to
qualifying events which occur on or before Closing Date.
41
<PAGE> 50
18.6 Reporting of Data. Purchaser and Seller shall complete and furnish to
each other such other employee data as shall be reasonably required from time to
time for each party to perform and fulfill its obligations under this Article.
18.7 Employment Related Claims. Seller agrees that it, and not Purchaser,
shall be solely responsible for, and Seller hereby agrees to indemnify, defend
and hold harmless Purchaser from and against, all liability, costs and expenses
(including reasonable attorneys' fees) for all existing employment claims that
have been filed by any employee or former employee of Seller prior to the
Closing Date relating to arbitrations, unfair labor practice charges, employment
discrimination charges, wrongful termination claims, workers' compensation
claims, any employment-related tort claim or other claims or charges of or by
employees of Seller, or any thereof filed after the Closing Date but arising as
a result of conditions, actions or events or series of actions or events which
occurred prior to the Closing Date. Schedule 18.7 hereto sets forth a brief
description of any of such claims that have been filed or, to Seller's
knowledge, threatened. Without in any way limiting the foregoing, Seller shall
defend and hold harmless Purchaser from and against any and all claims, demands,
actions, judgments, costs and expenses, including without limitation, attorney
fees and settlement costs and other reasonable expenses, related to all
liabilities and obligations in connection with Seller's qualified pension,
retirement or welfare plans, severance or vacation policies or benefits, or
other employee compensation or benefit arrangements or policies.
19. OFFSET PROVISIONS. Notwithstanding any other provisions of this
Agreement, in the event Seller or Shareholder become obligated to pay sums to
Purchaser 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
this Agreement or the Mt. Morris Lease in such amount or amounts as Purchaser
(and any Indemnitee that is not promptly paid by Seller) is entitled to receive
from Seller or Shareholder, and any such offset shall be deemed to be a payment
under this Agreement.
20. ADJUSTMENT OF PURCHASE PRICE. The Purchase Price shall be adjusted on
the Closing Date (a) to reduce the Purchase Price by the amount allocated to any
damaged or destroyed Assets as contemplated by Article 16; (b) to account for a
proration of personal property taxes on the Assets, lease payments, utilities
and other items commonly prorated; and (c) to account for any Deposits held by
Seller on the Closing Date. Three days prior to the Closing Date, Seller will
provide Purchaser with a statement of adjustments showing all proposed
adjustments to the Purchase Price, such statement of adjustments having all
reasonable backup documentation for such suggested adjustments. Purchaser and
Seller will work to finalize all required adjustments prior to the Closing Date.
21. SURVEY.
21.1 Survey. Upon written request by Purchaser within ten days from and
after the date hereof, Seller agrees, on behalf of Purchaser, and at Purchaser'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 of the Mt. Morris Land (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
42
<PAGE> 51
at least one copy of the Survey plat and a certificate under the seal of the
surveyor, which 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 (which shall be no earlier than the date hereof), 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 benefit of and
reliance by Rush Equipment Centers of Michigan, Inc., Rush Enterprises,
Inc. and Cislo Title Company, (ii) the description contained hereon is
correct, (iii) the property described hereon 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 property shown hereon are correct, and (vi) the area of the 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 Seller's expense) the standard printed exceptions from
the Leasehold Policy of Title Insurance to be delivered by Seller as provided
below. 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 surveyed parcel, 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. For purposes of the property description to be included in the
Mt. Morris Lease, the field notes prepared by the surveyor shall control any
conflicts or inconsistencies with the description herein. Without in any way
limiting the foregoing, the surveyor shall provide separate written field note
descriptions for each parcel comprising the Mt. Morris Land.
21.2 Remedies for Failure to Deliver Survey. In the event Seller does not
deliver the Surveys within such ten-day period, then and thereafter, Purchaser
shall have the option to (a) cancel this Agreement, in which event the parties
hereto shall have no further obligations hereunder, or (b) 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 Purchase Price on the Closing Date), or (c) waive the Survey
requirements and proceed to close the transactions contemplated by this
Agreement.
22. TITLE COMMITMENT AND CONDITION OF TITLE.
22.1 Title Commitment. Within ten days from and after the date hereof, at
Purchaser's sole cost and expense, Seller for the benefit of Purchaser agrees to
cause the Title Company to furnish
43
<PAGE> 52
Purchaser and its counsel a Commitment for Leasehold Owner Policy of Title
Insurance (the "Title Commitment") prepared and issued by the Title Company
describing and covering the Mt. Morris Land listing Purchaser as the prospective
named insured and showing as the policy amount $400,000. The Title Commitment
shall constitute the commitment of the Title Company to insure, by title
insurance in the standard form promulgated in the State of Michigan, Purchaser's
leasehold interest in the Mt. Morris Land subject only to the exceptions set
forth in the Title Commitment and to the standard printed exceptions except as
modified below, but deleting (at Purchaser's expense in excess of the expense of
a standard policy with exceptions) to the maximum extent permitted by applicable
title insurance regulations the standard printed form survey exception. 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 Commitments
shall contain no exception for "visible and apparent easements" or for "public
or private roads" or the like. The Title Commitments shall contain no exception
for "rights of parties in possession" (other than Purchaser). In addition, the
Title Commitment shall provide (by endorsements or otherwise as permissible
under applicable regulations) coverage against violation of restrictive
covenants and zoning laws, encroachments, overlapping of improvements, shortages
in area and mechanic's liens.
22.2 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 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 fifteen 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 its sole cost and expense, within such 15-day
period. If Seller cannot cure the objections within such fifteen- 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 $50,000 or less (subject to the consent
of the owner of the applicable parcel), to cure and deduct the cost of such cure
from the Purchase Price; or (c) waive the objections, and proceed to close the
transaction contemplated hereby in which event such objections shall be included
as exceptions to title in the Mt. Morris Lease. In the event, however, that a
lien indebtedness against the Mt. Morris Property (including past due taxes) is
disclosed by the applicable Title Commitment or UCC Report, then Seller shall
(y) discharge such lien indebtedness prior to the Closing, or (z) authorize the
Title Company to discharge such lien indebtedness at the Closing out of the
Purchase Price, and all costs incurred in connection with discharging such lien
indebtedness shall not count against the $50,000 amount referenced in clause (b)
of the immediately preceding sentence.
23. ENVIRONMENTAL STUDIES AND REMEDIATION ACTIVITIES.
23.1 Environmental Studies. Within 10 days after the date hereof, Seller
shall provide to Purchaser, at Seller's cost and expense, copies of (a) all
existing Environmental Site Assessments (whether Phase I, Phase II or otherwise)
covering all or any portion of the Mt. Morris Land, to the
44
<PAGE> 53
extent the same are in Seller's possession or Seller has 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 Mt. Morris Land, to the extent the same are in
Seller's possession or Seller has access to them (all of the foregoing
information, whether obtained by Purchaser or provided by Seller, being
hereinafter referred to as "Environmental Information"). At Purchaser's option
(x) Purchaser may obtain new or updated Environmental Site Assessments for the
Mt. Morris Land certified to Purchaser so that Purchaser may rely on same,
and/or (y) a recertification of the existing Environmental Site Assessments to
Purchaser, and/or (z) Phase II Environmental Site Assessments certified to both
Seller and Purchaser. 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 sixty (60) days from the date hereof
(the "Feasibility Period") within which to conduct any and all engineering,
environmental and economic feasibility studies and tests of the Mt. Morris Land
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. In accordance with Section 8.6 hereof,
Seller has granted and hereby grants to Purchaser and its contractors and
representatives access to the Mt. Morris Land 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 Business, and, upon completion of
their activities on the Mt. Morris Land shall restore each parcel of real
property as nearly as is reasonably possible to the condition it was in
immediately prior to such activities.
23.2 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 Mt. Morris Land, 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 or to give notice in writing to Purchaser, that it will not
undertake such remediation. In the event that an Environmental Condition exists
or is discovered on the Mt. Morris Land and Seller fails or refuses to remediate
or otherwise cure 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 notice thereof
given to Seller prior to the Closing Date, in which event the parties hereto
shall have no further obligations hereunder, (b) if the Environmental Condition
can be remediated or cured for $50,000 or less, to remediate or cure and deduct
the cost of such cure from the Purchase Price; (c) if the Environmental
Conditions affect a portion, but not all, of the Mt. Morris Land, to elect to
delete the portion of the real property so affected from the definition of "Mt.
Morris Land" hereunder and to lease only the newly defined "Mt. Morris Land" at
Closing, or (d) waive in writing the remediation or cure of such Environmental
Condition (without in any way waiving Purchaser's rights under Article 13 hereof
pertaining to Seller's environmental indemnification) and proceed to close the
sale contemplated by this Agreement.
24. GENERAL PROVISIONS.
24.1 Governing Law; Interpretation; Section Headings. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Texas, without regard to conflict-of-laws rules as applied in Michigan.
The section headings contained herein are for purposes
45
<PAGE> 54
of convenience only, and shall not be deemed to constitute a part of this
Agreement or to affect the meaning or interpretation of this Agreement in any
way.
24.2 Severability. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or the
State of Texas, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intention of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of this
Agreement shall not be affected by any such modification or severance, except
that if any severance materially alters the intentions of the parties hereto as
expressed herein (a modification being permitted only if there is no material
alteration), then the parties hereto shall use commercially reasonable efforts
to agree to appropriate equitable amendments to this Agreement in light of such
severance, and if no such agreement can be reached within a reasonable time, any
party hereto may initiate arbitration under the then current commercial
arbitration rules of the American Arbitration Association to determine and
effect such appropriate equitable amendments.
24.3 Entire Agreement. This Agreement, the Schedules and the documents and
agreements referenced herein set forth the entire agreement and understanding of
the parties hereto with respect to the transactions contemplated hereby, and
supersede all prior agreements, arrangements and understandings related to the
subject matter hereof. No representation, promise, inducement or statement of
intention has been made by any party hereto which is not embodied or referenced
in this Agreement, the Schedules or the documents or agreements referenced
herein, and no party hereto shall be bound by or liable for any alleged
representation, promise, inducement or statement of intention not so set forth.
24.4 Binding Effect. All the terms, provisions, covenants and conditions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
24.5 Assignment. This Agreement and the rights and obligations of the
parties hereto shall not be assigned or delegated by any party hereto without
the prior written consent of the other parties hereto.
24.6 Amendment; Waiver. This Agreement may be amended, modified, superseded
or canceled, and any of the terms, provisions, representations, warranties,
covenants or conditions hereof may be waived, only by a written instrument
executed by all parties hereto, or, in the case of a waiver, by the party
waiving compliance. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right to
enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provision, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach of
any other term, provision, representation, warranty or covenant.
46
<PAGE> 55
24.7 Gender; Numbers. All references in this Agreement to the masculine,
feminine or neuter genders shall, where appropriate, be deemed to include all
other genders. All plurals used in this Agreement shall, where appropriate, be
deemed to be singular, and vice versa.
24.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall be
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of the parties reflected hereon as signatories.
24.9 Telecopy Execution and Delivery. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties hereto agree to
execute an original of this Agreement as well as any facsimile, telecopy or
other reproduction hereof.
24.10 Press Releases. No press releases or other public announcement with
respect to this Agreement or the transactions contemplated herein shall be made
prior to the Closing Date without the joint approval of Purchaser and Seller,
except as required by law.
24.11 Expenses. Whether or not the transactions contemplated hereby are
consummated, each of the parties will pay all costs and expenses of its or his
performance of and compliance with this Agreement.
24.12 Arbitration. Except for the provisions of Articles 14 and 15 of this
Agreement dealing with restrictive covenants and non-disclosure of confidential
information, with respect to which the Rush Parties 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 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 and Fifty Thousand Dollars ($250,000),
exclusive of interest, attorneys' fees and costs, the arbitration shall be
conducted by a panel of three independent arbitrators. Otherwise, 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
47
<PAGE> 56
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. 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. Without limiting the scope of the parties' obligation
to arbitrate disputes pursuant to this Section, the arbitrator(s) are not
empowered to award damages including, without limitation, punitive damages and
multiple damages under applicable Texas statutes, in excess of compensatory
damages; provided that in no event shall consequential damages be awarded. Each
of Rush, Purchaser and Seller hereby irrevocably waives and releases any right
to recover such damages in excess of those damages authorized by this Section.
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 for a judgment to be
entered upon any award entered through such arbitration proceedings.
24.13 Assignment of Contracts. Notwithstanding any other provision of this
Agreement, nothing in this Agreement or any related document shall be construed
as an attempt to assign (a) any Contract which, as a matter of law or by its
terms, is non-assignable without the consent of the other parties thereto unless
such consent has been given, or (b) any Contract or claim as to which all of the
remedies for the enforcement thereof enjoyed by Seller would not, as a matter of
law or by its terms, pass to Purchaser as an incident of the transfers and
assignments to be made under this Agreement. In order, however, that the full
value of every Contract and claim of the character described in clauses (a) and
(b) above and all claims and demands on such Contracts may be realized for the
benefit of Purchaser, Seller, at the request and expense and under the direction
of Purchaser, shall take all such action and do or cause to be done all such
things as will, in the opinion of Purchaser, be necessary or proper in order
that the obligations of Seller under such Contracts may be performed in such
manner that the value of such Contract will be preserved and will inure to the
benefit of Purchaser, and for, and to facilitate, the collection of the moneys
due and payable and to become due and payable thereunder to Purchaser in and
under every such contract and claim. Seller shall promptly pay over to Purchaser
all moneys collected by or paid to it in respect of every such contract, claim
or demand. Nothing in this Section shall relieve Seller of its obligations to
obtain any consents required for the transfer of the Assets and all rights
thereunder to Purchaser, or shall relieve Seller from any liability to Purchaser
for failure to obtain such consents.
48
<PAGE> 57
24.14 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.
24.15 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid telex
or telegram or by facsimile or other similar instantaneous electronic
transmission device or mailed first class, postage prepaid, certified United
States mail, return receipt requested, as follows:
(a) If to Purchaser, at:
Rush Equipment Centers of Michigan, Inc.
P. O. Box 34630
San Antonio, Texas 78265
Attention: W. Marvin Rush
Facsimile No.: (210) 662-8017
With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro, Esq.
Facsimile No.: (210) 270-7205
(b) If to Rush, at:
Rush Enterprises, Inc.
P. O. Box 34630
San Antonio, Texas 78265
Attention: W. Marvin Rush
Facsimile No.: (210) 662-8017
With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro, Esq.
Facsimile No.: (210) 270-7205
49
<PAGE> 58
(c) If to Seller, at:
Attn: Thomas B. Calvert
4979 Skelton Road
Columbiaville, Michigan 48421
With a copy to:
Webster, Looby & Baumgarten, C.P.A.
G-3497 Richfield Road
Flint, Michigan 48506
Attention: Paul Webster, C.P.A.
Facsimile No.: (810) 736-9608
AND
Hicks, Shaheen & Schmidlin, PLC
2300 Austin Parkway, Suite 120
Flint, Michigan 48507
Attention: William A. Shaheen, Jr., Esq.
Facsimile No.: (810) 232-5538
(d) If to Shareholder, at:
Thomas B. Calvert, Trustee of Thomas B. Calvert Trust
4979 Skelton Road
Columbiaville, Michigan 48421;
provided that any party may change its address for notice by giving to the other
party written notice of such change. Any notice given under this Section shall
be effective when received at the address for notice for the party to which the
notice is given.
24.16 Risk of Loss. Seller shall bear all risk of loss to the Assets until
such time as the Closing has occurred and title to the Assets has passed to the
Purchaser.
(Remainder of page intentionally left blank, signatures on following page)
50
<PAGE> 59
IN WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement
as of the date first above written.
RUSH:
RUSH ENTERPRISES, INC.
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
PURCHASER:
RUSH EQUIPMENT CENTERS
OF MICHIGAN, INC.
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
SELLER:
CALVERT SALES, INC.
By:
---------------------------------------------------
Thomas B. Calvert, President
SHAREHOLDER:
------------------------------------------------------
Thomas B. Calvert, Trustee of Thomas B. Calvert Trust
51
<PAGE> 1
EXHIBIT 2.8
ASSET PURCHASE AGREEMENT
DATED SEPTEMBER 27, 1999
BY AND AMONG
RUSH TRUCK CENTERS OF CALIFORNIA, INC.
NORM PRESSLEY'S TRUCK CENTER
AND
SCOTT PRESSLEY
COVERING THE PURCHASE
OF SPECIFIED ASSETS OF
NORM PRESSLEY'S TRUCK CENTER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. GENERAL DEFINITIONS........................................................... 1
1.1 Adjoining Property Assignment........................................ 1
1.2 Adjoining Property Landlord.......................................... 1
1.3 Adjoining Property Lease............................................. 1
1.4 Affiliate............................................................ 1
1.5 Article.............................................................. 2
1.6 Assets............................................................... 2
1.7 Balance Sheet Date................................................... 2
1.8 Best Knowledge....................................................... 2
1.9 Bonus Payment........................................................ 2
1.10 Closing.............................................................. 2
1.11 Closing Date......................................................... 2
1.12 Closing Price........................................................ 2
1.13 Commission. ......................................................... 2
1.14 Common Stock......................................................... 2
1.15 Contracts............................................................ 2
1.16 Control.............................................................. 2
1.17 Dealer Cost.......................................................... 2
1.18 Deposits............................................................. 3
1.19 Disclosure Schedule.................................................. 3
1.20 El Centro Landlord................................................... 3
1.21 El Centro Lease...................................................... 3
1.22 Employment Agreement................................................. 3
1.23 ERISA................................................................ 3
1.24 Exchange Act......................................................... 3
1.25 Excluded Assets...................................................... 3
1.26 Fair Market Value Warrant............................................ 3
1.27 GMC.................................................................. 3
1.28 GMC Excluded Assets.................................................. 3
1.29 GMC Operating Agreement.............................................. 3
1.30 Governmental Authority............................................... 3
1.31 Governmental Requirement............................................. 4
1.32 Hino................................................................. 4
1.33 Hino Operating Agreement............................................. 4
1.34 HSR Act.............................................................. 4
1.35 Lease Documents...................................................... 4
1.36 New Contracts........................................................ 4
1.37 PACLEASE Lease....................................................... 4
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
1.38 Person............................................................... 4
1.39 Purchase Price....................................................... 4
1.40 Purchaser Claims..................................................... 4
1.41 Purchaser Damages.................................................... 4
1.42 Purchaser Environmental Liabilities.................................. 4
1.43 Purchaser Indemnified Parties........................................ 5
1.44 Reference Balance Sheet.............................................. 5
1.45 Registration Rights Agreement........................................ 5
1.46 Rule 144............................................................. 5
1.47 Rush................................................................. 5
1.48 San Diego Lease...................................................... 5
1.49 Schedule............................................................. 5
1.50 SEC.................................................................. 5
1.51 SEC Documents........................................................ 5
1.52 Section.............................................................. 5
1.53 Securities........................................................... 5
1.54 Securities Act....................................................... 5
1.55 Securities Laws...................................................... 6
1.56 Seller Certificate................................................... 6
1.57 Seller Claims........................................................ 6
1.58 Seller Damages....................................................... 6
1.59 Seller Environmental Liabilities..................................... 6
1.60 Seller Indemnified Parties........................................... 6
1.61 Seller Indemnifying Parties.......................................... 6
1.62 Subsidiary........................................................... 6
1.63 Taxes................................................................ 6
1.64 Territory............................................................ 6
1.65 Underwater Warrant................................................... 6
1.66 Warrant Stock........................................................ 7
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE................................. 7
2.1 Assets to be Purchased............................................... 7
2.2 Purchase and Sale.................................................... 8
2.3 Delivery of Assets and Transfer Documents............................ 8
2.4 Closing; Closing Date................................................ 8
3. PURCHASE PRICE................................................................ 9
3.1 Price and Payment.................................................... 9
3.2 Assumed Obligations.................................................. 10
3.3 Damage to Assets..................................................... 10
3.4 Adjustment of Purchase Price......................................... 11
3.5 Sales and Use Tax.................................................... 11
3.6 Allocation of Purchase Price......................................... 11
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER...................... 11
4.1 Incorporation........................................................ 12
4.2 Share Capital........................................................ 12
4.3 Financial Statements................................................. 12
4.4 Events Since the Balance Sheet Date.................................. 12
4.5 Customer List........................................................ 13
4.6 Taxes and Governmental Returns....................................... 13
4.7 Employee Matters..................................................... 14
4.8 Contracts and Agreements............................................. 15
4.9 Effect of Agreement.................................................. 16
4.10 Properties, Assets and Leasehold Estates............................. 17
4.11 Intangible Property.................................................. 17
4.12 Suits, Actions and Claims............................................ 17
4.13 Licenses and Permits; Compliance With Governmental Requirements...... 18
4.14 Authorization........................................................ 18
4.15 Records.............................................................. 18
4.16 Environmental Protection Laws........................................ 18
4.17 No Underground Storage Tanks......................................... 21
4.18 Securities Laws Matters.............................................. 21
4.19 Brokers and Finders.................................................. 22
4.20 Deposits............................................................. 23
4.21 Work Orders.......................................................... 23
4.22 Telephone Numbers.................................................... 23
4.23 No Untrue Statements................................................. 23
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER................................... 23
5.1 Incorporation........................................................ 23
5.2 Authorization........................................................ 23
5.3 SEC Documents........................................................ 24
5.4 Brokers and Finders.................................................. 24
5.5 Effect of Agreement.................................................. 24
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS,
GUARANTEES, REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDER................................................................... 25
7. CONTRACTS PRIOR TO THE CLOSING DATE........................................... 25
7.1 Approval of Contracts................................................ 25
7.2 Contracts Included in Assets......................................... 25
8. COVENANTS OF SELLER AND SHAREHOLDER PRIOR TO CLOSING DATE..................... 25
8.1 Access to Information................................................ 25
8.2 General Affirmative Covenants........................................ 26
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
8.3 General Negative Covenants................................................ 27
8.4 Disclosure of Misrepresentations and Breaches............................. 27
8.5 Government Filings........................................................ 27
8.6 Access to and Inspection of Premises, Facilities and Equipment............ 28
9. COVENANTS REGARDING THE CLOSING.................................................... 28
9.1 Covenants of Seller and Shareholder....................................... 28
9.2 Covenants of Purchaser.................................................... 28
9.3 Inventory Audit........................................................... 29
10. CONDITIONS TO OBLIGATIONS OF PURCHASER............................................. 29
10.1 Accuracy of Representations and Warranties and Fulfillment of Covenants... 29
10.2 No Governmental Actions................................................... 29
10.3 No Adverse Change......................................................... 30
10.4 Update of Contracts....................................................... 30
10.5 No Material Adverse Information........................................... 30
10.6 Notices and Consents...................................................... 30
10.7 Employment Agreement...................................................... 31
10.8 Lease Documents........................................................... 31
10.9 Other Documents........................................................... 31
10.10 West Mission Road Lease................................................... 31
10.11 Dealer License............................................................ 31
10.12 Inventory Audit........................................................... 31
10.13 Due Diligence............................................................. 31
10.14 Dealership Agreement...................................................... 31
10.15 Governmental Approvals.................................................... 31
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER...................................... 32
11.1 Accuracy of Representations and Warranties and Fulfillment of Covenants... 32
11.2 Governmental Approvals.................................................... 32
11.3 Employment Agreement...................................................... 32
11.4 Lease Documents........................................................... 32
11.5 Other Documents........................................................... 32
11.6 Inventory Audit........................................................... 32
11.7 Registration Rights Agreement............................................. 32
11.8 Norm Pressley............................................................. 32
11.9 Operating Agreements...................................................... 33
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS......................................... 33
12.1 Further Assurances........................................................ 33
12.2 Delivery of Funds and Other Assets Collected by Seller.................... 33
12.3 Change of Name of Seller.................................................. 33
12.4 Access to Files........................................................... 33
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
12.5 Exchange Act Filing; Cooperation.......................................... 34
12.6 Non-disclosure of Confidential Information................................ 34
12.7 Assignment of Contracts................................................... 35
12.8 Non-Compete, Non-Solicitation............................................. 35
12.9 Agreement Regarding GMC Excluded Assets................................... 37
12.10 Agreement Regarding Hino Excluded Assets.................................. 37
13. INDEMNITY BY SELLER AND SHAREHOLDER................................................ 38
13.1 Indemnity................................................................. 38
13.2 Environmental Liability of the Seller Indemnifying Parties................ 39
13.3 Notice of Claim........................................................... 40
13.4 Right of the Seller Indemnifying Parties to Participate in Defense........ 40
13.5 Payment................................................................... 41
13.6 Limit of Liability of Shareholder......................................... 41
13.7 Limitations on Indemnification............................................ 41
13.8 Insurance and Refunds..................................................... 41
13.9 Offset Provisions......................................................... 41
13.10 Time Limits for Indemnity Claims.......................................... 42
14. INDEMNITY BY PURCHASER............................................................. 42
14.1 Indemnity................................................................. 42
14.2 Environmental Liability of Purchaser...................................... 42
14.3 Notice of Claim........................................................... 43
14.4 Right of Purchaser to Participate in Defense.............................. 44
14.5 Payment................................................................... 44
14.6 Limitations on Indemnification............................................ 44
14.7 Insurance and Refunds..................................................... 44
15. REAL PROPERTY...................................................................... 44
16. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER................................... 45
16.1 New Employees of Purchaser................................................ 45
16.2 No Hiring Commitment...................................................... 45
16.3 Existing Employee Benefit Plans; Assumption of Vacation and Sick Leave
Obligations............................................................... 45
17. TERMINATION........................................................................ 46
17.1 Mutual Consent............................................................ 46
17.2 Failure of Conditions..................................................... 46
17.3 Failure to Close.......................................................... 46
18. NOTICES............................................................................ 46
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C> <C>
19. GENERAL PROVISIONS................................................................. 47
19.1 Governing Law; Interpretation; Section Headings........................... 47
19.2 Severability.............................................................. 48
19.3 Entire Agreement.......................................................... 48
19.4 Expenses.................................................................. 49
19.5 Further Actions........................................................... 49
19.6 Binding Effect............................................................ 49
19.7 Assignment................................................................ 49
19.8 Amendment; Waiver......................................................... 49
19.9 Gender; Numbers........................................................... 49
19.10 Counterparts.............................................................. 49
19.11 Telecopy Execution and Delivery........................................... 49
19.12 Press Releases............................................................ 50
19.13 Review of Counsel......................................................... 50
</TABLE>
vi
<PAGE> 8
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
this 27th day of September, 1999, by and among (i) Norm Pressley's Truck Center,
a California corporation ("Seller"), (ii) Scott Pressley, contemplated to be the
beneficial owner of a majority of the capital stock of Seller on the Closing
Date ("Shareholder"), and (iii) Rush Truck Centers of California, Inc., a
Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is the owner of all right, title and interest in and to the
assets described in Section 2.1 hereto (the "Assets"), with such Assets being
the assets currently used in the conduct of the heavy duty truck sales and
service business and various related businesses operated by Seller in the State
of California (collectively, the "Business");
WHEREAS, Seller desires to sell the Assets to Purchaser and Purchaser
desires to acquire the Assets from Seller, all pursuant to this Agreement as
hereinafter provided; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement, and to set forth certain additional
agreements related to the transactions contemplated hereby;
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the following terms
shall have the respective meanings set forth below:
1.1 Adjoining Property Assignment. "Adjoining Property Assignment" shall
have the meaning assigned thereto in Section 15(b).
1.2 Adjoining Property Landlord. "Adjoining Property Landlord" shall have
the meaning assigned thereto in Section 15(b).
1.3 Adjoining Property Lease. "Adjoining Property Lease" shall have the
meaning assigned thereto in Section 15(b).
1.4 Affiliate. "Affiliate" of any Person shall mean any Person Controlling,
Controlled by or under common Control with such Person.
<PAGE> 9
1.5 Article. "Article" shall mean an Article of this Agreement, unless
otherwise stated.
1.6 Assets. "Assets" shall have meaning assigned thereto in Section 2.1.
1.7 Balance Sheet Date. "Balance Sheet Date" shall have the meaning
assigned thereto in Section 4.3.
1.8 Best Knowledge. "Best Knowledge" shall mean both what a Person knew as
well as what the Person should have known had the person exercised reasonable
diligence. When used with respect to a Person other than a natural person, the
term "Best Knowledge" shall include matters that are known to the directors,
officers and employees of the Person.
1.9 Bonus Payment. "Bonus Payment" shall have the meaning assigned thereto
in Section 3.1.
1.10 Closing. "Closing" shall have the meaning assigned thereto in Section
2.4.
1.11 Closing Date. "Closing Date" shall have the meaning assigned thereto
in Section 2.4.
1.12 Closing Price. "Closing Price" shall mean the average weighted closing
price of the Common Stock on The Nasdaq National Market during the ten (10)
consecutive trading day period ending at the close of the third trading day
preceding the Closing Date.
1.13 Commission. "Commission" shall mean the United States Securities and
Exchange Commission.
1.14 Common Stock. "Common Stock" shall mean the Common Stock of Rush, $.01
par value per share.
1.15 Contracts. "Contracts" shall have the meaning assigned thereto in
Section 4.8.
1.16 Control. "Control" and all derivations thereof shall mean the ability
to either (i) vote (or direct the vote of) 50% or more of the voting interests
in any Person or (ii) direct the affairs of another, whether through voting
power, contract or otherwise.
1.17 Dealer Cost. "Dealer Cost" shall mean manufacturer's invoice price to
Seller, reduced by the amount of all manufacturer's rebates, allowances and
other price reductions paid or credited to Seller on such vehicle (other than
the manufacturer's reimbursement for dealer preparation and delivery expenses
and any floor plan interest
2
<PAGE> 10
credits for such vehicle), plus Seller's actual cost and expense of installation
of dealer-installed options on such vehicle and the pre- delivery inspection
costs incurred by Seller in the normal course of business that are not
reimbursed by the manufacturer; provided such inspection costs for each motor
vehicle shall be limited to the lesser of the actual cost of such pre-delivery
inspection to the new or used truck department of Seller and $500 per Class 8
truck and $250 per Class 7 truck included in the Assets.
1.18 Deposits. "Deposits" shall have the meaning assigned thereto in
Section 4.20.
1.19 Disclosure Schedule. "Disclosure Schedule" shall have the meaning
assigned thereto in Article 4.
1.20 El Centro Landlord. "El Centro Landlord" shall have the meaning
assigned thereto in Section 15(d).
1.21 El Centro Lease. "El Centro Lease" shall have the meaning assigned
thereto in Section 15(d).
1.22 Employment Agreement. "Employment Agreement" shall have the meaning
assigned thereto in Section 10.7.
1.23 ERISA. "ERISA" shall have the meaning assigned thereto in Section 4.7.
1.24 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.25 Excluded Assets. "Excluded Assets" shall have the meaning assigned
thereto in Section 2.1.
1.26 Fair Market Value Warrant. "Fair Market Value Warrant" shall have the
meaning assigned thereto in Section 3.1.
1.27 GMC. "GMC" shall mean GMC Truck Division and any successor thereto.
1.28 GMC Excluded Assets. "GMC Excluded Assets" shall have the meaning
assigned thereto in Section 2.1.
1.29 GMC Operating Agreement. "GMC Operating Agreement" shall have the
meaning assigned thereto in Section 11.9.
1.30 Governmental Authority. "Governmental Authority" shall mean any and
all foreign, federal, state or local governments, governmental institutions,
public
3
<PAGE> 11
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
panels, and any divisions or instrumentalities thereof, whether permanent or ad
hoc and whether now or hereafter constituted or existing.
1.31 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.
1.32 Hino. "Hino" shall mean Hino Diesel Trucks (USA), Inc. and any
successor thereto.
1.33 Hino Operating Agreement. "Hino Operating Agreement" shall have the
meaning assigned thereto in Section 11.9.
1.34 HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.35 Lease Documents. "Lease Documents" shall mean collectively the San
Diego Lease, the Adjoining Property Assignment, the PACLEASE Lease and the El
Centro Lease.
1.36 New Contracts. "New Contracts" shall have the meaning assigned thereto
in Section 10.4.
1.37 PACLEASE Lease. "PACLEASE Lease" shall have the meaning assigned
thereto in Section 15(c).
1.38 Person. "Person" shall mean any natural person, any Governmental
Authority and any entity the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not limited
to, corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or otherwise.
1.39 Purchase Price. "Purchase Price" shall have the meaning assigned
thereto in Section 3.1.
1.40 Purchaser Claims. "Purchaser Claims" shall have the meaning assigned
thereto in Section 13.3.
4
<PAGE> 12
1.41 Purchaser Damages. "Purchaser Damages" shall have the meaning assigned
thereto in Section 13.1.
1.42 Purchaser Environmental Liabilities. "Purchaser Environmental
Liabilities" shall have the meaning assigned thereto in Section 13.2.
1.43 Purchaser Indemnified Parties. "Purchaser Indemnified Parties" shall
have the meaning assigned thereto in Section 13.1.
1.44 Reference Balance Sheet. "Reference Balance Sheet" shall have the
meaning assigned thereto in Section 4.3.
1.45 Registration Rights Agreement. "Registration Rights Agreement" shall
have the meaning assigned thereto in Section 11.7.
1.46 Rule 144. "Rule 144" shall mean Rule 144, as amended, under the
Securities Act.
1.47 Rush. "Rush" shall mean Rush Enterprises, Inc., a Texas corporation
and the parent corporation of Purchaser.
1.48 San Diego Lease. "San Diego Lease" shall have the meaning assigned
thereto in Section 15(a).
1.49 Schedule. "Schedule" shall mean the Schedules to this Agreement,
unless otherwise stated, and shall include the Disclosure Schedule. The
Schedules to this Agreement may be attached to this Agreement or may be set
forth in a separate document denoted as the Schedules to this Agreement, or
both.
1.50 SEC. "SEC" shall mean the United States Securities and Exchange
Commission and any successor thereto.
1.51 SEC Documents. "SEC Documents" shall have the meaning assigned thereto
in Section 5.3.
1.52 Section. "Section" shall mean a Section of this Agreement, unless
otherwise stated.
1.53 Securities. "Securities" shall have the meaning assigned thereto in
Section 4.17.
1.54 Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended
5
<PAGE> 13
1.55 Securities Laws. "Securities Laws" shall have the meaning assigned
thereto in Section 4.18.
1.56 Seller Certificate. "Seller Certificate" shall mean the certificate to
be delivered at Closing to Purchaser pursuant to Article 11.
1.57 Seller Claims. "Seller Claims" shall have the meaning assigned thereto
in Section 14.2.
1.58 Seller Damages. "Seller Damages" shall have the meaning assigned
thereto in Section 14.2.
1.59 Seller Environmental Liabilities. "Seller Environmental Liabilities"
shall have the meaning assigned thereto in Section 14.2.
1.60 Seller Indemnified Parties. "Seller Indemnified Parties" shall have
the meaning assigned thereto in Section 13.1.
1.61 Seller Indemnifying Parties. "Seller Indemnifying Parties" and "Seller
Indemnifying Party" shall have the meanings assigned thereto in Section 13.1.
1.62 Subsidiary. "Subsidiary" shall mean, with respect to any Person (the
"parent"), (a) any corporation, association, joint venture, partnership or other
business entity of which securities or other ownership interests representing
more than 50% of the ordinary voting power or beneficial interest are, at the
time as of which any determination is being made, owned or controlled by the
parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent and (b) any joint venture or partnership of
which the parent or any Subsidiary of the parent is a general partner or has
responsibility for its management.
1.63 Taxes. "Tax" and "Taxes" shall mean any and all income, excise,
franchise or other taxes and all other charges or fees imposed or collected by
any Governmental Authority or pursuant to any Governmental Requirement, and
shall also include any and all penalties, interest, deficiencies, assessments
and other charges with respect thereto.
1.64 Territory. "Territory" shall have the meaning assigned thereto in
Section 3.1.
1.65 Underwater Warrant. "Underwater Warrant" shall have the meaning
assigned thereto in Section 3.1(a).
6
<PAGE> 14
1.66 Warrant Stock. "Warrant Stock" shall mean the number of shares of
Common Stock equal to $674,000 divided by the Closing Price.
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE.
2.1 Assets to be Purchased. The assets to be purchased from Seller are the
following assets held by Seller as of the Closing for use in connection with all
or any part of the Business (collectively, the "Assets"):
(a) subject to the provisions relating to Excluded Assets set forth in
this Section 2.1, all new 1998, 1999 and 2000 Peterbilt, GMC and Hino motor
vehicles inventory,
(b) subject to the provisions relating to Excluded Assets set forth in
this Section 2.1, all new, current and returnable parts and accessories
inventory and all chassis kits,
(c) all miscellaneous inventories, including gas, diesel fuel, oil,
grease, paint and body shop materials,
(d) all work in process and sublet repairs on vehicles in Seller's
service departments,
(e) all of Seller's leasehold improvements, including all signs,
furniture, fixtures and office equipment, other than the leasehold
improvements set forth on Schedule 2.1,
(f) all shop equipment and special tools, and all parts and
accessories equipment,
(g) all company vehicles, excluding the vehicles set forth on Schedule
2.1,
(h) all promotional, advertising and training materials,
(i) all sales files and customer lists, and all warranty and service
and customer service and repair files,
(j) to the extent transferable, all intangible assets of Seller to do
business in the State of California as a motor vehicle dealer, including
any permits or licenses issued by any department or agency of the State of
California for Seller's dealerships,
(k) subject to agreement on price pursuant to Section 3.1 below, all
prepaid expenses and deposits,
(l) subject to agreement on price pursuant to Section 3.1 below, all
used vehicles,
(m) subject to agreement on price pursuant to Section 3.1 below, all
new obsolete parts and accessories and all used parts and accessories, and
7
<PAGE> 15
(n) subject to the provisions relating to Excluded Assets set forth in
this Section 2.1, all customer deposits and agreements to sell Peterbilt,
GMC or Hino vehicles ordered but not delivered to the customer at the time
of Closing.
All other assets of Seller not described in this Section 2.1, including,
without limitation, cash, bank accounts, and the assets described on Schedule
2.1 (collectively, the "Excluded Assets"), shall not be sold by Seller to
Purchaser. Additionally, notwithstanding anything herein to the contrary, in the
event Purchaser does not enter into a dealer sales and service agreement with
Hino and GMC on or before the Closing Date, the Hino and/or GMC, as applicable,
vehicles, parts and accessories inventory and chassis kits and the customer
deposits and agreements to sell Hino and/or GMC vehicles, as applicable, will
not be included in the Assets, but will be included in the Excluded Assets (such
GMC Excluded Assets, other than the customer deposits and agreements to sell GMC
vehicles, are hereinafter referred to as the "GMC Excluded Assets", and such
Hino Excluded Assets, other than customer deposits and agreements to sell Hino
vehicles, are hereinafter referred to as the "Hino Excluded Assets").
2.2 Purchase and Sale. Subject to the terms and conditions herein
contained, Seller agrees to sell, assign, transfer and deliver the Assets to
Purchaser at the Closing (as hereinafter defined), free and clear of any liens
or encumbrances of any nature whatsoever (except for liens, encumbrances or
obligations, if any, expressly assumed by Purchaser hereunder). Subject to the
terms and conditions herein contained, Purchaser agrees to purchase from Seller
the Assets in consideration for the Purchase Price (as hereinafter defined)
payable as set forth in Section 3.
2.3 Delivery of Assets and Transfer Documents. At the Closing, Seller and
Shareholder shall take all steps necessary to put Purchaser in possession of the
Assets, free and clear of any liens or encumbrances of any nature whatsoever
(except for liens, encumbrances or obligations, if any, expressly assumed by
Purchaser hereunder), and shall deliver to Purchaser (i) a duly executed General
Conveyance, Assignment and Assumption Agreement covering the Assets and the
Assumed Obligations, in substantially the form attached hereto as Exhibit 2.3,
(ii) duly executed title and transfer documents covering any assets for which
there exists a certificate of title, and (iii) such other duly executed transfer
and release documents as Purchaser shall reasonably request to evidence the
transfer of the Assets to Purchaser free and clear of any liens or encumbrances
of any nature whatsoever (except for liens, encumbrances or obligations, if any,
expressly assumed by Purchaser hereunder).
2.4 Closing; Closing Date. Subject to the terms and conditions herein
contained, the consummation of the transactions referenced above shall take
place (the "Closing") on or before December 1, 1999, at 10:00 a.m., local time,
at the offices of Seller's counsel in Phoenix, Arizona, or at such other time,
date and place as
8
<PAGE> 16
Purchaser and Seller shall in writing designate. The date of the Closing is
referred to herein as the "Closing Date".
3. PURCHASE PRICE.
3.1 Price and Payment. Subject to adjustment as provided in Sections 3.3
and 3.4 with respect to damaged assets, prorations, deposits and certain other
items, the aggregate consideration (the "Purchase Price") to be paid by
Purchaser for the Assets is as follows:
(a) $2,926,000 to be paid in cash by wire transfer at Closing, plus
(b) an amount to be paid in cash at Closing equal to Dealer Cost for
each vehicle described in Section 2.1(a), plus
(c) an amount to be paid in cash at Closing equal to the replacement
cost of the items described in Sections 2.1(b) and (c), plus
(d) an amount to be paid in cash at Closing equal to Seller's actual
cost of the work in process and sublet repairs described in Section 2.1(d),
plus
(e) an amount to be paid in cash at Closing equal to the depreciated
book value (determined in accordance with generally accepted accounting
principles, consistently applied) at Closing of the items described in
Sections 2.1(e), (f) and (g), plus
(f) an amount to be agreed upon by Seller and Purchaser to be paid in
cash at Closing for the items described in Sections 2.1(k), (l) and (m)
(provided that if Seller and Purchaser cannot agree on the amount to be
paid for any Asset described in these Sections, such Asset shall be an
Excluded Asset), plus
(g) one of the following, at the election of Shareholder, to be issued
at Closing: (a) a warrant (the "Fair Market Value Warrant") to purchase the
Warrant Stock at an exercise price equal to the Closing Price, (b) a
warrant (the "Underwater Warrant") to purchase the Warrant Stock at an
exercise price equal to $5.00 greater than the Closing Price plus the
agreement of Purchaser to pay Shareholder a consulting fee of $3,100 per
month, or (c) the agreement of Purchaser to pay Shareholder a consulting
fee of $3,900 per month. The Fair Market Value Warrant and the Underwater
Warrant shall expire on the date the Bonus Payment is paid. The consulting
fee shall be payable monthly on the last day of each month until the date
the Bonus Payment is paid. Shareholder must make the election on or before
Closing. The warrant shall be issued and the consulting fee shall be paid,
upon such other terms and conditions as the parties thereto may agree.
9
<PAGE> 17
When and if Purchaser and/or its Affiliates sell 400 or more new Class 7 or
8 Peterbilt trucks in the Territory or outside the Territory through sales
personnel employed in the Territory (including sales to any affiliated leasing
company or division in the Territory), Purchaser shall pay Seller at the end of
the calendar month in which such performance criteria is satisfied, but no
earlier than at the end of the 24 month period after the Closing Date, an amount
equal to $674,000 (the "Bonus Payment"). The Bonus Payment, if paid, shall be
paid in cash by wire transfer and shall be additional consideration for the
Assets and shall be included in the Purchase Price. The "Territory" shall be
defined as the territory under Seller's dealership agreements with Peterbilt
Motors Company, a division of PACCAR, Inc. ("PACCAR").
Within 15 calendar days after the end of each six month period, beginning
six months after the Closing Date and ending on the date the Bonus Payment is
paid, Purchaser shall provide Seller a written report detailing the number of
Class 7 and 8 Peterbilt trucks sold in the Territory or through sales personnel
employed in the Territory during such six-month period, together with all
supporting documentation reasonably requested by Seller, at Purchaser's cost and
expense. Purchaser shall, and shall cause its Affiliates, employees, agents,
representatives, officers and directors to use their best efforts to sell Class
7 and 8 Peterbilt trucks in the Territory prior to the date the Bonus Payment is
paid.
All cash payments at Closing shall be subject to the adjustment provisions
of Sections 3.3 and 3.4. Purchaser shall not pay any cash for the conveyance of
the items identified in Sections 2.1(h), (i), (j), and (m).
3.2 Assumed Obligations. At the Closing, Purchaser shall assume and agree
to timely discharge (a) the obligations of Seller under all contracts and
agreements transferred by Seller to Purchaser under this Agreement that are (i)
listed and described on Schedule 4.8 or on the updated list of contracts
required by Section 10.4 and (ii) accepted in writing by Purchaser pursuant to
the provisions of Section 4.8, Article 7 or Section 10.4, and (b) certain
vacation and sick leave obligations of Seller pursuant to Section 16.3; provided
that Purchaser specifically does not assume any liabilities of Seller under any
contracts or agreements with respect to any breaches of such contracts or
agreements occurring on or before the Closing Date or any damages to third
parties resulting from acts, events or omissions occurring on or before the
Closing Date. Except as specifically set forth in this Section 3.2, Purchaser
shall not assume, and shall not be treated as having assumed, any liability or
obligation of Seller of any nature whatsoever
3.3 Damage to Assets. If, on or before the Closing Date, any of the Assets
are damaged or destroyed, Seller will immediately notify Purchaser in writing of
such damage or destruction. In the event of any such damage or destruction,
Purchaser shall (i) remove any or all of the damaged or destroyed asset or
assets it does not desire to purchase from the Assets to be purchased hereunder
and reduce the cash portion of the Purchase Price by an amount equal to the
portion of the Purchase Price
10
<PAGE> 18
attributable to the damaged or destroyed asset or assets so removed and (ii)
complete the purchase of the remainder of the Assets and reduce the cash portion
of the Purchase Price by the loss in fair market value of any damaged or
destroyed Assets that are purchased by Purchaser.
3.4 Adjustment of Purchase Price. The Purchase Price shall be adjusted on
the Closing Date (i) to reduce the Purchase Price by the amount allocated to any
damaged or destroyed Assets as contemplated by Section 3.3; (ii) to account for
a proration of property taxes on the Assets, lease payments, utilities and other
items commonly prorated; (iii) to account for any Deposits held by Seller on the
Closing Date; and (iv) to reduce the Purchase Price for the value of any
vacation and sick time obligations of Seller assumed by Purchaser pursuant to
Section 16.3. Three (3) days prior to the Closing Date, Seller will provide
Purchaser with a statement of adjustments showing all proposed adjustments to
the Purchase Price, such statement of adjustments having all reasonable back up
documentation for such suggested adjustments. Purchaser and Seller will work to
finalize all required adjustments prior to the Closing Date.
3.5 Sales and Use Tax. Seller shall be responsible for payment to the
appropriate Governmental Authority of all sales and use tax in connection with
the consummation of the transactions contemplated by this Agreement.
3.6 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets to the extent relevant for income tax purposes in accordance
with Section 1060 of the Internal Revenue Code of 1986, as amended, and Schedule
3.6 attached hereto. The parties agree to report the transactions contemplated
by this Agreement for tax purposes in accordance with the allocation shown on
Schedule 3.6, and each party will indemnify and hold each other party harmless
from any loss, cost, damage, additional tax or expense (including attorneys'
fees) arising from any failure by the indemnifying party to so report such
transactions.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER. Seller and
Shareholder hereby jointly and severally represent and warrant to Purchaser 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
disclosure schedule delivered by Seller and Shareholder to Purchaser on the date
hereof and initialed by Seller and Shareholder (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged in paragraphs corresponding to the numbered
paragraphs contained in this Article 4, and any disclosure on any part of the
Disclosure Schedule shall be deemed a disclosure on all other parts of the
Disclosure Schedule provided the required disclosure is fully and accurately
disclosed.
11
<PAGE> 19
4.1 Incorporation. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of its incorporation, and is
duly authorized, qualified and licensed under all applicable Governmental
Requirements to carry on its business in the places and in the manner as now
conducted in the State of California. Seller is not qualified as a foreign
corporation in any jurisdiction, and Seller is not required to qualify or
otherwise be authorized to do business as a foreign corporation in any
jurisdiction in order to carry on any of its businesses as now conducted or to
own, lease or operate the Assets.
4.2 Share Capital. Part 4.2 of the Disclosure Schedule is a list of all
Persons owning capital stock of Seller with an indication thereon of the class
of capital stock and the number of shares of each class owned by each such
Person.
4.3 Financial Statements. Seller has delivered to Purchaser copies of the
following financial statements for Seller, all of which financial statements are
included in Schedule 4.3 hereto:
(a) Unaudited Balance Sheet (the "Reference Balance Sheet") as of July
31, 1999, (the "Balance Sheet Date") and Unaudited Income Statement for the
nine-month period ended on the Balance Sheet Date; and
(b) Audited Balance Sheets, Income Statements and Statements of
Changes in Financial Position for Seller's two (2) most recent fiscal
years.
All financial statements supplied to Purchaser by Seller, whether or not
included in Schedule 4.3 hereto, are and will be true and accurate in all
material respects, have been and will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated, and will present fairly in all material respects the
financial condition of Seller as of the dates and for the periods indicated
thereon, except as otherwise indicated in the notes thereto. The Reference
Balance Sheet reflects, as of the Balance Sheet Date, all liabilities, debts and
obligations of any nature of Seller, whether accrued, absolute, contingent or
otherwise, and whether due, or to become due, including, but not limited to,
liabilities, debts or obligations on account of Taxes to the extent such items
are required to be reflected on such balance sheet under generally acceptable
accounting principles consistently applied.
4.4 Events Since the Balance Sheet Date. Since the Balance Sheet Date,
there has not been:
(a) any change in the condition (financial or otherwise) or in the
properties, assets, liabilities, business or prospects of all or any part
of the Business, except normal and usual changes in the ordinary course of
business, none of which has been adverse and all of which in the aggregate
have not been adverse;
12
<PAGE> 20
(b) any labor trouble, strike or any other occurrence, event or
condition affecting the employees of Seller that adversely affects the
condition (financial or otherwise) of the Assets or all or any part of the
Business;
(c) any breach or default by Seller or, to the Best Knowledge of
Seller and Shareholder, by any other party, under any agreement or
obligation included in the Assets or by which any of the Assets are bound;
(d) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Assets or the Business;
(e) to the Best Knowledge of Seller and Shareholder, any legislative
or regulatory change adversely affecting the Assets or the Business;
(f) any change in the types, nature, composition or quality of the
services of the Business, any adverse change in the contributions of any of
the service lines of the Business to the revenues or net income of such
Business, or any adverse change in the sales, revenue or net income of the
Business;
(g) any transaction related to or affecting the Assets or the Business
other than transactions in the ordinary course of business of Seller; or
(h) any other occurrence, event or condition that has adversely
affected (or can reasonably be expected to adversely affect) the Assets or
the Business.
4.5 Customer List. Part 4.5 of the Disclosure Schedule sets forth a true,
correct and complete list of all customers of the Business to which Seller has
sold or provided (i) new or used trucks during the period from January 1, 1998
through July 31, 1999, and/or (ii) parts and service during the one year period
immediately preceding the date hereof. Immediately prior to the Closing, Seller
shall deliver to Purchaser a true, correct and complete update of this list as
of the Closing Date.
4.6 Taxes and Governmental Returns. As of the date hereof, all Tax returns,
information returns and governmental reports of every nature required by any
Governmental Authority or Governmental Requirement to be filed by Seller or
which include or should include Seller, including, but not limited to, those
relating to Taxes of any nature to which Seller or any of its business is
subject ("Governmental Returns"), have been filed for all periods ending on or
before the date hereof (except for any returns not yet due), and all Taxes shown
to be due and payable on such Governmental Returns or on any assessments related
to such Governmental Returns have been paid. All such Governmental Returns and
reports 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 Tax
13
<PAGE> 21
liabilities of Seller for the periods covered by such Governmental Returns.
Seller has no unpaid liability for any Taxes of any nature whatsoever for any
period prior to the date hereof. To the Best Knowledge of Seller and
Shareholder, none of the Governmental Returns of Seller or that include Seller
have been audited, and none are now under audit, by any Governmental Authority.
There are no agreements, waivers or other arrangements providing for an
extension of time with respect to the assessment of any Taxes of any nature
against Seller or with respect to any Governmental Return filed by Seller or
that include Seller, or any suits or other actions, proceedings, investigations
or claims now pending or threatened against Seller with respect to any Taxes or
any matters under discussion with any Governmental Authority relating to any
Taxes, or any claims for additional Taxes asserted by any Governmental
Authority.
4.7 Employee Matters. Part 4.7 of the Disclosure Schedule sets forth a true
and complete list of the names of and current annual compensation paid by Seller
to each employee of Seller utilized in connection with the operation of the
Business. With respect to each employee hired after November 6, 1986, a copy of
the Form I-9 completed pursuant to the Immigration Reform and Control Act of
1986, and the rules and regulations promulgated thereunder, has been attached to
Part 4.7 of the Disclosure Schedule. Seller does not have any employee benefit
plans (including, but not limited to, pension plans and health or welfare
plans), arrangements or understandings, whether formal or informal. Purchaser
will have no liability with respect to any such plans as a result of the
transactions contemplated by this Agreement. Seller does not now contribute and
has not ever contributed to a "multiemployer plan" as defined in section
4001(a)(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Seller has complied with all applicable provisions of ERISA and all
rules and regulations promulgated thereunder and neither Seller nor any trustee,
administrator, fiduciary, agent or employee thereof has at anytime been involved
in a transaction that would constitute a "prohibited transaction" within the
meaning of Section 406 of ERISA. Seller is not a party to any collective
bargaining or other union agreements. Seller has not, within the last five
years, had or been threatened with any union activities, work stoppages or other
labor trouble with respect to its employees which had or might have had a
material adverse effect on any of the Business. To the Best Knowledge of Seller
and Shareholder, no union activities, work stoppages or other labor trouble with
respect to the employees of any of the customers or suppliers of the Business
are pending or threatened which might have an adverse effect on the Business.
Other than wage increases in the ordinary course of business, since the Balance
Sheet Date, Seller has not made any commitment or agreement to increase the
wages or modify the conditions or terms of employment of any of the employees of
Seller used in connection with the Business, and between the date of this
Agreement and the Closing Date, Seller will not make any agreement to increase
the wages or modify the conditions or terms of
14
<PAGE> 22
employment of any of the employees of Seller used in connection with the
Business without the prior written approval of Purchaser.
4.8 Contracts and Agreements. Part 4.8 of the Disclosure Schedule sets
forth a true and complete list of and briefly describes (including termination
date) all of the following contracts, agreements, leases, licenses, plans,
arrangements or commitments, written or oral, that relate to the Assets or the
Business (including all amendments, supplements and modifications thereto):
(a) all contracts, agreements or commitments in respect of the sale of
products or services or the purchase of raw materials, supplies or other
products or utilities;
(b) all offers, tenders or the like outstanding and capable of being
converted into an obligation of Seller by the passage of time or by an
acceptance or other act of some other person or entity or both;
(c) all sales, agency or distributorship agreements or franchises or
legally enforceable commitments or obligations with respect thereto;
(d) all collective bargaining agreements, union agreements, employment
agreements, consulting agreements or agreements providing for the services
of an independent contractor;
(e) all profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance
or other employee benefit plans, agreements, arrangements or commitments of
any nature whatsoever, whether or not legally binding, and all agreements
with any present or former officer, director or shareholder of Seller;
(f) all loan or credit agreements, indentures, guarantees (other than
endorsements made for collection), mortgages, pledges, conditional sales or
other title retention agreements, and all equipment financing obligations,
lease and lease-purchase agreements relating to or affecting the Assets or
the Business;
(g) all leases related to the Assets or the Business;
(h) all performance bonds, bid bonds, surety bonds and the like, all
contracts and bids covered by such bonds, and all letters of credit and
guaranties;
(i) all consent decrees and other judgments, decrees or orders,
settlement agreements and agreements relating to competitive activities,
requiring or prohibiting any future action;
(j) all accounts, notes and other receivables, and all security
therefor, and all documents and agreements related thereto;
15
<PAGE> 23
(k) all contracts or agreements of any nature with Shareholder or any
Affiliate of Shareholder; and
(l) all contracts, commitments and agreements entered into outside the
ordinary course of the operation of the Business.
All of such contracts, agreements, leases, licenses, plans, arrangements, and
commitments and all other such items included in the Assets but not specifically
described above (collectively, the "Contracts") are valid, binding and in full
force and effect in accordance with their terms and conditions and there is no
existing default thereunder or breach thereof by Seller, or, to the Best
Knowledge of Seller and Shareholder, by any other party to the Contracts, or any
conditions which, with the passage of time or the giving of notice or both,
might constitute such a default by Seller, or, to the Best Knowledge of Seller
and Shareholder, by any other party to the Contracts, and the Contracts will not
be breached by or give any other party a right of termination as a result of the
transactions contemplated by this Agreement. To the Best Knowledge of Seller and
Shareholder there is no reason why any of the Contracts (i) will result in a
loss to Purchaser on completion by performance or (ii) cannot readily be
fulfilled or performed by Purchaser with the Assets on time without undue or
unusual expenditure of money or effort. Copies of all of the documents (or in
the case of oral commitments, descriptions of the material terms thereof)
relevant to the Contracts listed in Part 4.8 of the Disclosure Schedule have
been delivered by Seller to Purchaser, and such copies and/or descriptions are
true, complete and accurate and include all amendments, supplements or
modifications thereto. After reviewing the Contracts, Purchaser may, at its sole
option, choose not to assume one or more of the Contracts, and, within 30 days
of receipt by Purchaser of all information reasonably requested by Purchaser
with respect to the Contracts, Purchaser shall notify Seller of which Contracts,
if any, Purchaser does not intend to assume hereunder. Except for Contracts, if
any, that Purchaser notifies Seller that it will not assume, all of the
Contracts are and shall be included in the Assets. All of the material Contracts
may be assigned to Purchaser without the approval or consent of any Person, or,
if such approval or consent is required, it will be obtained by Seller and
delivered to Purchaser at or prior to the Closing.
4.9 Effect of Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not (i) result in
any breach of any of the terms or conditions of, or constitute a default under,
the Articles of Incorporation or other charter documents or bylaws of Seller, or
any commitment, mortgage, note, bond, debenture, deed of trust, contract,
agreement, license or other instrument or obligation to which Seller is now a
party or by which Seller or any of its properties or assets may be bound or
affected; (ii) result in any violation of any Governmental Requirement
applicable to Seller, the Assets or the Business; (iii) cause Purchaser to lose
the benefit of any right or privilege included in the Assets; (iv) relieve any
Person of any obligation (whether contractual or otherwise) or enable any Person
to terminate any such obligation or any right or benefit enjoyed by Seller or to
exercise any right under any agreement in respect of the Assets or the Business;
or (v) require notice to or the consent, authorization, approval or order of any
Person
16
<PAGE> 24
(except as may be contemplated by the last sentence of Section 4.8). To the Best
Knowledge of Seller and Shareholder, the business relationships of clients,
customers and suppliers of the Business will not be adversely affected by the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
4.10 Properties, Assets and Leasehold Estates. Seller owns or has the right
to use (pursuant to a valid lease or license disclosed on Part 4.8 of the
Disclosure Schedule) all operating assets and properties necessary for Seller to
conduct the Business in the manner presently conducted by Seller, and all of
such operating assets and properties (or, in the case of leased assets, the
leases covering such assets) are included in the Assets. Seller has good and
marketable title to all the Assets, free and clear of all mortgages, liens,
pledges, conditional sales agreements, charges, easements, covenants,
assessments, options, restrictions and encumbrances of any nature whatsoever.
The plants, structures, equipment, vehicles and other tangible properties
included in the Assets and the tangible property leased by Seller under leases
included in the Assets are in good operating condition and repair, normal wear
and tear excepted, and are capable of being used for their intended purpose in
the Business as now conducted. The Assets include all existing warranties and
service contracts with respect to any of the Assets to the extent the same are
capable of being assigned to Purchaser. During the past two years, there has not
been any significant interruption of the Business due to the breakdown or
inadequate maintenance of any of the Assets. All plants, structures, equipment,
vehicles and other tangible properties included in the Assets, and the present
use of all such items, conform to all applicable Governmental Requirements, and
no notice of any violation of any such Governmental Requirements relating to
such assets or their use has been received by Seller. The Assets include all
easements, rights of ingress and egress, and utilities and services necessary
for the conduct of the Business.
4.11 Intangible Property. The operation of the Business as now conducted by
Seller does not require the use of or consist of any rights under any
trademarks, trade names, brand names, service marks or copyrights other than
"Peterbilt", "GMC", "Hino", "Bendix", "CAT", "Cummins", "Detroit Diesel",
"Thermo-King", "Caterpillar", "Norm Pressley's Truck Center", "Pressley
Peterbilt" and "Custom Truck Leasing".
4.12 Suits, Actions and Claims. There are no suits, actions, claims,
inquiries or investigations by any Person, or any legal, administrative or
arbitration proceedings in which Seller is engaged or which are pending or, to
the Best Knowledge of Seller and Shareholder, threatened against or affecting
Seller or any of its properties, assets or business, or to which Seller is or
might become a party, or which question the validity or legality of the
transactions contemplated hereby, no basis or grounds for any such suit, action,
claim, inquiry, investigation or proceeding exists, and there is
17
<PAGE> 25
no outstanding order, writ, injunction or decree of any Governmental Authority
against or affecting Seller or any of its properties, assets or business.
Without limiting the foregoing, neither Seller nor Shareholder has any Best
Knowledge of any state of facts or the occurrence of any event forming the basis
of any present or potential claim against Seller.
4.13 Licenses and Permits; Compliance With Governmental Requirements. Part
4.13 of the Disclosure Schedule sets forth a true and complete list of all
licenses and permits necessary for the conduct of the Business. Seller has all
such licenses and permits validly issued to it and in its name, and all such
licenses and permits are in full force and effect. True and correct copies of
all such licenses and permits are attached to Part 4.13 of the Disclosure
Schedule. No violations are or have been recorded in respect of such licenses or
permits and no proceeding is pending or, to the Best Knowledge of Seller and
Shareholder, threatened seeking the revocation or limitation of any of such
licenses or permits. All such licenses and permits that are subject to transfer
are included in the Assets, and all such licenses and permits that are not
subject to transfer are conspicuously marked as such on Part 4.13 of the
Disclosure Schedule. Seller has complied in all material respects with all
Governmental Requirements applicable to its business, and all Governmental
Requirements with respect to the distribution and sale of products and services
by it.
4.14 Authorization. Seller and Shareholder have full legal right, power,
and authority to enter into and deliver this Agreement and to consummate the
transactions set forth herein and to perform all the terms and conditions hereof
to be performed by them. The execution and delivery of this Agreement by Seller
and Shareholder and the performance by each of them of the transactions
contemplated herein have been duly and validly authorized by all requisite
corporate action of Seller and by Shareholder, and this Agreement has been duly
and validly executed and delivered by Seller and Shareholder and is the legal,
valid and binding obligation of each of them, enforceable against each of them
in accordance with its terms, except as limited by applicable bankruptcy,
moratorium, insolvency or other similar laws affecting generally the rights of
creditors or by principles of equity.
4.15 Records. The books, records and minutes kept by Seller with respect to
the Assets and the Business, including, but not limited to, all customer files,
service agreements, quotations, correspondence, route sheets and historic
revenue data of Seller, contain records of all matters required to be included
therein by any Governmental Requirement or by generally accepted accounting
principles, and such books, records and minutes are true, accurate and complete
in all material respects and (except for corporate minute books and stock
records) are included in the Assets.
4.16 Environmental Protection Laws.
18
<PAGE> 26
(a) For purposes of this Section 4.16, unless the context otherwise
specifies or requires, the following terms shall have the meaning herein
defined:
(i) "Waste Materials" shall mean
(A) any "hazardous waste" as defined by the Resource Conservation and
Recovery Act of 1976, 42. U.S.C. Sections 6901 et seq., as amended from
time to time, and regulations promulgated thereunder;
(B) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Sections 9601, et seq., as amended from time to time;
(C) asbestos;
(D) polychlorinated biphenyls;
(E) underground storage tanks, whether empty, filled or partially
filled with any substance;
(F) any other substance the presence of which is prohibited by any
Governmental Requirement; and
(G) any other substance which by any Governmental Requirement requires
special handling or notification of any federal, state or local
governmental entity in its collection, storage, treatment, recycling, or
disposal.
(ii) "Waste Materials Contamination" shall mean the presence of Waste
Materials on, in or under any property whatsoever which is associated with
or is in any way related to the Assets or the Business, including the
improvements, facilities, soil, ground, water or air.
(b) All business conducted by Seller, including but not limited to the
Business, has been and is being operated, and the assets of Seller,
including but not limited to the Assets, have been and are being used and
were obtained, in all material respects in compliance with all Governmental
Requirements.
(c) Seller is not now, and has not ever been, in violation of any
Governmental Requirement. The Assets, the Business and all of the
operations of Seller are in full compliance with all Governmental
Requirements relating to Waste Materials, and no judicial or administrative
actions, including non-compliance orders or demand letters, are pending
that relate to such Governmental Requirements. Without in any way limiting
the foregoing, Seller and Shareholder hereby jointly and severally
specifically represent and warrant that to the Best Knowledge of Seller and
Shareholder:
19
<PAGE> 27
(i) Seller has complied with all applicable Governmental Requirements
relating to pollution and environmental control;
(ii) Seller is not in violation of any of the permits described in or
required to be described on Part 4.13 of the Disclosure Schedule or any
Governmental Requirement regulating emissions, discharges or releases
(including solids, liquids and gases) into the environment or the proper
transportation, handling, storage, treatment or disposal of materials;
(iii) Seller has received all permits and approvals with respect to
emissions, discharges or releases (including solids, liquids and gases)
into the environment and the proper transportation, handling, storage,
treatment and disposal of materials required for the operation of the
businesses of Seller as presently conducted;
(iv) Seller has kept all records and made all filings required by
applicable Governmental Requirements with respect to emissions, discharges
or releases (including solids, liquids and gases) into the environment and
the proper transportation, handling, storage, treatment and disposal of
materials;
(v) All hazardous waste, hazardous materials and hazardous substances
attributable to the Assets, the Business or the operations of Seller on, in
or under any real property owned or leased by Seller have been removed and
no past or present disposal, spill, or other release of hazardous waste,
hazardous materials or hazardous substances attributable to the Assets, the
Business or the operations of Seller on, in, under or adjacent to any real
property owned or leased by Seller will subject Purchaser to corrective or
response action or any other liability under any Governmental Requirement
or the common law;
(vi) No investigation, administrative order, consent order and
agreement, litigation or settlement with respect to Waste Materials or
Waste Materials Contamination is proposed, threatened, anticipated or in
existence with respect to the Assets or the Business. None of the Assets
are currently on, and to the Best Knowledge of Seller and Shareholder, have
ever been on, any federal or state "Superfund" or "Superlien" list.
(vii) Seller does not have any contingent liabilities under any
Governmental Requirement to any Person, whether or not such contingent
liability is required pursuant to generally accepted accounting principles
to be reflected on the financial statements of Seller, in connection with
any emission, discharge or release of any hazardous or toxic waste,
substance or constituent or any other substance into the environment caused
by Seller; and
(viii) Seller has not handled, treated, stored, generated, transported
or disposed of any Waste Material in contravention of any Governmental
Requirement, and there have been no acts or omissions of Seller or any of
its agents or employees that would result in liability under any
Governmental Requirement.
20
<PAGE> 28
(d) Seller has, and has listed on Part 4.13 of the Disclosure
Schedule, all necessary environmental and operations permits for operations
relating to the Business or the Assets.
4.17 No Underground Storage Tanks. Except as described in the Disclosure
Schedule, there are no underground storage tanks located on any of the premises
to be leased by Purchaser pursuant to the provisions of Article 15.
4.18 Securities Laws Matters.
(a) Except as expressly set forth in the Registration Rights
Agreement, Seller recognizes and understands that the warrants described in
Section 3.1 and the Common Stock issued upon exercise of such warrants
(collectively, the "Securities") will not be registered under the
Securities Act, or under the securities laws of any state (the Securities
Act and such securities laws, collectively the "Securities Laws"). The
Securities are not being so registered in reliance upon exemptions from the
Securities Laws which are predicated, in part, on the representations,
warranties and agreements of Seller contained herein.
(b) (i) Seller has business knowledge and experience, such experience
being based on actual participation therein, (ii) Seller is capable of
evaluating the merits and risks of an investment in the Securities and the
suitability thereof as an investment therefor, (iii) the Securities will be
acquired solely for investment and not with a view toward resale or
redistribution in violation of the Securities Laws, (iv) in connection with
the transactions contemplated hereby, no assurances have been made
concerning the future results of Purchaser or Rush or any Affiliate thereof
or as to the value of the Securities and (v) Seller is an "accredited
investor" within the meaning of (i) Regulation D promulgated by the SEC
pursuant to the Securities Act and (ii) the Corporate Securities Laws of
1968 of the State of California and the regulations promulgated thereunder.
Seller understands that neither Purchaser nor Rush is under any obligation
to file a registration statement or to take any other action under the
Securities Laws with respect to any such Securities except as expressly set
forth in the Registration Rights Agreement.
(c) Seller has consulted with Seller's own counsel in regard to the
Securities Laws and is fully aware (i) of the circumstances under which
Seller is required to hold the Securities, (ii) of the limitations on the
transfer or disposition of the Securities, (iii) that the Securities must
be held indefinitely unless the transfer thereof is registered under the
Securities Laws or an exemption from registration is available and (iv)
that no exemption from registration is likely to become available for at
least one year from the date of acquisition of the Securities. Seller has
been advised by Seller's counsel as to the provisions of Rules 144 and 145
as promulgated by the Commission under the Securities Act and has been
advised of the applicable limitations thereof. Seller acknowledges that
Purchaser and Rush are relying upon the truth and accuracy of the
representations and warranties in this Section 4.18 by Seller in
consummating the transactions contemplated by this Agreement without
registering the Securities under the Securities Laws.
21
<PAGE> 29
(d) Seller has been furnished with (i) the definitive proxy statement
filed with the Commission in connection with the annual meeting of
stockholders of Rush held on May 18, 1999 and (ii) copies of Rush's
Amendment No. 2 to Form S-1 Registration Statement and Prospectus to Form
S-1 filed on Form 424(b)(4), Annual Report on Form 10-K for the year ended
December 31, 1998, and Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1999 and June 30, 1999, filed with the Commission under the
Exchange Act. Seller has been furnished with the complete financial
statements of Rush for the fiscal years ended 1996, 1997 and 1998. Seller
has been furnished with a summary description of the terms of the Common
Stock and Purchaser and Rush have made available to Seller the opportunity
to ask questions and receive answers concerning the terms and conditions of
the transactions contemplated by this Agreement and to obtain any
additional information which they possess or could reasonably acquire for
the purpose of verifying the accuracy of information furnished to Seller as
set forth herein or for the purpose of considering the transactions
contemplated hereby. Rush has offered to make available to Seller upon
request at any time all exhibits filed by Rush with the Commission as part
of any of the reports filed therewith.
(e) Seller agrees that the certificates representing the Securities
will be imprinted with the following legend, the terms of which are
specifically agreed to:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. NEITHER
THE SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE
SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND
SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COUNSEL FOR
THIS CORPORATION, IS AVAILABLE.
Seller understands and agrees that appropriate stop transfer notations will be
placed in the records of Rush and with its transfer agent in respect of the
Securities.
4.19 Brokers and Finders. No broker or finder has acted for Seller or
Shareholder in connection with this Agreement or the transactions contemplated
by this Agreement and no broker or finder is entitled to any brokerage or
finder's fee or to
22
<PAGE> 30
any commission in respect thereof based in any way on agreements, arrangements
or understandings made by or on behalf of Seller or Shareholder.
4.20 Deposits. Seller does not hold any deposits or prepayments by third
parties with respect to any of the Assets or the Business ("Deposits") which are
not reflected as liabilities on Seller's Reference Balance Sheet. If Seller
holds any Deposits as of the Closing Date, Purchaser will be given credit
against the cash portion of the Purchase Price for the amount of any such
Deposits pursuant to Section 3.4 hereof.
4.21 Work Orders. There are no outstanding work orders or contracts
relating to any portion of the Assets from or required by any policy of
insurance, fire department, sanitation department, health authority or other
governmental authority nor is there any matter under discussion with any such
parties or authorities relating to work orders or contracts.
4.22 Telephone Numbers. All telephone numbers used by Seller in connection
with the Business are included in the Assets and will not be used by Seller or
Shareholder following the Closing, except by Shareholder in the conduct of
Purchaser's business.
4.23 No Untrue Statements. The statements, representations and warranties
of Seller and Shareholder set forth in this Agreement, the Schedules, the Seller
Certificate and the exhibits and annexes attached hereto do not include (and in
the case of the Seller Certificate, will not include) any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements, representations and warranties made not misleading. To the Best
Knowledge of Seller and Shareholder, there is no fact or matter that is not
disclosed to Purchaser in this Agreement or the Schedules that materially and
adversely affects or, so far as Seller or Shareholder can now reasonably
foresee, could materially and adversely affect the condition (financial or
otherwise) of any of the Assets or the Business or the ability of Seller or
Shareholder to perform their respective obligations under this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller as follows:
5.1 Incorporation. Purchaser and Rush are each a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and the State of Texas, respectively.
5.2 Authorization. Purchaser has full legal right and corporate power to
enter into and deliver this Agreement and to consummate the transactions set
forth herein and to perform all the terms and conditions hereof to be performed
by it. This Agreement has been duly executed and delivered by Purchaser and is a
legal, valid and binding obligation of Purchaser enforceable in accordance with
its terms, except as limited by
23
<PAGE> 31
applicable bankruptcy, moratorium, insolvency or other laws affecting generally
the rights of creditors or by principles of equity.
5.3 SEC Documents. Rush has provided to Seller and Shareholder copies of
its Annual Report on Form 10-K for the year ended December 31, 1998, its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and June
30, 1999, its proxy statement with respect to the Annual Meeting of Stockholders
held on May 18, 1999, and its Amendment No. 2 to Form S-1 Registration Statement
and Prospectus to Form S-1 filed on Form 424(b)(4) (such documents collectively
referred to herein as the "SEC Documents"). As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Rush included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Rush and its consolidated Subsidiaries as of
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (except in the case of interim period financial
information for normal year-end adjustments). All material agreements, contracts
and other documents required to be filed as exhibits to the SEC Documents have
been so filed. The consolidated balance sheet included in Rush's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999 reflects, as of the date
thereof, all liabilities, debts and obligations of any nature, kind or manner of
Rush and its subsidiaries, whether direct, accrued, absolute, contingent or
otherwise, and whether due or to become due that are required to be reflected on
such balance sheet under generally accepted accounting principles consistently
applied.
5.4 Brokers and Finders. No broker or finder has acted for Purchaser or
Rush in connection with this Agreement or the transactions contemplated by this
Agreement and no broker or finder is entitled to any brokerage or finder's fee
or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Purchaser or Rush.
5.5 Effect of Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not (i) result in
any breach of any of the terms or conditions of, or constitute a default under,
the Articles of Incorporation or other charter documents or bylaws of Purchaser,
or any
24
<PAGE> 32
commitment, mortgage, note, bond, debenture, deed of trust, contract, agreement,
license or other instrument or obligation to which Purchaser is now a party or
by which Purchaser or any of its properties or assets may be bound or affected;
or (ii) result in any violation of any Governmental Requirement applicable to
Purchaser.
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES,
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER. All statements of fact
contained in this Agreement, the Schedules, the Seller Certificate and the
exhibits and annexes attached hereto delivered by or on behalf of Seller or
Shareholder shall be deemed representations and warranties of Seller and
Shareholder hereunder. Regardless of any investigation at any time made by or on
behalf of Purchaser, all indemnifications, guarantees, covenants, agreements,
representations and warranties made by Seller or Shareholder hereunder or
pursuant hereto or in connection with the transactions contemplated hereby shall
survive for eighteen months after the Closing Date, except with respect to (a)
the representations and warranties set forth in Section 4.6, which shall survive
until the sixth anniversary of the Closing Date, (b) the representations and
warranties set forth in Sections 4.16 and 4.17, which shall survive until the
fifth anniversary of the Closing Date and (c) the representations and warranties
set forth in Section 4.18, which shall survive the Closing Date indefinitely.
7. CONTRACTS PRIOR TO THE CLOSING DATE.
7.1 Approval of Contracts. Except in the ordinary course of business and
consistent with past practice, Seller shall not enter into or amend any
contracts related to the Business or the Assets between the date hereof and the
Closing Date unless approved in writing by Purchaser. Seller will provide all
information relating to each such contract or amendment that is necessary or
requested by Purchaser to enable Purchaser to make an informed decision
regarding approval of such contract or amendment.
7.2 Contracts Included in Assets. Any contracts, agreements or commitments
(or amendments to such items) related to the Business or the Assets that are
entered into by Seller between the date hereof and the Closing Date and are
approved pursuant to the provisions of Section 7.1, shall be included in the
Assets (with no addition to the Purchase Price) and shall be assumed by
Purchaser pursuant to Section 3.2.
8. COVENANTS OF SELLER AND SHAREHOLDER PRIOR TO CLOSING DATE. Seller and
Shareholder hereby covenant and agree that between the date of this Agreement
and the Closing Date:
8.1 Access to Information. Seller shall afford to the officers and
authorized representatives of Purchaser access to the plants, properties,
documents, books and
25
<PAGE> 33
records of Seller related to the Assets and the Business and shall furnish
Purchaser with such financial and operating data and other information regarding
the Assets and the Business and as Purchaser may from time to time reasonably
request.
8.2 General Affirmative Covenants. Seller shall, and Shareholder shall
cause Seller to:
(a) conduct the Business only in the ordinary course;
(b) maintain the Assets in good working order and condition, ordinary
wear and tear excepted;
(c) perform all its obligations under agreements relating to or
affecting the Assets or the Business;
(d) keep in full force and effect adequate insurance coverage on the
Assets and the operation of the Business;
(e) use its best efforts to maintain and preserve the Business, and
retain its present employees, customers, suppliers and others having
business relations with it;
(f) duly and timely file all reports or returns required to be filed
with any Governmental Authority, and promptly pay all Taxes levied or
assessed upon it or its properties or upon any part thereof;
(g) duly observe and conform to all Governmental Requirements relating
to the Assets or its properties or to the operation and conduct of its
business and all covenants, terms and conditions upon or under which any of
its properties are held;
(h) remove and have released, by payment or otherwise, all liens and
encumbrances of any nature whatsoever on the Assets (except for liens and
encumbrances, if any, specifically assumed by Purchaser pursuant to this
Agreement);
(i) duly and timely take all actions necessary to carry out the
transactions contemplated hereby;
(j) deliver to Purchaser on or before the 15th day of each month true
and correct unaudited monthly balance sheets and statements of income for
the Business for the immediately preceding month;
(k) deliver to Purchaser on or before the Closing Date any additional
financial information reasonably requested by Purchaser to allow Purchaser
to timely comply with its reporting
26
<PAGE> 34
requirements under the Exchange Act, all in form and substance sufficient
to allow Purchaser to timely comply with such reporting requirements; and
(l) preserve and maintain the goodwill of the Business.
8.3 General Negative Covenants. Seller shall not take, and Shareholder will
not permit Seller to take, any of the following actions without the prior
written consent of Purchaser:
(a) entering into or amending or assuming any contract, agreement,
obligation, lease, license or commitment related to the Business or the
Assets (or of a type included in the Assets) other than in accordance with
the provisions of Section 7.1;
(b) except in the ordinary course of business and consistent with past
practice, selling, leasing, abandoning or otherwise disposing of any of the
Assets, including, but not limited to, real property, machinery, equipment
or other operating properties;
(c) engaging in any activities or transactions that might adversely
affect the Assets or the Business;
(d) making any organizational change or personnel change, or
increasing the compensation or benefits of any officer or employee of
Seller, other than normal compensation and benefit adjustments in the
ordinary course of the Business consistent with past practice; or
(e) selling or agreeing to sell 10 or more new trucks in any single
transaction or any series of related transactions at a gross margin of less
than 3 1/2%, or purchasing or agreeing to purchase 10 or more used trucks
in a single transaction or any series of related transactions.
8.4 Disclosure of Misrepresentations and Breaches. If any of the
representations or warranties of Seller or Shareholder hereunder are determined
by Seller or Shareholder to have been incorrect when made, or are determined by
Seller or Shareholder to be incorrect as of any date subsequent to the date
hereof, or if any of the covenants of Seller or Shareholder contained in this
Agreement have not been complied with timely, then Seller and Shareholder shall
immediately notify Purchaser to such effect (provided that such notice shall in
no way limit the rights of Purchaser (i) under Articles 10 and 17 to terminate
this Agreement or refuse to consummate the transactions contemplated hereby or
(ii) to enforce any rights or remedies it may have hereunder).
8.5 Government Filings. Seller and Shareholder shall cooperate with
Purchaser and its representatives in the preparation of any documents or other
material that may be required by any Governmental Authority in connection with
the Assets or the
27
<PAGE> 35
Business or the transactions contemplated hereby. With respect to any filing
required by the HSR Act, Purchaser, on the one hand, and Seller, on the other
hand, shall split the cost of any such filing fees, and each party shall pay
their own attorneys' fees.
8.6 Access to and Inspection of Premises, Facilities and Equipment. Seller
shall afford the officers and authorized representatives of Purchaser access to
the premises, facilities and tangible assets included in the Assets and the
premises to be leased by Purchaser pursuant to the provisions of Article 15 for
the purpose of inspecting such premises, facilities and equipment in such manner
as Purchaser shall deem appropriate, including, but not limited to, an
environmental inspection and audit to be conducted by GEO-Consul. The cost of
such environmental inspection and audit shall be split equally between Purchaser
and Seller, provided that GEO-Consul shall address all reports generated by such
inspection and audit to Purchaser and Seller and shall authorize Purchaser and
Seller to each rely on all reports generated by such inspection and audit. If
upon completion of such inspection, Purchaser finds any conditions which
Purchaser, in its sole discretion, considers to be unacceptable, Purchaser shall
have the right to cause Seller to pay 50% of the first $200,000 to remedy such
unacceptable condition and, in the event the amount required to remedy such
unacceptable condition exceeds $200,000, Purchaser shall have the right to
terminate this Agreement pursuant to Articles 10 and 17.
9. COVENANTS REGARDING THE CLOSING.
9.1 Covenants of Seller and Shareholder. Seller and Shareholder hereby
covenant and agree that they shall (i) use commercially reasonable efforts to
cause all of their representations and warranties set forth in this Agreement to
be true on and as of the Closing Date, (ii) use commercially reasonable efforts
to cause all of their obligations that are to be fulfilled on or prior to the
Closing Date to be so fulfilled, (iii) use commercially reasonable efforts to
cause all conditions to the Closing set forth in this Agreement to be satisfied
on or prior to the Closing Date, and (iv) deliver to Purchaser at the Closing
the certificates, updated lists, notices, consents, authorizations, approvals,
agreements, leases, transfer documents, receipts, and amendments contemplated by
Article 10 (with such additions or exceptions to such items as are necessary to
make the statements set forth in such items accurate, provided that if any of
such additions or exceptions cause any of the conditions to Purchaser's
obligations hereunder as set forth in Article 10 not to be fulfilled, such
additions and exceptions shall in no way limit the rights of Purchaser under
Articles 10 and 18 to terminate this Agreement or refuse to consummate the
transactions contemplated hereby).
9.2 Covenants of Purchaser. Purchaser hereby covenants and agrees that it
shall (i) use commercially reasonable efforts to cause all of its
representations and warranties set forth in this Agreement to be true on and as
of the Closing Date,
28
<PAGE> 36
(ii) use commercially reasonable efforts to cause all of its obligations that
are to be fulfilled on or prior to the Closing Date to be so fulfilled, (iii)
use commercially reasonable efforts to cause all conditions to the Closing set
forth in this Agreement to be satisfied on or prior to the Closing Date
(provided that failure by Purchaser to comply with a second requirement for
information under the HSR Act or to comply with any requested divestiture of
assets or to enter into any consent or similar order or agreement shall not
constitute a failure of Purchaser to use commercially reasonable efforts), and
(iv) deliver to Seller at the Closing the certificate contemplated by Article 11
(with such additions or exceptions to such certificate as are necessary to make
the statements set forth in such certificate accurate, provided that if any of
such additions or exceptions cause any of the conditions to Seller's obligations
hereunder as set forth in Article 11 not to be fulfilled, such additions and
exceptions shall in no way limit the rights of Seller under Articles 11 and 18
to terminate this Agreement or to refuse to consummate the transactions
contemplated hereby).
9.3 Inventory Audit. Within five days prior to Closing, Seller and
Purchaser shall each appoint one or more representatives knowledgeable in the
heavy duty truck business, and shall cause such representatives to conduct an
audit (in accordance with generally accepted accounting principles, consistently
applied) of the inventory of the Assets as of the Closing Date. Each party shall
bear their cost of conducting such audit.
10. CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of Purchaser
hereunder are, at the option of Purchaser, subject to the satisfaction, on or
prior to the Closing Date, of the following conditions (any of which may be
waived by Purchaser, in its sole discretion):
10.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The representations and warranties of Seller and Shareholder
contained in this Agreement shall be true and correct in all material respects
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date. Each and
all of the agreements and covenants of Seller and Shareholder to be performed on
or before the Closing Date pursuant to the terms hereof shall have been
performed in all material respects. Seller and Shareholder shall have delivered
to Purchaser a certificate dated the Closing Date and executed by Seller and
Shareholder to all such effects or disclosing any such representation or
warranty not so true and correct or any such agreement or covenant not so
performed.
10.2 No Governmental Actions. No action or proceeding before any
Governmental Authority shall have been instituted or threatened to restrain or
prohibit the transactions contemplated by this Agreement. No Governmental
Authority shall have
29
<PAGE> 37
taken any other action as a result of which the management of Purchaser
reasonably deems it inadvisable to proceed with the transactions contemplated by
this Agreement.
10.3 No Adverse Change. No material adverse change in the Business shall
have occurred, and no loss or damage to any of the Assets, whether or not
covered by insurance, shall have occurred since the Balance Sheet Date, and
Seller shall have delivered to Purchaser a certificate dated the Closing Date
and executed by Seller and Shareholder to all such effects.
10.4 Update of Contracts. Seller and Shareholder shall have delivered to
Purchaser an accurate list, as of the Closing Date, showing (i) all agreements,
contracts and commitments of the type listed on Part 4.8 of the Disclosure
Schedule entered into since the date of this Agreement (including, but not
limited to, amendments, if any, to the items listed on Part 4.8 of the
Disclosure Schedule), and (ii) all other agreements, contracts and commitments
related to the Business or the Assets entered into since the date of this
Agreement, together with true, complete and accurate copies of all documents (or
in the case of oral commitments, descriptions of the material terms thereof)
relevant to the items on the list (the "New Contracts"). Purchaser shall have
the opportunity to review the New Contracts, and shall have the right to delay
the Closing for up to five (5) days if it in its sole discretion Purchaser deems
such a delay necessary to enable it to adequately review the New Contracts. All
of the New Contracts that are approved in writing by Purchaser prior to the
Closing, as it may be delayed, (whether such approval by Purchaser is given
before or after Seller executes the New Contract) shall be included in the
Assets (with no addition to the Purchase Price) and the future obligations of
Seller thereunder shall be assumed by Purchaser pursuant to Section 3.2. Any New
Contracts that are not approved in writing by Purchaser prior to the Closing, as
it may be delayed, shall remain the sole obligation of Seller and shall not be
assumed by Purchaser, and Purchaser shall have no obligation or liability with
respect thereto.
10.5 No Material Adverse Information. The investigations with respect to
Seller, the Assets and the Business, performed by Purchaser's professional
advisors and other representatives shall not have revealed any material adverse
information concerning Seller, the Assets or the Business that has not been made
known to Purchaser in writing prior to the date of this Agreement.
10.6 Notices and Consents. No notice to or consent, authorization, approval
or order of any Person shall be required for the consummation of the
transactions contemplated by this Agreement (except for notices that have been
duly and timely given and consents, authorizations and approvals that have been
obtained). True and correct copies of all required notices, consents,
authorizations and approvals shall have been delivered to Purchaser and shall be
satisfactory in form and substance to Purchaser and its counsel.
30
<PAGE> 38
10.7 Employment Agreement. Shareholder shall have executed and delivered to
Purchaser an employment agreement in substantially the form of the agreement
attached hereto as Exhibit 10.7 (the "Employment Agreement").
10.8 Lease Documents. Seller or Shareholder, as applicable, shall have
executed and delivered to Purchaser the Lease Documents; Seller shall have
executed, acknowledged and delivered to Purchaser the memorandum of lease
required by each of the San Diego Lease, the PACLEASE Lease and the El Centro
Lease; and the Adjoining Property Landlord shall have executed and delivered to
Purchaser a landlord estoppel and consent relating to the Adjoining Property
Lease in form and substance reasonably acceptable to Purchaser.
10.9 Other Documents. Seller and Shareholder shall have delivered or caused
to be delivered all other documents, agreements, resolutions, certificates or
declarations as Purchaser or its attorneys may reasonably request.
10.10 West Mission Road Lease. Seller shall have renegotiated the lease
agreement covering property located on West Mission Road, Escondido, California
where Seller's Escondido, California dealership is located on such terms and
conditions acceptable to Purchaser, and Seller shall have assigned its rights in
such renegotiated lease agreement to Purchaser pursuant to documentation
acceptable to Purchaser.
10.11 Dealer License. Purchaser shall have obtained written approval to be
licensed as a New Motor Vehicle Dealer by the appropriate department or agency
of the State of California to do business as a motor vehicle dealer at the
present locations of the dealerships; provided, however, that Purchaser shall
use its reasonable best efforts to secure such approval prior to Closing.
10.12 Inventory Audit. The inventory audit contemplated by Section 9.3
shall have been completed and the results thereof shall be satisfactory to
Purchaser.
10.13 Due Diligence. Purchaser shall be satisfied with the results of its
continuing legal, accounting and other due diligence regarding Seller and the
Business.
10.14 Dealership Agreement. Purchaser and PACCAR shall have executed and
delivered a dealer sales and service agreement, and ancillary or related
agreements, in form and substance satisfactory to Purchaser.
10.15 Governmental Approvals. All necessary government and regulatory
approvals have been obtained, and all required waiting periods under the HSR Act
shall have expired or been terminated.
31
<PAGE> 39
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of
Seller hereunder are, at its option, subject to the satisfaction, on or prior to
the Closing Date, of the following conditions (any of which may be waived by
Seller in its sole discretion):
11.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The representations and warranties of Purchaser contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date. Each of the agreements and covenants of Purchaser to be performed on
or before the Closing Date shall have been performed. Purchaser shall have
delivered to Seller a certificate dated the Closing Date and executed by
Purchaser to all such effects.
11.2 Governmental Approvals. All necessary government and regulatory
approvals have been obtained, and all required waiting periods under the HSR Act
shall have expired or been terminated.
11.3 Employment Agreement. Purchaser shall have executed and delivered to
Shareholder the Employment Agreement.
11.4 Lease Documents. Purchaser shall have executed and delivered to Seller
or Shareholder, as applicable, the Lease Documents.
11.5 Other Documents. Purchaser shall have delivered or caused to be
delivered all other documents, agreements, resolutions, certificates or
declarations as Seller or Shareholder or their attorneys may reasonably request.
11.6 Inventory Audit. The inventory audit contemplated by Section 9.3 shall
have been completed and the results thereof satisfactory to Seller.
11.7 Registration Rights Agreement. If Shareholder elects to receive the
warrant referenced in Section 3.1, Rush shall have executed and delivered to
Seller a registration rights agreement in substantially the form of the
agreement attached hereto as Exhibit 11.7 (the "Registration Rights Agreement").
11.8 Norm Pressley. In the event of the death of Norm Pressley, the father
of Shareholder, on or before the Closing Date, Shareholder shall have the option
to require any or all of the heirs of Norm Pressley to agree in writing to be
jointly and severally liable for the obligations of the Seller Indemnifying
Parties under Article 13 and Seller shall be entitled to the proceeds of an
accidental death and dismemberment insurance policy on the life of Norm Pressley
in the face amount of $3,000,000 or such other amount as Seller and Purchaser
may agree, the cost of which shall be borne equally between Purchaser and
Shareholder.
32
<PAGE> 40
11.9 Operating Agreements. Purchaser shall have executed and delivered (a)
an Operating Agreement relating to the GMC inventory of new and used vehicles,
parts and accessories held by Seller as of the Closing in substantially the form
of the agreement attached hereto as Exhibit 11.9(a) (the "GMC Operating
Agreement") and (b) an Operating Agreement relating to the Hino inventory of new
and used vehicles, parts and accessories held by Seller as of the Closing in
substantially the form of the agreement attached hereto as Exhibit 11.9(b) (the
"Hino Operating Agreement").
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
12.1 Further Assurances. After Closing, as and when requested by any party
hereto from time to time, the other parties hereto shall and shall cause their
Affiliates to execute and deliver, or cause to be executed and delivered, such
documents and instruments and shall take, or cause to be taken, such further or
other actions as may be reasonably necessary to carry out the purposes of this
Agreement, including without limitation, executing and delivering any instrument
Purchaser may reasonably request to convey the Assets to Purchaser as required
by this Agreement.
12.2 Delivery of Funds and Other Assets Collected by Seller. To the extent
Seller receives any funds or other assets in payment of receivables, or in
connection with any other Assets, being sold to Purchaser pursuant hereto,
Seller shall immediately deliver such funds and assets to Purchaser and take all
steps necessary to vest title to such funds and assets in Purchaser.
12.3 Change of Name of Seller. Immediately upon the occurrence of the
Closing, Seller and Shareholder shall cease using the name "Norm Pressley Truck
Center", "Pressley Peterbilt" and "Custom Truck Leasing" and all derivations
thereof, and covenant and agree that after Closing they will not, directly or
indirectly, use such names or any derivation thereof, in connection with
selling, servicing, renting, leasing, insuring or financing new or used Class 3
through 8 trucks; provided (i) Shareholder may use such names for a period of
one year following the Closing for the sole purpose of winding up the affairs of
Seller, so long as such use does not involve selling, servicing, renting,
leasing, insuring or financing new or used Class 3 through 8 trucks or interfere
with the use of such name by Rush or any of its Affiliates, and (ii) Seller and
Shareholder may use such names in connection with selling, renting or leasing
any Excluded Asset.
12.4 Access to Files. For a period of five years after the Closing, or such
longer term as Seller or Shareholder may reasonably require if Seller or
Shareholder is then involved in litigation or under investigation or audit by a
governmental agency or bureau relating to Seller or the Assets, Purchaser shall
maintain and give Seller and Shareholder and their respective representatives
full access to the premises of
33
<PAGE> 41
Purchaser and full access to, and shall permit Seller and Shareholder and their
respective representatives, at their own expense, to make photocopies of, all
originals of the files and records relating to Seller or the Assets.
12.5 Exchange Act Filing; Cooperation. After the Closing, Seller shall, at
the cost and expense of Purchaser, reasonably cooperate with and provide
information to Purchaser as is necessary for Purchaser to comply with its
reporting obligations under the Exchange Act.
12.6 Non-disclosure of Confidential Information.
(a) By Seller and Shareholder. Seller and Shareholder recognize and
acknowledge that they have and will have access to certain confidential
information) of Seller that is included in the Assets (including, but not
limited to, lists of customers, and costs and financial information) that
after the consummation of the transactions contemplated hereby will be
valuable, special and unique property of Purchaser. Seller and Shareholder
agree that they will not disclose, and they will use their best efforts to
prevent disclosure by any other Person of, any such confidential
information to, nor any discussion of any of the terms of this Agreement
with, any Person for any purpose or reason whatsoever, except to authorized
representatives of Purchaser. Seller and Shareholder recognize and agree
that violation of any of the agreements contained in this Section 12.6(a)
will cause irreparable damage or injury to Purchaser, the exact amount of
which may be impossible to ascertain, and that, for such reason, among
others, Purchaser shall be entitled to an injunction, without the necessity
of posting bond therefor, restraining any further violation of such
agreements. Such rights to any injunction shall be in addition to, and not
in limitation of, any other rights and remedies Purchaser may have at law
or in equity against Seller or Shareholder.
(b) By Purchaser. Purchaser recognizes and acknowledges that it may
have access to certain confidential information of Seller that is not
included in or connected with the Assets and not used or necessary for the
Business that after the consummation of the transactions contemplated
hereby will be valuable, special and unique property of Seller. Purchaser
agrees that it will not disclose, and will use its 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. Purchaser recognizes and agrees that
violation of any of the agreements contained in this Section 12.6(b) will
cause irreparable damage or injury to Seller, the exact amount of which may
be impossible to ascertain, and that, for such reason, among others, Seller
shall be entitled to an injunction, without the necessity of posting bond
therefor, restraining any further violation of such agreements. Such rights
to any injunction shall be in addition to, and not in limitation of, any
other rights and remedies Seller may have at law or in equity against
Purchaser.
(c) Exceptions. The foregoing restrictions will not apply to any
information which (a) becomes available to the public generally (otherwise
than by reason of a breach of the
34
<PAGE> 42
provisions of this Section 12.6), (b) can be shown by written records to
have been known by the disclosing party prior to the date of this Agreement
or (c) is lawfully acquired by the disclosing party from another person. In
the event any confidential information protected by this Section 12.6 is
required to be disclosed under court or governmental order, rule or
regulation, the party required to disclose such confidential information
shall immediately provide the party entitled to protection hereunder with
notice thereof and shall give full and complete cooperation to such party
in its efforts to object to, and to obtain protection of any confidential
information that is the subject of, such required disclosure.
12.7 Assignment of Contracts. Notwithstanding any other provision of this
Agreement, nothing in this Agreement or any related document shall be construed
as an attempt to assign (i) any Contract which, as a matter of law or by its
terms, is non-assignable without the consent of the other parties thereto unless
such consent has been given, or (ii) any Contract or claim as to which all of
the remedies for the enforcement thereof enjoyed by Seller would not, as a
matter of law or by its terms, pass to Purchaser as an incident of the transfers
and assignments to be made under this Agreement. In order, however, that the
full value of every Contract and claim of the character described in clauses (i)
and (ii) above and all claims and demands on such Contracts may be realized for
the benefit of Purchaser, Seller, at the request and expense and under the
direction of Purchaser, shall take all such action and do or cause to be done
all such things as will, in the opinion of Purchaser, be necessary or proper in
order that the obligations of Seller under such Contracts may be performed in
such manner that the value of such Contract will be preserved and will inure to
the benefit of Purchaser, and for, and to facilitate, the collection of the
moneys due and payable and to become due and payable thereunder to Purchaser in
and under every such contract and claim. Seller shall promptly pay over to
Purchaser all moneys collected by or paid to it in respect of every such
contract, claim or demand. Nothing in this Section 12.7 shall relieve Seller or
Shareholder of their obligations to obtain any consents required for the
transfer of the Assets and all rights thereunder to Purchaser, or shall relieve
Seller or Shareholder from any liability to Purchaser for failure to obtain such
consents.
12.8 Non-Compete, Non-Solicitation.
(a) Non-Competition. In consideration of the benefits of this
Agreement to Seller and Shareholder and as a material inducement to
Purchaser to enter into this Agreement and to pay the Purchase Price,
Seller and Shareholder, hereby covenant and agree that for a period of five
years after the Closing Date, Seller and Shareholder shall not, and each
shall cause their Affiliates not to, directly or indirectly, as proprietor,
partner, stockholder, director, 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 in the sale, servicing, renting,
leasing, insuring or financing of new or used Class 3 through 8 trucks (not
including construction equipment) in
35
<PAGE> 43
any geographical or commercial markets in which Rush or any of its
Affiliates (including Purchaser) conducts such business on the Closing
Date; provided, however, the foregoing shall not, in any event, prohibit
Seller or Shareholder from (i) purchasing and holding as an investment not
more than 1% of any class of publicly traded securities of any entity which
conducts such business, so long as neither Seller nor Shareholder
participates in any way in the management, operation or control of such
entity or (ii) selling, leasing or otherwise disposing of any vehicles,
parts and accessories inventory or chassis kits held by the Business as of
the Closing Date that are not transferred to Purchaser pursuant to the
terms of this Agreement. It is further recognized and agreed that, even
though the activity may not be restricted under the foregoing provision,
for a period of five years following the Closing Date, neither Seller nor
Shareholder shall, and each shall cause their Affiliates not to, provide
any services to any person or entity which may be used against, or in
conflict with the interests of, Purchaser or an Affiliate of Purchaser.
(b) Judicial Reformation. Seller and Shareholder acknowledge that,
given the nature of Purchaser and its Affiliates' business, the covenants
contained in this Section 12.8 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 and its Affiliates' business and to protect their
legitimate business interests. If, however, this Section 12.8 is determined
by any court of competent jurisdiction or an arbitrator pursuant to Section
20.1 to be unenforceable by reason of it 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 or arbitrator.
(c) Customer Lists, Non-Solicitation. In consideration of the benefits
of this Agreement to Seller and Shareholder and as a material inducement to
Purchaser to enter into this Agreement and to pay the Purchase Price,
Seller and Shareholder hereby further covenant and agree that for a period
of five years following the Closing Date, Seller and Shareholder shall not,
and each shall cause their Affiliates not to, directly or indirectly, (a)
use or make known to any person or entity the names or addresses of any
clients or customers of Seller, Purchaser or any Affiliate of Purchaser or
any other information pertaining to them, (b) call on, solicit, take away
or attempt to call on, solicit or take away any clients or customers of
Seller, Purchaser or any Affiliate of Purchaser, or (c) solicit for
employment, recruit, hire or attempt to recruit or hire any employees of
Seller, Purchaser or any Affiliate of Purchaser.
(d) Equitable Relief. In the event of a breach or a threatened breach
by Shareholder or Seller of any of the provisions contained in this Section
12.8, each acknowledges that Purchaser and its Affiliates will suffer
irreparable injury not fully compensable by money damages and, therefore,
will not have an adequate remedy available at law. Accordingly, Purchaser
shall be entitled, without the necessity of posting a bond, to obtain such
injunctive
36
<PAGE> 44
relief or other equitable remedy 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 Purchaser may have under this Agreement,
at law or in equity, including, without limitation, the right to sue for
damages.
(e) Covenants Independent. The covenants of Seller and Shareholder
contained in this Section 12.8 will be construed as independent of any
other provision in this Agreement, and the existence of any claim or cause
of action by Seller or Shareholder, or any of them, against Purchaser or
any Affiliate of Purchaser will not constitute a defense to the enforcement
by Purchaser of said provisions. Seller and Shareholder understand that the
provisions contained in this Section 12.8 are essential elements of the
transactions contemplated by this Agreement and, but for their agreement to
be bound by the provisions of this Section 12.8, Purchaser would not have
agreed to enter into this Agreement and the transactions contemplated
herein. Seller and Shareholder have each been advised to consult with, and
each represents that it or he has consulted with, counsel in order to be
informed in all respects concerning the reasonableness and propriety of the
provisions of this Section 12.8 and each acknowledges that the provisions
of this Section 12.8 are reasonable in all respects.
12.9 Agreement Regarding GMC Excluded Assets. If as of the date that is six
months after the Closing Date, Purchaser has not entered into a dealer sales and
service agreement with GMC, the GMC Excluded Assets have not been sold pursuant
to the GMC Operating Agreement and Seller is not able to transfer the GMC
Excluded Assets to GMC or an Affiliate of GMC, Purchaser will purchase the GMC
Excluded Assets from Seller and Seller shall sell the GMC Excluded Assets to
Purchaser for the price indicated for such items in Section 3.1. The closing for
such sale and purchase shall take place at a date and time that is mutually
agreeable to the parties, which shall be no more than 30 days after Seller
provides Purchaser written notice that Seller is not able to transfer the GMC
Excluded Assets to GMC or an Affiliate of GMC. Seller, at its sole cost and
expense, shall provide all documentation and evidence reasonably requested by
Purchaser to enable Purchaser to verify that the conditions to Purchaser's
purchase obligations hereunder have been satisfied. At such closing, Purchaser
shall pay the amount due Seller by wire transfer of immediately available funds
to an account designated by Seller.
12.10 Agreement Regarding Hino Excluded Assets. If as of the date of
termination of the Hino Operating Agreement, Purchaser has entered into a dealer
sales and service Agreement with Hino, Purchaser will purchase the Hino Excluded
Assets to the extent not previously sold under the Hino Operating Agreement from
Seller and Seller shall sell such Hino Excluded Assets to Purchaser for the
price indicated for such assets in Section 3.1. The closing for such sale and
purchase shall take place at a date and time that is mutually agreeable to the
parties, which shall be no more than 30 days after the termination date of the
Hino Operating Agreement. Seller, at its sole cost and expense, shall provide
all documentation and evidence reasonably requested
37
<PAGE> 45
by Purchaser to enable Purchaser to verify the conditions to Purchaser's
purchase obligations hereunder have been satisfied. At such closing, Purchaser
shall pay the amount due Seller by wire transfer of immediately available funds
to an account designated by Seller.
13. INDEMNITY BY SELLER AND SHAREHOLDER.
13.1 Indemnity. Seller and Shareholder (collectively, the "Seller
Indemnifying Parties" and individually, a "Seller Indemnifying Party") shall,
and hereby do, jointly and severally indemnify, hold harmless and defend
Purchaser and its officers, directors, employees, agents, consultants,
representatives and Affiliates (collectively, the "Purchaser Indemnified
Parties") from and against any and all penalties, demands, damages, punitive
damages, losses, liabilities, suits, costs, costs of any settlement or judgment,
claims of any and every kind whatsoever, refund obligations (including, without
limitation, interest and penalties thereon) and remediation costs and expenses
(including, without limitation, reasonable attorneys' fees), of or to any of the
Purchaser Indemnified Parties ("Purchaser Damages"), which may now or in the
future be paid, incurred or suffered by or asserted against the Purchaser
Indemnified Parties by any Person resulting or arising from or incurred in
connection with any one or more of the following (provided that this Section
13.1 shall not apply to any items that have been expressly assumed by Purchaser
under this Agreement):
(a) any liability or claim for liability (whether in contract, in tort
or otherwise, and whether or not successful) related in any way to the
Assets or the Business to the extent such liability or claim for liability
arises in connection with any action, omission or event occurring on or
prior to the Closing Date (including, but not limited to, claims for
product liability with respect to products manufactured, distributed or
sold by Seller on or prior to the Closing Date);
(b) any liability or claim for liability (whether in contract, in tort
or otherwise, and whether or not successful) related to any liens,
obligations or encumbrances of any nature whatsoever against or in any way
related to the Assets or the Business which have not been expressly assumed
by Purchaser hereunder;
(c) any liability or claim for liability (whether in contract, in tort
or otherwise, and whether or not successful) related to Taxes of Seller;
(d) any liability or claim for liability (whether or not successful)
related to any lawsuit or threatened lawsuit or claim involving any Seller
Indemnifying Party other than claims brought by the Seller Indemnifying
Parties pursuant to Article 14;
(e) any misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement on the part of a Seller Indemnifying Party under this
Agreement or from any
38
<PAGE> 46
misrepresentation in or omission from any Schedule, the Seller Certificate
or the exhibits and annexes hereto;
(f) any liability or claim for liability against Purchaser or any of
the Assets to the extent such liability or claim for liability arises in
connection with the failure of Purchaser and Seller to comply with any
applicable bulk transfer law; and
(g) all actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including costs of court and reasonable
attorneys' fees) incident to any of the foregoing.
13.2 Environmental Liability of the Seller Indemnifying Parties.
Notwithstanding anything herein to the contrary, the Seller Indemnifying Parties
shall have no liability or obligation to indemnify hereunder for any Purchaser
Environmental Liabilities or obligations arising from acts, events or omissions
occurring prior to Seller's operation of the Business on any real property
owned, leased or used by Seller or any environmental condition or liability
disclosed on the Disclosure Schedule. The Seller Indemnifying Parties, jointly
and severally, shall retain liability for, and any Seller Indemnifying Parties,
jointly and severally, shall indemnify, hold harmless and defend the Purchaser
Indemnified Parties from and against all claims (whether in contract, in tort or
otherwise, and whether or not successful), fines, penalties, liabilities,
damages and losses, including but not limited to remedial, removal, response,
abatement, clean-up, investigation and monitoring costs and any other related
costs and expenses incurred (whether any claims or causes of action relating
thereto be asserted in common law or under statute and regardless of form
including strict liability and negligence) (collectively referred to as
"Purchaser Environmental Liabilities") arising from (a) any violation of any
Requirement of Environmental Law or Environmental Permits (as those terms are
hereinafter defined) of any Seller Indemnifying Party occurring or existing
between the date Seller began conducting business on each parcel of real estate
owned, leased or used by Seller and the Closing Date, (b) any acts, omissions,
conditions, facts, or circumstances occurring or existing between the date
Seller began conducting business on each parcel of real estate owned, leased or
used by Seller and the Closing Date with respect to the Assets, the Business or
the operations of Seller which give rise to an Environmental Claim (as
hereinafter defined) before or after the date hereof, and (c) any failure of any
Seller Indemnifying Party to obtain or maintain, between the date Seller began
conducting business on each parcel of real estate owned, leased or used by
Seller and the Closing Date, any Environmental Permit. For purposes of this
Section 13.2 the term "Environmental Claim" means any action, lawsuit, claim or
proceeding by any Person relating to the Assets or the Business or the
operations or the business of Seller which seeks to impose liability for (i)
noise, (ii) pollution or contamination or threatened pollution or contamination
of the air, surface water, groundwater or land, (iii) solid, gaseous or liquid
waste generation, handling, treatment, storage, disposal or transportation, (iv)
exposure to hazardous or toxic substances or (v) non-compliance with any
39
<PAGE> 47
Requirement of Environmental Law. An "Environmental Claim" includes, without
limitation, a proceeding to terminate a permit or license to the extent that
such a proceeding attempts to redress violations of the applicable permit or
license or any Requirement of Environmental Law as alleged by any Governmental
Authority. For purposes of this Section 13.2 the term "Environmental Permit"
means any permit, license, approval or other authorization related to, used in
connection with or necessary for the operation or use of the Business or the
Assets, or the operations or the businesses of Seller under any applicable
Requirement of Environmental Law. For purposes of this Section 13.2 the term
"Requirement of Environmental Law" means all Governmental Requirements related
to health or the environment, including, but not limited to, all Governmental
Requirements that relate to (i) noise, (ii) pollution or protection of the air,
surface water, groundwater or land, (iii) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or transportation, (iv)
exposure to hazardous or toxic substances, or (v) any other matters related to
health or the environment.
13.3 Notice of Claim. Purchaser agrees that upon its discovery of facts
giving rise to a claim for indemnity under the provisions of this Agreement,
including receipt by it or any Purchaser Indemnified Party of notice of any
demand, assertion, claim, action or proceeding, judicial or otherwise, by any
Person with respect to any matter as to which any of the Purchaser Indemnified
Parties are entitled to indemnity under the provisions of this Agreement (such
actions being collectively referred to herein as a "Purchaser Claim"), Purchaser
will give prompt notice thereof in writing to the Seller Indemnifying Parties
together with a statement of such information respecting any of the foregoing as
it shall then have; provided that any delay in giving or failure to give such
notice shall not limit the rights of Purchaser or any Purchaser Indemnified
Party to indemnity hereunder except in accordance with the time limitations
provided in Section 13.10 and to the extent that the Seller Indemnifying Parties
are shown to have been damaged by such delay or failure.
13.4 Right of the Seller Indemnifying Parties to Participate in Defense.
With respect to any Purchaser Claim as to which any of the Purchaser Indemnified
Parties seeks indemnity hereunder, Purchaser shall provide the Seller
Indemnifying Parties with the opportunity to participate in the defense of such
Purchaser Claim with counsel of the Seller Indemnifying Parties' choice and at
the Seller Indemnifying Parties' cost and expense and shall not, without the
consent of Shareholder, which consent shall not be unreasonably withheld, settle
any such Purchaser Claim, so long as the Seller Indemnifying Parties shall have
unconditionally acknowledged their obligation to indemnify hereunder with
respect to such Purchaser Claim. To the extent reasonably requested by
Purchaser, shall reasonably cooperate with Purchaser and its representatives and
counsel in any dispute or defense related to any Purchaser Claim.
40
<PAGE> 48
13.5 Payment. The Seller Indemnifying Parties shall promptly pay to
Purchaser or such other Purchaser Indemnified Party as may be entitled to
indemnity hereunder in cash by wire transfer the amount of any Purchaser Damages
to which Purchaser or such Purchaser Indemnified Party may become entitled by
reason of the provisions of this Agreement.
13.6 Limit of Liability of Shareholder. Notwithstanding any other
provisions of this Agreement, the aggregate liability of the Seller Indemnifying
Parties under this Agreement shall be limited to $500,000, except that such
limit shall be $2,000,000 for breach of the representations and warranties set
forth in Sections 4.6, 4.16 and 4.17 or any indemnification claim relating to
environmental matters.
13.7 Limitations on Indemnification. Notwithstanding any provision of this
Agreement, the Seller Indemnifying Parties shall not be liable for any matter
that could be made the subject of a claim under this Article 13 regarding any
claims, losses, expenses or other liabilities until the aggregate amount thereof
exceeds $50,000 and after such threshold amount has been attained, all claims,
other than those aggregated to reach the threshold, shall be indemnified
hereunder.
13.8 Insurance and Refunds. The Seller Indemnifying Parties'
indemnification obligations shall be reduced to the extent that the subject
matter of the claim is covered by and paid to Purchaser or its Affiliates
pursuant to a warranty or indemnification from a third party or third party
insurance. The amount of indemnification due from the Seller Indemnifying
Parties with respect to any claim shall be reduced by the effect of any tax
deduction, credit, refund or other tax benefit to Purchaser or it Affiliates
relating to the same tax period and resulting from the subject matter of that
claim and such indemnification.
13.9 Offset Provisions. Notwithstanding any other provisions of this
Agreement, in the event, between the Closing Date and the date the Bonus Payment
is paid, the Seller Indemnifying Parties becomes obligated to pay sums to
Purchaser or any Purchaser Indemnified Party 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 have the
right to and shall be obligated to reduce and offset payments due on the Bonus
Payment in such amount or amounts as Purchaser (and any Purchaser Indemnified
Party that is not promptly paid by the Seller Indemnifying Parties) is entitled
to receive from the Seller Indemnifying Parties, and any such offset shall be
deemed to be a payment of the Bonus Payment to the extent of such offset;
provided, however, that any such offset shall not relieve the Seller
Indemnifying Parties from paying all amounts that are due in excess of the
amount offset. Prior to any offset under this Section 13.9, Purchaser shall have
provided to the Seller Indemnifying Parties a notice of Purchaser Claim as
41
<PAGE> 49
described in Section 13.3 or an otherwise reasonably detailed description of the
matter giving rise to such offset.
13.10 Time Limits for Indemnity Claims. Any claim for indemnification under
this Article 13 must be made within the time periods set forth in Article 6.
14. INDEMNITY BY PURCHASER.
14.1 Indemnity. Purchaser shall, and hereby does indemnify, hold harmless
and defend Seller and Shareholder (the "Seller Indemnified Parties") at all
times from and after the date of this Agreement, from and against any and all
penalties, demands, damages, punitive damages, losses, liabilities, suits,
costs, costs of any settlement or judgment, claims of any and every kind
whatsoever, refund obligations (including, without limitation, interest and
penalties thereon), remediation costs and expenses (including, without
limitation, reasonable attorneys' fees), of or to any of the Seller Indemnified
Parties ("Seller Damages"), which may now or in the future be paid, incurred or
suffered by or asserted against the Seller Indemnified Parties by any Person
resulting or arising from or incurred in connection with any one or more of the
following:
(a) any liability or claim for liability (whether in contract, in tort
or otherwise, and whether or not successful) related in any way to the
Assets or the Business to the extent such liability or claim for liability
arises in connection with any action, omission or event occurring after the
Closing Date (including, but not limited to, claims for product liability
with respect to products manufactured, distributed or sold by Purchaser
after the Closing Date); and
(b) any misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement on the part of Purchaser under this Agreement or from
any misrepresentation in or omission from any list, schedule, certificate
or other instrument furnished or to be furnished to Seller or Shareholder
pursuant to the terms of this Agreement.
14.2 Environmental Liability of Purchaser. Notwithstanding any other
provision of this Agreement, including, but not limited to the rights to
indemnity set forth in Section 14.1, and in addition thereto, Purchaser shall
indemnify, hold harmless and defend the Seller Indemnified Parties, at all times
from and after the Closing Date, from and against all claims (whether in
contract, in tort or otherwise, and whether or not successful), fines,
penalties, liabilities, damages and losses, including but not limited to
remedial, removal, response, abatement, clean-up, investigation and monitoring
costs and any other related costs and expenses incurred (whether any claims or
causes of action relating thereto be asserted in common law or under statute and
regardless of form including strict liability and negligence) (collectively
referred to as "Seller Environmental Liabilities") arising from (a) any
violation of any Requirement of Environmental Law or Environmental Permits (as
those terms are
42
<PAGE> 50
hereinafter defined) of Purchaser occurring after the Closing Date, (b) any
acts, omissions, conditions, facts, or circumstances occurring after the Closing
Date with respect to the Assets, the Business or the operations of Purchaser
which give rise to an Environmental Claim (as hereinafter defined) during the
time Purchaser is the owner of the Assets and the operator of the Business, and
(c) any failure of Seller or Shareholder to obtain or maintain after the Closing
Date, any Environmental Permit. For purposes of this Section 14.2, the term
"Environmental Claim" means any action, lawsuit, claim or proceeding by any
Person relating to the Assets or the Business or the operations or the Business
which seeks to impose liability for (i) noise, (ii) pollution or contamination
or threatened pollution or contamination of the air, surface water, groundwater
or land, (iii) solid, gaseous or liquid waste generation, handling, treatment,
storage, disposal or transportation, (iv) exposure to hazardous or toxic
substances or (v) non-compliance with any Requirement of Environmental Law. An
"Environmental Claim" includes, without limitation, a proceeding to terminate a
permit or license to the extent that such a proceeding attempts to redress
violations of the applicable permit or license or any Requirement of
Environmental Law as alleged by any Governmental Authority. For purposes of this
Section 14.2, the term "Environmental Permit" means any permit, license,
approval or other authorization related to, used in connection with or necessary
for the operation or use the Business or the Assets, or the operations or the
Business under any applicable Requirement of Environmental Law. For purposes of
this Section 14.2, the term "Requirement of Environmental Law" means all
Governmental Requirements related to health or the environment, including, but
not limited to, all Governmental Requirements that relate to (i) noise, (ii)
pollution or protection of the air, surface water, groundwater or land, (iii)
solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation, (iv) exposure to hazardous or toxic substances, or
(v) any other matters related to health or the environment. Notwithstanding
anything herein to the contrary, Purchaser shall have no liability or obligation
to indemnify hereunder for any Seller Environmental Liabilities or obligations
arising from acts, events or omissions occurring after Purchaser ceases to
operate the Business on any of the premises to be owned, leased or used by
Purchaser pursuant to the provisions of Article 15.
14.3 Notice of Claim. Seller and Shareholder agree that upon their
discovery of facts giving rise to a claim for indemnity under the provisions of
this Agreement, including receipt by Seller or Shareholder of notice of any
demand, assertion, claim, action or proceeding, judicial or otherwise, by any
Person with respect to any matter as to which Seller or Shareholder is entitled
to indemnity under the provisions of this Agreement (such actions being
collectively referred to herein as a "Seller Claim"), Seller and Shareholder
will give prompt notice thereof in writing to Purchaser together with a
statement of such information respecting any of the foregoing as they shall then
have; provided that any delay in giving or failure to give such notice shall
43
<PAGE> 51
not limit the rights of Seller or Shareholder to indemnity hereunder except to
the extent that Purchaser is shown to have been damaged by such delay or
failure.
14.4 Right of Purchaser to Participate in Defense. With respect to any
Seller Claim as to which Seller or Shareholder seeks indemnity hereunder, Seller
and Shareholder shall provide Purchaser with the opportunity to participate in
the defense of such Seller Claim with counsel of Purchaser's choice and at
Purchaser's cost and expense. To the extent reasonably requested by Seller and
Shareholder, Purchaser shall reasonably cooperate with Seller and Shareholder
and their representatives and counsel in any dispute or defense related to any
Seller Claim.
14.5 Payment. The Purchaser Indemnifying Parties shall promptly pay to
Seller and/or Shareholder, as applicable, in cash by wire transfer the amount of
any Seller Damages to which Seller and/or Shareholder, as applicable, may become
entitled by reason of the provisions of this Agreement.
14.6 Limitations on Indemnification. Notwithstanding any provision of this
Agreement, Purchaser shall not be liable for any matter that could be made the
subject of a claim under this Article 14 regarding any claims, losses, expenses
or other liabilities until the aggregate amount thereof exceeds $50,000 and
after such threshold amount has been attained, all claims, other than those
aggregated to reach the threshold, shall be indemnified hereunder.
14.7 Insurance and Refunds. Purchaser's indemnification obligations shall
be reduced to the extent that the subject matter of the claim is covered by and
paid to Seller or its Affiliates pursuant to a warranty or indemnification from
a third party or third party insurance. The amount of indemnification due from
Purchaser with respect to any claim shall be reduced by the effect of any tax
deduction, credit, refund or other tax benefit to either of Seller or its
Affiliates relating to the same tax period and resulting from the subject matter
of that claim and such indemnification.
15. REAL PROPERTY.
(a) San Diego, California Dealership. At Closing, Shareholder and
Purchaser shall enter into a lease agreement in substantially the form of
the Lease Agreement attached hereto as Exhibit 15(a) (the "San Diego
Lease"), pursuant to which Shareholder will lease to Purchaser the property
on which Seller's San Diego, California dealership is located.
(b) Property Adjoining San Diego, California Dealership. At Closing,
Seller shall assign to Purchaser its rights and Purchaser shall assume
Seller's obligations under that certain Commercial Lease between Seller and
Erickson Enterprises, formerly Red-e-Crete of San Diego ("Adjoining
Property Landlord") dated May 26, 1994 (the "Adjoining Property Lease")
relating to property adjoining the property on which Seller's San Diego
dealership
44
<PAGE> 52
is located. To evidence such assignment and assumption, Seller and
Purchaser shall enter into an Assignment and Assumption of Tenant's
Interest in Lease in substantially the form attached hereto as Exhibit
15(b) (the "Adjoining Property Assignment"). Seller shall obtain all
consents necessary to assign its rights and obligations under the Adjoining
Property Lease to Purchaser at Closing.
(c) PACLEASE Facility. At Closing, Shareholder and Purchaser shall
enter into a lease agreement in substantially the form of the Lease
Agreement attached hereto as Exhibit 15(c) (the "PACLEASE Lease"), pursuant
to which Shareholder will lease to Purchaser the property on which Seller's
PACLEASE facility is located in San Diego, California.
(d) El Centro, California Dealership. At Closing, Norm Pressley, an
individual, and The Smith Family Trust, joint owners (the "El Centro
Landlord"), and Purchaser shall enter into a lease agreement in
substantially the form attached hereto as Exhibit 15(d) (the "El Centro
Lease"), pursuant to which the El Centro Landlord will lease to Purchaser
the property on which Seller's El Centro, California dealership is located.
16. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER.
16.1 New Employees of Purchaser. It is the intention of Purchaser, and
Seller hereby acknowledges and agrees with such position, that any employees of
Seller that Purchaser hires will be new employees of Purchaser as of the Closing
Date or the date of hire, which ever is later. Such new employees shall be
entitled only to such compensation and employee benefits as are agreed to by
such employees and Purchaser, or as are otherwise provided by Purchaser, in its
sole discretion.
16.2 No Hiring Commitment. Purchaser specifically does not commit to hire
any of the employees of the Business, and Seller specifically understands and
acknowledges this fact. However, notwithstanding Purchaser's position, Purchaser
will review its needs in anticipation of the purchase of the Assets with a view
to hiring certain of the employees of Seller as of the Closing Date. In its
review, Purchaser expects to be able to review employee records and conduct
employee interviews. Seller agrees that after the date hereof it will make, on a
confidential basis, its employee records available to Purchaser and permit
Purchaser to contact its employees for the purpose of conducting employee
interviews. Seller further agrees to make employees designated by Purchaser
available to Purchaser for such purpose.
16.3 Existing Employee Benefit Plans; Assumption of Vacation and Sick Leave
Obligations. At the Closing, Purchaser shall assume Seller's obligations to
employees of Seller hired by Purchaser for accrued but unused vacation and sick
leave, and the Purchase Price shall be reduced by the dollar value of such
obligation. Except for vacation and sick leave time assumed by Purchaser as set
forth above, Purchaser shall have no obligation after the Closing to continue
any pension plans or work benefit
45
<PAGE> 53
plans currently offered by Seller to its employees. Except for vacation and sick
leave time assumed by Purchaser as set forth above, Seller and Shareholder
jointly and severally agree to indemnify and hold harmless Purchaser from and
against any claim which may arise because of the failure to continue such
pension plans or work benefit programs.
17. TERMINATION. This Agreement may be terminated without further
obligation of the parties, as follows:
17.1 Mutual Consent. This Agreement may be terminated at any time prior to
Closing by mutual written consent of the parties hereto.
17.2 Failure of Conditions. This Agreement may be terminated by either
party hereto, if the conditions, as set forth in this Agreement, to such party's
obligations under this Agreement are not fulfilled on or prior to the Closing
Date; provided that any such termination for any other reason shall not
otherwise limit the remedies otherwise available to such party as a result of
misrepresentations of or breaches by the other party.
17.3 Failure to Close. This Agreement will automatically terminate on
February 1, 2000, if the Closing shall not have occurred on or before such date,
unless the parties shall have otherwise agreed in writing prior to such date. No
party will be liable in damages to any other party as a result of termination
pursuant to this Article 17 unless the failure of the Closing was due to the
failure of such party to comply with the terms of this Agreement.
18. NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid telex
or telegram or by facsimile or other similar instantaneous electronic
transmission device or mailed first class, postage prepaid, certified United
States mail, return receipt requested, as follows:
(a) If to Purchaser, at:
If mailed:
P.O. Box 34630
San Antonio, Texas 78265
If personally delivered or delivered by overnight courier:
8810 I.H. 10 East
San Antonio, Texas 78219
Attention: W. Marvin Rush
Facsimile No.: (210) 662-8017
46
<PAGE> 54
With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro, Esq.
Facsimile No.: (210) 270-7205
(b) If to Seller or Shareholder, at:
Scott Pressley
3390 Lilac Summit
Encinitas, California 92024
With a copy to:
Greenberg, Traurig, P.A.
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012
Attention: Robert S. Kant, Esq.
Facsimile No.: (602) 263-2900
Any party may change its address for notice by giving to the other party written
notice of such change. Any notice given under this Article 18 shall be effective
when received at the address for notice for the party to which the notice is
given.
19. GENERAL PROVISIONS.
19.1 Governing Law; Interpretation; Section Headings. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Texas, without regard to conflict-of-law principles. The parties agree
to submit to the jurisdiction of the State and federal courts of the State of
California with respect to the breach or interpretation of Sections 12.3 and
12.8 of this Agreement or the enforcement of any and all rights, duties,
obligations, powers and other relations among the parties arising under this
Agreement. Exclusive venue for any action
47
<PAGE> 55
arising under Sections 12.3 and 12.8 of this Agreement shall be San Diego, San
Diego County, California. Except for the provisions of Sections 12.3 and 12.8 of
this Agreement, with respect to which Purchaser and its Affiliates expressly
reserve the right to petition a court directly for injunctive and other relief,
any claim, dispute or 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 the terms and conditions of this Agreement, including the
implementation, applicability or interpretation thereof, shall be resolved in
accordance with the dispute resolution procedures set forth in Appendix A
attached hereto and made a part hereof. The section headings contained herein
are for purposes of convenience only, and shall not be deemed to constitute a
part of this Agreement or to affect the meaning or interpretation of this
Agreement in any way.
19.2 Severability. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or the
State of Texas, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intention of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of this
Agreement shall not be affected by any such modification or severance, except
that if any severance materially alters the intentions of the parties hereto as
expressed herein (a modification being permitted only if there is no material
alteration), then the parties hereto shall use commercially reasonable efforts
to agree to appropriate equitable amendments to this Agreement in light of such
severance, and if no such agreement can be reached within a reasonable time, any
party hereto may initiate arbitration under the then current commercial
arbitration rules of the American Arbitration Association to determine and
effect such appropriate equitable amendments.
19.3 Entire Agreement. This Agreement, the Schedules and the documents and
agreements referenced herein set forth the entire agreement and understanding of
the parties hereto with respect to the transactions contemplated hereby, and
supersede all prior agreements, arrangements and understandings related to the
subject matter hereof. No representation, promise, inducement or statement of
intention has been made by any party hereto which is not embodied or referenced
in this Agreement, the Schedules or the documents or agreements referenced
herein, and no party hereto shall be bound by or liable for any alleged
representation, promise, inducement or statement of intention not so set forth.
48
<PAGE> 56
19.4 Expenses. Whether or not the transactions contemplated hereby are
consummated, each of the parties will pay all costs and expenses of its or his
performance of and compliance with this Agreement.
19.5 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.
19.6 Binding Effect. All the terms, provisions, covenants and conditions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
19.7 Assignment. This Agreement and the rights and obligations of the
parties hereto shall not be assigned or delegated by any party hereto without
the prior written consent of the other parties hereto.
19.8 Amendment; Waiver. This Agreement may be amended, modified, superseded
or canceled, and any of the terms, provisions, representations, warranties,
covenants or conditions hereof may be waived, only by a written instrument
executed by all parties hereto, or, in the case of a waiver, by the party
waiving compliance. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right to
enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provision, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach of
any other term, provision, representation, warranty or covenant.
19.9 Gender; Numbers. All references in this Agreement to the masculine,
feminine or neuter genders shall, where appropriate, be deemed to include all
other genders. All plurals used in this Agreement shall, where appropriate, be
deemed to be singular, and vice versa.
19.10 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall be
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of the parties reflected hereon as signatories.
19.11 Telecopy Execution and Delivery. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile
49
<PAGE> 57
or similar instantaneous electronic transmission device pursuant to which the
signature of or on behalf of such party can be seen, and such execution and
delivery shall be considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties hereto agree to execute an original
of this Agreement as well as any facsimile, telecopy or other reproduction
hereof.
19.12 Press Releases. No press releases or other public announcement with
respect to this Agreement or the transactions contemplated herein shall be made
prior to the Closing Date without the joint approval of Purchaser and Seller,
except as required by law.
19.13 Review of Counsel. Each party hereto acknowledges that it and its
counsel have received, reviewed and been involved in the drafting of this
Agreement and the agreements referenced herein to be executed at Closing and
that normal rules of construction, to the effect that ambiguities are to be
resolved against the drafting party, shall not apply.
[Signatures on following page]
50
<PAGE> 58
IN WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement
as of the date first above written.
PURCHASER:
RUSH TRUCK CENTERS OF
CALIFORNIA, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
SELLER:
NORM PRESSLEY'S TRUCK CENTER
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
SHAREHOLDER:
---------------------------------------------
Scott Pressley
<PAGE> 59
APPENDIX A
DISPUTE RESOLUTION PROCEDURES
Re: Asset Purchase Agreement dated September 27, 1999 (including any
amendments, the "Agreement"), by and among (i) Norm Pressley's Truck Center, a
California corporation ("Seller"), (ii) Scott Pressley, contemplated to be the
owner of a majority of the capital stock of Seller on the Closing Date
("Shareholder"), and (iii) Rush Truck Centers of California, Inc., a Delaware
corporation ("Purchaser"). Unless otherwise defined in this Appendix A, terms
defined in the Agreement and used herein shall have the meanings set forth
therein.
A. Related Parties. For purposes hereof, Seller and Shareholder shall be
considered one party and Purchaser and Rush shall be considered one party.
B. Negotiations. If any claim, dispute or controversy described in Section
20.1 of the Agreement (collectively, the "Dispute") arises, either party may, by
written notice to the party, have the Dispute referred to the persons designated
below for attempted resolution by good faith negotiations within 45 days (5 days
with respect to any dispute under Section 13.9 of the Agreement) after such
written notice is received. Such designated persons are as follows:
1. Purchaser and Rush. The Chairman of the Board and Chief Executive
Officer of Rush or his designee; and
2. Seller and Shareholder. Shareholder or his or her designee.
Any settlement reached by the parties under this Paragraph B shall not be
binding until reduced to writing and signed by both parties. When reduced to
writing, such settlement agreement shall supersede all other agreements, written
or oral, to the extent such agreements specifically pertain to the matters so
settled. If the above-designated persons are unable to resolve such dispute
within such 45-day period, either party may invoke the provisions of Paragraph C
below.
C. Arbitration. All Disputes shall be settled by negotiation among the
parties as described in Paragraph A above or, if such negotiation is
unsuccessful, by binding arbitration in accordance with procedures set forth in
Paragraphs D and E below.
D. Notice. Notice of demand for binding arbitration by one party shall be
given in writing to the other party pursuant to notice provisions of the
Agreement. In no event may a notice of demand of any kind be filed more than one
(1) year after the date the Dispute is first asserted in writing to the other
party pursuant to Paragraph B above, and if such demand is not timely filed, the
Dispute referenced in the notice given pursuant to Paragraph B above shall be
deemed released, waived, barred and unenforceable for all time, and barred as if
by statute of limitations.
Appendix A-1-
<PAGE> 60
E. Binding Arbitration. Upon filing of a notice of demand for binding
arbitration by either party, arbitration shall be commenced and conducted as
follows:
1. Arbitrators. All Disputes and related matters in question shall be
referred to and decided and settled by a panel of three arbitrators, one
selected by Purchaser, one selected by Shareholder and the third selected by the
two arbitrators so selected. Selection of the arbitrators to be selected by
Purchaser and Shareholder shall be made within ten (10) business days after the
date of giving of a notice of demand for arbitration, and the two arbitrators so
appointed shall appoint the third within 10 business days following their
appointment. No person who has a bias, or financial or personal interest in the
result of the arbitration or any past or present relationship with the parties
or their representatives shall serve as arbitrator
2. Cost of Arbitration. The cost of arbitration proceedings, including
without limitation the arbitrators' compensation and expenses, hearing room
charges, court reporter transcript charges etc., shall be borne by the parties
equally or otherwise as the arbitrators may determine. The arbitrators may award
the prevailing party its reasonable attorneys' fees and costs incurred in
connection with the arbitration. The arbitrators are specifically instructed to
award attorneys' fees for instances of abuse in the discovery process.
3. Location of Proceedings. The arbitration proceedings shall be held
in San Diego, California unless the parties agree otherwise.
4. Pre-hearing Discovery. The parties shall have the right to conduct
and enforce pre- hearing discovery in accordance with the then current Federal
Rules of Civil Procedure, subject to these limitations:
(a) Each party may serve no more than one set of interrogatories
limited to 30 questions, including sub-parts;
(b) Each party may depose the other party's expert witnesses who
will be called to testify at the hearing, plus two fact witnesses without
regard to whether they will be called to testify (each party will be
entitled to a total of no more than 24 hours of deposition time of the
other party's witnesses), provided however, that the arbitrators may
provide for additional depositions upon showing of good cause; and
(c) Document discovery and other discovery shall be under the
control of and enforceable by the arbitrators.
5. Discovery Disputes. All discovery disputes shall be decided by the
arbitrators. The arbitrators are empowered;
(a) to issue subpoenas to compel pre-hearing document or
deposition discovery;
Appendix A-2-
<PAGE> 61
(b) to enforce the discovery rights and obligations of the
parties; and
(c) to otherwise control the scheduling and conduct of the
proceedings.
Notwithstanding any contrary foregoing provisions, the arbitrators shall have
the power and authority to, and to the fullest extent practicable shall,
abbreviate arbitration discovery in a manner which is fair to all parties in
order to expedite the conclusion of each alternative dispute resolution
proceeding.
6. Pre-hearing Conference. Within fifteen (15) days after selection of
the third arbitrator, or as soon thereafter as is mutually convenient to the
arbitrators, the arbitrators shall hold a pre-hearing conference to establish
schedules for completion of discovery, for exchange of exhibit and witness
lists, for arbitration briefs and for the hearing, and to decide procedural
matters and address all other questions that may be presented.
7. Hearing Procedures. The hearing shall be conducted to preserve its
privacy and to allow reasonable procedural due process. Rules of evidence need
not be strictly followed, and the hearing shall be streamlined as follows:
(a) Documents shall be self-authenticating, subject to valid
objection by the opposing party;
(b) Expert reports, witness biographies, depositions and
affidavits may be utilized, subject to the opponent's right of a live
cross-examination of the witness in person;
(c) Charts, graphs and summaries shall be utilized to present
voluminous data, provided (i) that the underlying data is made available to
the opposing party thirty (30) days prior to the hearing, and (ii) that the
preparer of each chart, graph or summary is available for explanation and
live cross-examination in person;
(d) The hearing should be held on consecutive business days
without interruption to the maximum extent practicable; and
(e) The arbitrators shall establish all other procedural rules
for the conduct of the arbitration in accordance with the rules of
arbitration of the Center for Public Resources.
8. Governing Law. This arbitration provision shall be governed by, and
all rights and obligations specifically enforceable under and pursuant to, the
Federal Arbitration Act (9 U.S.C. Section 1, et seq.)
9. Consolidation. No arbitration shall include, by consolidation,
joinder or in any other manner, any additional person not a party to the
Agreement, except by written consent of both parties containing a specific
reference to these provisions.
Appendix A-3-
<PAGE> 62
10. Award. The arbitrators are empowered to render an award of general
compensatory damages and equitable relief (including, without limitations,
injunctive relief), but are not empowered to award exemplary, special or
punitive damages. The award rendered by the arbitrators (a) shall be final, (b)
shall not constitute a basis for collateral estoppel as to any issue and (c)
shall not be subject to vacation or modification.
11. Confidentiality. The parties hereto will maintain the substance of
any proceedings hereunder in confidence and the arbitrators, prior to any
proceedings hereunder, will sign an agreement whereby the arbitrators agree to
keep the substance of any proceedings hereunder in confidence.
Appendix A-4-
<PAGE> 63
LIST OF EXHIBITS
EXHIBIT 2.3
GENERAL CONVEYANCE,
ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
EXHIBIT 11.7
REGISTRATION RIGHTS AGREEMENT
EXHIBIT 11.9(a)
GMC OPERATING AGREEMENT
EXHIBIT 11.9(b)
HINO OPERATING AGREEMENT
EXHIBIT 15(a)
SAN DIEGO LEASE
EXHIBIT 15(b)
ADJOINING PROPERTY ASSIGNMENT
EXHIBIT 15(c)
PACLEASE LEASE
EXHIBIT 15(d)
EL CENTRO LEASE
Exhibits-1-
<PAGE> 64
LIST OF SCHEDULES
SCHEDULE 2.1
SCHEDULE 4.8
SCHEDULE 3.6
SCHEDULE 4.3
Schedules-1-
<PAGE> 1
Exhibit 10.16
[GENERAL MOTORS ACCEPTANCE CORPORATION LETTERHEAD]
February 1, 1999
Mr. W. Marvin Rush
Rush Enterprises, Inc.
Rush Truck Group (RUSH)
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. This special rate is offered for competitive
reasons as an incentive to encourage dealers to provide GMAC with . It is known
as the Wholesale Incentive Plan ("WIP").
This letter confirms GMAC's agreement to provide RUSH with the following WIP:
New and used wholesale floor plan and Borrowing Base Line of Credit,
will be net billed at Prime minus .50 p.p. with maximum Credit Account
Plan (CAP) at 50% of wholesale floor plan outstandings (the amount
earned in the CAP shall be at a rate equivalent to the amount payable
to GMAC on wholesale floor plan, less .25 p.p.). To qualify for this
reduction, minimum wholesale outstandings must total at least $25
million, GMAC must retain all current wholesale outstandings for
franchises presently owned and in the future and GMAC must be provided
first right of refusal on all future wholesale financing.
The WIP becomes effective as of February 1, 1999. 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 thirty (30) 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.
W. G. Hartnuss
Area Manager
<PAGE> 1
Exhibit 10.18
DEALER SALES AND SERVICE AGREEMENT
BETWEEN
PETERBILT MOTORS COMPANY
AND
---------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
I. INTRODUCTION ........................................................................... 1
A. PURPOSE AND GENERAL OBLIGATIONS...................................................... 1
B. APPOINTMENT OF DEALER................................................................ 1
C. LOCATION OF DEALER FACILITY.......................................................... 1
D. TERM OF THE AGREEMENT................................................................ 1
II. SALE OF PRODUCTS............................................................................ 1
A. DEALER RESPONSIBILITIES.............................................................. 1
1. PRODUCT SALES............................................................... 1
2. DEALER PERFORMANCE EVALUATION............................................... 1
3. SALES OPERATIONS AND PRODUCT PROMOTION...................................... 2
4. SALES REPORTING............................................................. 3
5. PURCHASE ORDERS............................................................. 3
6. PRICES AND PAYMENTS......................................................... 3
7. PAYMENT DEFAULT............................................................. 3
8. DELIVERY.................................................................... 3
9. WARRANTY.................................................................... 4
10. PRODUCT ALTERATIONS......................................................... 4
B. ADVERTISING.......................................................................... 4
III. SERVICE AND PARTS........................................................................... 4
A. DEALER RESPONSIBILITIES.............................................................. 4
1. PREDELIVERY SERVICE, WARRANTY SERVICE,
CAMPAIGN INSPECTIONS........................................................ 4
2. REIMBURSEMENT RATES......................................................... 4
3. NONGENUINE PARTS OR ACCESSORIES............................................. 4
B. ASSISTANCE PROVIDED BY PETERBILT..................................................... 5
1. CUSTOMER LISTS.............................................................. 5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
2. SALES AND SERVICE TRAINING ASSISTANCE....................................... 5
3. SERVICE MANUALS AND MATERIALS............................................... 5
4. FIELD SALES AND SERVICE PERSONNEL
ASSISTANCE.................................................................. 5
IV. CAPITAL STANDARDS........................................................................... 5
A. NET WORKING CAPITAL.................................................................. 5
B. OWNERSHIP........................................................................... 5
V. ACCOUNTS, RECORDS AND REPORTS............................................................... 5
A. UNIFORM ACCOUNTING SYSTEM............................................................ 5
B. AUDIT OF DEALER RECORDS.............................................................. 6
C. CONFIDENTIALITY...................................................................... 6
VI. TRADEMARKS, SERVICE MARKS AND TRADE NAMES................................................... 6
A. USE BY DEALER........................................................................ 6
B. DISCONTINUANCE OF USE................................................................ 6
VII. DEALER'S REPRESENTATION OF COMPETING LINES.................................................. 7
VIII. TERMINATION OF AGREEMENT.................................................................... 7
A. TERMINATION BY DEALER................................................................ 7
B. TERMINATION FOR CAUSE................................................................ 7
1. IMMEDIATE TERMINATION....................................................... 7
2. TERMINATION UPON 60 DAYS NOTICE ............................................ 8
3. TERMINATION FOR FAILURE OF PERFORMANCE
ON 100 DAYS NOTICE.......................................................... 9
4. TERMINATION BASED ON MARKET WITHDRAWAL...................................... 9
5. TERMINATION UPON DEATH OR INCAPACITY........................................ 9
C. EFFECTIVE DATE OF TERMINATION........................................................ 9
D. EFFECT OF TERMINATION................................................................ 9
1. THE RIGHT TO PURCHASE PRODUCTS ............................................. 9
2. REPURCHASE OF PRODUCTS...................................................... 10
</TABLE>
Page 2 of 4
<PAGE> 4
<TABLE>
<S> <C> <C>
IX. VOLUNTARY ARBITRATION OF DISPUTES........................................................... 11
A. FILING CLAIM......................................................................... 11
B. EXCLUSIVE REMEDY..................................................................... 11
C. PROCEDURES........................................................................... 11
D. CHOICE OF ARBITRATOR................................................................. 11
E. ARBITRATOR'S AWARD................................................................... 11
F. PAYMENT OF FEES...................................................................... 12
G. TIME PERIOD.......................................................................... 12
X. DEFENSE AND INDEMNIFICATION BY PETERBILT.................................................... 12
XI. MISCELLANEOUS PROVISIONS.................................................................... 12
A. ENTIRE AGREEMENT..................................................................... 12
B. AMENDMENT.......................................................................... 12
C. COLLATERAL ASSIGNMENT................................................................ 12
D. SEVERABILITY......................................................................... 12
E. GOVERNING LAW........................................................................ 12
F. WAIVERS .......................................................................... 12
G. NOTICES .......................................................................... 12
H. NEW AND SUPERSEDING DEALER AGREEMENTS................................................ 13
I. INDEPENDENT ENTITY................................................................... 13
</TABLE>
Page 3 of 4
<PAGE> 5
ADDENDA
A. PRODUCTS
B. DEALERSHIP LOCATION AND FACILITY STANDARDS
C. OPERATING REQUIREMENTS, PERFORMANCE GOALS AND SALES/SERVICE EVALUATION
D. STATEMENT OF OWNERSHIP AND FINANCIAL AND MANAGEMENT STANDARDS
E. RIGHT OF FIRST REFUSAL
Page 4 of 4
<PAGE> 6
EXHIBIT 10.18
DEALER SALES AND SERVICE AGREEMENT
This is an AGREEMENT between Peterbilt Motors Company ("PETERBILT"), a division
of PACCAR Inc, a Delaware corporation, and the principal owners identified in
Addendum D and _____________. a corporation (collectively referred to as
"DEALER" throughout this AGREEMENT), duly incorporated in the State of Delaware
and doing business as ___________________.
I. INTRODUCTION
A. PURPOSE AND GENERAL OBLIGATIONS. This AGREEMENT provides for the sale
and servicing of PETERBILT trucks and tractors ("Vehicles"), and parts
and accessories manufactured by or for PETERBILT and/or PACCAR Parts,
a division of PACCAR Inc, ("Genuine Parts and Accessories") in a
manner that will best serve the interests of PETERBILT, DEALER, other
authorized PETERBILT dealers, and owners of Vehicles and Genuine Parts
and Accessories (collectively called "PRODUCTS"). PETERBILT has
selected its dealers based on their experience and commitment to
provide adequate capital, equipment, personnel and facilities to sell
and service PRODUCTS in a manner which promotes and maintains customer
confidence and satisfaction and protects the reputation of PRODUCTS.
Both PETERBILT and DEALER agree to use the highest ethical business
standards in dealings with each other and with customers.
B. APPOINTMENT OF DEALER. Subject to the terms of this AGREEMENT,
PETERBILT hereby grants DEALER a nonexclusive right to buy PRODUCTS
identified in the attached Addendum A, to identify itself as an
authorized PETERBILT dealer and to use Trademarks in the promotion,
sale and servicing of PRODUCTS. PETERBILT reserves the right to revise
Addendum A from time to time. DEALER has paid no fee for this
AGREEMENT and no right granted by this AGREEMENT is a property right.
C. LOCATION OF DEALER FACILITY. DEALER will maintain a facility for the
sale and servicing of PRODUCTS at Dealer Location(s) identified in
Addendum B and in full compliance with all the requirements of
Addendum B including identifying the facility with a sign.
D. TERM OF THE AGREEMENT. This AGREEMENT will become effective on
___________ and will continue in effect for a period of Three (3)
year(s) to expire on _______________ unless terminated as provided in
Article VIII. This AGREEMENT may not be extended or renewed except in
writing signed by the General Manager or other authorized employee of
PETERBILT.
II. SALE OF PRODUCTS
A. DEALER RESPONSIBILITIES.
1. PRODUCT Sales. DEALER's fundamental obligation under this
AGREEMENT is to stock, sell at retail and service the PRODUCTS in
the area defined in Addendum C. DEALER agrees that PETERBILT may
add new dealers to, relocate dealers in, or make changes to the
area defined in Addendum C from time to time. DEALER expressly
agrees to develop the sales volume necessary to meet DEALER's
PERFORMANCE GOALS identified in Addendum C.
2. DEALER Performance Evaluation. PETERBILT and DEALER will meet
periodically, but not less than annually, to evaluate DEALER's
sales and service performance in the local market in accordance
with the criteria of Addendum C and this AGREEMENT. These
criteria include but are not limited to:
a. The achievement of reasonable sales objectives as PETERBILT
may establish, and as are set forth in Addendum C;
Page 1 of 13
<PAGE> 7
b. Customer satisfaction with DEALER'S conduct, participation
or assistance in sales transactions, as may be determined by
PETERBILT through customer opinion polls, personal
interviews, letters from customers or otherwise;
c. The relationship of the registrations in the area defined in
Addendum C of new PETERBILT Vehicles sold by DEALER to the
total registrations in this same period of all new trucks of
the same class (for this purpose, trucks of the same class
will be those selected by PETERBILT for comparison which
shall be generally competitive with PETERBILT Vehicles);
d. DEALER'S performance under subparagraph c above, as compared
with the performance of dealers similarly situated and with
the national average for all PETERBILT dealers, and with the
regional and district averages for all PETERBILT dealers in
the region and district to which DEALER is assigned.
e. The trend of DEALER'S sales performance over a period of
time;
f. Conditions affecting the market for trucks;
g. DEALER'S participation in sales and promotional programs
offered by PETERBILT;
h. DEALER'S inventory and sale of Genuine Parts and Accessories
in relation to the population of PETERBILT Vehicles and
similar vehicles of the same class in the area defined in
Addendum C; and
i. DEALER's participation in, and use of, other programs,
products and services offered by PETERBILT or PETERBILT
affiliates.
3. Sales Operations and Product Promotion. DEALER agrees to
establish and maintain a sales organization in accordance with
the requirements for a minimum number of personnel and training
certification defined in Addendum C. DEALER agrees to conduct all
sales activities in full compliance with PETERBILT's sales
directives and to maintain a high standard of ethical sales
activity and advertising. Under no circumstances will DEALER
solicit or make sales through sub-dealers, agents, or
representatives without the prior written consent of PETERBILT.
DEALER acknowledges that PETERBILT may sell direct to major
customers from time to time. If such sales occur, PETERBILT may
compensate DEALER in a manner and an amount to be determined by
PETERBILT for the contribution of the DEALER to the sale. DEALER
further agrees to the following:
a. In order to maintain the confidence of the public in DEALER
and PRODUCTS, DEALER shall use its best efforts to sell each
customer PRODUCTS with specifications most appropriate to
the customer's application and will not mislead or deceive
its customers with respect to the specifications or
performance of PRODUCTS.
b. DEALER shall use its best efforts to promote the sale of
PRODUCTS in the area defined in Addendum C through
systematic contacts with owners and users and prospective
owners and users of PRODUCTS, and through such other means
as may be specified from time to time by PETERBILT in its
directives and suggestions.
Page 2 of 13
<PAGE> 8
c. DEALER shall at all times carry in stock an adequate
inventory of unsold new PETERBILT Vehicles not ordered or
held for specific customers as may be sufficient to meet the
sales potential for PETERBILT Vehicles in the area defined
in Addendum C. DEALER shall also at all times carry in stock
an adequate inventory of Genuine Parts and Accessories as
may be required to meet the sales potential for Genuine
Parts and Accessories and the service needs of owners and
users of PETERBILT Vehicles in the area defined in Addendum
C.
d. In order to further sales of new PETERBILT Vehicles, DEALER
will engage in the purchase and sale of customer trade-ins
of used heavy-duty vehicles as may be required to
effectively compete in the area defined in Addendum C.
PETERBILT may from time to time provide DEALER with lists of
used heavy-duty vehicles available for sale. DEALER will use
its best efforts to market such used heavy-duty vehicles.
4. Sales Reporting. To assist PETERBILT in the evaluation of current
market trends, DEALER upon request will deliver a report in a
form prescribed by PETERBILT promptly upon delivery of new
vehicles to a customer. DEALER will also furnish other market
information reasonably requested by PETERBILT from time to time.
5. Purchase Orders. When placing orders for PRODUCTS, DEALER will
only use purchase order forms provided by PETERBILT. All orders
are subject to acceptance by PETERBILT. No order may be
cancelled, except in accordance with PETERBILT's standard policy
on order cancellation then in effect. PETERBILT will use its best
efforts to fill any orders it has accepted, but will not be
obligated to deliver to DEALER any particular number of PRODUCTS
over a specific period of time.
6. Prices and Payments. PETERBILT may change prices and terms of
sale from time to time. Unless otherwise agreed in writing,
payments for Vehicles purchased shall be by medium of payment
acceptable to PETERBILT against a wholesale line of credit
established by DEALER and expressly approved by PETERBILT as
provided for in Addendum D. PETERBILT will invoice DEALER for all
PRODUCT purchases in accordance with PETERBILT's standard policy.
In accordance with PETERBILT'S credit policy, PETERBILT may place
sales of Genuine Parts and Accessories on a payment in advance
basis. DEALER's right to return Genuine Parts and Accessories
shall be governed by the terms of PETERBILT's parts return policy
then in effect.
7. Payment Default. Should DEALER fail to pay for, or should any
applicable financing arrangement fail to provide credit for the
payment of, any PRODUCTS ordered by DEALER when payment is due,
PETERBILT may take any of the actions set forth in Addendum D.
8. Delivery. PETERBILT will select the distribution points, carriers
and modes of transportation for delivery of PRODUCTS to DEALER.
DEALER will reimburse PETERBILT for delivery, freight, and
related costs as set out on PETERBILT's invoice to DEALER. Unless
otherwise provided under PETERBILT's warranty procedures, DEALER
will file and pursue any claims against any carrier for loss or
damage during shipment. PETERBILT will not be liable for delay or
failure to fill orders that have been accepted where the failure
or delay is the result of any cause beyond PETERBILT's reasonable
control, including domestic or foreign laws, governmental
actions, war or civil disturbance, acts of God, interruptions of
navigation, shipwreck, strikes or other labor troubles, delays of
suppliers or carriers.
Page 3 of 13
<PAGE> 9
9. Warranty. DEALER agrees that the only warranties that will be
applicable to each new PRODUCT will be the written limited
warranty furnished by PETERBILT to the first retail purchaser of
the PRODUCTS as it may be revised from time to time. DEALER is
not authorized to provide any additional warranties or assume any
additional obligations or liabilities on behalf of PETERBILT.
DEALER agrees that at the time the customer signs an order,
DEALER will explain the warranty to the customer and obtain the
customer's signature acknowledging receipt thereof.
10. PRODUCT Alterations. DEALER will not alter any PRODUCT, or change
or substitute any of its components as sold by PETERBILT, if it
might affect the safe mechanical operation, safety or structural
integrity of any PRODUCT.
B. ADVERTISING.
PETERBILT agrees to establish and maintain general advertising and
promotion programs for the PRODUCTS. DEALER agrees to actively
participate in cooperative advertising programs developed by PETERBILT
from time to time for all DEALERS and to follow PETERBILT advertising
guidelines in local advertising. DEALER also agrees to promote the
purchase of PRODUCTS through DEALER's own advertising and sales
promotion activities.
Neither PETERBILT nor DEALER will publish any advertising likely to
mislead or deceive the public or impair the good will of PETERBILT or
DEALER or the reputation of the PRODUCTS.
III. SERVICE AND PARTS
A. DEALER RESPONSIBILITIES. DEALER agrees to establish and maintain a
service and parts organization in accordance with the requirements for
a minimum number of personnel with training certification defined in
Addendum C. DEALER agrees to take all reasonable steps to provide
service and parts for all PRODUCTS, regardless of where purchased, and
whether or not under warranty, and to ensure that necessary repairs on
PRODUCTS are performed in accordance with the highest professional
standards and with the customer's consent.
1. Predelivery Service, Warranty Service, Campaign Inspections.
DEALER will perform predelivery service on each new Vehicle,
warranty service and recall campaign inspections and service in
accordance with PETERBILT procedures then in effect. DEALER will
procure special tools and service equipment as may be necessary
to meet DEALER's obligations under this paragraph.
2. Reimbursement Rates. PETERBILT agrees to compensate DEALER for
all warranty, and campaign inspection work related to recalls, in
accordance with PETERBILT procedures and applicable law. Warranty
service is provided for the benefit of customers and customers
will not be obligated to pay any charges for warranty work,
except as required by law.
3. Non-Genuine Parts or Accessories. DEALER has the right to sell,
install or use parts or accessories which are not Genuine Parts
and Accessories manufactured by or for PETERBILT. However, in
cases where DEALER does not sell, install or use Genuine Parts
and Accessories, DEALER will only use such other parts or
accessories as will not adversely affect the mechanical operation
or safety of the PRODUCTS being serviced or repaired, or will be
equivalent in quality and design to Genuine Parts and
Accessories.
If DEALER uses parts or accessories which are not Genuine Parts
and Accessories or are not approved by PETERBILT or the PACCAR
Parts division for use in PRODUCTS, DEALER does so at its own
risk and PETERBILT will not be responsible to DEALER or to any
third party for any products liability, warranty or other claim
which may arise as a consequence of the installation and/or use
of such parts.
Page 4 of 13
<PAGE> 10
B. ASSISTANCE PROVIDED BY PETERBILT.
1. Customer Lists. PETERBILT may, from time to time, furnish DEALER
with a list of potential customers of PRODUCTS located in the
area defined in Addendum C. This will enable DEALER to maintain
regular and periodic contact with each such customer and make
every reasonable effort to sell PRODUCTS. Also, if available,
PETERBILT will furnish DEALER with a list of the owners of
Vehicles located in areas where such Vehicles could reasonably be
brought to the DEALER for service. This will enable DEALER to
maintain regular and periodic contact with each such Vehicle
owner and make every reasonable effort to see that every owner is
satisfied with their Vehicle(s).
2. Sales and Service Training Assistance. PETERBILT periodically
will offer general and specialized truck and parts sales, and
other service and technical training programs and materials.
DEALER agrees that its sales, service and/or parts personnel will
participate in these programs. Completion of training programs is
required to comply with training standards or recommendations set
out in Addendum C.
3. Service Manuals and Materials. PETERBILT agrees to make available
to DEALER copies of service manuals and bulletins, publications
and technical data as PETERBILT deems necessary for the effective
operation of DEALER's service and parts organization. PETERBILT
will use its best efforts to make available such data and
information before new PRODUCTS are introduced for sale. DEALER
agrees to keep these manuals, publications and data current and
available for use by its parts and service employees.
4. Field Sales and Service Personnel Assistance. PETERBILT agrees to
make available field personnel who will periodically advise
DEALER on sales, parts and service related subjects, including
fleet sales, product quality, technical adjustment, repair,
replacement and sale of PRODUCTS, customer relations, warranty
administration, and service and parts merchandising, training and
management.
IV. CAPITAL STANDARDS
A. NET WORKING CAPITAL. DEALER agrees to establish and maintain net
working capital in accordance with Addendum D. If at anytime DEALER's
net working capital falls below the minimum requirements as determined
by PETERBILT financial standards for dealership capitalization, DEALER
shall take all steps reasonably necessary to meet such minimum capital
requirements.
B. OWNERSHIP. Addendum D also sets forth the identity of all DEALER
owners and their respective ownership interests in DEALER (called
"DEALER PRINCIPAL(S)") and the principal managers, who may or may not
have ownership interests (called "OPERATING MANAGER(S)") of DEALER.
DEALER acknowledges that this is a personal service contract. The
effectiveness of DEALER is ultimately dependent upon the DEALER
PRINCIPAL(S) and OPERATING MANAGER(S) who must assume full managerial
authority and responsibility for DEALER business. No change in
ownership or change in DEALER PRINCIPAL(S) shall be made without first
consulting with and obtaining PETERBILT's prior written consent.
DEALER also agrees to notify PETERBILT of any changes in OPERATING
MANAGER(S). Any change approved by PETERBILT will be contained in a
new Addendum D.
V. ACCOUNTS, RECORDS AND REPORTS
A. UNIFORM ACCOUNTING SYSTEM. DEALER agrees to maintain a uniform
accounting system designated by PETERBILT, and in accordance with
PETERBILT policies, procedures and forms, as amended from time to
time. In addition, DEALER will furnish to PETERBILT, by the twentieth
of each month, in the manner set forth in the PETERBILT Accounting
Manual and in a format and on forms prescribed by PETERBILT, a
complete and accurate financial and operating statement covering the
preceding month and DEALER's fiscal year-to-date operations. DEALER
will also promptly furnish to PETERBILT a copy of any adjusted
financial or operating statement prepared by or for DEALER.
Page 5 of 13
<PAGE> 11
B. AUDIT OF DEALER RECORDS. DEALER agrees that PETERBILT will have the
right, at all reasonable times and during DEALER's regular business
hours, to examine, audit and reproduce all records, accounts and other
data relating to the sale and service of PRODUCTS by DEALER. PETERBILT
will provide a copy of the report of the examination or audit to
DEALER upon request.
C. CONFIDENTIALITY. PETERBILT agrees that it will not provide any data or
documents submitted to PETERBILT pursuant to this Article V to any
independent third party, unless authorized by DEALER, required by law,
or otherwise pertinent to legal proceedings. DEALER agrees that
PETERBILT may provide such data to affiliated entities such as PACCAR
Financial Corp., provided that such entities have agreed to comply
with the terms of this provision governing confidentiality. DEALER
also agrees that PETERBILT may use such data or documents to generate
composite data which PETERBILT believes will be useful to share with
its dealers to assist them in improving operations. Such composite
data will not specifically identify any dealer.
VI. TRADEMARKS, SERVICE MARKS AND TRADE NAMES
A. USE BY DEALER. PETERBILT authorizes DEALER to use the trade names,
trademarks and logos of PETERBILT (hereinafter "Trademarks").
PETERBILT grants to DEALER the nonexclusive privilege of displaying or
otherwise using Trademarks solely in connection with the promotion and
sale of PRODUCTS from approved location(s).
DEALER agrees, however, that it will promptly discontinue the display
and use of any Trademarks, and will change the manner in which any
Trademarks are displayed and used when requested to do so by
PETERBILT. DEALER further agrees that it will do nothing to impair the
value of or contest PETERBILT's use or ownership of any trademark,
design mark, service mark or trade name at any time acquired, claimed
or adopted by PETERBILT. In addition, no company owned by or
affiliated with DEALER or any DEALER PRINCIPALS may use any Trademarks
or PRODUCT name without the prior written consent of PETERBILT.
B. DISCONTINUANCE OF USE. Upon termination, non-renewal or expiration of
this AGREEMENT, DEALER agrees that it will immediately discontinue all
use of the word "Peterbilt" and the Trademarks, or similar words and
cease representing itself as an authorized PETERBILT Dealer.
Thereafter DEALER will not use, either directly or indirectly, any
Trademarks, trademarks of affiliated companies, or any other similar
trademarks in a manner likely to cause confusion or mistake or to
deceive the public. In addition, DEALER will promptly remove all
PRODUCT signs bearing the word "Peterbilt" or the Trademarks from its
facilities at DEALER's sole cost and expense. In the event DEALER
fails to comply with its obligations herein within thirty (30) days of
termination, non-renewal or expiration, PETERBILT will have the right
to enter upon DEALER's premises and remove, without liability, all
signs bearing the word "Peterbilt" or using any Trademarks. DEALER
will reimburse PETERBILT for any costs and expenses incurred in
connection with the enforcement of this paragraph, including
reasonable attorney's fees.
Page 6 of 13
<PAGE> 12
VII. DEALER'S REPRESENTATION OF COMPETING LINES
PETERBILT PRODUCTS have traditionally been sold primarily through
independently owned dealerships. Representing multiple lines of competing
truck manufacturers may create conflicts of interest resulting in
inadequate representation of PETERBILT PRODUCTS. Demands on capital,
personnel and other limited resources of a dealership may become
increasingly difficult to balance when they must be allocated among several
competing product lines. For these reasons, DEALER agrees not to enter into
a written agreement to sell and service the competitive vehicles of another
truck manufacturer without providing at least sixty (60) days prior written
notice to PETERBILT so that PETERBILT may evaluate and discuss with DEALER
the likely effect of such an action on DEALER, PETERBILT and other
PETERBILT dealers. In conducting its evaluation PETERBILT will consider and
discuss with DEALER the following:
a. Whether and to what degree the competing line competes with
PETERBILT's major product lines;
b. Whether DEALER already represents the competing line with the
acceptance or approval of PETERBILT;
c. Whether DEALER's representation of competing lines in another
PETERBILT dealer's marketing area is likely to cause competitive
injury to that dealer.
d. Whether DEALER's capital, personnel and management resources will be
adequate to represent more than one line; and
e. For non-exclusive facilities, whether the facility is adequate to
support an additional line.
VIII. TERMINATION OF AGREEMENT
This section explains the circumstances under which the AGREEMENT may be
terminated by either party, the procedure to be followed and the
consequences of termination. Identifying specific events which could result
in termination is intended to reduce the possibility of misunderstandings
between PETERBILT and DEALER.
A. TERMINATION BY DEALER. DEALER may voluntarily terminate this AGREEMENT
at any time by written notice to PETERBILT. Termination will be
effective thirty (30) days after PETERBILT receives such notice unless
otherwise mutually agreed in writing.
B. TERMINATION FOR CAUSE.
1. Immediate Termination. PETERBILT will have the right to terminate
this AGREEMENT immediately in any of the following situations:
a. Any misrepresentation to PETERBILT by DEALER or any Owner or
DEALER PRINCIPAL in applying for this AGREEMENT or for
approval as Owner or DEALER PRINCIPAL of DEALER;
b. If DEALER, or any Owner, officer, or DEALER PRINCIPAL of
DEALER, is convicted of any felony or of any violation of
law which in PETERBILT's sole opinion tends to adversely
affect the business or interests of DEALER or PETERBILT, or
to impair good will associated with the Trademarks;
c. Submission by DEALER to PETERBILT of: (i) false claims for
reimbursement, sales incentives, warranty claims, refunds,
rebates or credits; (ii) false financial information, sales
reports or other data required by PETERBILT; or (iii) false
statements relating to predelivery or warranty service,
campaign inspections, servicing, repairing, or maintenance
required by PETERBILT;
d. If DEALER is closed for a period of five (5) consecutive
days, except when due to an event beyond DEALER's reasonable
control such as acts of God, war or civil disturbance, labor
strikes or other labor trouble;
Page 7 of 13
<PAGE> 13
e. Failure of DEALER to obtain or maintain any license, or the
suspension or revocation of any license, necessary for the
conduct by DEALER of its business pursuant to this
AGREEMENT; or
f. If DEALER becomes insolvent, as defined by the Uniform
Commercial Code, or files any voluntary petition under any
bankruptcy law, or executes an assignment for the benefit of
creditors, or any petition is filed by any third party to
have DEALER declared bankrupt or to appoint a receiver or
trustee, or another officer having similar power, and such
filing or appointment is not vacated within thirty (30) days
or there is any levy under attachment or execution or
similar process which is not vacated or removed by payment
or bonding within ten (10) days.
g. Any attempted or actual sale, transfer or assignment by
DEALER of this AGREEMENT, ownership interests in the DEALER,
or any of the rights granted DEALER under this AGREEMENT, or
any attempted or actual transfer, assignment or delegation
by DEALER of any of the responsibilities assumed by it under
the AGREEMENT, including but not limited to removal,
withdrawal or change of Owner or DEALER PRINCIPAL, without
the prior written consent of PETERBILT;
2. Termination Upon Sixty (60) Days Notice. If any of the following
events has occurred and PETERBILT determines that the matter may
require termination of this AGREEMENT, PETERBILT will so advise
DEALER in writing. If DEALER does not correct the condition
within thirty (30) days after notice is sent, PETERBILT will have
the right to terminate this AGREEMENT upon an additional sixty
(60) days notice, subject to DEALER's right to arbitrate under
Article IX. Events which may result in such termination include:
a. he conduct, directly or indirectly, of DEALER's operations
from a facility other than a facility and location
specifically approved in Addendum B, without the prior
written consent of PETERBILT;
b. Any sale or transfer, by operation of law or otherwise, of
any of the location(s) approved in Addendum B or of
substantially all of the assets required in the conduct of
DEALER's operations, without the prior written consent of
PETERBILT;
c. Any dispute, disagreement or controversy between or among
Owners, DEALER PRINCIPALS, officers or managers of DEALER
which, in the sole opinion of PETERBILT, adversely affects
the operations, management, reputation or business interests
of DEALER or PETERBILT or the reputation of PETERBILT's
PRODUCTS;
d. Any refusal to permit PETERBILT to examine or audit DEALER's
accounts and records as provided in Article V upon receipt
by DEALER of written notice from PETERBILT requesting such
permission or information;
e. Repeated failure of DEALER to furnish timely sales or
financial information and related data;
f. Failure of DEALER to establish or maintain required net
working capital or adequate wholesale credit lines;
g. Failure of DEALER to pay PETERBILT for any PRODUCTS in
accordance with the terms and conditions of sale;
h. Failure of DEALER to accept an amended form of the AGREEMENT
or renewal within thirty (30) days after its presentation to
DEALER if the AGREEMENT is substantially the same as offered
and accepted by a substantial majority of PETERBILT dealers
or if any applicable law or regulation, or any new
interpretation thereof indicates that a change in any of the
provisions of the AGREEMENT is necessary or desirable;
Page 8 of 13
<PAGE> 14
i. Entry by DEALER into a written agreement to sell and service
vehicles for another truck manufacturer at an exclusive
facility identified in Addendum B;
j. Other than performance failures set out below in Article
VIII.B.3, any other failure to comply with material
provisions of the AGREEMENT and/or minimum standards set
forth in Addenda to the AGREEMENT.
3. Termination For Failure of Performance on Ninety (90) Days
Notice. If, upon evaluation of DEALER's performance pursuant to
Addenda B and C, PETERBILT determines that DEALER has failed to
perform adequately its sales responsibilities or to provide
adequate facilities, PETERBILT will review promptly with DEALER
the nature and extent of such failure(s). PETERBILT will notify
DEALER in writing of DEALER's failure of performance and will
grant DEALER one hundred eighty (180) days from the date of such
notice to correct such failure(s). If DEALER fails or refuses to
correct such failure(s) or has not made substantial progress
towards remedying such failure(s) at the expiration of such
period, PETERBILT may terminate this AGREEMENT upon ninety (90)
days notice.
4. Termination Based on Market Withdrawal. This AGREEMENT will
terminate upon the effective date of PETERBILT's ceasing to
manufacture or sell PRODUCTS subject to any notice requirements
under applicable federal or state laws.
5. Termination Upon Death or Incapacity. PETERBILT will have the
right to terminate this AGREEMENT in the event of the death or
incapacity of any Owner or DEALER PRINCIPAL identified in
Addendum D, upon ninety (90) days written notice to DEALER.
Notwithstanding its right to terminate under this paragraph 5,
PETERBILT agrees to permit succession to majority ownership or
DEALER PRINCIPAL by any person provided they are approved as an
Owner or DEALER PRINCIPAL by PETERBILT in accordance with the
then current policies and procedures of PETERBILT. Provided
DEALER is not then in default under any of the provisions of this
Article VIII, Company also will grant DEALER one hundred eighty
(180) days from the date of such death or incapacity to submit a
succession plan for PETERBILT's approval.
C. EFFECTIVE DATE OF TERMINATION. If any period of notice of termination
required under this Article VIII is less than that required by
applicable law, the period of notice required will be deemed to be the
minimum period required by such law.
D. EFFECT OF TERMINATION.
1. The Right to Purchase PRODUCTS. Upon sending any notice of
termination, expiration or non-renewal, PETERBILT will have no
further obligation to sell and DEALER will have no right to
purchase any PRODUCTS. Any decision to permit DEALER to purchase
PRODUCTS thereafter will be in PETERBILT's sole discretion and
will not be construed as a waiver of the termination or a
renewal, extension or continuation of this AGREEMENT. Upon the
expiration or prior termination of this AGREEMENT, PETERBILT will
have the right to cancel any and all pending requests by DEALER
to purchase PRODUCTS and any shipments scheduled for delivery to
DEALER.
Page 9 of 13
<PAGE> 15
2. Repurchase of PRODUCTS.
a. PETERBILT's Obligations. Upon expiration, non-renewal or
termination of this AGREEMENT, PETERBILT will repurchase
from DEALER the following PRODUCTS which DEALER initially
purchased from PETERBILT or from a source designated by
PETERBILT:
(i) New, unused, unmodified and undamaged current model
PETERBILT Vehicles then in DEALER's inventory. The
repurchase price will be the original purchase price
paid by DEALER, less all prior refunds or other
allowances made by PETERBILT to DEALER with respect
to the original purchase (and less standard freight
charges).
(ii) New, unused and undamaged Genuine Parts and
Accessories then in DEALER's inventory which are in
good and saleable condition, provided that they are
listed in the then current PETERBILT Dealer Parts
Price List. The prices for such Genuine Parts and
Accessories will be the prices last established by
PETERBILT for dealers in the area in which DEALER is
located (less standard re-stocking and freight
charges).
(iii) Tools and equipment required by PETERBILT and then
owned by DEALER especially designed for servicing
PETERBILT Vehicles. The purchase prices for tools
and equipment will be the price paid by DEALER less
appropriate depreciation or such other price as the
parties may negotiate.
PETERBILT shall have no obligation to repurchase
PRODUCTS as provided herein in the event DEALER and
PETERBILT agree to renew this AGREEMENT.
b. DEALER's Responsibilities. DEALER's right to reimbursement
under Article VIII.D.2.a is contingent upon the following:
(i). Within thirty (30) days after the date of expiration
or the effective date of termination of this
AGREEMENT, DEALER will request PETERBILT in writing
to purchase the qualifying inventory and tools and
will provide PETERBILT with a detailed and accurate
list of such inventory and tools. After receiving
the list, PETERBILT may, in its discretion, enter
upon DEALER's premises to verify the inventory and
tools as qualifying under Article VIII.D.2.a.
(ii) DEALER agrees to execute and deliver to PETERBILT
instruments satisfactory to PETERBILT conveying good
and marketable title to the inventory and tools as
PETERBILT may require. If such property is subject
to any lien or charge of any kind, DEALER agrees to
secure the discharge and satisfaction thereof prior
to the repurchase of the inventory and tools.
(iii) DEALER agrees to allow PETERBILT to remove, at its
own expense, all signage bearing PETERBILT
Trademarks before DEALER is eligible for payment
hereunder.
c. Payment by PETERBILT. PETERBILT will make payment for all
repurchased items as soon as practicable upon DEALER's
compliance with the obligations set forth in Article
VIII.D.2.b, above. Any amount due DEALER at termination
shall be fully subject to set-off against any amounts owed
PETERBILT by DEALER.
Page 10 of 13
<PAGE> 16
IX. VOLUNTARY ARBITRATION OF DISPUTES
In order to encourage DEALER and PETERBILT to resolve disputes in an
efficient and inexpensive manner, DEALER and PETERBILT may mutually agree
that any disputes, protests, controversies or claims, whether for damages,
stays of action or otherwise, ("Disputes"), may be resolved by arbitration.
If DEALER and PETERBILT agree to arbitrate a Dispute, it shall be subject
to arbitration under the following procedures:
A. FILING CLAIM. Unless otherwise agreed, arbitration may be initiated by
DEALER filing a written request therefor no later than sixty (60) days
after PETERBILT and DEALER have agreed to resolve the Dispute by
arbitration. DEALER's written request to arbitrate, together with the
appropriate filing fee, shall be filed by DEALER with the Office of
the American Arbitration Association located nearest to the DEALER,
which shall then become the site of the arbitration proceedings,
unless otherwise agreed between the parties. The arbitration request
should state clearly and completely the nature of DEALER's claim and
its basis, the amount involved, if any, and the remedies sought.
B. EXCLUSIVE REMEDY. Unless the parties specifically agree otherwise at
the time they elect to arbitrate the Dispute, arbitration shall be the
sole and exclusive remedy of DEALER for that Dispute, and the decision
and award of the arbitrator shall be final and binding on both
parties. At DEALER's request, PETERBILT will agree to mediation of the
Dispute prior to binding and final arbitration.
C. PROCEDURES. The arbitration and/or mediation will be conducted in
accordance with the Commercial Rules of the American Arbitration
Association then in effect (hereinafter referred to as the "Commercial
Rules"), except as modified by mutual agreement of the parties, and in
compliance with the United States Arbitration Act (9 U.S.C. Section 1,
et. seq.).
D. CHOICE OF ARBITRATOR. Unless the DEALER at its option requests three
(3) arbitrators, the arbitration shall be heard by a single arbitrator
mutually agreeable to the parties, who, unless the parties agree
otherwise, shall be an attorney at law admitted to practice for at
least ten (10) years with substantial commercial experience and
selected from a panel of American Arbitration Association arbitrators.
If the parties fail to reach agreement within fifteen (15) days of the
DEALER's request to arbitrate, an arbitrator (or three arbitrators, if
the DEALER so elects) meeting these qualifications shall be named by
the American Arbitration Association from such panel in accordance
with the Commercial Rules, provided that the arbitrator(s) selected
shall not have previously provided legal representation in litigation
between motor vehicle manufacturers and motor vehicle dealers.
E. ARBITRATOR'S AWARD. If the arbitrator finds that PETERBILT has acted
in accordance with provisions of this AGREEMENT, the standards set
forth in 15 U.S.C. Sections 1221-1225 (the "Dealer's Day in Court
Act"), and any applicable federal, state or local law, the arbitrator
shall render an award in favor of PETERBILT. If the award in favor of
PETERBILT relates to termination or nonrenewal of this AGREEMENT, the
termination or nonrenewal shall be expressly recognized by DEALER as
having been made without breach by PETERBILT of the AGREEMENT, the
Dealer's Day in Court Act, or any applicable federal, state or local
law. The termination or nonrenewal shall then become effective on the
date of the award. If the arbitrator renders an award in favor of
DEALER relating to a Dispute involving termination, PETERBILT's notice
of termination shall be void and shall not be deemed to constitute a
breach of this AGREEMENT. The arbitrator shall not have the authority
to award punitive damages for any Dispute or to impose remedies
unavailable in a court of law. The decision and award of the
arbitrator shall be conclusive as to all matters within the
arbitrator's jurisdiction in all other proceedings between parties,
their successors or assigns, and judgment upon the award may be
entered in any Court of competent jurisdiction.
Page 11 of 13
<PAGE> 17
F. PAYMENT OF FEES. The parties agree to compensate the arbitrator
commensurate with the professional standing of the arbitrator and in
accordance with the Commercial Rules. The compensation of the
arbitrator, the administrative fees and charges of the American
Arbitration Association, and the other expenses of the arbitration
shall be borne equally by the parties and each party shall bear its
own legal fees, provided that in all cases in which the DEALER is
entitled to recovery of its legal fees under applicable state or
federal law, PETERBILT shall pay such fees.
G. TIME PERIOD. Unless PETERBILT and DEALER specifically agree to the
contrary, and subject to the Commercial Rules and the procedures of
the American Arbitration Association, the arbitration hearing shall be
concluded not more than one hundred and eighty (180) days after the
date of DEALER's written request to arbitrate.
X. DEFENSE AND INDEMNIFICATION BY PETERBILT
PETERBILT will assume the defense of DEALER and agrees to indemnify and
hold DEALER harmless in any legal proceeding naming DEALER as a defendant
and involving any PRODUCT when the proceeding involves allegations of:
breach of warranty, or a defect in manufacture or design; provided that
PETERBILT has available sufficient evidence to support the conclusion that
DEALER has not done or failed to do any act which would provide an
independent basis for any allegations of liability against DEALER. DEALER
agrees to cooperate fully in developing the facts necessary for defense of
the lawsuits whether or not DEALER remains a party. The obligations of the
parties set forth in this Article X shall survive the termination of this
AGREEMENT.
XI. MISCELLANEOUS PROVISIONS
A. ENTIRE AGREEMENT. This AGREEMENT and Addenda constitute the entire
AGREEMENT made by the parties and cancels and supersedes any and all
previous agreements relating to the subject matters covered herein.
B. AMENDMENT. No amendment of any portion of this AGREEMENT will be valid
or binding unless approved in writing by an authorized representative
of each of the parties.
C. COLLATERAL ASSIGNMENT. DEALER may not pledge, assign, hypothecate, or
grant a security interest in, this AGREEMENT or DEALER's right, title
or interest therein.
D. SEVERABILITY. If any term or provision of this AGREEMENT is adjudged
by any court or government agency to be invalid, void or
unenforceable, such term or provision will be deemed deleted from this
AGREEMENT and the remaining provisions thereof will continue in full
force and effect.
E. GOVERNING LAW. This AGREEMENT will be governed and construed according
to the laws of the state in which DEALER is located. To the extent a
valid law of any jurisdiction requires any obligations or rights under
this AGREEMENT to be exercised other than in accordance with this
AGREEMENT, the rights and obligations shall be exercised in accordance
with such law. All provisions of this AGREEMENT shall be construed in
light of this paragraph.
F. WAIVERS. Any failure of either party at any time to require
performance by the other party of any provision herein will not be
deemed to be a waiver by such party of any subsequent breach or
violation of the same or any other provision.
G. NOTICES. Any notice required to be given by either party to the other
under or in connection with this AGREEMENT will be in writing and
delivered personally or by certified mail, return receipt requested
and will be effective from the date of receipt.
Page 12 of 13
<PAGE> 18
H. NEW AND SUPERSEDING DEALER AGREEMENTS. In the event any new and
superseding form of this AGREEMENT is offered by PETERBILT to all
authorized PETERBILT dealers at any time prior to the expiration of
the term of this AGREEMENT, and a substantial majority (no fewer than
sixty-five percent (65%) of PETERBILT dealers) accept it, PETERBILT
may, by written notice to DEALER, terminate this AGREEMENT and replace
it with a new AGREEMENT in the new and superseding form for a term not
less than the then unexpired term of this AGREEMENT. In that event,
such termination shall be effective, without further notice, upon the
earlier of: (1) execution of a new and superseding form of this
AGREEMENT by DEALER; or (ii) thirty (30) days after a new AGREEMENT is
offered and sent to DEALER for execution.
I. INDEPENDENT ENTITY. DEALER is not PETERBILT's agent in any respect and
has not been granted any express or implied authority to incur
obligations or make representations binding upon PETERBILT.
By their signatures hereto, PETERBILT and DEALER agree to abide by the terms and
conditions of this AGREEMENT in good faith and for their mutual benefit.
. PETERBILT MOTORS COMPANY
- -----------------------------
By: By:
------------------------ ------------------------------
W.M. Rush II Nicholas P. Panza
Title: Chairman & CEO Title: General Manager
Date Date: October 5, 1997
-------------
Page 13 of 13
<PAGE> 19
ADDENDUM A
PRODUCTS
--------------------------------------
-----------------
Effective ___________, DEALER has a non-exclusive right to buy the following
Vehicles:
Heavy Duty Models 320, 362, 357, 377, 378, 379, 385 and Medium Duty Model 330
trucks/tractors bearing the name "Peterbilt" and Genuine Parts and Accessories
consisting of new parts, components and accessories manufactured by or for
PETERBILT and/or the PACCAR Parts division of PACCAR Inc, designed primarily for
use on such Vehicles (the Vehicles and their Genuine Parts and Accessories are
referred to in the Dealer Sales and Service Agreement collectively as
"PRODUCTS").
This Addendum shall remain in full effect until superseded by a new Addendum A
furnished DEALER by PETERBILT. This Addendum A cancels and supersedes any
previous Addendum A.
PETERBILT MOTORS COMPANY
By:
------------------------------
Nicholas P. Panza
Title: General Manager
Date: October 5, 1997
Page 1 of 1
<PAGE> 20
ADDENDUM B
DEALERSHIP LOCATION AND FACILITY STANDARDS
----------------------.
PETERBILT has entered into this Agreement in reliance upon DEALER's
representation that it will establish and maintain DEALER facilities and
operations only at the following location(s) identified in this Addendum:
Main: _______________ Exclusive Heavy Duty Yes
____________________ Exclusive Medium Duty: Yes
Facility Type: Full Service
Moreover, it is the mutual desire of DEALER and PETERBILT that DEALER's
facilities reflect a premium image and distinctive appearance consistent with
all other duly authorized PETERBILT dealers. DEALER agrees that the facilities
will at all times be in compliance with standards set forth in this Addendum, as
amended from time to time.
DEALER further agrees to the following:
1. Operating Hours. DEALER will maintain its DEALER operations open for
business during 5.5 days per week and 16 hours per day which are customary
and lawful for truck dealers where DEALER is located.
2. Signs. Subject to applicable law, DEALER will erect and maintain at the
DEALER location(s), at DEALER's expense, standard product and service signs
owned by PETERBILT, as well as such other signs authorized by PETERBILT as
are necessary to identify the DEALER Operations effectively and as
recommended by PETERBILT. DEALER shall in no way alter or modify the signs
without obtaining prior written approval from PETERBILT.
3. Computer Systems. DEALER will acquire, install, maintain and upgrade at
DEALER's sole expense, standardized electronic data processing systems,
business systems, communication systems and appropriate software compatible
with PETERBILT's systems. The computer terminals for the system will be
installed and maintained by DEALER at location(s) identified herein.
Furthermore, DEALER will use the systems in accordance with PETERBILT's
instructions.
4. Evaluation of DEALER Facilities. PETERBILT will periodically evaluate
DEALER's facilities in accordance with the terms of this Addendum.
PETERBILT will provide DEALER with a written evaluation.
DEALER will maintain a facility which will reflect favorably upon and preserve
the goodwill of DEALER, PETERBILT and all other PETERBILT dealers and which will
meet PETERBILT's current minimum facilities standards as to size, cleanliness,
appearance, features, Peterbilt signage and corporate identity. DEALER shall use
the Peterbilt name in its legal name and/or a dba in a manner or form subject to
PETERBILT's prior approval. At such time as sales show the requirement for
additional facilities within the geographic area used by PETERBILT to establish
DEALER's sales quotas for Vehicles and Genuine Parts and Accessories, DEALER may
be expected to establish outlets in additional locations with the prior written
approval of PETERBILT.
It is agreed that each facility shall meet the following minimum standards:
(1) At least 20 service bays adequate for servicing heavy-duty trucks.
(2) 10,040 square feet for parts storage with adequate racking of which
800 square feet will be used for visual display.
(3) Adequate tools for heavy equipment maintenance including the
following: N/A.
Page 1 of 2
<PAGE> 21
For facilities designated as "exclusive" in this Addendum, DEALER agrees that
the facility will be dedicated to selling and servicing PETERBILT PRODUCTS and
DEALER acknowledges that PETERBILT has entered into this AGREEMENT in reliance
on DEALER's representation to provide and maintain an exclusive facility which
will not be used by DEALER to represent competitive truck manufacturers.
For nonexclusive facilities approved by PETERBILT, DEALER recognizes that if it
engages in other business activities in the facilities and/or on the DEALER
location(s), the facilities necessary for the sale and servicing of PRODUCTS may
be adversely affected. For these reasons, DEALER agrees that it will not
substantially modify, relocate, change the usage of, reduce or expand the DEALER
location(s) or the facilities without PETERBILT's prior approval.
All changes in the DEALER location(s) and facilities that may be agreed upon by
DEALER and PETERBILT pursuant to this Addendum shall be reflected in a new
Addendum B which supersedes and cancels the existing Addendum B.
- PETERBILT MOTORS COMPANY
- -----------------------------------
By: By:
------------------------------ ------------------------------
W.M. Rush II Nicholas P. Panza
Title: Chairman & CEO Title: General Manager
Date: October 5, 1997 Date: October 5, 1997
Page 2 of 2
<PAGE> 22
ADDENDUM C
OPERATING REQUIREMENTS, PERFORMANCE GOALS AND SALES/SERVICE EVALUATION
OPERATING REQUIREMENTS. DEALER agrees to meet the following minimum operating
requirements to order, sell, and service PETERBILT Vehicles. DEALER will:
1. Employ at all times a minimum of 10 qualified salespeople who have
completed the training required to sell Vehicles and also employ a minimum
of 10 qualified and trained salespeople to sell other PRODUCTS.
2. Maintain a minimum inventory of at least 8 new and unused PETERBILT Heavy
Duty Vehicles and 2 new and unused PETERBILT Medium Duty Vehicles in stock
or on order for stock.
3. Employ at all times a minimum of 20 qualified service personnel who have
sufficient training to perform routine diesel truck maintenance and
overhaul procedures.
4. Purchase and maintain the recommended inventory of special tools necessary
for servicing the PETERBILT Vehicles.
5. Purchase and maintain a minimum parts inventory of PETERBILT Genuine Parts
and Accessories. The anticipated investment for these parts is
approximately $1,300,000. Inventory records will be maintained and
available to support this requirement.
Where this Dealer Sales and Service Agreement covers multiple locations, minimum
operating requirements for each location may be set forth in an attachment to
this Addendum.
PERFORMANCE GOALS, SALES AND SERVICE EVALUATIONS. PETERBILT will evaluate
DEALER's sales and service performance periodically and agrees to review such
evaluations with DEALER so that DEALER may take prompt action if necessary to
improve its sales and service performance. PETERBILT will provide DEALER with a
copy of such evaluation. PETERBILT will evaluate DEALER's performance based on
criteria set forth in Article II.A.2. of the Dealer Sales and Service Agreement
and this Addendum C, including but not limited to:
1. Achievement of fair and reasonable PERFORMANCE GOALS as PETERBILT may
establish at its discretion;
2. The trend of DEALER's sales and service performance over a reasonable
period of time;
3. The manner in which DEALER has conducted its sales and service operations,
including advertising, sales promotions and customer relations.
IT IS AGREED THAT DEALER'S PERFORMANCE GOALS FOR 2000 ARE:
<TABLE>
<S> <C>
HEAVY DUTY VEHICLES 2212
MEDIUM DUTY VEHICLES 360
PARTS TBD
</TABLE>
These performance goals are established in reliance on the DEALER's commitment
to promote maximum sales in the non-exclusive area consisting of the following
counties in the State of _____.
For Medium Duty products these performance goals are established in reliance on
the DEALER'S commitment to promote maximum sales in the non-exclusive area
consisting of ______county _____.
Page 1 of 2
<PAGE> 23
Upon providing DEALER one hundred and eighty (180) days prior written notice,
PETERBILT may in its sole discretion alter the area described above at any time
by written notice to DEALER and/or appoint additional dealers in the area
without altering the area.
DEALER may sell outside this area and other PETERBILT dealers may sell into the
area from approved locations. If PETERBILT uses this area in part or in whole to
establish performance goals for another PETERBILT dealer, the performance goals
established for DEALER in this AGREEMENT shall be adjusted accordingly.
In addition, DEALER agrees to take the following actions in the time period
stated below in order to improve dealership operations:
ACTION COMPLETION DATE
General: DEALER agrees the following counties will be deleted from
DEALER's area of primary marketing responsibility at the
sole discretion of PETERBILT to establish a Central Texas
primary marketing area: Anderson, Brazos, Freestone,
Houston, Leon, Madison, and Robertson.
PETERBILT MOTORS COMPANY
- ---------------------------
By: By:
---------------------- ------------------------------
W.M. Rush II Nicholas P. Panza
Title: Chairman & CEO Title: General Manager
Date: January 4, 2000 Date: January 4, 2000
Page 2 of 2
<PAGE> 24
ADDENDUM D
STATEMENT OF OWNERSHIP AND FINANCIAL AND MANAGEMENT STANDARDS
STATEMENT OF OWNERSHIP AND MANAGEMENT. This Addendum is executed effective as of
_____________ pursuant to Articles I and IV of the Agreement. PETERBILT enters
into the Agreement in reliance upon personnel qualifications, representations
and present financial condition of the persons identified below and upon
DEALER's assurances that the following persons and only the following persons
will be the owners of DEALER.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Title Percent Ownership
- ---- ----- -----------------
Rush Enterprises, Inc. *a Public Owned Corporation 100%
</TABLE>
DEALER recognizes that the effective performance of its obligations require that
experienced DEALER management be actively involved in DEALER operations at all
times. PETERBILT enters into this DEALER Sales and Service Agreement in reliance
upon the qualifications of to participate actively in the daily operation and
management of DEALER and upon DEALER's assurance that such person(s), and no
other person(s), will at all times function as DEALER PRINCIPAL(S) and/or
OPERATING MANAGER(S) and be considered as the individual(s) with complete
authority to make all decisions on behalf of DEALER with respect to DEALER's
operations.
NET WORKING CAPITAL. DEALER agrees to establish and maintain actual net working
capital in an amount not less than the minimum net working capital requirements
as determined by PETERBILT financial standards for dealership capitalization.
DEALER further agrees to invest or obtain additional funds within a reasonable
period of time to meet such minimum net working capital requirements.
WHOLESALE CREDIT. DEALER recognizes that in order to operate successfully, it
must maintain flooring lines of credit adequate to meet its ongoing obligations.
Accordingly, DEALER agrees to obtain, maintain and increase as PETERBILT may
require, adequate flooring and lines of credit from reputable financial
institution(s) or other credit source expressly approved by PETERBILT.
DEFAULT IN PAYMENT. Should DEALER when payment is due fail to pay for, or fail
to obtain financing to pay for, any PRODUCTS ordered by DEALER, PETERBILT may,
with respect to any such PRODUCTS, take any of the following actions:
(a) Store them at the sole risk and expense of DEALER;
(b) Cause them to be shipped elsewhere (including returning the same to
PETERBILT) at DEALER's expense, including expenses for storing,
handling, and shipping; or
(c) Sell them directly to any other PETERBILT dealer or other party, all
expenses or losses occasioned thereby to be borne by DEALER.
FINANCIAL MANAGEMENT PERSONNEL ASSISTANCE. PETERBILT agrees to make available
field personnel who will periodically advise DEALER on subjects relating to
financial management of DEALER.
OTHER FINANCIAL STANDARDS. DEALER agrees to comply with all other PETERBILT
financial standards, including changes or additions thereto, published by
PETERBILT from time to time. PETERBILT agrees that DEALER will have a reasonable
period of time to comply with changes or additions to PETERBILT financial
standards.
PETERBILT MOTORS COMPANY
- ----------------------------------
By: By:
----------------------------- ------------------------------
W.M. Rush II Nicholas P. Panza
Title: Chairman & CEO Title: General Manager
Date: October 5, 1997 Date: October 5, 1997
Page 1 of 1
<PAGE> 25
ADDENDUM E
RIGHT OF FIRST REFUSAL
This Addendum to the Dealer Sales and Service Agreement between PETERBILT and
DEALER is entered into as of the date set forth below.
WHEREAS, DEALER desires to have PETERBILT provide assistance in identifying
potential buyers in the event DEALER decides to sell its business, or any branch
thereof (and DEALER has not otherwise entered into an agreement with PETERBILT
governing succession); and
WHEREAS, PETERBILT desires to have an option to purchase and a right of first
refusal in the event DEALER decides to sell its business, or any branch thereof;
NOW, therefor, in consideration of the promises and mutual covenants of the
parties hereinafter set forth, it is agreed as follows:
1. DEALER shall give PETERBILT notice in writing before undertaking any
efforts to sell the dealership. The notice will contain a description of
the assets to be sold, the proposed selling price, and other terms relevant
to the sale. Upon request, PETERBILT agrees to provide assistance to DEALER
in locating buyer candidates acceptable to both PETERBILT and DEALER,
although DEALER shall independently negotiate any buy/sell agreement.
PETERBILT also agrees to make best efforts to conditionally approve
potential buyers to facilitate DEALER'S negotiations. Upon conditionally
approving a specific buyer, PETERBILT will waive its right of first refusal
as to that buyer.
2. In the event PETERBILT refuses to approve DEALER's proposed transfer or
sale of any ownership interest in the dealership, PETERBILT shall have
under Paragraph 4 herein, the right of first refusal in the event the
DEALER has entered into a written buy/sell agreement or, under Paragraph 5
herein, an option to purchase the dealership assets, including any
leasehold interest or realty, if the DEALER has not yet entered into such
an agreement.
3. If PETERBILT intends to exercise its right of first refusal and/or option
to purchase the dealership, it must so advise DEALER in writing of its
decision within thirty (30) days of receiving the DEALER'S written request
for approval of sale or transfer to a bona fide buyer identified in
DEALER's request. DEALER agrees that PETERBILT shall have the right to
assign its right to exercise its option to purchase or right of first
refusal to any third party it may select and PETERBILT hereby guarantees
the full payment of the purchase price by such assignee.
4. If PETERBILT has refused to approve the transfer or sale of DEALER'S
ownership or assets and DEALER has entered into a bona fide arms length
written agreement governing such transfer or sale, PETERBILT'S right under
this paragraph shall be a right of first refusal, permitting PETERBILT to
assume the buyer's rights and obligations under such written agreement. The
purchase price and other terms of sale shall be those set forth in such
agreement and any related documents. PETERBILT may request and DEALER
agrees to provide any and all supporting documents relating to the transfer
or sale which PETERBILT may require to assess the bona fides of the
agreement. Refusal to provide such documentation or to state that no such
documents exist shall create the presumption that the buy/sell agreement is
not a bona fide agreement.
<PAGE> 26
5. If PETERBILT has refused to approve the transfer or sale of DEALER'S
ownership or assets and DEALER has not entered into a bona fide arms length
written agreement governing such transfer or sale, then PETERBILT shall
have the option to purchase the principal tangible and intangible assets of
DEALER used in the dealership operations, including real estate and/or
leasehold interest, and to terminate the Dealer Sales and Service
Agreement. The purchase price for the dealership shall be the fair market
value of the business as negotiated by the parties.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date set
forth below.
PETERBILT MOTORS COMPANY
- ----------------------------------
By: By:
----------------------------- -----------------------------------
W.M. Rush II Nicholas P. Panza
Title: Chairman & CEO Title: General Manager
Date: October 5, 1997 Date: October 5, 1997
Page 2 of 2
<PAGE> 1
Exhibit 10.19
LETTER AGREEMENT - FINAL
March 29, 2000
Via: Facsimile
830-626-5314
Mr. Marvin Rush, Chairman
Rush Enterprises
P O Box 346630
San Antonio, Texas 78265-4630
Dear Marvin:
PACCAR Financial Corp. is pleased to offer this Letter Agreement confirming the
2000/2001 "financing plan" for the Rush Enterprises' Peterbilt dealerships
listed below. In consideration of this preferred finance plan, our mutual
expectation is to reach at least 20% new Peterbilt finance penetration (units
financed/units sold) in the year 2000 (about $110 million in finance volume) and
at least 25% in 2001. The program described below is intended for "day to day"
business, and the parties are free to negotiate terms for other transactions as
needs arise.
PROGRAM PERIOD
January 1, 2000 through December 31, 2001, unless terminated by either party
prior to its conclusion.
RATES
New
5 year Treasuries plus 3.40 percent
Used
3 year Treasuries plus 4.25 percent
(1) Three Year Treasury Rates for new and used, respectively, will be based on
the weekly H-15 Treasury Interest Rate report. The rates appearing on the
last Tuesday of the preceding month will be used for the following month.
(2) The above rate structure will also be used for PFC's owner operator lease
program (stream rate). 60-month leases with 10% residual will be at a .25%
premium due to the longer amortization. The cost of PFC's liability
insurance will be added to this rate structure, for owner operator leases.
DEALER LIABILITY
8% New Non Fleet
5%* New Transactions of 10 or more units
10% Used
* 5% fixed, all other liability amounts based on the declining balance.
Parties are free to negotiate LL of other amounts as conditions warrant.
Nonrecourse is available for qualified credits.
<PAGE> 2
Mr. Marvin Rush, President
March 29, 2000 - Final
Page Two
ANNUAL LOSS CAP
The annual loss cap for the program period (2000 and 2001) will be $500,000 per
year, plus any additional recourse agreed to by the parties. This will be an
aggregate cap for all the Rush Peterbilt dealerships.
DEALERSHIPS
Rush Truck Centers of Texas, Inc.
Rush Truck Centers of California, Inc.
Rush Truck Centers of Colorado, Inc.
Rush Truck Centers of Louisiana, Inc.
Rush Truck Centers of Oklahoma, Inc.
Rush Truck Centers of Arizona, Inc.
Rush Truck Centers of New Mexico, Inc.
DEALER RESERVE
Dealer reserve will be paid 100% upfront on new trucks up to a 3% dealer reserve
and up to a 5% dealer reserve on used trucks. Reserve amounts above 3% and 5%
will be split pro rata 75% for Rush and 25% for PFC. PFC's 25% will be added to
the program rate. The following illustrates this concept:
<TABLE>
<CAPTION>
Dealer Reserve
Used New PFC Rate
- --------------- -------- ---------
<S> <C> <C>
Up to 5% Up to 3% No change
5.4% 3.4% +.1%
5.8% 3.8% +.2%
Etc. Etc. Etc.
</TABLE>
Dealer fees on the owner operator lease program in excess of 10% of the
capitalized equipment cost will be split 50/50 with PFC.
The dealer's reserve payment and dealer fee on leases will be paid on the 15 th
of the following month. The difference in payment methods will be used on all
finance transactions. Dealer fees on leases will be expressed as a percentage of
the capitalized equipment cost.
CHARGEBACKS
Early terminations of any retail finance contract or modification of terms due
to a bankruptcy proceeding will result in a chargeback of unearned dealer
reserve to Rush Enterprises based on current PFC practices, where dealer reserve
is earned using the same method as interest earned on the underlying retail
contract.
On owner operator lease transactions, 100% of unearned dealer fees will be
charged back on a straight line basis throughout the term of the lease on all
early termination defaults, repossessions and bankruptcies where terms are
amended.
Transactions will be evaluated based on PFC's credit underwriting standards. PFC
will provide standard administrative services including contract administration
and collections.
This Letter Agreement shall be and hereby is incorporated into the Agreement for
Acquisition of Secured Retail Installment Paper between
<PAGE> 3
Mr. Marvin Rush, President
March 29, 2000 - Final
Page Three
Rush Truck Centers of Texas, Inc., Rush Truck Centers of California,
Inc., Rush Truck Centers of Colorado, Inc., Rush Truck Centers of
Louisiana, Inc., and Rush Truck Centers of Oklahoma, Inc., and PACCAR
Financial Corp., dated September 14, 1998, as well as any amendments
thereto (including work to incorporate the dealerships in New Mexico
and Arizona), and the Lease Marketing Agreement between the same
parties and of even date therewith, as well as any amendments and
attachments thereto (collectively, the "Rush Dealer Agreements").
Except for the modifications stated herein, the Rush Dealer Agreements
shall remain in full force and effect unchanged.
INSURANCE
PFC is pleased to offer the following commission structure for physical
damage insurance for the year 2000:
o Standard Commission - 12.5% of Net Written Premium for all business (fleet
and non-fleet) paid monthly.
o Quarterly Bonus - 3.25% of Net Written Premium on volume over $300k (not
retroactive) paid quarterly.
o Annual Bonus - 1.25% of Net Written Premium on volume over $1.5 million
(retroactive) paid annually.
o Contingency Income - PFC's standard contingency program will remain in
effect, allowing up to 8% of annual earned premium based on loss ratios.
Contingency income is paid annually.
It is anticipated that the quarterly and annual targets will increase in 2001
and beyond and as our insurance relationship develops. Other Items:
1. Other insurance in PFC contracts - With PFC's competitive commission
structure outlined above, there should be little need to place other
physical damage insurance in PFC contracts. However, PFC will consider
exceptions when specific customer needs or market conditions warrant those
exceptions.
2. Specified perils versus comprehensive coverage - At this point in time, PFC
does not offer comprehensive coverage. To manage your E&O exposure, we
understand that you have the customer sign an acknowledgement in cases
where specified perils is sold.
3. Claims service - PFC's dedicated claims group, part of AIG, provides
outstanding claims service. The utilization of independent appraisers
allows for quick authorization of repairs and fast overall service. As we
experience claims over the next year, we will review this service together.
If the service is not satisfactory, we can develop a program similar to the
Rapid Repair program used by Associates.
<PAGE> 4
Mr. Marvin Rush, President
March 29, 2000 - Final
Page Four
We appreciate the opportunity to provide this program to Rush Enterprises, Inc.
and look forward to supporting your efforts to provide financial services to
truck owners in your territories. This proposal contains proprietary information
and may not be disclosed to anyone outside Rush Enterprises, Inc. without prior
written consent of PACCAR Financial Corp.
Please call me if you have any questions.
Sincerely,
Andrew J. Wold
President
AJW:ejb
rushltragreement
Acknowledged and Agreed to this ______ day of January, 2000.
By:
-------------------------------------
Rush Truck Centers of Texas, Inc.
Rush Truck Centers of California, Inc.
Rush Truck Centers of Colorado, Inc.
Rush Truck Centers of Louisiana, Inc.
Rush Truck Centers of Oklahoma, Inc.
Rush Truck Centers of Arizona, Inc.
Rush Truck Centers of New Mexico, Inc.
<PAGE> 1
Exhibit 11.1
72
<PAGE> 2
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME AND EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
BASIC EARNINGS PER SHARE CALCULATION (UNAUDITED)
<S> <C> <C> <C> <C>
Net Income $ 4,775 $ 3,862 $ 16,166 $ 10,797
========== ========== ========== ==========
Weighted average number of common shares outstanding 7,002 6,644 6,735 6,644
Earnings per share - Basic $ 0.68 $ 0.58 $ 2.40 $ 1.62
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE CALCULATION
Net Income $ 3,862 $ 3,862 $ 16,166 $ 10,797
========== ========== ========== ==========
Weighted average number of common shares outstanding 7,002 6,644 6,735 6,644
Weighted average number of common share equivalents applicable to
stock options 178 29 152 26
---------- ---------- ---------- ----------
Common shares and common share equivalents 7,180 6,673 6,887 6,670
========== ========== ========== ==========
Earnings per share - Diluted $ 0.66 $ 0.58 $ 2.34 $ 1.62
========== ========== ========== ==========
</TABLE>
73
<PAGE> 1
Exhibit 23.1
74
<PAGE> 2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 (SEC File No. 333-07043 and
333-70451).
/s/ARTHUR ANDERSEN LLP
San Antonio, Texas
March 26, 2000
75
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANICAL STATEMENT OF RUSH ENTERPRISES, INC. FOR THE YEAR ENDED DECEMBER 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,004
<SECURITIES> 0
<RECEIVABLES> 29,767
<ALLOWANCES> 0
<INVENTORY> 173,565
<CURRENT-ASSETS> 224,072
<PP&E> 120,007
<DEPRECIATION> (16,581)
<TOTAL-ASSETS> 365,696
<CURRENT-LIABILITIES> 221,229
<BONDS> 65,414
0
0
<COMMON> 70
<OTHER-SE> 74,782
<TOTAL-LIABILITY-AND-EQUITY> 365,696
<SALES> 0
<TOTAL-REVENUES> 808,355
<CGS> 673,563
<TOTAL-COSTS> 773,227
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,185
<INCOME-PRETAX> 26,943
<INCOME-TAX> 10,777
<INCOME-CONTINUING> 16,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,166
<EPS-BASIC> 2.40
<EPS-DILUTED> 2.34
</TABLE>
