1
STOCK PURCHASE AGREEMENT
DATED AS OF
FEBRUARY 20, 1998
BY AND AMONG
RUSH ENTERPRISES, INC.
RUSH RETAIL CENTERS, INC.
D&D FARM & RANCH SUPERMARKET, INC.
AND
XXXXXXXXX XXXXXXX
2
TABLE OF CONTENTS
-----------------
1. Definitions................................................................................... 1
1.1 Acquisition.......................................................................... 1
1.2 Adverse Consequences................................................................. 1
1.3 Affiliate or affiliate............................................................... 1
1.4 Agreement............................................................................ 1
1.5 Audited Financial Statements......................................................... 1
1.6 Basis................................................................................ 2
1.7 Business Combination................................................................. 2
1.8 Business Day......................................................................... 2
1.9 Cash Consideration................................................................... 2
1.10 Closing.............................................................................. 2
1.11 Closing Date......................................................................... 2
1.12 Closing Date Balance Sheet........................................................... 2
1.13 Code................................................................................. 2
1.14 Company Contracts.................................................................... 2
1.15 Company Licenses..................................................................... 2
1.16 Company Stock........................................................................ 2
1.17 Confidential Information............................................................. 2
1.18 Contaminated Site List............................................................... 2
1.19 Defensible Title..................................................................... 3
1.20 Employee Plans....................................................................... 3
1.21 Environmental Conditions............................................................. 3
1.22 Environmental Information............................................................ 3
1.23 Environmental Laws................................................................... 3
1.24 Environmental Liabilities............................................................ 3
1.25 Environmental Remediation Costs...................................................... 4
1.26 ERISA................................................................................ 4
1.27 ERISA Affiliate...................................................................... 4
1.28 ESA.................................................................................. 4
1.29 Exchange Act......................................................................... 4
1.30 Feasibility Period................................................................... 4
1.31 Financial Statements................................................................. 4
1.32 Governmental Entity.................................................................. 4
1.33 Governmental Authority............................................................... 4
1.34 Governmental Requirement............................................................. 5
1.35 Hazardous Materials.................................................................. 5
1.36 Intellectual Property................................................................ 5
1.37 IRS.................................................................................. 5
1.38 Knowledge............................................................................ 5
1.39 Liability............................................................................ 5
1.40 Market Price......................................................................... 5
1.41 Material Adverse Change.............................................................. 5
1.42 Material Adverse Effect.............................................................. 5
1.43 Ordinary Course of Business.......................................................... 6
1.44 Parties.............................................................................. 6
1.45 PBGC................................................................................. 6
1.46 Permitted Exceptions................................................................. 6
-i-
3
1.47 Person............................................................................... 6
1.48 Promissory Note...................................................................... 6
1.49 Real Property........................................................................ 6
1.50 Purchase Price....................................................................... 6
1.51 Regulatory Authority................................................................. 6
1.52 Release.............................................................................. 6
1.53 Rush Stock........................................................................... 6
1.54 SEC.................................................................................. 6
1.55 Securities Act....................................................................... 6
1.56 Security Interest.................................................................... 7
1.57 Subsidiary........................................................................... 7
1.58 Tax.................................................................................. 7
1.59 Tax Return........................................................................... 7
1.60 Title Company........................................................................ 7
1.61 Title Commitment..................................................................... 7
1.62 Trade Secrets........................................................................ 7
1.63 UCC Report........................................................................... 7
1.64 Unaffiliated Firm.................................................................... 7
2. Purchase and Sale............................................................................. 7
2.1 Purchase and Sale.................................................................... 7
2.2 Closing.............................................................................. 8
2.3 Adjustments to Purchase Price........................................................ 8
3. Representations and Warranties Concerning the Company......................................... 10
3.1 Organization, Etc.................................................................... 10
3.2 Subsidiaries......................................................................... 11
3.3 Capitalization....................................................................... 11
3.4 Authorization........................................................................ 11
3.5 No Violation......................................................................... 12
3.6 Approvals............................................................................ 12
3.7 Financial Statements and Other Information........................................... 12
3.8 No Undisclosed Liabilities........................................................... 14
3.9 Corporate Action..................................................................... 14
3.10 Events Subsequent to April 30, 1997.................................................. 14
3.11 Taxes................................................................................ 16
3.12 Litigation........................................................................... 18
3.13 Compliance with Laws................................................................. 18
3.14 Title to and Condition of Property................................................... 18
3.15 Environmental Matters................................................................ 21
3.16 Inventories.......................................................................... 22
3.17 Contracts............................................................................ 23
3.18 Employee and Labor Matters and Plans................................................. 24
3.19 Insurance Policies................................................................... 28
3.20 Records.............................................................................. 29
3.21 No Illegal or Improper Transactions.................................................. 29
3.22 Brokerage Fees....................................................................... 29
3.23 No Product Liabilities; Product Warranties........................................... 29
3.24 Suppliers and Customers.............................................................. 29
-ii-
4
3.25 Intellectual Properties.............................................................. 30
3.26 Licenses............................................................................. 31
3.27 Restrictive Documents and Territorial Restrictions................................... 32
3.28 No Misleading Statements............................................................. 32
4. Additional Representations and Warranties Relating to Seller.................................. 32
4.1 Due Authorization.................................................................... 32
4.2 No Conflict.......................................................................... 33
4.3 Stock................................................................................ 33
4.4 Brokers.............................................................................. 33
5. Representations and Warranties of Purchaser................................................... 34
5.1 Organization......................................................................... 34
5.2 Due Authorization.................................................................... 34
5.3 No Conflict.......................................................................... 34
5.4 Brokers.............................................................................. 35
5.5 Securities Act....................................................................... 35
6. Pre-closing Covenants......................................................................... 35
6.2 Notices and Consents................................................................. 35
6.3 Operation of Business................................................................ 35
6.4 Preservation of Business............................................................. 36
6.5 Full Access.......................................................................... 36
6.6 Notice of Developments............................................................... 36
6.7 Updated Financial Statements......................................................... 36
6.8 Exclusivity.......................................................................... 36
6.9 Environmental Inspections and Assessments............................................ 37
6.10 Schedules............................................................................ 37
6.11 Inventory Audit...................................................................... 37
6.12 Company Information.................................................................. 37
7. Post-closing Covenants........................................................................ 38
7.1 General.............................................................................. 38
7.2 Litigation Support................................................................... 38
7.3 Transition........................................................................... 38
7.4 Confidentiality...................................................................... 38
7.5 Tax Matters.......................................................................... 39
8. Conditions to Obligation to Close............................................................. 41
8.1 Conditions to Obligation of Purchaser................................................ 41
8.2 Conditions to Obligation of Seller................................................... 43
9. Indemnity by Seller........................................................................... 44
9.1 Survival of Representations and Warranties........................................... 44
9.2 Indemnification Provisions for Benefit of the Purchaser and
Rush.......................................................................................... 45
9.3 Indemnification Provisions for Benefit of the Seller................................. 46
9.4 Matters Involving Third Parties...................................................... 46
9.5 Determination of Adverse Consequences................................................ 47
-iii-
5
9.6 Other Indemnification Provisions..................................................... 47
9.7 Indemnification if Negligence of Indemnitee.......................................... 48
9.8 Releases............................................................................. 48
10. Offset Provisions............................................................................. 49
11. Termination................................................................................... 49
11.1 Termination of Agreement............................................................. 49
11.2 Effect of Termination................................................................ 50
12. Requirements of Securities Laws............................................................... 50
12.1 Accredited Investors................................................................. 50
12.2 Legend............................................................................... 51
12.3 SEC Documents........................................................................ 51
13. Non-Competition Agreement..................................................................... 51
13.1 Non-Competition...................................................................... 51
13.2 Judicial Reformation................................................................. 52
13.3 Customer Lists; Non-Solicitation..................................................... 52
13.4 Covenants Independent................................................................ 52
13.5 Remedies............................................................................. 53
13.6 Exceptions........................................................................... 53
14.1 Survey............................................................................... 53
14.2 Remedies for Failure to Deliver Survey............................................... 54
15. Title Commitment and Condition of Title....................................................... 54
15.1 Title Commitment..................................................................... 54
15.2 UCC Reports.......................................................................... 55
15.3 Disclosure of Exceptions by Title Commitment and UCC Report.......................... 55
16. Environmental Studies and Remediation Activities.............................................. 56
16.1 Environmental Studies................................................................ 56
16.2 Remediation.......................................................................... 56
16.3 No Waiver............................................................................ 57
17. Miscellaneous................................................................................. 57
17.1 Damage to Assets..................................................................... 57
17.2 Expenses............................................................................. 57
17.3 Further Actions...................................................................... 57
17.4 Dispute Resolution................................................................... 57
17.5 Effect of Due Diligence.............................................................. 59
17.6 Press Releases and Public Announcements.............................................. 59
17.7 No Third Party Beneficiaries......................................................... 59
17.8 Entire Agreement..................................................................... 59
17.9 Succession and Assignment............................................................ 59
17.10 Counterparts......................................................................... 60
17.11 Headings............................................................................. 60
17.12 Notices.............................................................................. 60
17.13 Governing Law........................................................................ 61
-iv-
6
17.14 Amendments and Waivers...................................................... 61
17.15 Severability................................................................ 61
17.16 Expenses.................................................................... 61
17.17 Construction................................................................ 61
17.18 Incorporation of Exhibits, Annexes, and Schedules........................... 62
17.19 Specific Performance........................................................ 62
-v-
7
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of February 20, 1998 (this
"Agreement"), by and among RUSH RETAIL CENTERS, INC., a Delaware corporation
("Purchaser"), D&D FARM & RANCH SUPERMARKET, INC., a Texas corporation (the
"Company") and XXXXXXXXX XXXXXXX, the sole stockholder of the Company
("Seller"). RUSH ENTERPRISES, INC., a Texas corporation ("Rush"), joins this
Agreement for the limited purposes expressly set forth in this Agreement.
RECITALS:
WHEREAS, Seller owns all of the outstanding capital stock of the
Company.
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser, all of the outstanding capital stock of the Company on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions. The following terms shall have the following
respective meanings for all purposes of this Agreement:
1.1 Acquisition. "Acquisition" shall mean the purchase and sale
of the Company Stock pursuant to the terms of this Agreement.
1.2 Adverse Consequences. "Adverse Consequences" shall mean all
actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses, expenses
and fees, including court costs and reasonable attorneys' fees and
expenses.
1.3 Affiliate or affiliate. "Affiliate or affiliate" shall mean,
with respect to any Person, any other Person that, directly or
indirectly, controls or is controlled by or is under common control
with such Person, and shall include the spouse of any natural person.
As used in this definition of "Affiliate", the term "control" and any
derivatives thereof mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities, by
contract, or otherwise.
1.4 Agreement. "Agreement" shall mean this Stock Purchase
Agreement, as it may be from time to time amended.
1.5 Audited Financial Statements. "Audited Financial Statements"
shall have the meaning set forth in Section 3.7(a).
8
1.6 Basis. "Basis" shall mean any past or present fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction that
forms or could form the basis for any specified consequence.
1.7 Business Combination. "Business Combination" shall mean (i)
any merger or consolidation of, or share exchange involving, the
Company with or into any Person, (ii) any sale, lease, exchange,
transfer or other disposition (whether in one transaction or a series
of related transactions) of more than ten percent of the Company's
consolidated assets, (iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Company, (iv) any issuance, sale,
purchase or redemption of equity securities, any reclassification of
equity securities or recapitalization of the Company, and (v) any
transaction having an effect similar to those described above.
1.8 Business Day. "Business Day" shall mean any day, other than
a Saturday, Sunday or legal holiday under the Federal laws of the
United States.
1.9 Cash Consideration. "Cash Consideration" shall have the
meaning set forth in Section 2.1.
1.10 Closing. "Closing" shall mean the completion of the
Acquisition pursuant to this Agreement.
1.11 Closing Date. "Closing Date" shall mean the date the Closing
takes place.
1.12 Closing Date Balance Sheet. "Closing Date Balance Sheet"
shall have the meaning assigned to it in Section 2.3.
1.13 Code. "Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.14 Company Contracts. "Company Contracts" shall have the
meaning set forth in Section 3.17(a).
1.15 Company Licenses. "Company Licenses" shall have the meaning
set forth in Section 3.26.
1.16 Company Stock. "Company Stock" shall mean all the issued and
outstanding capital stock of D&D Farm & Ranch Supermarket, Inc.
1.17 Confidential Information. "Confidential Information" shall
mean any information concerning the businesses and affairs of the
Company that is not already generally available to the public.
1.18 Contaminated Site List. "Contaminated Site List" shall mean
any list, registry or other compilation established by any Governmental
Entity of sites that require or potentially require investigation,
removal actions, remedial
2
9
actions or any other response under any Environmental Laws or treaty
covering environmental matters, as the result of a Release or
threatened Release of any Hazardous Materials.
1.19 Defensible Title. "Defensible Title" shall mean such title
that is good, valid and indefeasible.
1.20 Employee Plans. "Employee Plans" shall have the meaning set
forth in Section 3.18(a).
1.21 Environmental Conditions. "Environmental Conditions" shall
mean any pollution, contamination, degradation, damage or injury caused
by, related to, arising from or in connection with the generation,
handling, use, treatment, storage, transportation, disposal, discharge,
Release or emission of any Hazardous Materials.
1.22 Environmental Information. "Environmental Information" shall
have the meaning set forth in Section 16.1.
1.23 Environmental Laws. "Environmental Laws" shall mean all
laws, rules, regulations, statutes, ordinances, decrees or orders of
any governmental entity relating to (a) the control of any potential
pollutant or protection of the air, water or land, (b) solid, gaseous
or liquid waste generation, handling, treatment, storage, disposal or
transportation, and (c) exposure to hazardous, toxic or other
substances alleged to be harmful, and includes without limitation final
and binding requirements related to the foregoing imposed by (i) the
terms and conditions of any license, permit, approval or other
authorization by any governmental entity, and (ii) applicable judicial,
administrative or other regulatory decrees, judgments and orders of any
governmental entity. The term "Environmental Laws" shall include, but
not be limited to the following statutes and the regulations
promulgated thereunder, as currently in effect or as subsequently
amended: the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the Clean Water
Act, 33 U.S.C. ss. 1251 et seq., the Resource Conservation Recovery Act
("RCRA"), 42 U.S.C. ss. 6901 et seq., the Superfund Amendments and
Reauthorization Act, 42 U.S.C. ss. 11011 et seq., the Toxic Substances
Control Act, 15 U.S.C. ss. 2601 et seq., the Water Pollution Control
Act, 33 U.S.C. ss. 1251, et seq., the Safe Drinking Water Act, 42
U.S.C. ss. 300f et seq., the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq.,
and any similar state, federal or local statute or ordinance.
1.24 Environmental Liabilities. "Environmental Liabilities" shall
mean any and all liabilities, responsibilities, claims, suits, losses,
costs (including remediation, removal, response, abatement, clean-up,
investigative and/or monitoring costs and any other related costs and
expenses, including without limitation Environmental Remediation
Costs), other causes of action recognized now or at any later time,
damages, settlements, expenses, charges, assessments, liens, penalties,
fines, pre-judgment and post-judgment interest, attorney fees and other
legal fees (a) pursuant to any agreement, order, notice, directive
(including directives embodied in Environmental Laws), injunction,
judgment or similar
3
10
documents (including settlements), or (b) pursuant to any claim by a
governmental entity or other person for personal injury, property
damage, damage to natural resources, remediation or similar costs or
expenses incurred or asserted by such governmental entity or person
pursuant to common law or statute.
1.25 Environmental Remediation Costs. "Environmental Remediation
Costs" shall mean all costs and expenses of actions or activities to
(a) clean-up or remove Hazardous Materials from the environment, (b)
prevent or minimize the movement, leaching or migration of Hazardous
Materials into the environment, (c) prevent, minimize or mitigate the
Release or threatened Release of Hazardous Materials into the
environment, or injury or damage from such Release, and (d) comply with
the requirements of any Environmental Laws. Environmental Remediation
Costs include, without limitation, costs and expenses payable in
connection with the foregoing for legal, engineering or other
consultant services, for investigation, testing, sampling and
monitoring, for boring, excavation and construction, for removal,
modification or replacement of equipment or facilities, for labor and
material, and for proper storage, treatment and disposal of Hazardous
Materials.
1.26 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.27 ERISA Affiliate. "ERISA Affiliate" shall mean any person,
firm or entity (whether or not incorporated) which, by reason of its
relationship with the Company, is required to be aggregated with the
Company under Sections 414(b), 414(c) or 414(m) of the Code, or which,
together with the Company is a member of a controlled group within the
meaning of Section 4001(a) of ERISA.
1.28 ESA. "ESA" shall have the meaning set forth in Section 16.1.
1.29 Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.30 Feasibility Period. "Feasibility Period" shall have the
meaning set forth in Section 16.1.
1.31 Financial Statements. "Financial Statements" shall have the
meaning set forth in Section 3.7(a).
1.32 Governmental Entity. "Governmental Entity" shall mean any
foreign or domestic court, administrative agency or commission or other
governmental authority or instrumentality.
1.33 Governmental Authority. "Governmental Authority" shall mean
any and all foreign, federal, state or local governments, governmental
institutions, public authorities and governmental entities of any
nature whatsoever, and any subdivisions or instrumentalities thereof,
including, but not limited to, departments, boards, bureaus,
commissions, agencies, courts, administrations and
4
11
panels, and any divisions or instrumentalities thereof, whether
permanent or ad hoc and whether now or hereafter constituted or
existing.
1.34 Governmental Requirement. "Governmental Requirement" shall
mean any and all laws (including, but not limited to, applicable common
law principles), statutes, ordinances, codes, rules, regulations,
interpretations, guidelines, directions, orders, judgments, writs,
injunctions, decrees, decisions or similar items or pronouncements,
promulgated, issued, passed or set forth by any Governmental Authority.
1.35 Hazardous Materials. "Hazardous Materials" shall mean any (a)
toxic or hazardous materials or substances; (b) solid wastes, including
asbestos, buried contaminants, chemicals, flammable or explosive
materials; (c) radioactive materials; (d) petroleum wastes and spills
or releases of petroleum products; and (e) any other chemical,
pollutant, contaminant, substance or waste that is regulated by any
governmental entity under any Environmental Law.
1.36 Intellectual Property. "Intellectual Property" shall mean all
patents (including all reissues, divisions, continuations, and
extensions thereof), patent applications, trademarks, servicemarks,
trade names, all other names, logos and slogans embodying business,
product or service goodwill and all computer software (including data
and related documentation).
1.37 IRS. "IRS" shall mean the Internal Revenue Service.
1.38 Knowledge. "Knowledge" shall mean, with respect to a Person,
actual knowledge after reasonable investigation, including the
knowledge of such Person's directors and officers and employees of such
Person with responsibility for the particular matters referred to.
1.39 Liability. "Liability" shall mean any liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
liability for Taxes.
1.40 Market Price. "Market Price" shall mean the average of the
closing bid and asked prices of a share of Rush Stock for the trading
day immediately prior to the Closing Date, as reported in the
over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotation System.
1.41 Material Adverse Change. "Material Adverse Change" shall mean
an occurrence, event or development which has had or is reasonably
likely to have a Material Adverse Effect.
1.42 Material Adverse Effect. "Material Adverse Effect" shall
mean, with respect to any Person, a material adverse effect on the
business, prospects, results of operations, financial condition or
assets of such Person and its Subsidiaries taken as a whole. In
determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does
5
12
not of itself have such effect, a Material Adverse Effect shall be
deemed to have occurred if the cumulative effect of such event and all
other then existing events would result in a Material Adverse Effect.
1.43 Ordinary Course of Business. "Ordinary Course of Business"
shall mean the ordinary course of business consistent with past custom
and practice (including with respect to quantity and frequency).
1.44 Parties. "Parties" shall mean collectively Purchaser, the
Company and Seller.
1.45 PBGC. "PBGC" shall mean the United States Pension Benefit
Guaranty Corporation.
1.46 Permitted Exceptions. "Permitted Exceptions" shall have the
meaning set forth in Section 15.3.
1.47 Person. "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative or
a governmental entity or agency thereof.
1.48 Promissory Note. "Promissory Note" shall have the meaning set
forth in Section 2.1.
1.49 Real Property. "Real Property" shall mean all of that
property located in Xxxxxxxxx County, Texas, which is comprised of
three tracts of land as more fully described in three legal
descriptions attached hereto as Exhibit 1.49 A.
1.50 Purchase Price. "Purchase Price" shall mean the Cash
Consideration and the aggregate amount of the Promissory Note,
collectively, as adjusted in accordance with Section 2.3.
1.51 Regulatory Authority. "Regulatory Authority" shall mean any
foreign, United States Federal or state government or governmental
authority the approval of which, or filing with, is legally required or
permitted for consummation of the transactions contemplated by this
Agreement.
1.52 Release. "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment.
1.53 Rush Stock. "Rush Stock" shall mean the common stock, $.01
par value, of Rush.
1.54 SEC. "SEC" shall mean the Securities and Exchange Commission.
1.55 Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended, and the rules and regulations thereunder.
6
13
1.56 Security Interest. "Security Interest" shall mean any
mortgage, pledge, lien, encumbrance, charge or other security interest,
other than (a) mechanic's, materialmen's and similar liens, (b) liens
for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings and for which
adequate reserves exist on such Person's books, (c) purchase money
liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
1.57 Subsidiary. "Subsidiary" shall mean, with respect to any
entity, any corporation of which securities or other ownership
interests having ordinary voting power to elect a majority of the board
of directors or other persons performing similar functions are directly
or indirectly owned by such entity.
1.58 Tax. "Tax" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties,
capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.
1.59 Tax Return. "Tax Return" shall mean any return, declaration,
report, claim for refund or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
1.60 Title Company. "Title Company" shall mean Alamo Title
Company, Attention Xxx Xxxxx, 000 X. Xxxxx, Xxxxx 000, Xxx Xxxxxxx,
Xxxxx 00000.
1.61 Title Commitment. "Title Commitment" shall have the meaning
set forth in Section 15.1.
1.62 Trade Secrets. "Trade Secrets" shall have the meaning
assigned to it in Section 3.25.
1.63 UCC Report. "UCC Report" shall have the meaning set forth in
Section 15.2.
1.64 Unaffiliated Firm. "Unaffiliated Firm" shall have the meaning
assigned to it in Section 2.3.
2. Purchase and Sale.
2.1 Purchase and Sale. At the Closing and subject to and upon
the terms and conditions of this Agreement, Seller shall sell, transfer
and deliver to Purchaser, and Purchaser shall purchase and acquire from
Seller, all right, title and interest in and to all of the outstanding
shares of Company Stock free and
7
14
clear of all Security Interests or other restriction on transfer (other
than restrictions on transfer imposed by the Securities Act and state
securities laws) in consideration for the Purchase Price. At the
Closing, (a) Purchaser shall deliver to Seller $8,750,000, subject to
adjustment, in cash (the "Cash Consideration") by wire transfer of
immediately available funds, with such account being specified to
Purchaser in writing at least five Business Days prior to the Closing
Date, and (b) Rush shall execute and deliver to Seller a promissory
note (the "Promissory Note") in the original principal sum of
$1,750,000 and in the form of Exhibit 2.1 A.
2.2 Closing.
(a) Subject to the provisions of Article 8 hereof,
the Closing of the Acquisition shall take place at 10:00 a.m.,
San Antonio time, at the offices of Duncan, Ulman, Xxxxxxx &
Xxxxxxxx, Inc., 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxx Xxxxx
Building, San Antonio, Texas 78205-1838, no later than the
second Business Day after satisfaction of the latest to occur
of the conditions set forth in Article 8 hereof (other than
the delivery of the officers' certificates referred to therein
and other than any conditions which are waived in accordance
with said Article) or such other time, place or date as Seller
and Purchaser may mutually agree. Failure to consummate the
transactions provided for in this Agreement on the date and
time selected pursuant to this Section 2.2(a) shall not,
except as permitted by Article 8 hereof, result in the
termination of this Agreement and shall not relieve any party
to this Agreement of any obligation hereunder.
(b) At the Closing, Seller shall deliver to Purchaser
certificate(s) representing the Company Stock accompanied by
stock power(s) duly executed in blank, and with all necessary
transfer tax and other revenue stamps, acquired at Seller's
expense, affixed and canceled. Seller agrees to cure any
deficiencies with respect to the endorsements of the
certificates representing the Company Stock or with respect to
the stock powers accompanying any such certificates.
2.3 Adjustments to Purchase Price.
(a) At the Closing, Purchaser shall have the option,
exercised by written notice from Purchaser to Seller delivered
at the Closing, subject to Seller's rights under Section
8.2(f), to reduce the value of any inventory on the Closing
Date Balance Sheet which Purchaser, in its sole discretion,
determines to be obsolete or not saleable in the ordinary
course of business in such amount as Purchaser shall determine
in its sole discretion and of which Purchaser shall give
written notice to Seller at the Closing.
(b) As soon as practicable and in any event no later
than ninety (90) days after the Closing Date, Seller shall
deliver to Purchaser a consolidated balance sheet of the
Company as of the Closing Date,
8
15
prepared by the Company's independent auditors in accordance
with generally accepted accounting principles and on a basis
consistent with the Audited Financial Statements, subject to
the reductions pursuant to Section 2.3(a) and excluding any
accounts receivable of the company existing on the Closing
Date and not collected by the date of such delivery, (the
"CLOSING DATE BALANCE SHEET"). The Company shall pay the costs
of preparing the Closing Date Balance Sheet.
(c) Within thirty (30) days after receipt of the
Closing Date Balance Sheet and copies of the workpapers
relating thereto, Purchaser shall inform Seller in writing
that either the Closing Date Balance Sheet is acceptable or
object to the Closing Date Balance Sheet in writing setting
forth a specific description of Purchaser's objections (it
being agreed that the failure of Purchaser to deliver such
written notice to Seller within such thirty (30) day period
shall be deemed acceptance by Purchaser). If Purchaser objects
as provided above and if Seller does not agree with
Purchaser's objections, if any (it being agreed that the
failure of Seller to deliver written notice to the Purchaser
of Seller's disagreement with Purchaser's objections within
thirty (30) days of Seller's receipt of Purchaser's objections
shall be deemed acceptance by Seller), or such objections are
not resolved on a mutually agreeable basis within thirty (30)
days after Seller's receipt of Purchaser's objections, any
such disagreement shall be promptly submitted to a mutually
acceptable "big-six" accounting firm that has no affiliation
with any of Purchaser, Seller or the Company (the
"UNAFFILIATED FIRM"). The Unaffiliated Firm shall resolve
within thirty (30) days after said Unaffiliated Firm's
engagement by the parties the differences regarding the
Closing Date Balance Sheet in accordance with generally
accepted accounting principles consistently applied and this
Agreement. The decision of such Unaffiliated Firm shall be
final and binding upon, and its fees, costs and expenses shall
be shared equally by, Seller and Purchaser. Seller and
Purchaser shall each bear the fees, costs and expenses of its
own accountants. Upon resolution of any such dispute, the
determination of the Closing Date Balance Sheet shall be
deemed to be final.
(d) If the Closing Date Balance Sheet as finally
determined pursuant to this Section 2.3 shows that
stockholders' equity is less than $8,600,000, then the
purchase price shall be reduced through the return to
Purchaser of cash in an amount equal to the difference between
$8,600,000 and the amount of stockholders' equity of the
Company as reflected on the Closing Date Balance Sheet. Such
amount shall be promptly returned by wire transfer of
immediately available funds to Purchaser. If the Closing Date
Balance Sheet as finally determined pursuant to this Section
2.3 shows that stockholders' equity is greater than
$8,600,000, then the purchase price shall be increased through
the prompt payment to Seller of cash in an amount equal to 50%
of the difference between $8,600,000 and the amount of
stockholders' equity of the Company as reflected on the
Closing Date Balance Sheet. Such amount shall be paid by wire
transfer of immediately available funds to
9
16
Seller. If the Closing Date Balance Sheet as finally
determined pursuant to this Section 2.3 shows that
stockholders' equity is equal to $8,600,000, no adjustment to
the Purchase Price shall be made.
(e) From and after the Closing, the Company shall use
its best efforts to sell any inventory reduced in value
pursuant to Section 2.3(a) and to collect any accounts
receivable excluded pursuant to Section 2.3(b) and shall
promptly pay to Seller by wire transfer of immediately
available funds 50% of the proceeds of such sale in excess of
the reduced value and 50% of the proceeds of such collection;
provided, however, that the Company may, at its option, at any
time transfer any of such inventory and accounts receivable to
Seller and shall have no further obligation under this Section
2.3(e) with respect to the inventory and accounts receivable
so transferred.
3. Representations and Warranties Concerning the Company.
Seller represents and warrants to Purchaser and Rush that the
statements contained in this Article 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article 3), except as set forth in the disclosure
schedule delivered by Seller to Purchaser on the date hereof and initialed by
the Parties (the "Disclosure Schedule"). Nothing in the Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article 3.
3.1 Organization, Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas and has full corporate power and authority to conduct
its business as it is now being conducted and to own, operate or lease
the properties and assets it currently owns, operates or holds under
lease. The Company is duly qualified or licensed to do business and is
in good standing as a foreign corporation in each jurisdiction where
the character of its business or the nature of its properties makes
such qualification or licensing necessary, all of which jurisdictions
are set forth on the Disclosure Schedule. The Company has heretofore
delivered to Purchaser true and correct copies of its Certificate of
Incorporation and By-laws as in effect on the date hereof. The minute
books (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the
stock certificate books, and the stock record books of the Company are
correct and complete.
10
17
3.2 Subsidiaries. The Company does not have, directly or
indirectly, any legal or beneficial interest in any Subsidiary,
partnership, joint venture or other entity.
3.3 Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth on the Disclosure
Schedule. All of the issued and outstanding shares of capital stock of
the Company are owned, of record and beneficially, by Seller. No Person
other than Seller is or will be entitled to receive any payment with
respect to the Company Stock. On the Closing Date, no shares of Company
Stock will be held as treasury shares. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the
Company are as set forth in the Company's Certificate of Incorporation,
and all such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable and in
accordance with all applicable laws. All outstanding shares of capital
stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable. All of the outstanding securities of
the Company were issued in compliance with all applicable Federal and
state securities laws. None of such outstanding securities has been
issued in violation of any preemptive rights, rights of first refusal
or similar rights. There are no outstanding options, warrants,
convertible securities, calls, rights, commitments, preemptive rights
or agreements or instruments or understandings of any character to
which the Company is a party or by which the Company is bound,
obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, contingently or otherwise, additional shares
of its capital stock or any securities or obligations convertible into
or exchangeable for such shares or to grant, extend or enter into any
such option, warrant, convertible security, call, right, commitment,
preemptive right or agreement. There are no outstanding obligations,
contingent or other, of the Company to purchase, redeem or otherwise
acquire any shares of its capital stock. There are no voting trust
agreements or other contracts, agreements, arrangements, commitments,
plans or understandings restricting or otherwise relating to voting,
dividend or other rights with respect to the capital stock of the
Company.
3.4 Authorization. The Company has all requisite corporate
power and authority to enter into this Agreement and each of the other
agreements contemplated hereby, to carry out its obligations under this
Agreement and each of the other agreements contemplated hereby and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the performance by the Company of
its obligations hereunder have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been
duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable against the
Company and in accordance with its terms (except as the enforceability
thereof may be limited by any applicable bankruptcy, insolvency or
other laws affecting creditors' rights generally or by general
principles of equity, regardless of whether such enforceability is
considered in equity or at law).
11
18
3.5 No Violation. The execution and delivery of this
Agreement by the Company does not, and the consummation by the Company
of the transactions contemplated hereby and compliance with the terms
hereof will not, (a) conflict with, or result in any violation of or
default or loss of any benefit under, any provision of the Company's
Certificate of Incorporation or By-laws; (b) conflict with, or result
in any violation of or default or loss of any benefit under, any
permit, concession, grant, franchise, law, rule or regulation, or any
judgment, decree or order of any court or other governmental agency or
instrumentality to which the Company is a party or to which any of its
property is subject; (c) conflict with, or result in a breach or
violation of or default or loss of any benefit under, or accelerate the
performance required by, the terms of any agreement, contract,
indenture or other instrument to which the Company is a party or to
which any of its property is subject, or constitute a default or loss
of any right thereunder or an event which, with the lapse of time or
notice or both, might result in a default or loss of any right
thereunder or the creation of any Security Interest upon any of the
assets or properties of the Company; or (d) result in any suspension,
revocation, impairment, forfeiture or non-renewal of any Company
License.
3.6 Approvals. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by the
Company will not require the consent, approval, order or authorization
of any Governmental Entity or Regulatory Authority or any other Person
under any statute, law, rule, regulation, permit, license, agreement,
indenture or other instrument to which the Company or Seller is a party
or to which any of its or their properties are subject, and no
declaration, filing or registration with any Governmental Entity or
Regulatory Authority is required or advisable by the Company or Seller
in connection with the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, or the
performance by each of the Company and Seller of its or their
respective obligations hereunder.
3.7 Financial Statements and Other Information.
(a) Seller has delivered to Purchaser (i) true, correct
and complete copies of the audited consolidated balance sheets
of the Company as of April 30, 1997 and 1996, and the related
statements of operations, retained earnings and cash flows
(together with the auditors' reports thereon) for each of the
years in the three year period ended April 30, 1997, together
with notes to such financial statements (the "Audited
Financial Statements") and (ii) true, correct and complete
copies of the unaudited balance sheets of the Company as of
December 31, 1997, and the related statements of operations
and cash flows for the eight-month period ended December 31,
1997 (the "Interim Financial Statements"). The Audited
Financial Statements and Interim Financial Statements are
herein collectively referred to as the "Financial Statements".
(b) The Financial Statements are in accordance with the
books and records of the Company and have been prepared in
accordance with generally accepted accounting principles
consistently applied throughout
12
19
the periods covered thereby, and the balance sheets included
therein present fairly as of their respective dates the
financial condition of the Company (subject, in the case of
Interim Financial Statements, to year-end adjustments that may
be required upon audit, which adjustments will not have a
Material Adverse Effect on such financial statements). All
liabilities and obligations, whether absolute, accrued,
contingent or otherwise, whether direct or indirect, and
whether due or to become due, which existed at the date of
such Financial Statements have been disclosed in the balance
sheets included in the Financial Statements or in notes to the
Financial Statements to the extent such liabilities were
required, under generally accepted accounting principles, to
be so disclosed. The statements of operations, retained
earnings and cash flows included in the Financial Statements
present fairly the results of operations and cash flows of the
Company for the periods indicated (subject, in the case of
Interim Financial Statements, to year-end adjustments that may
be required upon audit, which adjustments will not have a
Material Adverse Effect on such financial statements), and the
notes included in the Financial Statements present fairly the
information purported to be shown thereby. The statements of
operations included in the Financial Statements do not contain
any items of special or non-recurring income or other income
not earned in the ordinary course of business except as
expressly specified therein.
(c) All properties and tangible assets reflected in the
latest balance sheet included in the Financial Statements have
a fair market or realizable value at least equal to the value
thereof as reflected therein. Purchaser acknowledges that
certain personal property located on the premises of the
Company is owned by Seller, all of which property is
designated as such on the Disclosure Schedule. Purchaser
further acknowledges that certain rebates identified as such
on the Disclosure Schedule, if received by the Company within
nine months after the Closing Date, shall be paid to Seller as
a commission.
(d) The accounts receivable of the Company, net of
applicable allowances in accordance with generally accepted
accounting principles consistently applied, as set forth on
the latest balance sheet included in the Financial Statements
or arising since the date thereof are valid and genuine; have
arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions in the
ordinary course of business consistent with past practice; are
not subject to valid defenses, set-offs or counterclaims; and
are collectible at the full recorded amount thereof over the
period of usual trade terms (by use of the Company's normal
collection methods without resort to litigation or reference
to a collection agency). The Company has fully performed all
obligations with respect thereto which they were obligated to
perform to the date hereof. Seller has delivered to Purchaser
an aging schedule for the accounts receivable as of December
31, 1997.
13
20
(e) The books, records and accounts of the Company
maintained with respect to its business accurately and fairly
reflect, in reasonable detail, the transactions and their
assets and liabilities with respect to their business. The
Company has not engaged in any transaction with respect to its
business, maintained any bank account for its business or used
any of its funds in the conduct of its business except for
transactions, bank accounts and funds which have been and are
reflected in its normally maintained books and records.
(f) Since April 30, 1997, there has been (i) no adverse
change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of
operations or prospects, of the Company, whether as a result
of any legislative or regulatory change, revocation of any
license or right to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or otherwise, and (ii) to the best
Knowledge of the Company and Seller, no fact or condition
exists or is contemplated or threatened which could reasonably
be anticipated to cause such a change in the future.
3.8 No Undisclosed Liabilities. Except as set forth in the
notes to the Financial Statements, the Liabilities on the latest
balance sheet included in the Financial Statements consist solely of
accrued obligations and Liabilities incurred by the Company in the
ordinary course of its business to Persons which are not Affiliates of
the Company. There are no Liabilities of the Company of any kind
whatsoever, whether or not accrued and whether or not contingent or
absolute, determined or determinable or otherwise, including without
limitation documentary or standby letters of credit, bid or performance
bonds, or customer or third party guarantees, and no existing
condition, situation or set of circumstances that could reasonably
result in such a Liability, other than (i) Liabilities disclosed in the
Financial Statements or (ii) Liabilities which have arisen after April
30, 1997 in the Ordinary Course of Business and consistent with past
practice (none of which is a Liability for breach of contract, breach
of warranty, tort, infringement claim or lawsuit). There are no
asserted claims for indemnification by any Person against the Company
under any law or agreement or pursuant to the Company's Certificate of
Incorporation or By-laws and the Company is not aware of any facts or
circumstances that might reasonably give rise to the assertion of such
a claim against the Company thereunder.
3.9 Corporate Action. All corporate action of the Board of
Directors and of the stockholders of the Company taken on or prior to
the date hereof has been duly authorized, adopted or ratified in
accordance with applicable law and the Certificate of Incorporation and
By-laws (or analogous organizational documents) of the Company and has
been duly recorded in its corporate minute books (which have been made
available for inspection by Purchaser).
3.10 Events Subsequent to April 30, 1997. Since April 30,
1997, the Company has not (a) sold, leased, transferred or assigned any
of its assets, tangible or intangible, other than for fair
consideration in the Ordinary Course of Business; (b) entered into any
agreement, contract, lease or license (or series
14
21
of related agreements, contracts, leases and licenses) either involving
more than $5,000 or outside the Ordinary Course of Business; (c)
discharged or satisfied any lien or encumbrance or incurred or paid any
obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the most recent balance sheet included in
the Financial Statements and current liabilities incurred since April
30, 1997 in the Ordinary Course of Business; (d) imposed any Security
Interest upon any of its assets, tangible or intangible; (e) made any
capital expenditure (or series of related capital expenditures) either
involving more than $5,000 or outside the Ordinary Course of Business;
(f) made any capital investment in, any loan to, or any acquisition of
the securities or assets of, any other Person (or series of related
capital investments, loans and acquisitions) either involving more than
$5,000 or outside the Ordinary Course of Business; (g) borrowed any
amount or incurred or become subject to any liability (absolute,
accrued or contingent), except current liabilities incurred,
liabilities under contracts entered into, borrowings under its
revolving credit facility and liabilities in respect of letters of
credit issued under the credit facility, all of which were in the
Ordinary Course of Business; (h) delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business; (i) canceled, compromised, waived or released any right or
claim (or series of related rights and claims) either involving more
than $5,000 or outside the Ordinary Course of Business; (j) granted any
license or sublicense of any rights under or with respect to any
Intellectual Property; (k) made or authorized any change in its charter
or bylaws; (l) issued, sold or otherwise disposed of any of its capital
stock, or granted any options, warrants or other rights to purchase or
obtain (including upon conversion, exchange or exercise) any of its
capital stock; (m) declared, set aside or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased or otherwise acquired any of its capital
stock; (n) experienced any damage, destruction or loss (whether or not
covered by insurance) to its property; (o) made any loan to, or entered
into any other transaction with, any of its directors, officers and
employees outside the Ordinary Course of Business; (p) suffered any
adverse change in its relations with, or any loss or threatened loss
of, any of its suppliers or customers disclosed pursuant to Section
3.24; (q)(i) granted any severance or termination pay to any of its
directors, officers or employees, (ii) entered into any employment,
deferred compensation, collective bargaining or other similar agreement
(or any amendment to any such existing agreement) or arrangement with
any of its directors, officers or employees, (iii) increased any
benefits payable under any existing severance or termination pay
policies or employment agreements, or (iv) increased the compensation,
bonus or other benefits payable to any of its directors or officers or,
other than in the Ordinary Course of Business and consistent with past
practice, employees; (r) accelerated, terminated, modified or canceled
any agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses), or had any third party do
so, involving more than $5,000 to which it is a party or by which it is
bound; (s) made any change in the manner of its business or operations;
(t) made any change in any method of accounting or accounting practice,
except for any such change required by reason of a concurrent change in
generally accepted accounting principles or disclosed in the Financial
Statements; (u) entered into
15
22
any transaction except in the Ordinary Course of Business or as
otherwise contemplated hereby; or (v) entered into any commitment
(contingent or otherwise) to do any of the foregoing; provided,
however, that the Company may pay dividends, make distributions and pay
bonuses so long as the foregoing do not exceed, in the aggregate,
$250,000. There has not been any other occurrence, event, incident,
action, failure to act or transaction outside the Ordinary Course of
Business involving the Company.
3.11 Taxes.
(a) The Company has filed all Tax Returns that it was
required to file (taking into account all extensions). All
such Tax Returns and the information and data contained
therein have been properly and accurately compiled and
completed, fairly present the information purported to be
shown therein and reflect all Liabilities for Taxes for the
periods covered by such Tax Returns. All Taxes owed by the
Company (whether or not shown on any Tax Return) have been
paid. The Company currently is not the beneficiary of any
extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction
where the Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of the Company that
arose in connection with any failure (or alleged failure) to
pay any Tax.
(b) The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(c) No Seller or director or officer (or employee
responsible for Tax matters) of the Company expects any
authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of the Company either (i)
claimed or raised by any authority in writing or (ii) as to
which Seller or the Company has Knowledge based upon personal
contact with any agent of such authority. The Disclosure
Schedule lists all federal, state, local and foreign income
Tax Returns filed with respect to the Company for taxable
periods ended on or after April 30, 1995, indicates those Tax
Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Seller has
delivered to Purchaser correct and complete copies of all
federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by
the Company since April 30, 1995.
(d) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
16
23
(e) The Company has not filed a consent under Section
341(f) of the Code concerning collapsible corporations. The
Company has not made any payments, is obligated to make any
payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will
not be deductible under Section 280G of the Code. The Company
has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. The Company has disclosed on their federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the
meaning of Section 6662 of the Code. The Company is not a
party to any Tax allocation or sharing agreement. The Company
(i) has not been a member of an affiliated group (within the
meaning of Section 1504 of the Code) filing a consolidated
federal income Tax Return (other than a group the common
parent of which was the Company) or (ii) has no Liability for
the Taxes of any Person (other than the Company) under Treas.
Reg. ss.1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or
otherwise.
(f) All elections and consents with respect to any
Tax (or the computation thereof) affecting the Company as of
the date hereof are obvious from the Tax Returns or are set
forth on the Disclosure Schedule. After the date hereof, no
election or consent with respect to any Tax (or the
computation thereof) affecting the Company will be made
without the written consent of Purchaser. The Company has not
agreed to make or is required to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(g) The Disclosure Schedule sets forth the following
information with respect to the Company as of the most recent
practicable date (as well as on an estimated pro forma basis
as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (i) the basis of the
Company in its assets; (ii) the amount of any net operating
loss, net capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution
allocable to the Company; and (iii) the amount of any deferred
gain or loss allocable to the Company arising out of any
Deferred Intercompany Transaction (as defined in Treas. Reg.
ss.1.1502-13).
(h) The unpaid Taxes of the Company (i) did not, as
of the date of the latest balance sheet included in the
Financial Statements, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set
forth on the face of the latest balance sheet included in the
Financial Statements (rather than in any notes thereto) and
(ii) do not exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the past
custom and practice of the Company in filing its Tax Returns.
17
24
3.12 Litigation. There is no action, suit, investigation,
arbitration or proceeding pending or, to the best Knowledge of the
Company and Seller threatened against or affecting the Company or any
of its respective properties or rights (including without limitation no
charge of patent and/or trademark infringement), by or before any
Governmental Entity, or any Basis in fact therefor known to the Company
or Seller, against or involving the Company or any of its officers,
directors or employees (in their capacity as such), assets, business or
products, whether at law or in equity. None of the actions, suits,
proceedings, hearings and investigations set forth in the Disclosure
Schedule could result in any adverse change in the Company. With
respect to each litigation or claim described in the Disclosure
Schedule, copies of all pleadings, filings, correspondence with
opposing parties and their counsel, opinions of counsel, results of
studies, judgments, orders, attachments, impositions of or recordings
of Security Interests and other documents have been furnished to
Purchaser. The Company is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge.
3.13 Compliance with Laws. The Company and its predecessors
and Affiliates, has complied in all respects with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings and charges thereunder) of any Governmental
Entity relating to or affecting the operation, conduct or ownership of
their respective property or business, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has
been filed or commenced or, to the best Knowledge of the Company and
Seller, threatened against any of them alleging any failure so to
comply. Neither the Company nor, to the best Knowledge of the Company
and Seller, any of the Company's directors, officers, consultants or
employees (in their capacity as such), is in default in any respect
with respect to any order, writ, injunction or decree known to or
served upon the Company of any Governmental Entity or Regulatory
Authority. There is no existing law, rule, regulation or order, whether
Federal, state, local or foreign, which would prohibit or restrict the
Company from, or otherwise adversely affect the Company in, conducting
its business in any jurisdiction in which it is now conducting business
or in which it currently proposes to conduct business.
3.14 Title to and Condition of Property.
(a) The Disclosure Schedule identifies all of the
rights and interests in real property and leasehold estates
owned by the Company as of the date hereof, and the nature and
amount of its respective interest therein. The Company has
Defensible Title to all real property and have valid,
subsisting and enforceable leases to all leasehold estates
identified and reflected in the Disclosure Schedule and either
good and indefeasible title or rights as lessee to all
personalty of any kind or nature owned or used by the Company
in its business, in each case free and clear of all Security
Interests, easements, covenants or other restrictions
whatsoever, except for (i) Security Interests or
irregularities of title identified on the Disclosure Schedule
which, individually or in the aggregate, do not detract from
or interfere with the present or reasonably foreseeable use or
value
18
25
of the properties subject thereto, and (ii) Security Interests
for non-delinquent ad valorem taxes and non-delinquent
statutory liens arising other than by reason of default by the
Company and (iii) Permitted Exceptions.
(b) With respect to each parcel of owned real
property:
(i) there are no pending or, to the best
Knowledge of the Company and Seller, threatened
condemnation proceedings, lawsuits or administrative
actions relating to the property or other matters
affecting adversely the current use, occupancy or
value thereof;
(ii) the legal description for the parcel
contained in the deed thereof describes such parcel
fully and adequately, the buildings and improvements
are located within the boundary lines of the
described parcels of land, are not in violation of
applicable setback requirements, zoning laws and
ordinances (and none of the properties or buildings
or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming
structure" classifications), and do not encroach on
any easement which may burden the land, and the land
does not serve any adjoining property for any purpose
inconsistent with the use of the land, and the
property is not located within any flood plain or
subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have
not been obtained;
(iii) to the best Knowledge of the Company
and Seller, all facilities have received all
approvals of Governmental Entities (including
licenses and permits) required in connection with the
ownership or operation thereof and have been operated
and maintained in accordance with applicable laws,
rules and regulations;
(iv) there are no leases, subleases,
licenses, concessions or other agreements, written or
oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real
property;
(v) there are no outstanding options or
rights of first refusal to purchase the parcel of
real property, or any portion thereof or interest
therein;
(vi) there are no parties (other than the
Company) in possession of the parcel of real
property, other than tenants under any leases
disclosed in the Disclosure Schedule which are in
possession of space to which they are entitled;
19
26
(vii) all facilities located on the parcel
of real property are supplied with utilities and
other services necessary for the operation of such
facilities, including gas, electricity, water,
telephone, sanitary sewer and storm sewer, all of
which services are adequate in accordance with all
applicable laws, ordinances, rules and regulations
and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the
parcel of real property; and
(viii) each parcel of real property abuts on
and has direct vehicular access to a public road, or
has access to a public road via a permanent,
irrevocable, appurtenant easement benefitting the
parcel of real property, and access to the property
is provided by paved public right-of-way with
adequate curb cuts available.
(c) The Company as lessee has the right under
valid leases to occupy, use, possess and control all property
leased by the Company as now occupied, used, possessed and
controlled by the Company. With respect to each parcel of
leased real property:
(i) the Company has not assigned,
transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold;
(ii) to the best Knowledge of the Company
and Seller, all leased facilities have received all
approvals of Governmental Entities (including
licenses and permits) required in connection with the
operation thereof and have been operated and
maintained in accordance with applicable laws, rules
and regulations; and
(iii) all leased facilities are supplied
with utilities and other services necessary for the
operation of said facilities.
(d) Each lease or agreement under which the
Company is a lessee or lessor of any property, real or
personal, is a valid and binding agreement of the Company and,
to the best Knowledge of the Company and Seller, the other
party thereto, without any default by the Company thereunder
and, to the best Knowledge of the Company and Seller, without
any default thereunder by any other party thereto. No event
has occurred and is continuing which, with due notice or lapse
of time or both, would constitute a default or event of
default by the Company under any such lease or agreement or,
to the best Knowledge of the Company and Seller, by any other
party thereto. The Company's possession of such property has
not been disturbed and no claim has been asserted in writing
against the Company adverse to its rights in such leasehold
interests.
(e) All buildings, structures, appurtenances and
items of machinery, equipment and other tangible assets used
by the Company are in good operating condition and repair,
normal wear and tear excepted,
20
27
are usable in the ordinary course of business, are adequate
and suitable for the uses to which they are being put and
conform, to the best Knowledge of the Company and Seller, to
all applicable laws, ordinances, codes, rules, regulations and
authorizations relating to their construction, use and
operation. To the best Knowledge of the Company and Seller,
none of the Company's premises or equipment are in need of
maintenance or repairs other than ordinary routine maintenance
and repairs which are not material, individually or in the
aggregate, in nature or cost.
(f) The assets and properties owned or leased by the
Company are sufficient to operate and conduct the business of
the Company in a manner consistent with at least the same
standards of quality and reliability as have been achieved as
of the date hereof.
3.15 Environmental Matters.
(a) With respect to permits and licenses, (i) all
licenses, permits, consents or other approvals required under
Environmental Laws that are necessary to the operations of the
business of the Company have been obtained and are in full
force and effect and neither the Company nor Seller is aware
of any Basis for revocation or suspension of any such
licenses, permits, consents or other approvals; (ii) to the
best Knowledge of the Company and Seller, no Environmental
Laws impose any obligation upon Purchaser, as a result of any
transaction contemplated hereby, requiring prior notification
to any Governmental Entity of the transfer of any permit,
license, consent or other approval which is necessary to the
operations of the business of the Company; (iii) all of the
facilities and operations of the business of the Company were
constructed, and have been operated, in accordance with the
representations and conditions made or set forth in the permit
applications and the permits for the business of the Company;
and (iv) the business of the Company has at all times been
operated in full compliance with such permits, licenses,
consents or approvals, and within the production levels or
emission levels specified in such permits, licenses, consents
or approvals.
(b) To the best Knowledge of the Company and Seller,
the Company has at all times operated its business in
compliance with all applicable limitations, restrictions,
conditions, standards, prohibitions, requirements and
obligations of Environmental Laws and related orders of any
court or other Governmental Entity.
(c) There are not any existing, pending or, to the
best Knowledge of the Company and Seller, threatened actions,
suits, claims, investigations, inquiries or proceedings by or
before any court or any other Governmental Entity directed
against the Company in connection with the operation of its
business which pertain or relate to (i) any remedial
obligations under any applicable Environmental Law, (ii)
violations by the Company of any Environmental Law, (iii)
personal injury or property damage claims relating to a
release of chemicals or Hazardous
21
28
Materials by the Company, or (iv) response, removal or
remedial costs under the Comprehensive Environmental Response,
Compensation, and
Liability Act or any similar state law.
(d) No portion of the real property owned or leased
by the Company with respect to its business is listed on any
Contaminated Site List.
(e) There has been no Release of any Hazardous
Materials on or underlying any Real Property owned or leased
by the Company.
(f) No asbestos-containing materials or
polychlorinated biphenyls ("PCBs") are present on or
underlying any real property owned or leased by the Company.
(g) There are no underground storage tanks for
Hazardous Materials, active or abandoned, at any property now
or previously owned or leased by the Company.
(h) Seller has provided to Purchaser all engineering,
geologic, environmental and other documents or maps in the
possession of Seller or the Company relating to (i) any
Environmental Conditions existing on any real property owned
or leased by the Company, or (ii) any violations by the
Company of any Environmental Laws.
(i) All Hazardous Materials, if any, generated by the
Company in its business have been transported, stored, treated
and disposed of by transporters or carriers, or at treatment,
storage and disposal facilities, authorized or maintaining
valid permits under all applicable Environmental Laws.
(j) The Company nor Seller is aware of any
Environmental Remediation Costs which are required or have
been planned relating to the operation of their business by
the Company for which Seller or the Company reasonably
anticipates payment or accrual.
3.16 Inventories. The inventories of the Company reflected
on the Closing Date Balance Sheet consist of items of a quality and
quantity usable and saleable in the normal course of business of the
Company at an aggregate value at least equal to the value at which such
inventories are reflected on the Closing Date Balance Sheet. The method
of valuing such inventories on the Closing Date Balance Sheet is
consistent with that used in respect of the beginning and end of each
of the two (2) most recent fiscal years of the Company. The value of
obsolete materials and materials below standard quality has been
written down on the books of account of the Company to realizable
market value, or adequate reserves have been provided therefor. To the
best Knowledge of Seller and the Company, the inventories of the
Company are not excessive in kind or amount in light of the business
done or reasonably expected to be done by it. The values at which such
inventories are carried reflect the inventory valuation
22
29
policy applied by the Company of stating inventory at the lower of
actual cost (first in-first out method) or realizable market value in
accordance with generally accepted accounting principles.
3.17 Contracts.
(a) The Disclosure Schedule contains a complete list
of all currently effective written or oral (i) employment
contracts, arrangements or policies (including without
limitation any collective bargaining contract or union
agreement) of the Company which may not be immediately
terminated without penalty (or any augmentation or
acceleration of benefits); (ii) leases, sales contracts and
other agreements with respect to any property, real or
personal, of the Company, except for leases of personal
property involving less than $1,000 individually and $10,000
in the aggregate; (iii) contracts or commitments for capital
expenditures or acquisitions in excess of $5,000 for one
project or set of related projects; (iv) agreements,
contracts, indentures or other instruments relating to the
borrowing of money, or the guarantee of any obligation (third
party or otherwise) for the borrowing of money; (v) contracts
or agreements providing for any covenant not to compete by the
Company or otherwise restricting in any way the Company's
engaging in any business activity (including a description of
the businesses to which the covenant not to compete applies);
(vi) contracts or agreements relating to consultancies,
professional retentions, agency, sales or distributorship
arrangements pertaining to the Company or its products,
services or activities; (vii) any agreement (or group of
related agreements) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property,
or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year,
result in a loss to the Company, or involve consideration in
excess of $5,000; (viii) contracts, agreements or commitments
requiring the Company to indemnify or hold harmless any Person
other than purchase orders entered into in the Ordinary Course
of Business; (ix) all contracts with any customer or supplier
listed on the Disclosure Schedule pursuant to Section 3.24
hereto other than outstanding purchase orders in the Ordinary
Course of Business; and (x) contracts, agreements,
arrangements or commitments, other than the foregoing, which
could reasonably be considered material to the business of the
Company (all agreements, arrangements or commitments to which
the Company is a party, whether or not listed on the
Disclosure Schedule, being hereinafter referred to as "Company
Contracts"). True and correct copies of all the Company
Contracts listed on the Disclosure Schedule have been
furnished to Purchaser. With respect to each Company Contract:
(i) the agreement is legal, valid, binding, enforceable and in
full force and effect; (ii) the agreement will continue to be
legal, valid, binding, enforceable and in full force and
effect on identical terms following the consummation of the
transactions contemplated hereby; (iii) neither the Company
nor, to the best Knowledge of the Company and Seller, any
other party thereto, is in breach or default, and no event has
occurred which with notice or lapse
23
30
of time would constitute a breach or default, or permit
termination, modification or acceleration, under the
agreement; and (iv) no party has repudiated any provision of
the agreement. There are no Liabilities of the Company or, to
the best Knowledge of the Company and Seller, any other party
to any of the Company Contracts arising from any breach of or
default in any provision thereof, nor has there occurred any
breach or default thereof by the Company which would permit
the acceleration of any obligation of any party thereto or the
creation of a Security Interest upon any asset(s) of the
Company. There are no negotiations pending or in progress to
revise any terms of such Company Contracts.
(b) (i) No purchase contracts or commitments of the
Company continue for a period of more than 12 months or are in
quantities or amounts in excess of the normal, ordinary, usual
and current requirements of its business or in excess of
market prices generally available to purchasers of similar
quantities; (ii) no Company Contract requires the Company to
provide services at a fixed price; (iii) the Company does not
have outstanding any bid, contract, commitment or proposal
either (x) continuing for a period of more than 12 months or
(y) quoting prices which will not result in profits consistent
with past experience; and (iv) none of such Company Contracts
obligates the Company to sell products or to perform services
to third parties which the Company or Seller knows or has
reason to believe are at a price which would result in a net
loss on the sale of such products or the provision of
services, or are pursuant to terms or conditions they cannot
reasonably expect to satisfy or fulfill in their entirety.
3.18 Employee and Labor Matters and Plans.
(a) The Disclosure Schedule lists each of the
following plans, contracts, policies and arrangements which is
or, within six years prior to the date hereof, was sponsored,
maintained or contributed to by, or otherwise binding upon the
Company, or in the case of an "employee pension plan" (as
defined in Section 3(2) of ERISA), an ERISA Affiliate for the
benefit of any current or former employee, director or other
personnel (including any such plan, contract, policy or
arrangement approved or adopted before, but effective on or
after, the date of this Agreement): (i) any "employee benefit
plan," as such term is defined in Section 3(3) of ERISA,
whether or not subject to the provisions of ERISA; (ii) any
personnel policy; and (iii) any other employment, consulting,
collective bargaining, stock option, stock bonus, stock
purchase, phantom stock, incentive, bonus, deferred
compensation, retirement, severance, vacation, dependent care,
employee assistance, fringe benefit, medical, dental, sick
leave, death benefit, golden parachute or other compensatory
plan, contract, policy or arrangement which is not an employee
benefit plan as defined in Section 3(3) of ERISA (each such
plan, contract, policy and arrangement being herein referred
to as an "Employee Plan").
24
31
(b) With respect to each Employee Plan, Seller has
delivered to Purchaser true and complete copies of (i) each
contract, plan document, policy statement, summary plan
description and other written material governing or describing
the Employee Plan and/or any related funding arrangements
(including, without limitation, any related trust agreement or
insurance company contract) or, if there are no such written
materials, a summary description of the Employee Plan; and
(ii), where applicable, (1) the last two annual reports (5500
series) filed with the IRS or the Department of Labor; (2) the
most recent balance sheet and financial statement; (3) the
most recent actuarial report or valuation statement; (4) the
most recent determination letter issued by the IRS, as well as
any other determination letter, private letter ruling, opinion
letter or prohibited transaction exemption issued by the IRS
or the Department of Labor within the last six years and any
application therefor which is currently pending; and (5) the
last PBGC-1 filed with the PBGC.
(c) Each Employee Plan (which, for the purpose of
this subsection (c), includes any Employee Plan which, within
six years prior to the date hereof, was sponsored, maintained,
contributed to or binding upon the Company or an ERISA
Affiliate) has been maintained and administered in all
respects in accordance with its terms and in compliance with
the provisions of applicable law, including, without
limitation, applicable disclosure, reporting, funding and
fiduciary requirements imposed by ERISA and/or the Code. All
contributions, insurance premiums, benefits and other payments
required to be made to or under each Employee Plan have been
made timely and in accordance with the governing documents and
applicable law. With respect to each Employee Plan, (i) no
application, proceeding or other matter is pending before the
IRS, the Department of Labor, the PBGC or any other
governmental agency; (ii) no action, suit, proceeding or claim
(other than routine claims for benefits) is pending or
threatened; and (iii) to the Knowledge of Seller, no facts
exist which could give rise to an action, suit, proceeding or
claim which, if asserted, could result in a liability or
expense to the Company or the plan assets.
(d) With respect to each Employee Plan which is an
"employee benefit plan" within the meaning of Section 3(3) of
ERISA or which is a "plan" within the meaning of Section
4975(e) of the Code, there has occurred no transaction which
is prohibited by Section 406 of ERISA or which constitutes a
"prohibited transaction" under Section 4975(c) of the Code and
with respect to which a prohibited transaction exemption has
not been granted and is not currently in effect.
(e) The Disclosure Schedule identifies each funded
Employee Plan which is an employee pension plan within the
meaning of Section 3(2) of ERISA (other than a multiemployer
plan within the meaning of Section 3(37) of ERISA). With
respect to each such Employee Plan, (i) the Employee Plan is a
qualified plan under Section 401(a) or 403(a) of the Code, and
its related trust is exempt from Federal income taxation
25
32
under Section 501(a) of the Code; (ii) a favorable IRS
determination letter is currently in effect and, since the
date of the last determination letter, the Employee Plan has
not been amended or operated in a manner which would adversely
affect its qualified status and no event has occurred which
has caused or could cause the loss of such status; (iii) there
has been no termination or partial termination within the
meaning of Section 411(d)(3) of the Code; (iv) with respect to
each such Employee Plan which is covered by Section 412 of the
Code, there has been no accumulated funding deficiency,
whether or not waived, within the meaning of Section 302(a)(2)
of ERISA or Section 412 of the Code, and there has been no
failure to make a required installment by its due date under
Section 412(m) of the Code; and (v) with respect to each such
Employee Plan which is covered by Title IV of ERISA, (1) no
reportable event within the meaning of Section 4043(b) of
ERISA and the regulations thereunder has occurred; (2) no
notice of intent to terminate the plan has been provided to
participants or filed with the PBGC under Section 4041 of
ERISA, nor has the PBGC instituted or threatened to institute
any proceeding under Section 4042 of ERISA to terminate the
plan; (3) no liability has been incurred under Title IV of
ERISA to the PBGC or otherwise (except for the payment of PBGC
premiums) and no event or set of conditions exists which would
subject the assets of the Company to a lien under Section 412
of the Code or under ERISA; and (4) in the case of a defined
benefit pension plan (including for this purpose any Employee
Plan which is described in Section 4(b)(4) of ERISA), the
value of the plan assets exceeds the total present value of
the plan's benefit liabilities on a plan termination Basis
based upon actuarial assumptions and asset valuation
principles applied by the PBGC (or applicable foreign law).
Neither the Company nor any ERISA Affiliate has ceased
operations at a facility so as to become subject to the
provisions of Section 4068(f) of ERISA, withdrawn as a
substantial employer so as to become subject to the provisions
of Section 4063 of ERISA or ceased making contributions to any
Employee Plan which is a pension plan subject to Section
4064(a) of ERISA.
(f) Each trust which is intended to be exempt from
federal income taxation pursuant to Section 501(c)(9) of the
Code has been identified as such on the Disclosure Schedule,
and each such trust satisfies the requirements of that Section
and is covered by a favorable IRS determination letter, and
neither the trust nor any related plan has been amended or
operated since the date of the most recent determination
letter in a manner which would adversely affect such exempt
status.
(g) No Employee Plan listed on the Disclosure
Schedule is a multiemployer plan within the meaning of Section
3(37) of ERISA. Neither the Company nor ERISA Affiliate is, or
within six years prior to the date hereof was, obligated to
contribute or otherwise a party to any such multiemployer
plan. Neither the Company nor any ERISA Affiliate has incurred
or expects to incur any withdrawal liability under Title IV of
ERISA (either as a contributing employer or as part of a
controlled
26
33
group which includes a contributing employer) in connection
with a complete or partial withdrawal from a multiemployer
plan, and no ERISA Affiliate has received notice from any such
multiemployer plan that the plan is in reorganization or
insolvency pursuant to Sections 4241 or 4245 or ERISA or that
the plan is intended to terminate or has terminated under
Sections 4041A or 4042 of ERISA.
(h) The Company and its ERISA Affiliates have
complied in all respects with the provisions of Section
4980(B) of the Code with respect to any Employee Plan or
benefit arrangement which is a group health plan within the
meaning of Section 5001(b)(1) of the Code. Except as may be
required under Section 4980(B) of the Code or any similar
state law requiring continuous coverage with respect to health
plans, the Company does not maintain, contribute to, and is
not obligated under any plan, contract, policy or arrangement
providing health or death benefits (whether or not insured) to
current or former employees or other personnel beyond the
termination of their employment or other services. Except as
set forth in the Disclosure Schedule, each Employee Plan may
be unilaterally terminated and/or amended by the Company at
any time.
(i) The consummation of the transactions contemplated
by this Agreement will not (either alone or in conjunction
with another event, such as a termination of employment or
other services) entitle any employee or other person to
receive severance or other compensation which would not
otherwise be payable absent the consummation of the
transactions contemplated by this Agreement or cause the
acceleration of the time of payment or vesting of any award or
entitlement under any Employee Plan.
(j) The Disclosure Schedule sets forth a complete and
accurate list showing the names, the rate of compensation (and
the portions thereof attributable to salary and bonuses,
respectively) and location of all current officers of the
Company or any ERISA Affiliate and of all employees of or
consultants to the Company or any ERISA Affiliate that
received, for the year ended December 31, 1996, or are
expected to receive, during the year ending December 31, 1997,
annual base salary or other compensation in excess of $40,000
(or the equivalent thereof in foreign currency). There are no
covenants, agreements or restrictions to which the Company or
any ERISA Affiliate is a party, including but not limited to
employee non-compete agreements, prohibiting, limiting or in
any way restricting any officer or employee listed on the
Disclosure Schedule from engaging in any types of business
activity in any location. To the best Knowledge of the Company
and Seller, no officer or employee listed on the Disclosure
Schedule, and no group of the Company's or any ERISA
Affiliate's employees, has any plans to terminate their
employment. There has not been, and neither the Company nor
Seller anticipates, any adverse change in relations with
employees as a result of the announcement of the transactions
contemplated by this Agreement. Neither the Company nor any
ERISA Affiliate has instituted any "freeze"
27
34
of, or delayed or deferred the grant of, any cost-of-living or
other salary adjustments for any of its employees.
(k) The Disclosure Schedule sets forth by number and
employment classification the approximate numbers of employees
employed by the Company and each ERISA Affiliate as of the
date of this Agreement, and, except as set forth therein, none
of said employees are subject to union or collective
bargaining agreements. There have been no audits of the equal
employment opportunity practices of the Company and, to the
best Knowledge of the Company and Seller, no Basis for such
claim exists. There is no unfair labor practice charge or
complaint against the Company pending before the National
Labor Relations Board or strike, dispute, slowdown or stoppage
pending or threatened against or involving the Company and
none has occurred since April 30, 1995. No representation
question exists respecting the employees of the Company and no
collective bargaining agreement is currently being negotiated
by the Company, nor is any grievance procedure or arbitration
proceeding pending under any collective bargaining agreement
and no claim therefor has been asserted. Neither Seller nor
the Company has received notice from any union or employees
setting forth demands for representation, elections or for
present or future changes in wages, terms of employment or
working conditions.
(l) The Disclosure Schedule sets forth all
outstanding loans and other advances (other than travel
advances in the ordinary course of business which do not
exceed $5,000 per individual) made by the Company to any of
its officers, directors, employees, stockholders or
consultants.
3.19 Insurance Policies. The Disclosure Schedule contains
a correct and complete description of all insurance policies of the
Company covering the Company and its business, employees, agents and
assets. Each such policy is in full force and effect and is, to the
best Knowledge of the Company and Seller, adequate in coverage and
amount to insure fully against risks to which the Company and its
employees, businesses, properties and other assets may be exposed in
the operation of their respective business. All retroactive premium
adjustments under any worker's compensation policy of the Company have
been recorded in the Financial Statements in accordance with generally
accepted accounting principles and are reflected in the Financial
Statements. All premiums with respect to such insurance policies have
been paid on a timely basis, and no notice of cancellation or
termination has been received with respect to any such policy. The
Company has not failed to give any notice or present any claim
thereunder in due and timely fashion. There are no pending claims
against such insurance by the Company as to which the insurers have
denied coverage or otherwise reserved rights. The Company has not been
refused any insurance with respect to assets or operations, nor has its
coverage been limited, by any insurance carrier to which it has applied
for any such insurance with which it has carried insurance since April
30, 1995.
28
35
3.20 Records. The Company has records that accurately and
validly reflect its transactions and accounting controls sufficient to
insure that such transactions are (i) in all respects executed in
accordance with its management's general or specific authorization and
(ii) recorded in conformity with generally accepted accounting
principles.
3.21 No Illegal or Improper Transactions. Neither the
Company nor any of its officers, directors, employees, agents or
Affiliates has offered, paid or agreed to pay to any person or entity
(including any governmental official) or solicited, received or agreed
to receive from any such person or entity, directly or indirectly, any
money or anything of value for the purpose or with the intent of (i)
obtaining or maintaining business, (ii) facilitating the purchase or
sale of any product or service, or (iii) avoiding the imposition of any
fine or penalty, in any such case in any manner which is in violation
of any applicable ordinance, regulation or law; and there have been no
false or fictitious entries made in the books or records of the
Company.
3.22 Brokerage Fees. Neither the Company, Seller nor any
of their respective Affiliates has retained any financial advisor,
broker, agent or finder or paid or agreed to pay any financial advisor,
broker, agent or finder on account of this Agreement or any transaction
contemplated hereby or any transaction of like nature that would be
required to be paid by the Company.
3.23 No Product Liabilities; Product Warranties.
(a) The Company has not incurred, nor does the
Company or Seller know of or have any reason to believe there
is any Basis for alleging, any liability, damage, loss, cost
or expense as a result of any defect or other deficiency
("Product Liability") with respect to any service rendered by
the Company, whether such Product Liability is incurred by
reason of any express or implied warranty (including, without
limitation, any warranty of merchantability or fitness), any
doctrine of common law (tort, contract or other), any
statutory provision or otherwise and irrespective of whether
such Product Liability is covered by insurance.
(b) Seller has furnished Purchaser with the standard
forms of warranties or guarantees of the Company's services
that are in effect or proposed to be used by it, which forms
contain all warranties and guarantees given by the Company to
its customers with respect to their services, except for those
warranties imposed by law. There are no pending or, to the
best Knowledge of the Company and Seller, threatened claims
under any warranty or guaranty against the Company. The
Disclosure Schedule lists all payments or settlements made in
respect of any such warranty or guaranty (including without
limitation any returns or allowances) in excess of $10,000
since April 30, 1995, indicating the name of each customer,
the amount of each payment and a brief description of the
facts relating thereto.
3.24 Suppliers and Customers.
29
36
(a) The Disclosure Schedule lists (i) all suppliers
of the Company to which the Company made payments greater than
$5,000 during the year ended April 30, 1997, or expect to make
payments during the year ending April 30, 1998, and (ii) all
customers maintaining charge accounts with the Company or that
have purchased trailers from the Company that paid the Company
greater than $5,000 during the year ended April 30, 1997 or
that the Company expects will pay to the Company during the
year ending April 30, 1998.
(b) Neither the Company nor Seller has any
information which would currently indicate that any of the
suppliers of the Company listed on the Disclosure Schedule
intend to cease selling to or dealing with the Company nor has
any information been brought to its attention which currently
leads it to believe any such supplier intends to alter in any
respect the amount of such sales or the extent of dealings
with the Company or would alter in any respect such sales or
dealings in the event of the consummation of the Acquisition.
The Company has no information which might reasonably
indicate, nor has any information been brought to its
attention which might reasonably lead it to believe that, (i)
any supplier will not be able to fulfill outstanding or
currently anticipated purchase orders placed by the Company
which, individually or in the aggregate, exceed $10,000, or
(ii) any customer will cancel outstanding or currently
anticipated purchase orders placed with the Company which,
individually or in the aggregate, exceed $10,000.
(c) Neither the Company nor, to the best Knowledge of
the Company and Seller, any of their respective officers,
directors or Affiliates, nor any relative or spouse (or
relative of such spouse) of any such officer, director or
Affiliate, nor any entity controlled by one of more of the
foregoing:
(i) owns, directly or indirectly, any
interest in (excepting less than 1% stock holdings
for investment purposes in securities of publicly
held and traded companies), or is an officer,
director, employee or consultant of, any Person which
is, or is engaged in business as, a competitor,
lessor, lessee, supplier, distributor, sales agent,
customer or client of the Company;
(ii) owns, directly or indirectly, in whole
or in part, any tangible or intangible property that
the Company uses in the conduct of business; or
(iii) has any cause of action or other claim
whatsoever against, or owes any amount to, the
Company, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued
benefits under employee benefit plans, and similar
matters and agreements existing on the date hereof.
3.25 Intellectual Properties.
30
37
(a) Schedule 3.25 includes a true, complete and
accurate list of all Intellectual Property held or owned by
the Company or in which the Company has any interest and is
all the Intellectual Property necessary for use in the
Company's businesses as presently conducted. Except as
completely and accurately set forth on Schedule 3.25, the
Company owns or has the perpetual right to use, without
payment to or interference from any person, all Intellectual
Property identified in Schedule 3.25, such Intellectual
Property being valid, enforceable and in good standing. The
Company does not know, and has received no notice of any claim
or infringement or interference or other conflict with the
asserted rights of others with respect to any Intellectual
Property.
(b) The Company owns or has the right to use all
inventions (whether or not patentable), all proprietary rights
and all business information (including, without limitation,
ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications,
customer/subscriber lists, supplier lists, pricing and cost
information and business and marketing plans and proposals)
(collectively, "Trade Secrets") necessary for the operation of
the business or operations of the Company as presently
conducted and as proposed to be conducted, free and clear of
all Security Interests and no Trade Secret has been challenged
or misappropriated in any way or to the best Knowledge of
Seller and the Company, has any proceeding been threatened
with respect thereto and none of the subject matter of any
such Trade Secret has been misappropriated or is alleged to
have been misappropriated from any person.
(c) Each item of Intellectual Property owned or used
by the Company immediately prior to the Closing hereunder will
be owned or available for use by the Company on identical
terms and conditions immediately subsequent to the Closing
hereunder. The Company has taken all necessary and desirable
action to maintain and protect each item of Intellectual
Property that it owns or uses.
3.26 Licenses. The Company has all licenses, permits and
other governmental certificates, authorizations and approvals required
by every Federal, state, local and foreign Governmental Entity for the
conduct of its business and the use of its properties as presently
conducted or used including, without limitation, all licenses required
under Environmental Laws and any Federal, state, local or foreign law
relating to public health and safety, or employee health and safety
(collectively, "Company Licenses"). The Disclosure Schedule contains a
true and complete list of the Company Licenses, exclusive of any
Company Licenses with respect to state or local sales, use or other
Taxes. All of the Company Licenses are in full force and effect and no
action or claim is pending nor, to the best Knowledge of the Company
and Seller, is threatened to revoke or terminate any Company License or
declare any Company License invalid in any respect. The Company has
taken all necessary action to maintain such Company Licenses. The
Disclosure Schedule contains a true and complete
31
38
list of all Federal, state, local and foreign governmental or judicial
consents, orders, decrees and other compliance agreements relating to
the Company or any of its assets or business under which the Company is
operating or bound.
3.27 Restrictive Documents and Territorial Restrictions.
The Company is not subject to, or a party to, any charter, by-law,
mortgage, Security Interest, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment
or decree, or any other restriction of any kind or character, which
adversely affects the business, prospects, operations or condition
(financial or otherwise) of the Company or any of its assets or
property, or which would prevent consummation of the transactions
contemplated hereby, or the continued operation of the Company's
business after the date hereof on substantially the same basis as
heretofore operated or which would restrict the ability of the Company
to acquire any property or conduct business in any area.
3.28 No Misleading Statements. This Agreement, the
information and schedules referred to herein and the information that
has been furnished to Purchaser in connection with the transactions
contemplated hereby do not include any untrue statement of a material
fact and do not omit to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact known to
the Company or Seller which adversely affects or in the future may (so
far as the Company or Seller can now reasonably foresee) adversely
affect the business, condition (financial or otherwise), property or
assets of the Company which has not been set forth herein.
4. Additional Representations and Warranties Relating to Seller.
Seller represents and warrants to Purchaser and Rush that the
statements contained in this Article 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article 4), except as set forth in the Seller
Disclosure Schedule attached hereto. Nothing in the Seller Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Seller Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Seller Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article 4.
4.1 Due Authorization. Seller has full power and
authority to execute and deliver this Agreement and to perform her
obligations hereunder and thereunder. Seller has duly executed this
Agreement, and this Agreement is, and each other agreement contemplated
hereby to which she will be a party will be, upon execution and
delivery thereof by her, her legal, valid and binding
32
39
obligation, enforceable against her in accordance with its terms
(except as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditors' rights
generally or by general principles of equity, regardless of whether
such enforceability is considered in equity or at law).
4.2 No Conflict. Neither Seller's execution and delivery
of this Agreement nor the consummation of the transactions contemplated
hereby or thereby by her will (i) conflict with, result in a breach or
violation of or constitute (or with notice or lapse of time or both
constitute) a default under any law, statute, regulation, order,
judgment or decree or any instrument, contract or other agreement to
which she is a party or by which she (or any of her assets or
properties) is bound; or (ii) require her to obtain any authorization,
consent, approval or waiver from, to give notification to, or to make
any filing with, any Governmental Entity or Regulatory Authority, or to
obtain the approval or consent of any other Person.
4.3 Stock. Seller has full right, power and authority to
sell, transfer, assign and deliver the Company Stock being sold by her
hereunder. Immediately prior to the delivery of the shares of Company
Stock being sold by her, she was the sole registered and beneficial
owner of such shares of Company Stock and had good and valid title to
such shares of Company Stock, free and clear of all Security Interests,
rights or claims of others, restrictions on transfer or other
encumbrances (other than restrictions on transfer imposed by the
Securities Act and state securities laws) and, upon consummation of the
transactions contemplated hereby, assuming that Purchaser purchases
such shares of Company Stock in good faith without notice of any
adverse claims as defined in Section 8.302 of the Uniform Commercial
Code as in effect in the State of Texas on the date hereof, Purchaser
will have acquired all the rights of Seller in such shares of Company
Stock free of any adverse claim, any lien in favor of the Company or
restrictions on transfer (other than restrictions on transfer imposed
by the Securities Act and state securities laws). There are no
outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights or agreements or instruments or
understandings of any character to which Seller is a party or by which
Seller is bound, obligating Seller to issue, deliver or sell, or cause
to be issued, delivered or sold, contingently or otherwise, any shares
of Company Stock owned by Seller or any securities or obligations
convertible into or exchangeable for such shares or to grant, extend or
enter into any such option, warrant, convertible security, call, right,
commitment, preemptive right or agreement. Seller is not a party to any
voting trust agreements or other contracts, agreements, arrangements,
commitments, plans or understandings restricting or otherwise relating
to voting, dividend or other rights with respect to the Company Stock
owned by her. The Company Stock is the separate property of Seller and
neither Xxxxx Xxxxxxx nor any other Persons have any community property
or other interest in such Company Stock.
4.4 Brokers. Seller has not paid or become obligated to
pay any fee or commission to any broker, finder, investment banker or
other intermediary in connection with the transactions contemplated by
this Agreement.
33
40
5. Representations and Warranties of Purchaser.
Purchaser represents and warrants to Seller that the statements
contained in this Article 5 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article 5), except as set forth in Purchaser
Disclosure Schedule attached hereto. Nothing in Purchaser Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Purchaser Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). The Purchaser Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Article 5.
5.1 Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to own or
lease its properties and carry on its business as presently conducted.
Purchaser is licensed or qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the
character of its business or the nature of its properties makes such
qualification or licensing necessary.
5.2 Due Authorization. Purchaser has all requisite
corporate power and authority to execute and deliver this Agreement and
to perform fully its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by Purchaser, the performance
by Purchaser of its obligations hereunder and thereunder, and the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Purchaser.
This Agreement has been duly executed by Purchaser, and this Agreement
is a legal, valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms (except as the
enforceability thereof may be limited by any applicable bankruptcy,
insolvency or other laws affecting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability
is considered in equity or at law).
5.3 No Conflict. Neither the execution and delivery of
this Agreement by Purchaser nor the consummation of the transactions
contemplated hereby or thereby by Purchaser will (i) conflict with,
result in a breach or violation of or constitute (or with notice or
lapse of time or both constitute) a default under, (A) the certificate
of incorporation or by-laws of Purchaser, or (B) any law, statute,
regulation, order, judgment or decree or any instrument, contract or
other agreement to which Purchaser is a party or by which it (or any of
its properties or assets) is subject or bound; (ii) result in the
creation of, or give any party the right to create, any Security
Interest or other adverse interest upon any property or asset of
Purchaser; (iii) terminate or modify, or give any third party the right
34
41
to terminate or modify, the provisions or terms of any agreement or
commitment to which Purchaser is a party or by which it (or any of its
properties or assets) is subject or bound; or (iv) require Purchaser to
obtain any authorization, consent, approval or waiver from, to give
notification to, or to make any filing (other than filing to qualify as
a foreign corporation where necessary) with, any Governmental Entity or
Regulatory Authority, or to obtain the approval or consent of any other
Person.
5.4 Brokers. Neither Purchaser nor any of its Affiliates
has paid or become obligated to pay any fee or commission to any
broker, finder, investment banker or other intermediary in connection
with the transactions contemplated by this Agreement.
5.5 Securities Act. Purchaser represents and warrants to
Seller that the Company Stock is being acquired solely for its own
account for investment and not with a view to, or for offer or resale
in connection with, a distribution thereof within the meaning of the
Securities Act.
6. Pre-closing Covenants.
The Parties agree as follows, except as otherwise described on the
Disclosure Schedule, with respect to the period between the execution of this
Agreement and the Closing:
6.1 General. Each of the Parties will use her or its
reasonable best efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in
Article 8 below).
6.2 Notices and Consents. Each of the Parties, as
promptly as practicable, (i) will make, or cause to be made, all
filings and submissions required under laws, rules and regulations
applicable to it, or to its Subsidiaries and Affiliates, as may be
required for it to consummate the transactions contemplated hereby;
(ii) will use their respective reasonable efforts to obtain, or cause
to be obtained, all authorizations, approvals, consents and waivers
from all Persons, Governmental Entities and Regulatory Authorities
necessary to be obtained by each of them, or any of their respective
Subsidiaries or Affiliates, in order for each of them, respectively, so
to consummate such transactions; and (iii) will use their respective
best efforts to take, or cause to be taken, all other actions
necessary, proper or advisable in order for each of them to fulfill
their respective obligations hereunder.
6.3 Operation of Business. The Company will not, and
Seller will not cause or permit the Company to engage in any practice,
take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing,
the Company will not, and Seller will not cause or permit the Company
to, (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock, except as provided in
Section
35
42
3.10(v), or redeem, purchase or otherwise acquire any of its capital
stock, (ii) take any action or omit to take any action which act or
omission would result in the inaccuracy of any of its representations
and warranties set forth herein if such representations or warranties
were to be made immediately after the occurrence of such act or
omission, or (iii) otherwise engage in any practice, take any action or
enter into any transaction of the sort described in Section 3.10 above.
6.4 Preservation of Business. The Company and Seller
will, and Seller will cause the Company to, (a) keep its business and
properties substantially intact, including its present operations,
physical facilities, working conditions and relationships with lessors,
licensors, suppliers, customers and employees and (b) comply in all
respects with all laws, ordinances, rules, regulations and orders
applicable to its business.
6.5 Full Access. The Company and Seller will, and Seller
will cause the Company to, permit representatives of Purchaser and its
financing parties, upon not less than 24 hours notice to Seller, to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company to all
premises, properties, personnel, books, records (including Tax records
and the workpapers of the independent accountants for the Company,
contracts and documents of or pertaining to the Company).
6.6 Notice of Developments. Each Party will give prompt
written notice to the others of any adverse development causing a
breach of any of her or its own representations and warranties in
Articles 3, 4 or 5 above. No disclosure by any Party pursuant to this
Section 6.6, however, shall be deemed to amend or supplement the
Disclosure Schedule, the Seller Disclosure Schedule or the Purchaser
Disclosure Schedule or to prevent or cure any misrepresentation, breach
of warranty or breach of covenant.
6.7 Updated Financial Statements. As soon as available
and in any event within 30 days after the end of each month prior to
the Closing Date, commencing with January 31, 1998, Seller shall
deliver to Purchaser a consolidated balance sheet and related statement
of operations and cash flows of the Company. All such financial
statements shall be covered by and conform to the representations and
warranties set forth in Section 3.7 hereof and shall be included in the
term "Financial Statements" for purposes of this Agreement.
6.8 Exclusivity.
(a) Seller will not, and will not cause or permit any
of the Company to, (i) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating
to a Business Combination or (ii) participate in any
discussions or negotiations regarding, furnish any information
with respect to, assist or participate in, or facilitate in
any other manner any effort or attempt by any Person to do or
seek a Business Combination. Seller will notify Purchaser
immediately if any
36
43
Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(b) The Parties hereto recognize and acknowledge that
a breach by Seller of this Section 6.8 will cause irreparable
and material loss and damage to Purchaser as to which it will
not have an adequate remedy at law or in damages. Accordingly,
each Party acknowledges and agrees that the issuance of an
injunction or other equitable remedy is an appropriate remedy
for any such breach. In addition, in the event of any breach
of the foregoing which results in Business Combination with a
Person other than Purchaser within 12 months of the date of
such breach, Seller shall promptly reimburse Purchaser for the
reasonable expenses incurred by Purchaser in connection with
the transactions contemplated by this Agreement.
6.9 Environmental Inspections and Assessments. Purchaser
shall have the right to inspect the records and the operations of the
Company with respect to environmental matters, and shall have the right
to require the Company to conduct Phase I assessments, as it deems
appropriate. The Company shall pay the cost of such Phase I
assessments. The representations, warranties, indemnities and other
undertakings set forth herein shall not be affected by any such
inspection or assessment or lack thereof, or the results of any such
inspection or assessment.
6.10 Schedules. From time to time prior to the Closing,
Seller and the Company will promptly supplement or amend the Disclosure
Schedule with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule. No
supplement or amendment of the Disclosure Schedule made pursuant to
this Section shall be deemed to cure any breach of, affect or otherwise
diminish any representation or warranty made in this Agreement unless
Purchaser specifically agrees thereto in writing.
6.11 Inventory Audit. Within thirty (30) days prior to
Closing, Seller and Purchaser shall mutually agree on an appraiser
knowledgeable in the farm and ranch business, and shall cause such
appraiser to conduct an audit (in accordance with generally accepted
accounting principles, consistently applied) of the inventory of the
Company's assets as of the Closing Date. Each of the Company and
Purchaser shall pay one-half of the cost of conducting such audit.
6.12 Company Information. The Company and Seller shall
provide to Purchaser all financial information of the Company in the
format required in connection with the filing of financial information
of the Company with Purchaser's Current Report on Form 8-K under the
Exchange Act required in connection with Purchaser's acquisition of the
Business. Once such information has been provided to Purchaser, the
expense of preparation of such Form 8-K shall be borne entirely by
Purchaser.
37
44
7. Post-closing Covenants.
The Parties agree as follows with respect to the period following the
Closing:
7.1 General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of
this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole
cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefor under Article 9 below). Seller
acknowledges and agrees that from and after the Closing Purchaser will
be entitled to possession of all documents, books, records (including
Tax records), agreements, and financial data of any sort relating to
the Company. Purchaser will afford to Seller reasonable access to, and
copies of, the records of the Company transferred to Purchaser at the
Closing during normal business hours after the Closing.
7.2 Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand
in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure
to act or transaction on or prior to the Closing Date involving the
Company, each of the other Parties will cooperate with her or it and
her or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled
to indemnification therefor under Article 9 below).
7.3 Transition. Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier or other business associate of any of the
Company from maintaining the same business relationships with the
Company after the Closing as it maintained with the Company prior to
the Closing. Seller will refer all customer inquiries relating to the
businesses of the Company to Purchaser from and after the Closing.
7.4 Confidentiality. Seller recognizes and acknowledges
that she has and will have access to certain Confidential Information
of the Company that, after the consummation of the transactions
contemplated hereby, will be valuable, special and unique property of
Purchaser. Seller agrees that she will, and will cause her Affiliates
and representatives, to keep confidential and not disclose to any other
Person or use for her own benefit or for the benefit of any other
Person, and she will use her best efforts to prevent disclosure by any
other Person of, any such Confidential Information to any Person for
any purpose or reason whatsoever, except to authorized representatives
of Purchaser; provided, however, such limitation shall not apply to any
information which (i) is then generally known to the public; (ii)
become or becomes generally known to the
38
45
public through no fault of Seller, her Affiliates or representatives;
and (iii) is disclosed in accordance with an order of a court of
competent jurisdiction or applicable law. In the event of a breach or a
threatened breach by Seller of any of the provisions contained in this
Section 7.4 of this Agreement, Seller acknowledges that Purchaser and
Rush will suffer irreparable damage or injury not fully compensable by
money damages, or the exact amount of which may be impossible to
obtain, and, therefore, will not have an adequate remedy available at
law. Accordingly, Purchaser and Rush shall be entitled to obtain such
injunctive relief or other equitable remedy, without the necessity of
posting bond therefor, from any court of competent jurisdiction as may
be necessary or appropriate to prevent or curtail any such breach,
threatened or actual. The foregoing shall be in addition to and without
prejudice to any other rights that the Purchaser and Rush may have
under this Agreement, at law or in equity, including, without
limitation, the right to xxx for damages.
7.5 Tax Matters. The following provisions shall govern
the allocation of responsibility as between Purchaser and Seller for
certain tax matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date.
Seller shall prepare or cause to be prepared and file or cause
to be filed all Tax Returns for the Company for all periods
ending on or prior to the Closing Date which are filed after
the Closing Date. Seller shall permit Purchaser to review and
comment on each such Tax Return described in the preceding
sentence prior to filing. Seller shall reimburse Purchaser for
Taxes of the Company with respect to such periods within
fifteen (15) days after payment by Purchaser or the Company of
such Taxes to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Closing
Date Balance Sheet.
(b) Tax Periods Beginning Before and Ending After the
Closing Date. Purchaser shall prepare or cause to be prepared
and file or cause to be filed any Tax Returns of the Company
for Tax periods which begin before the Closing Date and end
after the Closing Date. Seller shall pay to Purchaser within
fifteen (15) days after the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such
Taxes which relates to the portion of such Taxable period
ending on the Closing Date to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of
the Closing Date Balance Sheet. For purposes of this clause
(b), in the case of any Taxes that are imposed on a periodic
basis and are payable for a Taxable period that includes (but
does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such Taxable period ending on
the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed
to be the amount of such Tax for the entire Taxable period
39
46
multiplied by a fraction, the numerator of which is the number
of days in the Taxable period ending on the Closing Date, and
the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or
related to income or receipts be deemed equal to the amount
which would be payable if the relevant Taxable period ended on
the Closing Date. Any credits relating to a Taxable period
that begins before and ends after the Closing Date shall be
taken into account as though the relevant Taxable period ended
on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Company.
(c) Cooperation on Tax Matters.
(i) Purchaser, the Company and Seller shall
cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the
provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder. The Company and Seller agree (A) to retain
all books and records with respect to Tax matters pertinent to
the Company relating to any Taxable period beginning before
the Closing Date until the expiration of the Taxable period
beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by
Purchaser or Seller, any extensions thereof) of the respective
Taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and
records and, if the other party so requests, the Company or
Seller, as the case may be, shall allow the other party to
take possession of such books and records.
(ii) Purchaser and Seller further agree,
upon request, to use their reasonable best efforts to obtain
any certificate or other document from any Governmental Entity
or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated
hereby).
(iii) Purchaser and Seller further agree,
upon request, to provide the other party with all information
that either party may be required to report pursuant to
Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(d) Certain Taxes. All transfer, documentary,
sales, use, stamp, registration and other such Taxes and fees
(including any penalties and
40
47
interest) incurred in connection with this Agreement, shall be
paid by Seller when due, and Seller will, at its expense, file
all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees.
(e) Name. Seller will not use any name or
trademark containing the phrase "D&D" or any derivative
thereof.
8. Conditions to Obligation to Close.
8.1 Conditions to Obligation of Purchaser. The obligation
of Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) all representations and warranties of the Company
and Seller contained in this Agreement (including the
Schedules hereto), and all written information delivered to
Purchaser by the Company and Seller on or prior to the Closing
Date pursuant to this Agreement, (i) that are qualified as to
materiality shall be true in all respects on and as of the
Closing Date and (ii) that are not qualified as to materiality
shall be true in all material respects on and as of the
Closing Date, with the same force and effect as though such
representations and warranties were made, and such written
information was delivered, on and as of the Closing Date;
(b) the Company and Seller shall have performed and
complied with all of its or her covenants hereunder in all
material respects through the Closing;
(c) there shall have been no Material Adverse Change
in the Company from April 30, 1997 to the Closing Date not
consented to by Purchaser in writing;
(d) the Company shall have procured all of the third
party consents required in connection with the consummation of
the transactions contemplated hereby;
(e) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would
(i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affect adversely the right of
Purchaser to own the Company Stock and to control the Company,
(iv) affect adversely the right of the Company to own its
assets and to operate its businesses, (v) require or could
reasonably be expected to require any divestiture by the
Company of a portion of its business that Purchaser in its
reasonable judgment believes will have a Material Adverse
Effect on the Company or (vi) imposes any condition upon the
41
48
Company that in Purchaser's reasonable judgment (x) would be
materially burdensome to the Company or (y) would materially
increase the costs incurred or that will be incurred by
Purchaser as a result of consummating the Acquisition and the
other transactions contemplated hereby (and no such
injunction, judgment, order, decree, ruling or charge shall be
in effect);
(f) Seller shall have delivered to Purchaser a
certificate to the effect that (i) each of the conditions
specified above in Section 8.1(a) through (e) is satisfied in
all respects;
(g) the Parties shall have received all
authorizations, consents, and approvals of any Governmental
Entity or Regulatory Authority required in connection with the
consummation of the transactions contemplated hereby;
(h) Seller shall have delivered to Purchaser an MAI
appraisal, dated as of a date within two months prior to the
Closing Date, concluding that the orderly liquidation value of
the Real Property is not less than $1,500,000 (Purchaser shall
provide a list of prospective MAI appraisers to Seller from
which list Seller shall choose the appraiser who shall conduct
the appraisal and the Company shall pay the costs of such
appraisal);
(i) Purchaser shall have received the resignations,
effective as of the Closing, of each director and officer of
the Company other than those whom Purchaser shall have
specified in writing at least five Business Days prior to the
Closing;
(j) all actions, proceedings, instruments and
documents required or incidental to carrying out this
Agreement and all other related legal matters shall have been
approved by counsel to Purchaser;
(k) the board of directors of Purchaser and Rush, in
its sole discretion, shall have approved this Agreement and
the consummation by Purchaser and Rush of the transactions
contemplated hereby;
(l) Purchaser is satisfied with the results of its
continuing business, legal, and accounting due diligence
regarding the Company;
(m) the Company and Seller shall have provided to
Purchaser all financial information of the Company in the
format required in connection with the filing of financial
information of the Company with Purchaser's Current Report on
Form 8-K under the Exchange Act required in connection with
Purchaser's acquisition of the Business; provided, however,
Purchaser shall pay for the preparation of the Form 8-K at its
own expense;
42
49
(n) the inventory audit contemplated by Section 6.11
shall have been completed and the results thereof shall be
satisfactory to Purchaser;
(o) Xxxxx Xxxxxxx shall have entered into the
Non-Competition and Confidentiality Agreement attached hereto
as Schedule 8.1(o)(1), and the Consent Agreement attached
hereto as Schedule 8.1(o)(2);
(p) Purchaser shall have had issued to it upon terms
satisfactory to Purchaser a five-year term life insurance
policy on each of the lives of Seller and Xxxxx Xxxxxxx in the
amount of $5.0 million and $1.0 million, respectively; and
(q) all actions to be taken by Seller in connection
with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to Purchaser.
Purchaser may waive any condition specified in this Section 8.1 if it
executes a writing so stating at or prior to the Closing.
8.2 Conditions to Obligation of Seller. The obligation of
Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) all representations and warranties of Purchaser
contained in this Agreement, and all written information
delivered to Seller by Purchaser on or prior to the Closing
Date pursuant to this Agreement, (i) that are qualified as to
materiality shall be true in all respects on and as of the
Closing Date and (ii) that are not qualified as to materiality
shall be true in all material respects on and as of the
Closing Date, with the same force and effect as though such
representations and warranties were made, and such written
information was delivered, on and as of the Closing Date;
(b) Purchaser shall have performed and complied with
all of its covenants hereunder in all material respects
through the Closing;
(c) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would
(A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment,
order, decree, ruling or charge shall be in effect);
43
50
(d) Purchaser shall have delivered to Seller a
certificate to the effect that each of the conditions
specified above in Section 8.2(a) through (c) is satisfied in
all respects;
(e) the Parties shall have received all other
authorizations, consents and approvals of any Governmental
Entity or Regulatory Authority required in connection with the
consummation of the transactions contemplated hereby;
(f) Purchaser shall not have elected to reduce the
value of the inventory of the Company as reflected on the
Closing Date Balance Sheet by greater than $150,000;
(g) the inventory audit contemplated by Section 6.11
shall have been completed and the results thereof shall be
satisfactory to Seller;
(h) all actions to be taken by Purchaser in
connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance
to Seller; and
(i) Rush shall execute and deliver to each of Xxxxx
Xxxxxxx and Seller an option (the "Option") in the form of
Exhibits 8.2A and 8.2B.
Seller may waive any condition specified in this Section 8.2 if they execute a
writing so stating at or prior to the Closing.
9. Indemnity by Seller.
9.1 Survival of Representations and Warranties. All of
the representations and warranties contained in this Agreement shall
survive the Closing hereunder (even if the other Party knew or had
reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of
three years thereafter, regardless of any investigation made by Rush,
Purchaser or Seller or on their behalf, except as to any matters with
respect to which a bona fide written claim shall have been made or an
action at law or in equity shall have commenced before such date, in
which event survival shall continue (but only with respect to, and to
the extent of, such claim) until the final resolution of such claim or
action, including all applicable periods for appeal; provided, however,
that the representations and warranties relating to (i) environmental
matters and ERISA shall survive and remain in full force and effect for
the periods equal to the applicable statutes of limitation relating
thereto and (ii) Taxes shall survive and remain in full force and
effect until the latest to occur of (x) three years from the date of
the last filing of a Tax Return covering all Taxes relating to all
periods prior to the Closing Date, (y) the expiration of the applicable
statute of limitations, or (z) six months following the ultimate
disposition of any claim with respect to any
44
51
Taxes; and provided further that the representations set forth in
Sections 3.3 and 4.3 shall survive and remain in full force and effect
forever.
9.2 Indemnification Provisions for Benefit of the
Purchaser and Rush.
(a) In the event the Company or Seller breaches (or
in the event any third party alleges facts that, if true,
would mean the Company or Seller has breached) any of their
representations, warranties and covenants contained herein,
and, if there is any applicable survival period pursuant to
Section 9.1 above, provided that the Purchaser makes a written
claim for indemnification against Seller within such survival
period, then Seller agrees to indemnify the Purchaser and Rush
from and against the entirety of any Adverse Consequences the
Purchaser, the Company or Rush may suffer through and after
the date of the claim for indemnification (including any
Adverse Consequences the Purchaser, the Company or Rush may
suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of
or caused by the breach (or the alleged breach); provided,
however, that Seller shall not have any obligation to
indemnify the Purchaser or Rush from and against any Adverse
Consequences resulting from, arising out of, relating to, in
the nature of or caused by the breach (or alleged breach) of
any representation or warranty of the Company or Seller until
Rush, Purchaser or the Company have, in the aggregate,
suffered Adverse Consequences by reason of all such breaches
(or alleged breaches) in excess of $25,000, and then for all
such Adverse Consequences, and provided further that Seller's
maximum liability hereunder shall not exceed the Purchase
Price. Notwithstanding anything herein to the contrary, the
$25,000 and $10.5 million limitations shall not apply to any
Adverse Consequences resulting from breaches of the
representations and warranties contained in Sections 3.3 and
4.3 hereof.
(b) Seller agrees to indemnify the Purchaser and Rush
from and against the entirety of any Adverse Consequences the
Purchaser, Rush or the Company may suffer resulting from,
arising out of, relating to, in the nature of or caused by any
Liability of any of Seller, the Company, the Purchaser and
Rush (w) for any Taxes of the Company with respect to any Tax
year or portion thereof ending on or before the Closing Date
(or for any Tax year beginning before and ending after the
Closing Date to the extent allocable (determined in a manner
consistent with Section 7.5) to the portion of such period
beginning before and ending on the Closing Date), to the
extent such Taxes are not reflected in the reserve for Tax
Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) shown on the face of the Closing Date Balance Sheet,
(x) for the unpaid Taxes of any Person (other than the
Company) under Treas. Reg. ss. 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise, (y) for the legal
proceedings listed on the Disclosure Schedule or any legal
proceedings (whether or not disclosed on the Disclosure
Schedule) commenced after the Closing Date but in which the
45
52
principal event(s) giving rise thereto occurred prior to the
Closing, or (z) for any Environmental Liabilities.
9.3 Indemnification Provisions for Benefit of the Seller.
In the event the Purchaser breaches (or in the event any third party
alleges facts that, if true, would mean the Purchaser has breached) any
of its representations, warranties and covenants contained herein, and,
if there is an applicable survival period pursuant to Section 9.1
above, provided that the Seller makes a written claim for
indemnification against the Purchaser within such survival period, then
the Purchaser agrees to indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Seller may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the
nature of or caused by the breach (or alleged breach); provided,
however, that Purchaser shall not have any obligation to indemnify the
Seller from and against any Adverse Consequences resulting from,
arising out of, relating to, in the nature of or caused by the breach
(or alleged breach) of any representation or warranty of the Purchaser
until the Seller has, in the aggregate, suffered Adverse Consequences
by reason of all such breaches (or alleged breaches) in excess of
$25,000, and then for all such Adverse Consequences up to and including
the $25,000, and provided further that Purchaser's maximum liability
hereunder shall not exceed the Purchase Price.
9.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD
PARTY CLAIM") which may give rise to a claim for
indemnification against any other Party (the "INDEMNIFYING
PARTY") under this Article 9, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(b) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim
with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within fifteen (15)
days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of or caused by the
Third Party Claim, (ii) the Indemnifying Party provides the
Indemnified Party with the evidence reasonably acceptable to
the Indemnified Party that the Indemnifying Party will have
the financial resources to defend against the Third Party
Claim and fulfill its indemnification obligations hereunder,
(iii) the Third Party Claim involves only money damages and
does not seek an injunction or other
46
53
equitable relief, (iv) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with
Section 9.4(b) above, (i) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the Prior written consent of the
Indemnifying Party (not to be withheld, delayed or conditioned
unreasonably), and (iii) the Indemnifying Party will not
consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be
withheld, delayed or conditioned unreasonably).
(d) In the event any of the conditions in Section
9.4(b) above is or becomes unsatisfied, however, (i) the
Indemnified Party may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with,
or obtain any consent from, any Indemnifying Party in
connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for
the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii)
the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent
provided in this Article 9.
9.5 Determination of Adverse Consequences. All
indemnification payments under this Article 9 shall be deemed
adjustments to the Purchase Price.
9.6 Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation
of, any statutory, equitable or common law remedy any Party may have
for breach of representation, warranty or covenant. Seller hereby
agrees that she will not make any claim for indemnification against the
Company by reason of the fact that she was a stockholder, director,
officer, employee or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer,
employee or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise and whether such claim is
pursuant to any statute, charter document, bylaw, agreement or
otherwise) with respect to any action, suit, proceeding, complaint,
47
54
claim or demand brought by the Purchaser against such Seller (whether
such action, suit, proceeding, complaint, claim, or demand is pursuant
to this Agreement, applicable law or otherwise).
9.7 INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE. THE
INDEMNIFICATION PROVIDED IN THIS ARTICLE 9 SHALL BE APPLICABLE WHETHER
OR NOT THE SOLE OR CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF THE
PARTY SEEKING INDEMNIFICATION, OR THE SOLE OR CONCURRENT STRICT
LIABILITY IMPOSED ON THE PARTY SEEKING INDEMNIFICATION, OR THE SOLE OR
CONCURRENT LIABILITY IMPOSED VICARIOUSLY ON THE PARTY SEEKING
INDEMNIFICATION, IS ALLEGED OR PROVEN.
9.8 Releases.
(a) As of the Closing, Seller does hereby for such
Seller and such Seller's Affiliates, heirs, executors,
administrators and legal representatives remise, release,
acquit and forever discharge the Company and its Affiliates,
officers, directors, controlling Persons or entities,
employees, attorneys and successors and assigns (collectively,
the "Company Released Parties") of and from any and all
claims, demands, liabilities, responsibilities, disputes,
causes of action and obligations of every nature whatsoever,
liquidated or unliquidated, known or unknown, matured or
unmatured, fixed or contingent, which such Seller and such
Seller's Affiliates now have, own or hold or have at any time
previously had, owned or held against the Company Released
Parties, including without limitation all liabilities created
as a result of the sole or contributory negligence, gross
negligence and willful acts of any Company Released Party,
existing as of the Closing or relating to any matter that
occurred on or prior to the Closing; provided, however, that
any claims, liabilities, debts or causes of action that may
arise in connection with the failure of any of the parties
hereto to perform any of their obligations hereunder or under
any other agreement relating to the transactions contemplated
hereby or from any breaches by any of them of any
representations or warranties herein or in connection with any
of such other agreements shall not be released or discharged
pursuant to this Agreement. Seller represents and warrants
that such Seller has not previously assigned or transferred,
or purported to assign or transfer, to any Person or entity
whatsoever all or any part of the claims, demands,
liabilities, responsibilities, disputes, causes of action or
obligations released in this Section 9.8(a). Seller covenants
and agrees that such Seller will not assign or transfer to any
Person or entity whatsoever all or any part of the claims,
demands, liabilities, responsibilities, disputes, causes of
action or obligations released in this Section 9.8(a). Each of
Seller and Purchaser represent and warrant to the other that
they have been represented or advised by legal counsel and
other professional advisors in connection with the negotiation
and delivery of this Agreement.
48
55
(b) As of the Closing, the Company does hereby for
such Company remise, release, acquit and forever discharge
Seller and Seller's Affiliates, heirs, executors,
administrators and legal representatives (collectively, the
"Seller Released Parties") of and from any and all claims,
demands, liabilities, responsibilities, disputes, causes of
action and obligations of every nature whatsoever, liquidated
or unliquidated, known or unknown, matured or unmatured, fixed
or contingent, which such Company now have, own or hold or
have at any time previously had, owned or held against the
Seller Released Parties, including without limitation all
liabilities created as a result of the sole or contributory
negligence, gross negligence and willful acts of any Seller
Released Party, existing as of the Closing or relating to any
matter that occurred on or prior to the Closing; provided,
however, that any claims, liabilities, debts or causes of
action that may arise in connection with the failure of any of
the parties hereto to perform any of their obligations
hereunder or under any other agreement relating to the
transactions contemplated hereby or from any breaches by any
of them of any representations or warranties herein or in
connection with any of such other agreements shall not be
released or discharged pursuant to this Agreement. The Company
covenants and agrees that after the Closing Date the Company
will not assign or transfer to any Person or entity whatsoever
all or any part of the claims, demands, liabilities,
responsibilities, disputes, causes of action or obligations
released in this Section 9.8(b). Seller represents and
warrants that neither Seller nor Seller Released Parties are
indebted to the Company as of the Closing Date and that
neither Seller nor Seller Released Parties will owe any amount
to the Company that will be reflected as an asset on the
Closing Date Balance Sheet.
10. Offset Provisions. Notwithstanding any other provisions of
this Agreement, in the event Seller becomes obligated to pay sums to Purchaser,
Rush or any party entitled to indemnification under this Agreement or any of the
documents or agreements referenced herein or contemplated hereby (whether as a
result of indemnity, breach of contract or otherwise), Purchaser shall be
entitled to, and shall have the right to, reduce and offset payments due under
the Promissory Note in such amount or amounts as Purchaser (and Rush and any
Indemnified Party that is not promptly paid by Seller) is entitled to receive
from Seller, and any such offset shall be deemed to be a payment under the
Promissory Note.
11. Termination.
11.1 Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(a) Purchaser and Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(b) Purchaser may terminate this Agreement by giving
written notice to Seller on or before the Closing Date if
Purchaser is not satisfied
49
56
with the results of its continuing business, legal, and
accounting due diligence regarding the Company;
(c) Purchaser may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing (i)
in the event the Company or Seller has breached any
representation, warranty or covenant contained in this
Agreement in any material respect, Purchaser has notified
Seller of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach or
(ii) if the Closing shall not have occurred on or before April
30, 1998, by reason of the failure of any condition precedent
under Section 8.1 hereof (unless the failure results primarily
from Purchaser itself breaching any representation, warranty
or covenant contained in this Agreement); and
(d) Seller may terminate this Agreement by giving
written notice to Purchaser at any time prior to the Closing
(i) in the event the Purchase has breached any representation,
warranty or covenant contained in this Agreement in any
material respect, Seller has notified Purchaser of the breach,
and the breach has continued without cure for a period of 30
days after the notice of breach or (ii) if the Closing shall
not have occurred on or before April 30, 1998, by reason of
the failure of any condition precedent under Section 8.2
hereof (unless the failure results primarily from the Company
or Seller themselves breaching any representation, warranty or
covenant contained in this Agreement).
11.2 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 11.1 above, all rights and obligations of
the Parties hereunder shall terminate without any Liability of any
Party to any other Party (except for any Liability of any Party then in
breach).
12. Requirements of Securities Laws.
12.1 Accredited Investors. Seller recognizes that the
Option Stock is not being registered under the Securities Act in
reliance upon an exemption from the Securities Act which is predicated,
in part, on the representations and agreements of Seller set forth in
this Agreement. Seller represents and warrants to Purchaser and Rush
that she is an "accredited investor" as that term is defined in Rule
501(a) of the Securities Act and that the Option Stock is being
acquired solely for her own account for investment and not with a view
to, or for offer or resale in connection with, a distribution thereof
within the meaning of the Securities Act. Seller understands that the
effect of such representation and warranty is that the Option Stock
must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available at
the time for any proposed sale or other transfer thereof. Seller also
understands that neither Purchaser nor Rush is under any obligation to
file a registration statement under the Securities Act covering the
Option Stock or to take any other action to enable Seller to transfer
or otherwise dispose of the Option Stock. Seller represents that she
has consulted with counsel in regard to the Securities Act and that she
is fully familiar with the circumstances under
50
57
which she is required to hold the Option Stock and the limitations upon
the transfer or other disposition thereof. Seller acknowledges that
Purchaser and Rush are relying upon the truth and accuracy of the
foregoing representations and warranties in issuing the Option Stock
under the Securities Act. Seller agrees to indemnify and hold Purchaser
and Rush harmless against all liabilities, costs and expenses,
including reasonable attorneys' fees, incurred by either Purchaser or
Rush as a result of any sale, transfer or other disposition by him of
all or any part of the Option Stock in violation of the Securities Act.
12.2 Legend. The certificates representing the Option
Stock shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
12.3 SEC Documents. Seller acknowledges that she has been
furnished by Rush with (a) a copy of the Annual Report on Form 10-K of
Purchaser for the fiscal year ended December 31, 1996, in the form
filed with the SEC, and (b) copies of all filings since December 31,
1996, by Purchaser with the SEC in compliance with Section 13 or 14 of
the Exchange Act. Seller represents that she has reviewed the foregoing
documents and acknowledge that she has been afforded the opportunity to
obtain any additional information necessary to verify the accuracy of
the information contained in the foregoing documents, including the
opportunity to ask questions of, and receive answers from, officers and
representatives of Rush concerning Rush and the terms and conditions of
the transactions contemplated by this Agreement.
13. Non-Competition Agreement.
13.1 Non-Competition. In consideration of the benefits of
this Agreement to the Seller and as a material inducement to Purchaser
and Rush to enter into this Agreement and pay the Purchase Price,
Seller hereby covenants and agrees that, commencing on the Closing Date
and ending on the later of (i) five years from the Closing Date, or
(ii) three years following the date Seller ceases to be employed by
Purchaser or an Affiliate of Purchaser, regardless of how such
cessation of employment may be brought about; she shall not, and the
Seller will cause her Affiliates and representatives not to, directly
or indirectly, as proprietor, partner, stockholder, director,
executive, officer, employee, consultant, joint venturer, investor or
in any other capacity, engage in, or own, manage, operate or control,
or participate in the ownership, management, operation or control, of
any entity which engages anywhere in the States of California, Arizona,
New Mexico, Texas, Oklahoma, Louisiana, Arkansas, Tennessee,
Mississippi, Alabama, Georgia or Florida, in any business activity in
which the Company participates or participated as of the Closing
51
58
Date; provided, however, the foregoing shall not prohibit the Seller
and her representatives from purchasing and holding as an investment
not more than 1% of any class of publicly-traded securities of any
entity which conducts a business in competition with the business of
the Company, so long as Seller, her Affiliates and representatives do
not participate in any way in the management, operation or control of
such entity.
13.2 Judicial Reformation. Seller acknowledges that, given
the nature of the Purchaser's business, the covenants contained in
Section 13.1 establish reasonable limitations as to time, geographic
area and scope of activity to be restrained and do not impose a greater
restraint than is reasonably necessary to protect and preserve the
goodwill of Purchaser's and Rush's business and to protect their
legitimate business interests. If, however, Section 13.1 is determined
by any court of competent jurisdiction to be unenforceable by reason of
its extending for too long a period of time or over too large a
geographic area or by reason of it being too extensive in any other
respect or for any other reason, it will be interpreted to extend only
over the longest period of time for which it may be enforceable and/or
over the largest geographic area as to which it may be enforceable
and/or to the maximum extent in all other aspects as to which it may be
enforceable, all as determined by such court.
13.3 Customer Lists; Non-Solicitation. Seller hereby
further covenants and agrees that she shall not, and Seller will cause
her Affiliates and representatives not to, directly or indirectly, for
a period commencing on the Closing Date and ending on the later of (i)
five years from the Closing Date, or (ii) three years following the
date Seller ceases to be employed by Purchaser or an Affiliate of
Purchaser, the Company or Rush (a) use or make known to any person or
entity the names or addresses of any clients or customers of the
Company or Purchaser or Rush or any other information pertaining to
them; provided, however, such limitation shall not apply to any
information which (i) is then generally known to the public; (ii)
become or becomes generally known to the public through no fault of
Seller, her Affiliates or representatives; and (iii) is disclosed in
accordance with an order of a court of competent jurisdiction or
applicable law, (b) call on, solicit, or attempt to call on or solicit
any clients or customers of the Company or Purchaser or Rush, (c)
solicit for employment, recruit, hire or attempt to recruit or hire any
employees of the Company or Purchaser or Rush, nor (d) become the
employee or consultant of or otherwise render services to, or own any
interest in, any enterprise that directly or indirectly competes with
the business engaged in by the Company as of the Closing Date.
13.4 Covenants Independent. The covenants of the Seller
contained in Sections 13.1, 13.2 and 13.3 of this Agreement will be
construed as independent of any other provision in this Agreement, and
the existence of any claim or cause of action by Seller against
Purchaser or Rush will not constitute a defense to the enforcement by
Purchaser or Rush of said provisions. Seller understands that the
provisions contained in Sections 13.1, 13.2 and 13.3 are essential
elements of the transactions contemplated by this Agreement and, but
for the agreement of Seller to Sections 13.1, 13.2 and 13.3, Purchaser
and Rush would not have
52
59
agreed to enter into this Agreement and the transactions contemplated
herein. Seller has been advised to consult with counsel in order to be
informed in all respects concerning the reasonableness and propriety of
Sections 13.1, 13.2 and 13.3 with specific regard to the nature of the
business conducted by the Company and Purchaser and Rush and Seller
acknowledges that Sections 13.1, 13.2 and 13.3 are reasonable in all
respects.
13.5 Remedies. In the event of a breach or a threatened
breach by either Seller of any of the provisions contained in Sections
13.1, 13.2 or 13.3 of this Agreement, Seller acknowledges that
Purchaser and Rush will suffer irreparable damage or injury not fully
compensable by money damages, or the exact amount of which may be
impossible to obtain, and, therefore, will not have an adequate remedy
available at law. Accordingly, Purchaser and Rush shall be entitled to
obtain such injunctive relief or other equitable remedy, without the
necessity of posting bond therefor, from any court of competent
jurisdiction as may be necessary or appropriate to prevent or curtail
any such breach, threatened or actual. The foregoing shall be in
addition to and without equity, including, without limitation, the
right to xxx for damages.
13.6 Exceptions. Notwithstanding the foregoing provisions
of Article 13, Seller shall be entitled at all times from and after the
Closing to (i) have membership in, hold office in and perform services
on behalf of any trade association or similar organization, (ii)
collect any accounts receivable transferred to Seller pursuant to
Section 2.3(e), (iii) sell any inventory transferred to Seller pursuant
to Section 2.3(a), (iv) solicit for employment and employ members of
the immediate family of Seller, and (v) utilize the services of Xxxxx
Xxxxxxx in a capacity not in competition with the Company's business so
long as such utilization does not materially interfere with Xx.
Xxxxxxx'x performance of services as an employee of the Company.
14. Survey.
14.1 Survey. Within 20 days from and after the date
hereof, The Company agrees, and Seller agrees to cause the Company to,
at the Company's sole cost and expense, (a) to cause a registered,
licensed state surveyor approved by Purchaser and the Title Company to
prepare a new or updated on the ground survey or surveys of the Real
Property (whether one or more, the "Survey"), and (b) to deliver to
Purchaser at least three copies, to Purchaser's counsel at least one
copy, and to the Title Company at least one copy of each Survey plat
and a certificate under the seal of the surveyor, which Survey shall be
made in accordance with the "Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys" jointly adopted by the American Land
Title Association and the American Congress on Surveying and Mapping in
1992, including items 1, 2, 3, 4, 6, 7, 8, 9, 10, 11 and 13 thereof.
The survey shall also include the surveyor's registered number and
seal, the date of the Survey, and the following narrative certificate:
"The undersigned does hereby certify that (i) this
survey was this day made upon the ground of the
property reflected hereon, for the
53
60
benefit of and reliance by Rush Enterprises, Inc., Rush Retail
Centers, Inc. and Alamo Title Company, (ii) the description
contained hereon is correct, (iii) the Real Property has
separate access to and from a dedicated roadway as shown
hereon, (iv) except as shown hereon, there are no
discrepancies, conflicts, shortages in area, encroachments,
improvements, overlapping of improvements, set-back lines,
easements or roadways, (v) the gross and net areas (both
acreage and square footage) of the Real Property shown hereon
are correct, and (vi) the area of the Real Property is shown,
if any, which lies within the one hundred year (100) year
plain or any area having special flood hazards as designated
by the U.S. Army Corps of Engineers, the Federal Emergency
Management Agency, or any other government agency."
The Survey shall be in form and substance acceptable to the
Title Company as a basis for deleting to the maximum extent permitted
by applicable title insurance regulations (at the Company's expense)
the standard printed exceptions from the Owner Policy of Title
Insurance to be delivered by Seller as hereinabove provided. The terms
"net acreage" and "net square footage" as used herein shall mean the
number of acres and square feet determined by the Surveyor to be equal
to (a) the total acreage and square footage within the Real Property
less (b) the number of total acres and square feet contained within any
land lying within any easement or right-of-way or other such matter as
described in Subsections (iv), (v) and (vi) above, and contained within
any land lying within the 100 year flood plain. Without in any way
limiting the foregoing, the surveyor shall provide separate written
field note descriptions for the Real Property.
14.2 Remedies for Failure to Deliver Survey. In the event
Seller does not cause the Survey to be delivered within such 20-day
period, then and thereafter, Purchaser shall have the option to (a)
procure the Survey, at the expense of Seller (and Seller shall
reimburse Purchaser immediately upon demand for all amounts incurred or
expended in procuring the same, and in the event Seller does not so
reimburse Purchaser, Purchaser may deduct such amounts from the Cash
Consideration on the Closing Date), or (b) waive the Survey
requirements and proceed to close the sale contemplated by this
Agreement.
15. Title Commitment and Condition of Title.
15.1 Title Commitment. Within ten days from and after the
date hereof, at the Company's sole cost and expense, Seller agrees to
cause the Company to, and the Company agrees to cause the Title Company
to furnish Purchaser and its counsel a Commitment for Owner Policy of
Title Insurance (the "Title Commitment") prepared and issued by the
Title Company describing and covering the Real Property, listing the
Company as the prospective named insured and showing as the policy
amount an amount equal to the value of the Real Property as determined
by the appraisal to be conducted pursuant to Section 8 hereof. The
Title Commitment shall constitute the commitment of the
54
61
Title Company to insure, by title insurance in the standard form
promulgated by the Board of Insurance of the State of Texas, The
Company's title to the Real Property to be good and indefeasible and
subject to the standard printed exceptions except as modified below,
but deleting (at the Company's expense) to the maximum extent permitted
by applicable title insurance regulations the standard printed form
survey exception from the Owner Policy of Title Insurance as
hereinabove provided. The standard exception as to the lien for taxes
shall be limited to the year of Closing, and shall be endorsed "Not Yet
Due and Payable." The Title Commitment shall contain no exception for
"visible and apparent easements" or for "public or private roads" or
the like. The Title Commitment shall contain no exception for "rights
of parties in possession".
15.2 UCC Reports. Within ten days from and after the date
hereof, Seller shall cause the Company to, and the Company shall, at
the Company's sole cost and expense, furnish to Purchaser a report (the
"UCC Report") of searches made of the Uniform Commercial Code Records
of Xxxxxxxxx County, Texas, of the Official Public Records of Real
Property of Xxxxxxxxx County, Texas, and of the Office of the Secretary
of State, State of Texas, or the proper offices in the State of Texas
where Uniform Commercial Code records are maintained, which searches
shall show that none of the Company's assets are subject to any lien or
security interest (other than liens and security interests which are
not objected to by Purchaser). An update of the searches (dated no more
than two days prior to the Closing Date, but delivered prior to the
Closing Date) shall be provided by Seller to Purchaser at the Company's
sole cost and expense.
15.3 Disclosure of Exceptions by Title Commitment and UCC
Report. Purchaser shall have a period of 20 days from the last to be
delivered to Purchaser and its counsel of each of the Survey, UCC
Report, Title Commitment and the documents referred to therein as
conditions or exceptions to title to the Real Property in which to
review such items and to deliver to Seller in writing such objections
as Purchaser may have to anything contained or set forth in the Survey,
UCC Report, Title Commitment or title exception documents. Any items to
which Purchaser does not object within such period shall be deemed to
be permitted exceptions hereunder ("Permitted Exceptions"). In the
event Purchaser timely objects to any matter contained in the Survey,
UCC Report, Title Commitment or title exception documents, Seller shall
have a reasonable time, not to exceed twenty five days from the date
such objections are made known in writing to Seller, to cure such
objections. Any curative actions shall be completed and all curative
materials shall be filed by Seller, at the Company's sole cost and
expense, within such 25-day period. If Seller cannot cure the
objections within such twenty-five day period, Purchaser shall have the
option to (a) cancel this Agreement, in which event the parties shall
have no further obligations hereunder; (b) if the matters to which
Purchaser has objected can be cured for $25,000 or less, to cure and
deduct the cost of such cure from the Cash Consideration; or (c) waive
the objections, and proceed to close the transaction contemplated
hereby. In the event, however, that a lien indebtedness against any of
the Company's Assets (including past due taxes) is disclosed by the
Title Commitment or the UCC Report, then Seller shall (y) discharge
such lien
55
62
indebtedness prior to the Closing, or (z) authorize the Title Company
to discharge such lien indebtedness at the Closing out of the Cash
Consideration, and all costs incurred in connection with discharging
such lien indebtedness shall not count against the $25,000 amount
referenced in clause (b) of the immediately preceding sentence.
16. Environmental Studies and Remediation Activities.
16.1 Environmental Studies. Seller shall cause the Company
to, and the Company shall, at the Company's cost and expense, undertake
or is undertaking a Phase I environmental site assessment ("ESA") with
respect to the Real Property utilizing the party designated by
Purchaser. Within 20 days after the date hereof, Seller shall provide
to Purchaser, at the Company's sole cost and expense, copies of (a) all
existing ESAs (whether Phase I, Phase II or otherwise) covering all or
any portion of the Real Property, to the extent the same are in
Seller's or the Company's possession or Seller or the Company have
access to them, and (b) any other environmental studies, reports and
information, including, without limitation, correspondence from
Governmental Authorities, concerning the environmental condition of the
Real Property, to the extent the same are in Seller's or the Company's
possession or Seller or the Company have access to them (all of the
foregoing information, whether obtained by Purchaser or provided by
Seller, being hereinafter referred to as "Environmental Information").
Without in any way limiting the provisions of the preceding sentence,
Purchaser and its contractors and representatives, at Purchaser's
expense, shall have at least 60 days from the date hereof, but in no
event less than 20 days from receipt of the Environmental Information
(the "Feasibility Period") within which to conduct any and all
engineering, environmental and economic feasibility studies and tests
of the Real Property which Purchaser, in Purchaser's sole discretion,
deems necessary to determine whether the Real Property is
environmentally, engineeringly and economically suitable for
Purchaser's intended use. Each of Seller and Company have granted and
hereby grant to Purchaser and its contractors and representatives
access to the Real Property for the purpose of performing such studies
or tests. Such persons shall conduct their studies and tests in such a
manner as to minimize interference with the Company's business, and,
upon completion of their activities on the Real Property, shall restore
the Real Property as nearly as is reasonably possible to the condition
it was in immediately prior to such activities.
16.2 Remediation. In the event that any of the
Environmental Information or any studies or tests performed or
commissioned by Purchaser indicate the existence of any Environmental
Conditions on the Real Property, then Seller shall have a period of 30
days after notification thereof in which to remediate or otherwise cure
the same in accordance with all applicable Governmental Requirements.
In the event that an Environmental Condition exists or is discovered on
the Real Property and Seller fails or refuses to remediate or otherwise
cure or have cured such Environmental Condition within the required
30-day period, or in the event such Environmental Condition is not
capable of being remediated or otherwise cured within such 30-day
period, then Purchaser shall have the following options: (a) cancel
this Agreement by written
56
63
notice thereof given to Seller prior to the Closing Date, in which
event the parties hereto shall have no further obligations hereunder or
(b) if the Environmental Condition can be remediated or cured for
$25,000 or less, to remediate or cure and deduct the cost of such cure
from the Cash Consideration.
16.3 No Waiver. It is expressly understood and agreed by
Purchaser and Seller that nothing in this Article 16 shall in any way
operate as a waiver of or limitation on the environmental
indemnification obligations of Seller set forth in this Agreement, and
such indemnification obligations shall apply without regard to whether
(a) any Environmental Conditions are disclosed as existing on reports
performed or commissioned by Seller, the Company or Purchaser, (b) any
environmental remediation or curative actions are undertaken by
Purchaser, the Company or Seller hereunder, or (c) Purchaser elects to
waive remediation or other curative actions with respect to
Environmental Conditions on the Real Property and to proceed to
Closing.
17. Miscellaneous.
17.1 Damage to Assets. If, on or before the Closing Date,
the assets or properties of the Company are damaged or destroyed,
Seller will immediately notify Purchaser of such damage or destruction.
In the event of any such damage or destruction, Purchaser shall have
the right, in its sole discretion, to either (i) reduce the Purchase
Price by an amount equal to the difference between the insurance
proceeds and the value of the damaged or destroyed asset or assets, and
complete the purchase, or (ii) terminate this Agreement as provided by
Section 11.1 hereof and not complete the purchase.
17.2 Expenses. Whether or not the transactions
contemplated hereby are consummated, each of the Parties will pay all
costs and expenses of its performance of and compliance with this
Agreement.
17.3 Further Actions. From time to time, at the request of
any Party hereto, the other parties hereto shall execute and deliver
such instruments and take such action as may be reasonably requested to
evidence the transactions contemplated hereby.
17.4 Dispute Resolution. Except for the provisions of
Articles 7.4, 9 and 13 of this Agreement dealing with restrictive
covenants and non-disclosure of confidential information and other
disputes with respect to which the remedy of injunctive relief is
sought as provided for in this Agreement, with respect to which
Purchaser and Rush expressly reserve the right to immediately and
without any negotiation or mediation as provided herein, petition a
court directly for injunctive and other relief, the parties agree that
each will attempt to resolve through negotiation any dispute, claim or
controversy arising out of or relating to this Agreement prior to
proceeding to arbitration as provided herein. Either party may initiate
this agreement prior to filing for arbitration as provided herein.
Either party may initiate negotiations by providing written notice in
letter form to the other party, setting forth the subject of the
dispute and the relief requested. The recipient of such notice will
respond in writing within five
57
64
days with a statement of its position on and recommended solution to
the dispute. If the dispute is not resolved by this exchange of
correspondence, then representatives of each party with full settlement
authority will meet at a mutually agreeable time and place within ten
days of the date of the initial notice in order to exchange relevant
information and perspectives, and to attempt to resolve the dispute. If
the dispute is not resolved by these negotiations, the matter will be
submitted to a J.A.M.S., or its successor, for mediation. If the matter
is not resolved by such mediation within 30 days of the initiation of
negotiations, then either party may proceed with arbitration in
accordance with this Agreement.
Except for the provisions of Articles 7.4, 9 and 13 of this Agreement
dealing with restrictive covenants and non-disclosure of confidential
information and other disputes with respect to which the remedy of
injunctive relief is sought as provided for in this Agreement, with
respect to which Purchaser and Rush expressly reserve the right to
petition a court directly for injunctive and other relief, any
controversy of any nature whatsoever, including, but not limited to,
tort claims or contract disputes, between the parties to this Agreement
or their respective heirs, executors, administrators, legal
representatives, successors and assigns, as applicable, arising out of
or related to this Agreement, including the implementation,
applicability and interpretation thereof, shall, upon the written
request of one party served upon the other, be submitted to and settled
by arbitration in accordance with the provisions of the Federal
Arbitration Act, 9 U.S.C. ss. ss. 1-15, as amended. The terms of the
commercial arbitration rules of the American Arbitration Association
(the "AAA") shall apply except to the extent they conflict with the
provisions of this paragraph. If the amount in controversy in the
arbitration exceeds Two Hundred Fifty Thousand Dollars ($250,000),
exclusive of interest, attorneys' fees and costs, the arbitration shall
be conducted by a single independent arbitrator. The parties shall
endeavor to select independent arbitrators by mutual agreement. If such
agreement cannot be reached within 30 calendar days after a dispute has
arisen which is to be decided by arbitration, the selection of the
arbitrator(s) shall be made in accordance with Rule 13 of the Rules as
presently in effect. If three arbitrators are selected, the arbitrators
shall elect a chairperson to preside at all meetings and hearings. If a
dispute is to be resolved by a sole arbitrator in accordance with the
terms hereof, or if the dispute is to be resolved by a panel of three
arbitrators as provided hereinabove, then each such arbitrator shall be
a member of a state bar engaged in the practice of law in the United
States or a retired member of a state or the federal judiciary in the
United States. The award of the arbitrator(s) shall require a majority
of the arbitrators in the case of a panel of arbitrators, shall be
based on the evidence admitted and the substantive law of the State of
Texas and shall contain an award for each issue and counterclaim. The
award shall be made 30 days following the close of the final hearing
and the filing of any post-hearing briefs authorized by the
arbitrator(s). The award of the arbitrator(s) shall be final and
binding on the parties hereto. Each party shall be entitled to inspect
and obtain a copy of non-privileged relevant documents in the
possession or control of the other party. All such discovery shall be
in accordance with procedures approved by the arbitrator(s). Unless
otherwise provided in the award, each party shall bear its own costs of
discovery.
58
65
Each party shall be entitled to take one deposition. Each party shall
be entitled to submit one set of interrogatories which require no more
than 30 answers. All discovery shall be expedited, consistent with the
nature and complexity of the claim or dispute and consistent with
fairness and justice. The arbitrator(s) shall have the power to compel
any party to comply with discovery requests of the other parties and to
issue binding orders relating to any discovery dispute which shall be
enforceable in the same manner as awards. The arbitrator(s) also shall
have the power to impose sanctions for abuse or frustration of the
arbitration process, including, without limitation, the refusal to
comply with orders of the arbitrator(s) relating to discovery and
compliance with subpoenas. Each Seller, Purchaser and Rush hereby
irrevocably waives and releases any right to recover such damages in
excess of those damages authorized by this Section 17.4. The
arbitrator(s) may require the non-prevailing party to pay the
prevailing party's attorneys' fees and costs incurred in connection
with the arbitration. It is further agreed that any of the parties
hereto may petition the United States District Court for the Western
District of Texas, San Antonio Division, for a judgment to be entered
upon any award entered through such arbitration proceedings.
17.5 Effect of Due Diligence. No investigation by or on
behalf of Purchaser into the business, operations, prospects, assets or
condition (financial or otherwise) of the Company shall diminish in any
way the effect of any representations or warranties made by Seller and
the Company in this Agreement or shall relieve Seller or the Company of
any of its obligations under this Agreement.
17.6 Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement relating
to the subject matter of this Agreement prior to the Closing without
the prior written approval of Purchaser and Seller; provided, however,
that any Party may make any public disclosure it believes in good faith
is required by applicable law (in which case the disclosing Party will
use its reasonable best efforts to advise the other Parties prior to
making the disclosure).
17.7 No Third Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
17.8 Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among
the Parties and supersedes any prior understandings, agreements or
representations by or among the Parties, written or oral, to the extent
they related in any way to the subject matter hereof, including without
limitation that certain letter agreement dated November 10, 1997.
17.9 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party may assign
either this Agreement or any of her or its rights, interests, or
obligations hereunder without the prior
59
66
written approval of Purchaser and Seller; provided, however, that
Purchaser may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or
all of which cases Purchaser nonetheless shall remain responsible for
the performance of all of its obligations hereunder).
17.10 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all
of which together will constitute one and the same instrument.
17.11 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
17.12 Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim or other communication hereunder shall be deemed duly
given (a) on the date of delivery, if delivered to the persons
identified below, (b) two Business Days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Seller: Xxxxxxxxx Xxxxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxx 00000
Copy to: Duncan, Ulman, Xxxxxxx & Xxxxxxxx, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxx Building
San Antonio, Texas 78205-1838
Attn: Xxxxx X. Xxxxxx
If to Purchaser: Rush Enterprises, Inc.
X.X. Xxx 00000
Xxx Xxxxxxx, Xxxxx 00000
Attention: W. Xxxxxx Xxxx and
Xxxxxx X. Xxxxxxxx, Xx.
Copy to: Fulbright & Xxxxxxxx L.L.P.
000 Xxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any
60
67
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which
notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Parties notice in the manner
herein set forth.
17.13 Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of
Texas without giving effect to any choice or conflict of law provision
or rule (whether of the State of Texas or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than
the State of Texas.
17.14 Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing
and signed by Purchaser and Seller. No waiver by any Party of any
default, misrepresentation or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
17.15 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms
and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other
jurisdiction.
17.16 Expenses. Each of Purchaser and Seller will bear her
own costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby. Seller agrees that the Company
has not borne or will bear any of Seller's costs and expenses in
connection with this Agreement or any of the transactions contemplated
hereby, other than her attorneys' fees, the fees of her accountants,
the title policy, survey, environmental studies, inventory audit and
appraisal of the Real Property, which shall be paid by the Company as
provided in this Agreement.
17.17 Construction. The Parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and
no presumption or burden of proof shall arise favoring or disfavoring
any Party by virtue of the authorship of any of the provisions of this
Agreement. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without
limitation. The Parties intend that each representation, warranty and
covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists
61
68
another representation, warranty or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which
the Party has not breached shall not detract from or mitigate the fact
that the Party is in breach of the first representation, warranty or
covenant.
17.18 Incorporation of Exhibits, Annexes, and Schedules.
The Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
17.19 Specific Performance. Each of the Parties
acknowledges and agrees that the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that the other
Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter, in
addition to any other remedy to which they may be entitled, at law or
in equity.
62
69
IN WITNESS WHEREOF, the undersigned have duly executed this
Stock Purchase Agreement as of the date set forth above.
RUSH RETAIL CENTERS, INC.
By:
----------------------------------
Title:
-------------------------------
RUSH ENTERPRISES, INC.
By:
----------------------------------
Title:
-------------------------------
D&D FARM & RANCH SUPERMARKET, INC.
By:
----------------------------------
Title:
-------------------------------
-------------------------------------
XXXXXXXXX XXXXXXX
63
