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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 333-3346
RUSH ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1733016
(State or other jurisdiction of (I.R. S. Employer
incorporation or organization) Identification No.)
8810 IH-10 EAST, SAN ANTONIO, TEXAS 78219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (210) 661-4511
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED
ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER
PERIODS THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS
BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS
PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K
OR ANY AMENDMENT TO THIS FORM 10-K. ______
The aggregate market value of voting stock held by
non-affiliates of the registrant as of March 21, 1997 was approximately
$23,302,500, based upon the last sales price on March 21, 1997 on the NASDAQ
National Market for the Company's common stock. The registrant had 6,643,730
shares of Common Stock outstanding on March 21, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
PORTION'S OF REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION NOT
LATER THAN 120 DAYS AFTER THE CLOSE OF THE REGISTRANT'S
FISCAL YEAR ARE INCORPORATED BY REFERENCE INTO PART III
OF THIS FORM 10-K.
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RUSH ENTERPRISES, INC.
INDEX TO FORM 10-K
YEAR ENDED DECEMBER 31, 1996
PAGE NO.
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PART I
Item 1. Business 3
Item 2. Properties 23
Item 3. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 24
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters 24
Item 6. Selected Consolidated Financial Data 24
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations 27
Item 8. Financial Statements and Supplementary Data 35
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 56
PART III
Item 10. Directors and Executive Officers of the Registrant 56
Item 11. Executive Compensation 56
Item 12. Security Ownership of Certain Beneficial Owners and Management 56
Item 13. Certain Relationships and Related Transactions 56
PART V
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 57
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This Form 10-K contains certain "forward-looking" statements as such
term is defined in the Private Securities Litigation Reform Act of 1995 and
information relating to the Company and its subsidiaries that are based on the
beliefs of the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect" and "intend" and words or phrases
of similar import, as they relate to the Company or its subsidiaries or Company
management, are intended to identify forward-looking statements. Such
statements reflect the current risks, uncertainties and assumptions related to
certain factors including, without limitation, competitive factors, general
economic conditions, customer relations, relationships with vendors, the
interest rate environment, governmental regulation and supervision,
seasonality, distribution networks, product introductions and acceptance,
technological change, changes in industry practices, onetime events and other
factors described herein and in other filings made by the Company with the
Securities and Exchange Commission. Based upon changing conditions, should any
one or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected, or
intended. The Company does not intend to update these forward-looking
statements.
PART I
ITEM 1. BUSINESS
References herein to the "Company" or "Rush Enterprises" mean Rush
Enterprises, Inc., a Texas corporation, its subsidiaries and Associated
Acceptance, Inc., the insurance agency affiliated with the Company, unless the
context requires otherwise.
GENERAL
Founded in 1965, Rush Enterprises operates a regional network of truck centers
that provide an integrated one-stop source for the trucking needs of its
customers, including retail sales of new Peterbilt and used heavy-duty trucks;
after-market parts, service and body shop facilities; and a wide array of
financial services, including the financing of new and used truck purchases,
insurance products and truck leasing and rentals. The Company's truck centers
are strategically located in high truck traffic areas on or near major highways
in Texas, California, Oklahoma, Colorado and Louisiana. The Company is the
largest Peterbilt truck dealer in North America, representing approximately
14.0% of all new Peterbilt truck sales in 1996, and is the sole authorized
vendor for new Peterbilt trucks and replacement parts in its market areas. The
Company was named Peterbilt Dealer of the Year for North America for the
1993-1994 year.
The Company believes that large, multi-location, full-service dealerships,
which offer a large selection of new and used trucks, parts and sophisticated
service and body shop facilities, are able to realize economies of scale and
have a competitive advantage in the truck sales and services industry. The
Company's growth strategy is to continue the expansion of its existing
facilities, to open new facilities in its existing territories and to acquire
additional Peterbilt dealerships in new territories.
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The Company's executive offices are located at the San Antonio, Texas
truck center at 8810 I.H. 10 East, San Antonio, Texas 78219, and its mailing
address is P. O. Box 34630, San Antonio, Texas 78265-4630. The Company's phone
number is (210) 661-4511.
INDUSTRY OVERVIEW
Heavy-duty trucks are primarily used for over-the-road and off-highway
hauling of general freight and a number of vocational applications, including
the hauling of petroleum, wood products, refuse, construction materials and
other specialty uses. Trucks are purchased for commercial purposes and are
outfitted to perform according to the specifications of the user. Customers
include owner-operators, regional and national fleets, corporations and
government organizations.
Trucks marketed by the Company are typically classified in the Class 8
heavy-duty truck category. Class 8 trucks are constructed on a heavy-duty
chassis, which includes the engine, drive train and operations components and
have a minimum gross vehicle weight ("gvw") rating above 33,000 pounds, with
the typical heavy-duty truck having a gross combined weight ("gcw") of
approximately 80,000 pounds. Industry-wide negotiated sales prices for new
Class 8 heavy-duty trucks generally range from $57,000 to $100,000 and
negotiated sales prices for new Peterbilt trucks generally range from $65,000
to $100,000, depending upon features and component specifications.
Typically, Class 8 trucks are assembled by the manufacturer utilizing
certain components manufactured by other companies, including engines,
transmissions, axles, wheels and other components. As trucks and truck
components have become increasingly complex, including the use of computerized
controls and diagnostic systems, the ability to provide state-of-the-art
service for a wide variety of truck equipment has become a competitive factor
in the industry. Such service requires a significant capital investment in
advanced equipment, parts inventory and a high level of training of service
personnel. Additionally, Environmental Protection Agency ("EPA") and Department
of Transportation ("DOT") regulatory guidelines for service processes,
including body shop, paint work and waste disposal, require sophisticated
operating and testing equipment to ensure compliance with environmental and
safety standards. Differentiation between truck dealers has become less
dependent on pure price competition and is increasingly based on their ability
to offer a wide variety of trucking services. These include the ability to
provide easily accessible, efficient and sophisticated truck service,
replacement parts, the ability to offer financing for truck purchases, leasing
and rental programs and the ability to accept multiple unit trade-ins related
to large fleet purchases.
The United States retail heavy-duty truck industry is highly
fragmented with over 1,700 dealerships nationwide, including 97 Peterbilt
dealerships operating 170 locations. New heavy-duty truck sales historically
have shown a high correlation to the rate of change in industrial production
and gross domestic product. According to data published by R. L. Polk, during
1996 new heavy-duty truck sales in the United States were 184,989 units,
decreasing by 11.0% from the 207,932 units sold in 1995. Since 1991, however,
annual domestic retail heavy-duty truck
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sales have averaged approximately 155,000 units. New Peterbilt truck
registrations during the calendar year ended December 31, 1996 were 20,624, for
a national market share, based on new truck registrations, of 11.1%. In the
Company's seven primary market areas 18,449 new heavy-duty trucks were
registered in 1996, 2,883 of which were new Peterbilts, resulting in an average
market share for Peterbilts of 15.7%.
BUSINESS STRATEGY
The Company's business strategy is to operate an integrated
full-service dealer network marketing Peterbilt heavy-duty trucks and related
services in the Western and Southern regions of the United States. As part of
its business strategy, the Company will seek to expand its existing
dealerships, establish new full-service and parts/service Peterbilt dealerships
in its existing and newly appointed territories and make strategic acquisitions
of additional Peterbilt heavy-duty truck dealers in new territories. The
Company has successfully implemented its business strategy which has resulted
in significant market penetration within both existing and new market areas.
The Company's objective is to continue to build upon this base of operations
and enhance its position as a leading dealer of heavy-duty trucks and related
services by emphasizing the following key elements of its business strategy.
One-Stop Center. The Company has developed its "one-stop truck center"
where customers can purchase new Peterbilt or used heavy-duty trucks, lease and
rent heavy-duty Peterbilt trucks, as well as purchase after-market parts and
accessories and have virtually any kind of truck serviced by factory-certified
technicians, all at one convenient location. Rush truck centers are the sole
authorized vendor for new Peterbilt trucks and replacement parts in their
market areas and have expansive parts departments that display many of the
parts in open showrooms in a mix tailored to local buying patterns and market
trends. As part of its one-stop sales and service strategy, the Company,
through Rush Financial Services, offers third-party financing and insurance
products to assist customers purchasing a new or used truck, as well as truck
leasing and rentals. The Company's truck centers, four of which are open 24
hours a day, six days a week for parts and service, are located on or near
major highways in high truck traffic areas. The continued implementation and
enhancement of its one-stop truck center concept is an integral element of the
Company's business strategy.
Dealership Network. The Company believes it is one of the few
organizations in the heavy-duty truck sales and service industry to operate a
large, multi-state, full-service dealership network in an effort to realize
economies of scale. The Company believes that its expansion and increasing
economies of scale have resulted in superior purchasing power, favorable
financing terms and cost savings from centralized management, which have
enabled the Company to maximize profitability and offer competitive prices to
its customers. In addition, the Company's dealership network and consistency in
service have allowed it to reinforce relationships with fleet customers and
attract those customers traveling throughout the Company's territories by
guaranteeing them competitive and uniform pricing for parts and service at each
of its truck centers. Management believes that this has resulted in continuing
customer relationships. Furthermore, because of its large size, strong
relationships with fleet customers and its ability to
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handle large quantities of used truck trade-ins, the Company, unlike most
dealers, markets and sells to fleets nationwide.
The Company believes that its aggressive expansion program into
California, Oklahoma, Louisiana, and most recently into Colorado, and
diversification into truck-related services, including financial services,
leasing, renting and service and parts, has reduced cyclicality in the
Company's operations due to geographic diversity and reduced reliance on new
and used truck sales. The geographic diversity of the Company's dealer network
has significantly increased the Company's customer base while ameliorating the
effects of certain local and regional economic downswings that more severely
affect single dealership operators. Management believes that the Company's
full-service concept and continued geographic expansion will help to mitigate
the adverse impact on the Company's operations resulting from reduced demand
for new and used heavy-duty trucks and regional economic downturns.
Rush Truck Center Development. The Company has begun to employ a
branding program for its facilities, designating each as a Rush Truck Center
through distinctive signage and uniform marketing programs to enhance its name
recognition and to communicate the standardized high level of quality products
and services throughout its truck center network. The Company believes the Rush
Truck Center strategy will increase its market recognition and encourage its
customers to utilize multiple locations throughout its dealership network.
Currently eight locations are branded Rush Truck Centers and the Company
intends to establish all of its facilities as Rush Truck Centers by December
31, 1997.
Expansion in Existing and New Territories. Since 1990, the Company has
opened five facilities in its existing and new territories. As part of its
expansion strategy, the Company intends to continue to open both full-service
and parts/service truck centers to enhance market coverage in its existing
territories and to enter newly appointed territories. In identifying new areas
for expansion and acquisition, the primary focus of the Company is the market's
historic level of new heavy-duty truck registrations, customer buying trends
and the availability of suitable facilities. By approximately mid 1997 to late
1998, management plans to open a full-service truck center in the Texas Rio
Grande Valley area, relocate and expand its existing parts/service facilities
in Southern California into a full service dealership, expand an existing full
service dealership in Southern California, relocate and expand its Houston,
Texas dealership and open leasing locations in Denver, Colorado and San
Antonio, Texas.
The parts/service truck centers offer a variety of product and service
combinations, including parts, rental and leasing services; parts, service and
body shop facilities; and parts only. Management often analyzes the performance
of a parts/service truck center as a factor to determine whether a full-service
facility is warranted in a market area. The Company's truck centers in Lufkin
and Laredo, Texas, and Bossier City, Louisiana, were originally opened as
parts/service facilities and later expanded into full-service dealerships. The
Company also intends to continue to open parts/service facilities in areas of
its territory to maximize market coverage.
PACCAR, Inc., the parent company to Peterbilt, typically evaluates the
management and capitalization of a prospective dealer in determining whether to
grant such prospective dealer
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additional Peterbilt territories. The Company believes that its management and
capitalization allow it to effectively compete for such additional dealership
locations. Although the Company does not have exclusive territories, management
believes that it is unlikely that PACCAR will create additional dealerships in
the market areas in which the Company currently operates. The Company is not
aware of any policies of PACCAR that would limit its ability to continue to
acquire additional Peterbilt dealerships; however, there can be no assurance
that PACCAR will not object to ownership concentration of Peterbilt dealerships
beyond a certain level.
Expansion by Acquisition. The Company has, since 1990, acquired six
full-service and two parts/service truck centers, and its current expansion
plan focuses beyond its existing presence in Texas, California, Louisiana,
Oklahoma and, most recently, Colorado. The Company's operating strategy and
management systems establish a framework for continued acquisitions into the
foreseeable future. Management believes that it can improve the operating
results of acquired dealers as a result of economies of scale, sophisticated
management information systems, purchasing power, merchandising capability and
the introduction of enhanced financial services and products.
In March 1997, the Company purchased the assets of Denver Peterbilt,
Inc., which consisted of two full-service Peterbilt dealerships in Denver and
Greeley, Colorado. The Company believes that the acquisition of such facilities
provides the Company with an immediate market presence in the state of
Colorado. The purchase price was approximately $7.9 million, funded by (i) $6.5
million of cash and (ii) $1.4 million of borrowings under the Company's floor
plan financing arrangement with GMAC to purchased new and used truck and parts
inventory. The Company also entered into an agreement whereby the principal of
Denver Peterbilt, Inc. may receive additional amounts based on future sales of
new Peterbilt trucks at the Colorado locations.
Any prospective acquisition which the Company may be able to negotiate
would require the willingness of PACCAR to accept the Company as a Peterbilt
dealer at such additional retail locations. Although the Company is constantly
evaluating acquisition opportunities, as of the date of this Form 10-K, the
Company does not have any agreements or understandings, written or oral, with
any third party regarding a potential acquisition or business combination.
TRUCK CENTERS
The Company currently operates ten full-service and six parts/service
truck centers in Texas, California, Oklahoma, Louisiana and Colorado. Rush
truck centers are strategically located in high truck traffic areas on or near
major highways. The Company's original dealership opened in Houston, Texas in
1965, and, since 1990, the Company has grown through a combination of
acquisitions and new store openings in its existing and newly-appointed
territories. The Company currently operates three full-service truck centers in
Texas, two in Southern California, two in Oklahoma, one in Louisiana and two in
Colorado.
The full-service truck centers provide an integrated one-stop source
for the trucking needs of its customers, including retail sales of new
Peterbilt and used heavy-duty trucks; parts, service and body shop facilities;
and a wide array of financial products. The Company's six parts/service
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facilities offer a variety of product and service combinations in areas of the
Company's markets to maximize market coverage. Four of the Company's truck
centers are open 24 hours a day, six days a week for parts and services. The
Company's plans include the opening of a full-service truck center in the Texas
Rio Grande Valley area, the relocation and expansion a Southern California
parts/service facility into a full service dealership and the relocation of the
Company's Houston, Texas sales and service facilities.
The full-service truck centers range in size from 13,500 to 73,000
square feet, with from six to 50 service bays, and are situated on lots ranging
from three to 14 acres, while the parts/service facilities range in size from
2,500 to 6,200 square feet, with from six to 25 service bays, and are situated
on lots ranging from 0.4 to five acres. The typical full-service Rush truck
center displays between 10 and 100 new and used trucks, has six to 40 repair
and maintenance service bays, four to 20 body shop bays, one to four paint
bays, an open retail parts showroom ranging from 600 to 2,000 square feet, a
parts warehouse ranging from 3,000 to 20,000 square feet and administrative and
sales offices ranging from 1,000 to 7,000 square feet. Facility characteristics
determined by market needs.
Set forth below is a summary description of each the Company's
facilities:
DATE
OPENED FINANCING
RUSH TRUCK OR STATUS/ TRUCK LEASING AND
CENTER LOCATION ACQUIRED METHOD SALES SERVICE PARTS BODY SHOP AND RENTING INSURANCE
--------------- -------- ------ ----- ------- ----- --------- ----------- ---------
Existing Truck
Centers
San Antonio, TX . . 1968 Start-up O O O O O
Houston, TX(1) . . 1988 Start-up O O
Houston, TX(1) . . 1988 Start-up O O O(2)
Houston, TX(1) . . 1993 Start-up O O O(3)
Houston, TX(1) . . 1993 Start-up O O O
Lufkin, TX . . . . 1991 Start-up O O O O O
Laredo, TX . . . . 1993 Start-up O O O O(4) O
Bossier City, LA . 1994 Start-up O O O O O
Pico Rivera, CA . . 1994 Acquisition O O O O O O
Sun Valley, CA(5) . 1994 Acquisition O
Fontana, CA . . . . 1994 Acquisition O O O O O O
Tulsa, OK . . . . . 1995 Acquisition O O O O O
Oklahoma City, OK . 1995 Acquisition O O O O(6) O
Oklahoma City, OK . 1995 Acquisition O O O
Denver, 1997 Acquisition O O O O O O
CO(7).................
Greeley, 1997 Acquisition O O O O O
CO(7).................
Planned Truck Centers
Rio Grande Valley, 1996-97 Start-up O O O O O
TX . . . . . . . .
Southern CA(5) . . 1997-98 Start-up O O O O
Expanded Facilities
Pico Rivera, 1998 Acquisition O O O O O O
CA(8).................
Houston, 1997 Start-up O O O O O O
TX(1).................
San Antonio, TX(9) 1997 Start-up O
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(1) The Company started a full-service dealership in Houston, Texas in 1965,
which was sold in 1979. The Company reacquired the dealership in 1988.
Currently, the Company is seeking to relocate the dealership, parts and
service, leasing and renting and finance and insurance facilities to a new
location.
(2) Paint shop only.
(3) Operating at another location in Houston from 1988 to 1993.
(4) Trailer repair shop.
(5) The Company currently plans to relocate and expand into a full service
dealership by late 1998.
(6) Body shop under construction to be completed in mid 1997.
(7) The acquisition of the Denver, Colorado and Greeley, Colorado locations
was completed in March 1997. The Company plans to start-up leasing and
rental and finance and insurance operations.
(8) The Company currently plans to expand its existing Pico Rivera, California
dealership.
(9) The Company currently plans to open a leasing and rental operation in San
Antonio, Texas during mid 1997.
TRUCK SALES
New Truck Sales. Rush truck centers sell new trucks which are marketed
under the Peterbilt nameplate primarily in the Class 8 diesel category. The
Company also markets Class 7 Peterbilt trucks (having a gvw rating of 26,001 to
33,000 pounds), Peterbilt refuse chassis and cement mixer chassis, GMC
medium-duty trucks and, at its Oklahoma facilities, Volvo Class 8 heavy-duty
trucks. The Company's new Class 8 Peterbilt trucks, which are manufactured and
supplied to the Company by PACCAR, constitute over 90% of all new trucks sold
by the Company. Peterbilt trucks have a reputation as premium-quality vehicles
which are skillfully designed and driver friendly, and are typically customized
to satisfy the requirements of its customers. Peterbilt's premium reputation is
an important aspect of the Company's marketing of new and used trucks and
management believes that such reputation has resulted in relatively higher
resale prices for used Peterbilt trucks. New heavy-duty truck sales are the
largest segment of the Company's business, accounting for approximately 59% of
total revenues in 1996.
The Company's customers use Peterbilt heavy-duty trucks for
over-the-road and off-highway handling of virtually all materials, including
general freight, petroleum, wood products, refuse and construction materials.
PACCAR purchases major truck components, such as engines, transmissions, tires,
wheels and axles from other manufacturers, pursuant to each customer's
specifications, to assemble its new trucks. The Company sells approximately 75%
of its new heavy-duty trucks according to customer order, and the remaining 25%
are sold out of inventory at its truck centers. It takes between 60 days and
six months for the Company to receive delivery from PACCAR on a new truck order
from the time an order is placed.
A new Peterbilt heavy-duty truck typically ranges in negotiated price
from $65,000 to $100,000, while a typical Class 8 truck ranges in negotiated
price from $57,000 to $100,000. The Company aggressively markets to regional
and national fleets, with approximately 60% of all unit sales to fleet
customers (those that purchase more than five trucks in a single 12-month
period) and the balance of new truck sales to other owner-operators,
corporations and local governments. An important competitive issue for the
Company's customers is driver retention, with a typical fleet averaging in
excess of 100% driver turnover annually. Management believes Peterbilt trucks,
due to their premium reputation and attractiveness to the drivers, are
increasingly being used by major fleets and carriers as incentives to attract
new drivers and retain existing drivers.
The Company has a competitive advantage in that it can absorb
multi-unit trade-ins often associated with fleet sales of new trucks and
disperse the used trucks for resale throughout its
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dealership network. Because of its large size, strong relationships with fleet
customers and its ability to handle large quantities of used truck trade-ins,
the Company, unlike most dealers, markets and sells to fleets nationwide.
Additionally, the Company believes that its attention to customer service and
its broad range of trucking services, including its ability to offer truck
financing and insurance, has resulted in a high level of customer loyalty.
During 1996, approximately 75% of the Company's truck sales were to repeat
customers. The Company sold 2,871 new trucks in 1996 compared with 2,263 in
1995.
Used Truck Sales. The Company sells used heavy-duty trucks of numerous
manufacturers, including Peterbilt, Kenworth, Freightliner, Mack and Navistar.
The Company is well positioned to market used heavy-duty trucks due to its
ability to recondition used trucks for resale utilizing its parts and service
departments and to shift inventory from location to location to satisfy
customer demand. Approximately 85% of the Company's used truck fleet is
comprised of trucks taken as trade-ins by new truck customers to be used as all
or part of the new truck customer's down payment, and the remainder are
purchased from third parties for resale on the Company's retail lots.
The Company's used truck sales staff is trained to evaluate each
prospective used truck on the basis of wholesale value and the costs of
delivery, reconditioning and otherwise making the truck ready for sale. In a
fleet purchase of several new trucks, not all of the trucks traded in will be
suitable for sale on a Rush truck center's retail lot. Trucks that are not
acceptable are typically sold at wholesale. Most used trucks acquired by the
Company require some reconditioning prior to resale. The reconditioning process
generally takes between one and three weeks, depending on the type of services
to be performed. The Company utilizes its on-site parts, service and body shop
facilities to perform such reconditioning services. Unlike new trucks, the
majority of the Company's used trucks are sold "as is" and without
manufacturer's warranty, although manufacturers sometimes provide limited
warranties on used vehicles if they have been reconditioned at a Rush truck
center prior to resale or if the manufacturer's warranty is transferrable and
has not yet expired.
The Company closely monitors the age and quality of its used truck
inventory and transfers such inventory between truck centers in order to
maximize inventory turnover, avoid inventory overstock and understock
situations and satisfy customer demand. The Company sold approximately 1,349
used trucks during 1996 compared with 1,135 in 1995.
FINANCIAL SERVICES
As part of its one-stop sales and service strategy, the Company offers
third-party financing and insurance products to assist customers purchasing a
new or used truck. The Company also offers truck leasing and rentals at five of
its locations. Revenues from financial services were $19.3 million in 1996, or
5.6%, of total revenues.
New and Used Truck Financing. Each new and used truck customer is
directed by the Company's truck sales staff to the Company's financial services
sales personnel. The Company, through Associates, the largest third-party
provider of heavy-duty truck financing in North
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America, and PACCAR Financial, financed approximately $76.4 million of new and
used truck purchases by customers in 1996, an increase of 43.6% from the $53.2
million financed in 1995. The Company is one of the largest originators of
Class 8 heavy-duty truck loans for Associates. At times, the Company also acts
as a broker, matching truck purchasers with alternative financing sources in
exchange for a fee that is determined on a case-by-case basis.
During 1996, the Company arranged customer financing for approximately
31% of its total new and used truck sales, with approximately 64% related to
new truck sales and the remaining 36% of financing related to used truck sales.
The financings are typically installment contracts, which are secured by the
trucks financed, and generally require a down payment of 10% to 30%, with the
remaining balance financed over two to five years. The Company presents all of
its financing opportunities in Texas, Oklahoma and Louisiana to Associates and
its financing opportunities in California and Colorado to PACCAR Financial.
Approximately 91% of the principal amount financed by the Company under
installment contracts during 1996 was financed through Associates, with the
remainder financed through PACCAR Financial. The Company's contracts with
Associates and PACCAR Financial provide for payment to the Company of all
finance charges in excess of a negotiated discount rate within 30 days of the
date of financing. Such payments are subject to offsets resulting from the
early pay-off of, or defaults under, installment contracts previously sold to
Associates and PACCAR Financial by the Company. The Company has been able to
negotiate favorable discount rates with Associates and PACCAR Financial because
of its low historical delinquency rate, and, with respect to Associates, the
large volume of trucks financed.
Associates and PACCAR Financial analyze each customer's credit risk
and determine whether they will extend credit and the minimum terms for doing
so. The Company evaluates the standards prescribed by Associates and PACCAR
Financial and determines whether it is agreeable to completing the financing on
such terms. The Company often requires an increased down payment, higher
finance charges or additional collateral in order to complete the financing.
The Company's agreements with Associates and PACCAR Financial limit the
aggregate recourse liability of the Company for defaults under the installment
contracts sold to Associates and PACCAR Financial to $400,000 and $200,000 per
year, respectively. The Company carefully monitors its outstanding installment
contracts and actively communicates with Associates and PACCAR Financial
regarding delinquent accounts. Over the last five years, the default rate on
loans originated by the Company has averaged less than 0.5% per year. The
Company has not in the past experienced significant losses resulting from
defaults on loans, and such losses have historically been significantly less
than the amount of its total recourse liability.
Truck Leasing and Rental. The Company engages in full-service
Peterbilt truck leasing under the PacLease trade name at five of its locations.
Under the terms of a full-service lease, all parts sales, service and
maintenance for the lease or rental trucks is performed at the Company's
facilities. The Company has increased its lease and rental fleet from less than
100 trucks in 1993 to approximately 559 trucks at December 31, 1996. The
Company owns approximately 11.0% of its lease and rental fleet, and
approximately 89.0% of the fleet is leased from PACCAR. The Company was named
PacLease Western Region Franchise of the Year in 1995 and Midwest Region
Franchise of the Year in 1996.
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The Company offers both long-term leasing and short-term rentals to
its customers. Approximately 80% of the Company's fleet is leased to customers
for periods ranging from two to five years, and the remainder of the trucks are
rented or leased for periods ranging from one day to two years. The Company
generally holds trucks in its lease and rental fleet for approximately five
years and then typically sells such used trucks through its truck centers. The
Company has consistently realized gains on the sale of such trucks in excess of
lease purchase option values. The Company constantly monitors the age of its
lease and rental fleet, and as trucks are taken out of the fleet, the Company
adds new trucks as needed. The average age of trucks in the Company's lease and
rental fleet is 32 months. The Company's lease and rental customers provide a
market to support the Company's parts and service operations by creating
additional parts sales and service work for the Company. The Company also
receives a rebate from PACCAR for each Peterbilt truck purchased for use in its
lease fleet.
Insurance Agency Services. The Company sells a complete line of
property and casualty insurance, including collision and liability insurance on
trucks, cargo insurance, standard automobile liability coverages, life, credit
life and health, workers' compensation coverages and homeowner's insurance. The
Company's agents are licensed in 25 states to sell insurance for various
insurance companies, including Associates Insurance and Motors Insurance
Corporation, which underwrite the products offered by the Company. While the
Company sells a majority of its insurance products to its truck-purchasing
customers, the Company also sells to the general public. The Company believes
it has developed good relationships with its insurance-purchasing customers
which resulted in an average renewal rate of 86% during 1996.
The Company provides insurance premium financing to its insurance
customers. Lending operations are supported by the Company's insurance
subsidiary's own capital base. Premiums for property and casualty insurance are
typically payable at the time a policy is placed in force or renewed. The
Company's premium financing services allow the insured to pay a portion of the
premium when the policy is placed in force and the balance in monthly
installments substantially over the life of the policy. As security, the
Company retains a contractual right to cancel the insurance policy if a premium
installment is not paid when due. In the event of such cancellation, the
Company applies the unearned premium toward the payment obligation of the
insured. Premium financing which the Company offers to its customers does not
involve any credit risk since no funds are advanced to outside parties and the
Company is fully secured by the unearned premiums on the financed policies.
PARTS, SERVICE AND BODY SHOP OPERATIONS
The parts, service and body shop operations of the Company provide
relatively higher profit margins and tend to be less cyclical than new and used
truck sales. Parts, service and body shop revenues accounted for approximately
$64.5 million, or 18.7%, of the Company's total revenues in 1996.
Parts. Each Rush truck center carries a wide variety of Peterbilt and
other parts inventory, with an average of approximately 4,500 items from over
30 suppliers at each location. The Company is the sole authorized Peterbilt
parts and accessories supplier in each of its markets and
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estimates that approximately 80% of its service and parts functions are
performed on Peterbilt heavy-duty trucks.
The parts departments support the Company's sales and service
functions. The Company utilizes its parts department when performing its
repair, maintenance and body shop services, including all parts required to
recondition used trucks for resale and maintain and repair the Company's lease
fleet. In addition to supporting the Company's service and body shop functions,
the Company markets its parts and accessories both at its truck centers and
through its outside sales staff. The Company's outside sales staff markets
parts directly to fleet customers, who often perform truck maintenance and
repairs at their own in-house service facilities.
The Company's real-time inventory management tracking system reduces
delays in parts delivery, helps maximize inventory turns and assists in
controlling the potential of overstock and understock situations. The Company's
inventory system also assists management in determining the appropriate parts
inventory mix in each location and tailoring such inventory to local buying
patterns and market trends, while monitoring product mix to optimize pricing
and maximize profit margins. The Company's automated reordering system assists
each truck center in maintaining the proper inventory levels and permits
inventory delivery to each location, or directly to customers, typically within
24 hours from the time the order is placed. The Company provides the standard
manufacturer's warranty on the parts that it sells, which is generally a 90-day
to one-year replacement guarantee.
The Company displays many of its higher margin parts and accessory
items in open showrooms. Open parts showrooms are typically 600 to 2,000 square
feet and feature up to 1,000 parts items and accessories in a mix tailored to
local buying patterns and market trends. In order to maximize turnover, open
parts showrooms are located near driver lounges and other high traffic areas of
its truck centers. The Company encourages qualified customers to open accounts
for parts purchases.
Service and Body Shop. Rush truck centers feature various combinations
of fully equipped service and body shop facilities capable of handling almost
any type of truck repair on virtually any type of truck, from rebuilding entire
trucks and engines to routine maintenance functions, including tune-ups, oil
changes, tire balancing, front-end alignments and inspections. Rush truck
centers offer such services in a relaxed and accommodating atmosphere. Most
Rush truck centers have driver lounges equipped with televisions, recliners,
sofas, phones and food and beverage machines to allow drivers to sleep, relax
or conduct business while waiting for service to be performed. To simplify the
buying process, the Rush truck centers offer "menu" pricing of service and body
shop functions and offer expedited service at a premium price for certain
routine repair and maintenance functions.
The Company has a total of 266 service bays, including 11 paint bays,
throughout its network. The Company performs both warranty and non-warranty
service work, with the cost of the warranty work being reimbursed by the
manufacturer at retail consumer rates. The Company estimates that approximately
20% of its service functions are performed under manufacturers' warranties.
Rush truck centers are Peterbilt designated warranty service centers and most
are
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authorized service centers for a number of manufacturers of heavy-duty truck
components, including Cummins, Detroit Diesel, Caterpillar, Eaton and Rockwell.
Manufacturers permit warranty work to be performed only at designated warranty
service centers. To enhance accuracy and timeliness in payment of warranty
claims, the Company maintains a computerized system for sending warranty claims
to PACCAR and various other manufacturers.
The Company's service and body shop facilities, four of which are open
24 hours a day, six days a week, are equipped with state-of-the-art tools and
diagnostic equipment and staffed by manufacturer-trained and certified service
technicians. The Company's service technicians perform full-service truck
repairs and make-ready on Peterbilt and virtually any other type of heavy-duty
truck. Rush truck centers' factory-certified service employees regularly attend
manufacturer-sponsored training programs to remain abreast of current
diagnostic and repair and maintenance techniques. The Company employs an
innovative compensation program for its service technicians designed to
encourage the performance of expedited and high quality repair and maintenance
services. Rather than paying service technicians on an hourly basis, each
technician receives a flat rate for each service or repair performed. If a
service or repair is performed incorrectly, the technician making the initial
repair or service must correct the situation without additional compensation.
This compensation arrangement facilitates the retention of efficient service
technicians who can increase their compensation by expeditiously and accurately
completing service and repairs.
The Company's body shops, which include multiple EPA approved paint
bays, are fully equipped to make virtually any type of truck body repair, from
complete reconstruction of truck frames damaged in accidents to repairs and
replacements of hoods, body panels and fenders. Rush truck centers' body shops
are also used to refurbish trucks in need of updating due to changes in
industry standards or to satisfy regulatory guidelines.
SALES AND MARKETING
The Company's aggressive expansion program and long history of
operations have resulted in a customer base that is diverse in terms of
geography, industry and scale of operations. The Company's customers include
owner-operators, regional and national fleets, corporations and local
governments, none of which accounted for more than 7% of its total sales in
1996. Because of its large size, strong relationships with fleet customers and
its ability to handle large quantities of used truck trade-ins, the Company,
unlike most dealers, markets and sells to fleets nationwide. Management also
believes that the consistently reliable service received by customers at each
Rush truck center and the Company's longevity have resulted in increased
recognition of the "Rush" name, customer loyalty and continuing customer
relationships. During 1996, approximately 75% of the Company's truck sales were
to repeat customers.
The Company believes that large, multi-location, full-service
dealerships, which offer a large selection of new and used trucks, parts and
sophisticated service and body shop facilities, are able to realize economies
of scale and have a competitive advantage in the truck sales and services
industry. As part of its strategy, the Company has begun to employ a Rush Truck
Center branding program for its facilities to enhance the Company's name
recognition and to communicate the
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standardized high level of quality products and services throughout its truck
center network. The Company intends to brand each of its facilities as a Rush
Truck Center through distinctive signage and uniform marketing programs.
Currently eight locations are branded as Rush Truck Centers and the Company
intends to establish all of its facilities as Rush Truck Centers by December
31, 1997.
The Company generally promotes its trucks and related services through
its sales staff, trade magazine advertisements and attendance at industry
shows, including the International Truck Show and the Southwest Trucking Show.
In addition to cultivating walk-in customers, the Company's sales staff also
makes customer visits and participates in organizations that support industries
that utilize the Company's trucks. The Company uses its proprietary direct mail
database to distribute its bi-monthly truck magazine, which includes new and
used truck and parts specials, and other marketing materials to over 50,000
existing and potential customers. Support of the industry is achieved through
membership and support of trucking organizations, such as the American Truck
Dealers and American Trucking Association. In addition, the Company has a
world-wide web site on the Internet featuring truck and parts specials at
http://www.rushtruckcenters.com.
The Company's new truck sales staff consists of 85 employees,
including a Senior Vice President of Sales and Marketing and seven regional
sales managers. Used trucks are sold through 17 used truck sales personnel,
including a Vice President of Used Trucks and five regional sales managers. The
sales staff at each Rush truck center receives sales training, instruction on
technical and operating aspects of the trucks and education with respect to the
industries in which such trucks are utilized, including the waste-disposal,
construction and forestry industries. The sales staff of each Rush truck center
is compensated on a commission and salary basis, with a high percentage of
compensation based on commission.
The Company has approximately 110 parts and service sales employees,
including a Vice President of Parts and Service, one national parts director,
one national service director, one national parts and service marketing
director, 15 regional service managers and 10 regional parts managers. The
Company sells parts in conveniently located open showrooms and parts counters
at its truck centers and directly to fleet customers through its outside sales
staff. The direct marketing to its fleet customers is intended to position the
Company as the primary supplier of parts to such customers, who often perform
truck maintenance and repairs at their own in-house service facilities.
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FACILITY MANAGEMENT
Personnel. Each Rush truck center is managed by a general manager who
oversees the operations, personnel and the financial performance of the
location, subject to the direction of the Company's corporate office. Each Rush
truck center is also typically staffed by a sales manager, parts manager,
service manager, sales representatives, parts employees, and other service and
make-ready employees. The sales staff of each Rush truck center is compensated
on a salary plus commission basis, with a high percentage of compensation based
on commission, while the general manager, parts manager and service manager
receive a combination of salary and performance bonus, with a high percentage
of compensation based on the performance bonus. The Company believes that its
employees are among the highest paid in the truck sales industry.
General managers annually prepare detailed monthly forecasts and
monthly profit and loss statements based upon historical information and
projected trends and an element of each general manager's compensation is
determined by meeting or exceeding these operating plans. During the year,
general managers regularly review their Rush truck center's progress with
senior management and make appropriate adjustments as needed. All employees of
the Company undergo annual performance evaluations.
The Company has been successful in retaining its senior management,
general managers and other employees. The average tenure of the Company's
current senior management is 14 years, and the average tenure of its current
truck centers general managers is approximately 10 years with the Company. To
promote communication and efficiency in operating standards, general managers
and members of senior management attend several Company-wide strategy sessions
per year. In addition, management personnel attend various industry-sponsored
leadership and management seminars and receive continuing education on
Peterbilt products, marketing strategies and management information systems.
Members of senior management regularly travel to each location to
provide on-site management and support. Each location is audited twice a year
for administrative record-keeping, human resources and environmental compliance
matters. The Company has instituted succession planning pursuant to which
employees in each truck center are groomed as assistant managers to assume
management responsibilities in existing and future dealerships.
Purchasing and Suppliers. The Company believes that pricing is an
important element of its marketing strategy. Because of its size, the Company
benefits from volume purchases at favorable prices that permit it to achieve a
competitive pricing position in the industry. The Company purchases its
Peterbilt heavy-duty truck inventory and Peterbilt parts and accessories
directly from PACCAR. All other manufacturers' parts and accessories, including
those of Cummins, Detroit Diesel, Caterpillar and others are purchased through
wholesale vendors or from PACCAR, who buys such products in bulk for resale to
the Company and other Peterbilt dealers. All purchasing, volume and pricing
levels and commitments are negotiated by the Company's corporate headquarters.
The Company has been able to negotiate favorable terms, which facilitates the
Company's ability to offer competitive prices for its products.
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Management Information Systems. Each Rush truck center maintains a
centralized real-time inventory tracking system which is accessible
simultaneously by all locations and by the Company's corporate office. The
Company utilizes the information assimilated from its management information
systems to determine and monitor the appropriate inventory level at each
facility. From this information, management has developed a model reflecting
historic sales levels of different product lines. This information identifies
the appropriate level and mix of inventory and forms the basis of the Company's
operating plan. The Company's management information systems and databases are
also used to monitor market conditions, sales information and assess product
and expansion strategies. Information received from state and regulatory
agencies, manufacturers and industry contacts allows the Company to determine
market share statistics and gross volume sales numbers for its products as well
as those of competitors. This information impacts ongoing operations by
allowing the Company to remain abreast of changes within the market and allows
management to react accordingly by realigning product lines and by adding new
product lines and models.
Distribution and Inventory Management. The Company utilizes its
real-time inventory management tracking system to maintain a close link between
each truck center. This link allows for a timely and cost-effective sharing of
managerial and sales information as well as the prompt transfer of inventory
among various locations. The transfer of inventory reduces delays in delivery,
helps maximize inventory turns and assists in controlling problems created by
overstock and understock situations. The Company is linked directly to its
major suppliers, including PACCAR and GMC, via real-time satellite
communication links for purposes of ordering and inventory management. These
automated reordering and satellite communication systems allow the Company to
maintain proper inventory levels and permit the Company to have inventory
delivered to its locations, or directly to customers, typically within 24 hours
of an order being placed.
RECENT ACQUISITIONS
In March 1997, the Company purchased the assets of Denver Peterbilt,
Inc., which consisted of two full-service Peterbilt dealerships in Denver and
Greeley, Colorado. The Company believes that the acquisition of such facilities
provides the Company with an immediate market presence in the state of
Colorado. The purchase price was approximately $7.9 million, funded by (i) $6.5
million of cash and (ii) $1.4 million of borrowings under the Company's floor
plan financing arrangement with GMAC to purchased new and used truck and parts
inventory. The Company also entered into an agreement whereby the principal of
Denver Peterbilt, Inc. may receive additional amounts based on future sales of
new Peterbilt trucks at the Colorado locations.
COMPETITION
There is significant competition both within the markets currently
being served by the Company and in new markets into which the Company may
enter. Dealer competition continues to increase based on accessibility of
dealership location, the number of the Company's dealership locations, price,
value, quality and design of the product as well as attention to customer
service (including technical service). The Company believes that it is
competitive in all of these
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categories. Despite being what the Company believes to be one of the largest
dealers in the industry in terms of total revenues, during 1996 the Company
accounted for approximately 1.6% of all new Class 8 truck sales in North
America.
The Company's products compete with Class 8 and Class 7 trucks made by
other manufacturers and sold through competing independent and factory-owned
truck dealerships, including trucks manufactured by Navistar (International),
Mack, Freightliner, Volvo, Ford, Western Star, other Class 8 trucks
manufactured by PACCAR (Kenworth) and other manufacturers. Management believes
it is able to effectively compete with dealerships and service providers on the
basis of overall Peterbilt product quality, reputation and name recognition as
well as its ability to provide full parts and service support, financing and
insurance and other customer services, at easily accessible locations in high
truck traffic areas on or near major highways.
DEALERSHIP AGREEMENTS
PACCAR. The Company has entered into non-exclusive dealership
agreements (the "Dealership Agreements") with PACCAR with respect to each of
the Company's territories. The Dealership Agreements each have current terms
expiring between April 1997 and March 2000 and may be terminated by PACCAR upon
a violation by the Company of the provisions contained therein. Upon the
expiration of the term of the Dealership Agreements, written renewals of such
agreements must be executed by PACCAR. Any termination or non-renewal of the
Dealership Agreements must be done by PACCAR in accordance with both state and
federal legislation designed to protect dealers from arbitrary termination or
non-renewal of franchise agreements. The Automobile Dealers Day in Court Act
and applicable state laws provide that termination or non-renewal of a
dealership agreement must be done in "good faith" and upon a showing of "good
cause" by the manufacturer for such termination or non-renewal, as those terms
have been defined by statute and case law. The Company has consistently had its
Dealership Agreements renewed and the Company anticipates obtaining renewals in
the future. However, no assurances can be given that such renewals will be
obtained.
The Company is not required to pay a royalty fee under the Dealership
Agreements. Rather, the Company has agreed to stock, sell at retail and service
Peterbilt trucks and products in its defined market areas. Pursuant to the
terms of the Dealership Agreements, the Company is entitled to use the
"Peterbilt" name, trade symbols and intellectual property. PACCAR periodically
furnishes the Company general and specialized truck and parts sales and other
service and technical training programs and makes available to the Company
copies of service manuals and bulletins, publications and technical data to
assist in the effective operation of the Company's services and parts
operations. PACCAR also makes available field personnel who periodically advise
the Company on sales, parts and service related subjects, including fleet
sales, product quality, technical adjustments, repair, replacement and sale of
products, customer relations, warranty administration, and service and parts
merchandising, training and management. PACCAR maintains general advertising
and promotion programs for the sale of Peterbilt products.
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Each of the Company's dealerships is required to establish and
maintain a ratio of net working capital to total assets ranging from .05 to .25
as provided in its Dealership Agreement. If at any time a dealership's net
working capital falls below the minimum requirements as determined from time to
time by PACCAR, the dealership is required to take steps reasonably necessary
to meet such minimum capital requirements. The Company has had no problem in
the past satisfying such minimum capitalization requirements and does not
anticipate any problems through fiscal 1997. The Dealership Agreements also
require the Company to maintain a uniform accounting system designated by
PACCAR and provide PACCAR with monthly financial and operating data.
The Company is required to provide 60 days' prior written notice to
PACCAR before it enters into a written agreement to sell and service the
competitive vehicles of another truck manufacturer. The purpose of the notice
is to provide PACCAR with an opportunity to evaluate and discuss with the
Company the likely effect of such an action on the Company, PACCAR and the
other Peterbilt dealers.
In the event of a change of control of the Company, the Dealership
Agreement may be immediately terminated by PACCAR. For this purpose, a change
of control occurs (i) if the Dealer Principals (W. Marvin Rush, W. M. "Rusty"
Rush, Robin M. Rush and other executives of the Company) in the aggregate own
less than 30% of the capital stock entitled to vote on the election of
directors of the Company, or (ii) if any "person" (as that term is defined
under the Securities Exchange Act of 1934, as amended) other than the Dealer
Principals or any person who has been approved in writing by PACCAR, either (x)
owns a greater percentage of the capital stock entitled to vote on the election
of directors of the Company than the Dealer Principals in the aggregate, or (y)
holds the office of Chairman of the Board, President or Chief Executive Officer
of the Company. In the event that the Company were to find it necessary or
advisable to sell any of its Peterbilt dealership locations, PACCAR retains the
right of first refusal to purchase such dealership location in any proposed
sale. The change of control and right of first refusal provisions may have
anti-takeover effects.
In addition to its dealership agreements with PACCAR, the Company is
also an authorized dealer for Volvo GM Heavy Truck Corporation ("Volvo") and
General Motors Corporation ("GMC") at certain of the Company's locations.
Volvo. The Company is an authorized, exclusive retail dealer of new
Volvo trucks and parts at its Oklahoma City and Tulsa, Oklahoma facilities. As
part of the dealership agreement with Volvo (the "Volvo Agreement"), the
Company is granted the right to use various Volvo trademarks in the conduct of
its business and the benefit of Volvo materials and training. In order to
remain in compliance with the terms of the Volvo Agreement, the Company must
meet certain sales, service and facilities criteria established by Volvo,
provide Volvo with various financial and planning documents on a regular basis
and provide warranty repairs on covered Volvo trucks.
The Volvo Agreement is effective through March 31, 2000 and is renewed
annually unless terminated according to the provisions of the Volvo Agreement.
The occurrence of any of the following events constitutes grounds for
termination by Volvo: (a) ownership of a majority of the capital stock of the
Company by persons other than W. Marvin Rush and members of his family;
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(b) disputes among, or actions by, the Controlling Individuals which may
adversely affect the reputation of Volvo; (c) the sale by the Company of any of
its principal operating assets; (d) the sale or transfer of the Volvo Agreement
to an unauthorized party; and (e) the occurrence of various other material
breaches enumerated in the Volvo Agreement which are typical of dealership
agreements.
GMC. Under the Company's non-exclusive dealership Agreement with GMC
(the "GMC Agreement"), GMC provides the Company with, among other things,
trucks, parts and training in the sales and service of GMC medium-duty trucks.
GMC also allows the Company to use various GMC licenses, trade symbols and
intellectual property owned by GMC. The Company is obligated to conform its
operations to the standards established by the GMC Agreement and ongoing
reviews of the Company's facilities and operations. The obligations of the
Company include maintaining minimum size and appearance standards for its
dealership facilities, maintaining its accounting records in conformance with
GMC standards, performing GMC warranty repairs and responsibly promoting the
sale and service of GMC products throughout the Company's assigned territory.
The GMC Agreement is effective through October 31, 2000 and may be
terminated by GMC in specific circumstances. The GMC Agreement is based on the
personal relationship between GMC and the Dealer Operators (W. Marvin Rush, W.
M. "Rusty" Rush and Robin M. Rush) and prohibits any attempted assignment,
including upon the death or incapacity of one or more of the Dealer Operators,
of the GMC Agreement to a third party which is not expressly approved by GMC.
With regard to any proposed assignment of the GMC Agreement, GMC retains a
right of first refusal on any offers to purchase the GMC Agreement. The Company
is also prohibited from making any transfer of more than a ten percent equity
interest in the Company without the consent of GMC. Some of the additional
grounds upon which GMC may terminate the GMC Agreement are: (a) material
conflicts with GMC over the Company's facilities and operations; (b) misconduct
by the Company or the Dealer Operators; or (c) failure to maintain the
specified net capital requirement and an open line of credit pursuant to the
terms of the GMC Agreement. The Company has remained in compliance with the
terms of the GMC Agreement and anticipates no conflicts through 1997.
The Company believes that the change of ownership resulting from its
initial public offering completed in June 1996 violated the GMC Agreement and
that such agreements is terminable by GMC. The termination of the GMC Agreement
would not have a material adverse impact on the Company.
FLOOR PLAN FINANCING
Substantially all of the Company's truck purchases from PACCAR are
made on terms requiring payment within 15 days or less from the date of
shipment of the trucks from the factory. The Company finances all, or
substantially all, of the purchase price of its new truck inventory, and 75% of
the loan value of its used truck inventory, under a floor plan arrangement with
GMAC under which GMAC pays PACCAR directly with respect to new trucks. The
Company makes monthly interest payments on the amount financed but is not
required to commence loan principal
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repayments on new vehicles to GMAC for a period of 12 months and for used
vehicles for a period of three months. The loan is collateralized by a lien on
the vehicle. The Company's floor plan agreements with its primary lender limit
the aggregate amount of borrowings based on the number of new and used trucks.
As of December 31, 1996, the Company's floor plan arrangements permit the
financing of up to 888 new trucks and 349 used trucks. At December 31, 1996,
the Company had $42.2 million outstanding under its floor plan financing
arrangement with GMAC. GMAC permits the Company to earn interest at the prime
rate on overnight funds deposited by the Company with GMAC for up to one-half
of the amount borrowed under its floor plan financing, real estate financing
and revolving credit arrangements with GMAC. GMAC has indicated that it will
continue to provide GMAC financing to the Company in the absence of a franchise
agreement with GMC.
PRODUCT WARRANTY
PACCAR provides retail purchasers of new trucks with a limited
warranty against defects in materials and workmanship, excluding certain
specified components which are separately warranted by component suppliers. The
Company does not otherwise provide any warranty to retail purchasers of new
trucks.
The Company generally sells its used trucks "as is" and without
manufacturer's warranty, although manufacturers sometimes provide limited
warranties on used vehicles if they have been reconditioned at the Rush truck
center prior to resale or if the manufacturer's warranty is transferrable and
has not yet expired. The customer does not receive any warranty from the
Company.
BACKLOG
At December 31, 1996, the Company's backlog of orders was
approximately $80.0 million, compared to $90.0 million at December 31, 1995.
The Company includes in backlog only confirmed orders. It takes between 60 days
and six months for the Company to receive delivery from PACCAR once an order is
placed. The Company expects to fill at least 90% of these orders by the end of
1997. The Company sells approximately 75% of its new heavy-duty trucks by
customer special order, with the remainder sold out of inventory. Included in
the Company's backlog as of December 31, 1996 are orders from a number of the
Company's major fleet customers.
REGULATION
The Company is subject to the National Traffic and Motor Vehicle
Safety Act (the "Act"), Federal Motor Vehicle Safety Standards promulgated by
the DOT and various state motor vehicle regulatory agencies. The Company
believes that it is in compliance with the Act and applicable standards.
The Company's service and body shop facilities are subject to federal,
state and local laws and regulations concerning environmental matters with
respect to air quality and discharges into the
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environment, as well as storage, shipping, disposing and manifesting of
hazardous materials and hazardous and non- hazardous waste. These environmental
matters are associated with the repair and maintenance of heavy-duty trucks at
the Company's facilities, and no location or operation exceeds small quantity
generation status. In addition, these laws and regulations affect the storing,
dispensing and discharge of petroleum-based products and other waste, and
require the Company to secure permits in connection with its dealership
operations. The securing of permits and compliance with all laws and
regulations can be costly and could, in the future, affect the Company's
earnings; however, to date, the cost of permitting and compliance has not been
material. Further, each dealership must comply with local governmental
requirements concerning zoning, land use and environmental factors. Although
the Company has not experienced difficulties in obtaining the required
licensing or approvals, difficulties in obtaining such licensing or approvals
in the future could result in delays in the opening of proposed new
dealerships. State and local laws and regulations also require each dealership
to obtain licenses to operate as a dealer in heavy-duty vehicles. The Company
has obtained all necessary licenses and permits, and management believes the
Company is in full compliance with all federal, state and local laws and
regulations.
The Company's insurance and financing services are subject to the laws
and regulations of the states in which it conducts business. These laws and
regulations cover all aspects of the Company's insurance and financing
business, including, with respect to insurance, licensing, regulation of
insurance premiums financing rates and insurance agency legislation pertaining
to insurance agencies and their affiliates; and with respect to financing,
commercial finance regulations that in some states may be similar to certain
consumer finance regulations, including those governing interest rates and
charges, maximum amounts and maturities of credit and disclosure to debtor of
certain terms of each transaction.
The Company is also subject to the regulations promulgated by the
Occupational Safety and Health Administration ("OSHA"), which regulates
workplace health and safety. The Company's facilities are periodically
inspected by representatives of OSHA.
TRADEMARKS
The Peterbilt, Volvo and GMC trademarks and trade names, which are
licensed from each of the respective corporations, are recognized
internationally and play an important role in the marketing of the Company's
products. Each corporation engages in a continuous program of trademark and
trade name protection in all marketing areas. The Company does not hold any
registered trade or service marks at this time, but has trademark applications
pending with the U. S. Patent and Trademark Office for the name "Rush."
PRODUCT LIABILITY
Products that have been or may be sold by the Company may expose it to
potential liabilities for personal injury or property damage claims relating to
the use of such products. Historically, product liability claims have not been
material to the Company. While the Company maintains third-party product
liability insurance which it believes to be adequate, there can be no assurance
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that the Company will not experience legal claims in excess of its insurance
coverage, or claims which are ultimately not covered by insurance. Furthermore,
if any significant claims are made against the Company or PACCAR, the Company's
business may be adversely affected by related negative publicity.
EMPLOYEES
At December 31, 1996, the Company employed approximately 700 people,
of which 85 were involved in new truck sales, 17 in used truck sales, 419 in
parts, service and body shop services, nine in insurance agency services, five
in financing services, 85 in truck leasing and rental operations and 80 in
administrative, management and corporate functions.
The Company has no contracts or collective bargaining agreements with
labor unions and has never experienced work stoppages. The Company considers
its relations with employees to be satisfactory.
ITEM 2. PROPERTIES
The Company owns its truck center locations in Houston (4) and San
Antonio (1), Texas, as well as 6,000 square feet of administrative office space
located in San Antonio, Texas, its Oklahoma City, Oklahoma facilities, and a
4,140- acre ranch located in Cotulla, Texas. The remaining facilities operate
on leased premises, with the unexpired terms of the leases ranging from six
months to eight years, inclusive of options to renew. The Company has an option
to terminate its leases on the Bossier City, Louisiana and Laredo, Texas
locations, by providing notice and paying rent ranging from three to six
months. In all cases the Company pays a fixed rent and is responsible for
taxes, insurance, repairs and maintenance. For 1996, the total net rent expense
for the Company's leased stores was approximately $937,000. The building square
footage of the Company's full-service truck centers range in size from 13,500
to 73,000 square feet, and are situated on lots ranging from three to 14 acres,
while the parts/service facilities range in size from 2,500 to 62,000 square
feet, and are situated on lots ranging from 0.4 to five acres.
ITEM 3. LEGAL PROCEEDINGS AND INSURANCE
From time to time, the Company is involved in certain litigation
arising out of its operations in the ordinary course of business. The Company
maintains liability insurance, including product liability coverage, in amounts
deemed adequate by management. To date, aggregate costs to the Company for
claims, including product liability actions, have not been material. However,
an uninsured or partially insured claim, or claim for which indemnification is
not available, could have a material adverse effect on the financial condition
of the Company. The Company believes that there are no claims or litigation
pending, the outcome of which could have a material adverse effect on the
financial position or results of operations of the Company, however, due to the
inherent uncertainty of litigation, there can be no assurance that the
resolution of any particular claim or proceeding would not have a material
adverse effect on the Company's results of operations for the fiscal period in
which such resolution occurred.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholder's
during the fourth quarter of the fiscal year ended December 31, 1996.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's common stock, $0.01 par value ("Common Stock"), is
listed for quotation on the Nasdaq/National Market ("NASDAQ/NMS") under the
symbol "RUSH." From June 7, 1996, the date of the Company's initial public
offering, the following table sets forth the high and low closing sales prices
for the Common Stock for the fiscal periods indicated, as reported by the
Nasdaq/NMS. The quotations represent prices in the over-the-counter market
between dealers in securities, do not include retail markup, markdown or
commissions and may not necessarily represent actual transactions.
High Low
---------- ---------
Fiscal 1996:
Second quarter (from June 7, 1996) . . . . . . . . . $14.00 $12.25
Third quarter . . . . . . . . . . . . . . . . . . . . $12.75 $12.00
Fourth quarter . . . . . . . . . . . . . . . . . . . $13.13 $12.00
As of March 21, 1997, there were approximately 57 record holders of
the Common Stock and approximately 500 beneficial holders of the common stock.
The Board of Directors intends to retain any earnings of the Company
to support operations and to finance expansion and does not intend to pay cash
dividends on the Common Stock in the foreseeable future. Any future
determination as to the payment of dividends will be at the discretion of the
Board of Directors of the Company, and will depend on the Company's financial
condition, results of operations, capital requirements and such other factors
as the Board of Directors deems relevant.
Because the Company was a S corporation prior to its initial public
offering, a portion of the net income of the Company in past years has been
distributed to W. Marvin Rush, and one additional distribution of approximately
$7.1 million was made simultaneously with the closing of the Company's initial
public offering.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following Selected Consolidated Financial and Operating Data
relating to the Company has been taken or derived from the Consolidated
Financial Statements and other records of the Company. The consolidated
statements of income and consolidated balance
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sheets for each of the four years in the period ended December 31, 1996, have
been audited by Arthur Andersen LLP, independent public accountants. The
consolidated statements of income and consolidated balance sheets for the
four-month period ended December 31, 1992 and for the year ended August 31,
1992 have been derived from the books and records of the Company for those
periods. The Financial and Operating Data presented below may not be comparable
between periods in all material respects or indicative of the Company's future
financial position or results of operations due primarily to acquisitions which
occurred during the periods presented, including the acquisition of the
Company's California and Oklahoma operations in February 1994 and in December
1995, respectively. See Note 17 to the Company's Consolidated Financial
Statements for a discussion of such acquisitions. The Selected Consolidated
Financial and Operating Data should be read in conjunction with the Company's
Historical Consolidated Financial Statements and related notes and other
financial information included elsewhere herein. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
YEAR FOUR MONTH
ENDED PERIOD ENDED
AUGUST 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
1992 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
(IN THOUSANDS)
SUMMARY OF INCOME
STATEMENT DATA
Revenues
New and used truck sales . . . . . . . . . . . . . . . $63,730 $20,518 $ 79,909 $143,569 $192,949 $258,613
Parts and service . . . . . . . . . . . . . . . . . . . 15,315 6,541 24,604 46,516 53,368 64,505
Lease and rental . . . . . . . . . . . . . . . . . . . 2,633 955 2,158 5,476 10,058 13,426
Finance and insurance . . . . . . . . . . . . . . . . . 745 143 2,247 3,774 3,980 5,855
Other . . . . . . . . . . . . . . . . . . . . . . . . . 601 258 1,353 1,936 1,279 2,262
------- ------- -------- -------- -------- --------
Total revenues . . . . . . . . . . . . . . . . . . . 83,024 28,415 110,271 201,271 261,634 343,661
Cost of products sold . . . . . . . . . . . . . . . . . . 70,271 24,270 95,811 168.254 219,059 289,143
------- ------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . . . . . 12,753 4,145 14,460 33,017 42,575 54,518
Selling, general and administrative expenses . . . . . . 10,233 3,687 11,101 25,789 31,238 40,552
Depreciation and amortization expense . . . . . . . . . . 475 151 1,022 1,615 1,846 2,416
------- ------- -------- -------- -------- --------
Operating income . . . . . . . . . . . . . . . . . . . . 2,045 307 2,337 5,613 9,491 11,550
Interest expense . . . . . . . . . . . . . . . . . . . . 587 15 998 2,048 2,886 3,053
Minority interest . . . . . . . . . . . . . . . . . . . . -- -- -- 123 162 --
Income from continuing operations before income taxes . . 1,458 292 1,339 3,442 6,443 8,497
Income tax expense . . . . . . . . . . . . . . . . . . . -- -- -- -- -- 2,295
Income from continuing operations . . . . . . . . . . . . 1,458 292 1,339 3,442 6,443 6,202
Discontinued operations --
Operating income (loss) . . . . . . . . . . . . . . . . (42) 55 325 283 (224) --
Gain on disposal . . . . . . . . . . . . . . . . . . . -- -- -- -- 1,785 --
-- -- -- -- ----- --
Income from discontinued operations . . . . . . . . . . . (42) 55 325 283 1,561 --
------- ------- -------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 1,416 $ 347 $ 1,664 $ 3,725 $ 8,004 $ 6,202
======= ======= ======== ======== ======== ========
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YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1996
---- ----
(IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA INCOME
STATEMENT DATA (Unaudited)
Income from continuing operations before taxes . . . . . . . . . $6,443 8,497
Pro forma adjustments to reflect federal and state income
taxes(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,448 3,229
----- -----
Pro forma income from continuing operations . . . . . . . . . . . $3,995 $5,268
====== ======
Pro forma income from continuing operations per share(2) . . . . $.93 $ .94
==== =====
Weighted average shares outstanding used in the pro forma income
from continuing operations per share calculation . . . . . . . . 4,297 5,590
===== =====
FOUR-MONTH
YEAR ENDED PERIOD ENDED
AUGUST 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
1992 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT OPERATING DATA)
OPERATING DATA
Number of locations --
Full-service 1 1 2 6 8 8
Parts/service 3 3 5 5 6 6
- - - - - -
Total locations 4 4 7 11 14 14
Unit truck sales --
New trucks 623 237 982 1,705 2,263 2,871
Used trucks 675 229 647 889 1,135 1.349
--- --- --- --- ----- -----
Total unit trucks sales 1,298 466 1,629 2,594 3,398 4,220
Aggregate new and used truck
finance
contracts sold (in thousands) $21,295 $10,100 $32,188 $45,453 $53,165 $76,390
Truck lease and rental units 100 100 143 345 521 559
FOUR-MONTH
YEAR ENDED PERIOD ENDED
AUGUST 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
1992 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
(IN THOUSANDS)
BALANCE SHEET DATA
Working capital . . . $875 $2,213 $(245) $(937) $626 $24,676
Inventories . . . . . 6,799 7,960 14,183 20,755 36,517 36.688
Total assets . . . . 13,268 17,683 29,263 44,185 76,079 109,217
Floor plan financing 4,003 6,023 10,648 17,325 34,294 42,228
Line-of-credit
borrowings . . . . . 50 50 950 860 10 20
Long-term debt, including
current portion . . 4,149 6,002 8,167 8,887 17,287 15,547
Shareholders' equity 1,847 2,298 2,706 4,376 7,685 36,692
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- ----------
(1) For all periods presented prior to the Company's public offering on June
7, 1996, the Company was an S corporation and was not generally subject to
corporate income taxes. The pro forma income tax provision has been
computed as if the Company were subject to corporate income taxes for all
periods presented based on the tax laws in effect during the respective
periods. See Note 15 to the Consolidated Financial Statements.
(2) Pro forma income from continuing operations per share was computed by
dividing pro forma income from continuing operations by the weighted
average number of common shares outstanding, as adjusted for the stock
split of the Common Stock and giving pro forma effect for the issuance of
547,400 shares of Common Stock, at an initial public offering price of
$12.00 per share, to repay the line-of-credit borrowings made to fund the
approximately $6.0 million distribution to the Company's sole shareholder
of the undistributed taxable S corporation earnings. See Notes 3 and 5 to
the Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Certain statements contained in this Form 10-K, including statements
regarding the anticipated development and expansion of the Company's business,
expenditures, the intent, belief or current expectations of the Company, its
directors or its officers, primarily with respect to the future operating
performance of the Company and other statements contained herein regarding
matters that are not historical facts, are "forward-looking" statements (as
such term is defined in the Private Securities Litigation Reform Act of 1995).
Because such statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements include, but are
not limited to, those discussed in other filings made by the Company with the
Securities and Exchange Commission.
Rush Enterprises operates a regional network of truck centers that
provide an integrated one-stop source for the trucking needs of its customers,
including retail sales of new Peterbilt and used heavy-duty trucks; parts,
service and body shop facilities; and a wide array of financial services,
including the financing of new and used truck purchases, insurance products and
truck leasing and rentals.
In February 1994, the Company consummated the purchase of the assets
of Engs Motor Truck Company ("Engs"), which consisted of three full-service
Peterbilt dealerships located in Pico Rivera, Fontana and Ventura, California,
and a parts store located in Sun Valley, California. As part of the Company's
acquisition strategy, the Company closed the Ventura facility in August 1994,
consolidating its operations into the remaining facilities. The purchase price
was approximately $9.6 million, funded by (i) $3.1 million of cash, (ii) $5.4
million of borrowings under the Company's floor plan financing with GMAC to
purchase new and used truck inventory, and (iii) $984,000 payable pursuant to a
note to the seller. In June 1994 the Company purchased the related leasing and
truck rental operations of Engs for $300,000 in cash. In addition, the Company
entered into a five year consulting agreement with two principals of the seller
under which they are paid an aggregate of $12,500 per month. One of the former
employees of Engs became a 10% partner in the acquired business, and the
Company subsequently purchased this interest in August 1995 for cash
consideration of approximately $435,000.
In March 1995, the Company sold an automobile dealership in San
Antonio, Texas, for cash of approximately $3.6 million.
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In December 1995, the Company acquired the assets of Kerr
Consolidated, Inc., which consisted of a full-service Peterbilt dealership and
stand-alone leasing facility in Oklahoma City, Oklahoma, and a full-service
Peterbilt dealership in Tulsa, Oklahoma. The purchase price was approximately
$10.2 million, funded by (i) $2.7 million of cash, (ii) $3.9 million of
borrowings under the Company's floor plan financing with GMAC to purchase new
and used truck and parts inventory, (iii) a $750,000 interest-free advance
against future accounts receivable from Interstate Billing Services, Inc. and
(iv) $2.8 million payable pursuant to a note to the seller. The Company also
agreed to pay the principals of Kerr an aggregate consulting fee of $2,225 per
month for five years from the effective date of this offering.
In March 1997, the Company purchased the assets of Denver Peterbilt,
Inc., which consisted of two full-service Peterbilt dealerships in Denver and
Greeley, Colorado. The Company believes that the acquisition of such facilities
provides the Company with an immediate market presence in the state of
Colorado. The purchase price was approximately $7.9 million, funded by (i) $6.5
million of cash and (ii) $1.4 million of borrowings under the Company's floor
plan financing arrangement with GMAC to purchased new and used truck and parts
inventory. The Company also entered into an agreement whereby the principal of
Denver Peterbilt, Inc. may receive additional amounts based on future sales of
new Peterbilt trucks at the Colorado locations.
RESULTS OF OPERATIONS
The following discussion and analysis includes the Company's historical results
of operations for 1994, 1995, 1996.
The following table sets forth for the years indicated certain
financial data as a percentage of total revenues:
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
-------- -------- --------
New and used truck sales . . . . . . . . . . . . . . . . . . . . . . 71.3% 73.7% 75.3%
Parts and service . . . . . . . . . . . . . . . . . . . . . . . . . . 23.1 20.4 18.8
Lease and rental . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7 3.8 3.9
Finance and insurance . . . . . . . . . . . . . . . . . . . . . . . . 1.9 1.5 1.7
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 0.5 0.4
--- --- ---
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 100.0 100.0
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . 83.6 83.7 84.1
---- ---- ----
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.4 16.3 15.9
Selling, general and administrative expenses . . . . . . . . . . . . 12.8 11.9 11.8
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 0.8 0.7 0.7
--- --- ---
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 3.6 3.4
Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 1.0 0.9
--- --- ---
Income from continuing operations . . . . . . . . . . . . . . . . . . 1.8% 2.6% 2.5%
==== ==== ====
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FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED WITH FISCAL YEAR ENDED DECEMBER
31, 1995.
Revenues
Revenues increased by approximately $82.0 million, or 31.4%, from
$261.6 million to $343.7 million from 1995 to 1996. This increase was
attributable to gains achieved from each of the Company's revenue categories,
with the largest increase resulting from the acquisition of the Company's
Oklahoma facilities in December 1995.
Sales of new and used trucks increased by approximately $65.7 million,
or 34.0%, from $192.9 million to $258.6 million from 1995 to 1996. Unit sales
of new and used trucks increased by 26.9% and 18.9%, respectively. The average
selling price of new trucks increased by 5.0% while used truck average selling
prices increased by 15.9%. Unit sales increases were due to the factors
described above. New truck and used truck prices increased due to product mix
and increased market demand.
Parts and service sales increased by approximately $11.1 million, or
20.9%, from $53.4 million to $64.5 million from 1995 to 1996, with the
inclusion of the Oklahoma operations accounting for most of the increase.
Lease and rental revenues increased by approximately $3.4 million, or
33.5%, from $10.1 million to $13.4 million from 1995 to 1996, primarily as a
result of the acquisition of the Company's Oklahoma facilities in December
1995.
Finance and insurance revenues increased by approximately $1.9
million, or 47.1%, from $4.0 million to $5.9 million from 1995 to 1996, with
approximately $800,000 in growth resulting from the acquisition of the
Company's Oklahoma operations in December 1995.
Gross Profit
Gross profit increased by approximately $11.9 million, or 28.1%, from
$42.6 million to $54.5 million from 1995 to 1996, primarily due to the increase
in revenues from the acquisition of the Oklahoma operations discussed above.
Gross profit as a percentage of sales decreased slightly from 16.3% during 1995
to 15.9% during 1996. The decrease in gross margins was due to a 1% decrease in
gross profit on the sale of new and used trucks, which was offset by a 1.8%
increase in gross margins on parts and service sales and increased spreads on
customer financings due to improved financing terms. The company believes that
its increase in gross margins on parts and service activities was in part the
result of integration of distribution and inventory management information
systems in the Company's Oklahoma operations in December 1995 and in its
California operations in April 1996.
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30
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by
approximately $9.3 million, or 29.8%, from $31.2 million to $40.6 million from
1995 to 1996, primarily as a result of the increase in revenues described
above. As a percentage of revenues, selling, general and administrative
expenses decreased from 11.9% to 11.8%, respectively, primarily due to the
spreading of fixed costs over a larger base of sales..
Interest Expense, Net
Net interest expense increased by approximately $167,000, or 5.8%,
from approximately $2.9 million to $3.1 million, from 1995 to 1996,
respectively, primarily as a result of increased levels of floor plan financing
associated with increased sales and higher inventory levels during 1996, and
the acquisition of the Company's Oklahoma facilities in December 1995, offset
by proceeds from the Company's initial public offering.
Income from Continuing Operations
Income from continuing operations increased by $2.1 million, or 31.9%, from
$6.4 million to $8.5 million, from 1995 to 1996, as a result of the factors
described above
Income Taxes
As a result of the Company's initial public offering and termination of its
subchapter S tax status, the Company incurred $2.3 million in income taxes from
the period of the initial public offering to December 31, 1996. The company has
provided for taxes at a 38% effective rate.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED WITH FISCAL YEAR ENDED DECEMBER
31, 1994.
Revenues
Revenues increased by approximately $60.4 million, or 30.0%, from
$201.3 million to $261.6 million from 1994 to 1995. This increase was
attributable to gains achieved by each of the Company's revenue categories.
Approximately one- half of the increase from 1994 to 1995 is due to the
inclusion in 1995 of a full year's results of the Company's California
dealership operations which were acquired in February 1994. Increased activity
at the Company's San Antonio dealership was the next largest contributor to
revenue growth, while the balance of the improvement came throughout all other
operating locations.
Sales of new and used trucks increased by approximately $49.4 million,
or 34.4%, from $143.6 million to $192.9 million from 1994 to 1995. Unit sales
of new and used trucks increased by 32.3% and 27.7%, respectively, during 1995.
While prices of new trucks remained unchanged during 1995, used truck prices
increased by 16.6%. Unit increases were attributable to the factors discussed
above, while price increases resulted from increased market demand.
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31
Parts and service sales increased by approximately $6.9 million, or
14.8, from $46.5 million to $53.4 million primarily as the result of the
factors discussed above plus the addition of 18 service and body shop bays at
the Company's facilities in San Antonio, Texas (10), Lufkin, Texas (6) and
Fontana, California (2). Pricing information and decisions improved following
the implementation of the Company's new management information systems
installed in 1994.
Lease and rental revenues increased by approximately $4.6 million, or
83.7%, from $5.5 million to $10.1 million, primarily as the result of (i) the
inclusion of a full year of results from the California lease and rental
operations, which were acquired by the Company in June 1994, and (ii) the
addition of 65 trucks to the California lease and rental fleet during 1995.
Finance and insurance revenues increased by approximately $200,000, or
5.3%, from $3.8 million to $4.0 million from 1994 to 1995, primarily as a
result of the increased sales of new and used trucks discussed above and an
addition to the Company's insurance sales staff. Finance and insurance revenues
have limited direct costs and therefore contribute a disproportionate share of
operating profits.
Gross Profit
Gross profit increased by approximately $9.6 million, or 29.1%, from
$33.0 million to $42.6 million from 1994 to 1995, primarily due to the increase
in revenues discussed above. Gross profit as a percentage of sales increased
slightly from 16.0% to 16.3% from 1994 to 1995. Higher gross margins on new
truck sales and parts and service and body shop operations offset a decrease in
used truck gross margins and decreased spreads from financing activities caused
by rising interest rates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by
approximately $5.4 million, from $25.8 million to $31.2 million, or 21.0%, from
1994 to 1995, primarily as a result of expenses associated with the California
operations. The balance of the increase resulted from variable expense
increases associated with higher revenues. As a percentage of revenues,
selling, general and administrative expenses declined from 12.5% to 12.0% from
1994 to 1995, due primarily to the spreading of fixed costs over a larger base
of sales, improved operating efficiencies from the integration of the Company's
facilities in California following their acquisition in February 1994, and
implementation of the Company's management information systems and distribution
and management systems discussed above.
Interest Expense
Interest expense increased by approximately $722,000, from $2.0
million to $2.8 million, or 35.3%, from 1994 to 1995. Almost half the increase
in interest expense relates to the inclusion of California results for a full
year in 1995. Increased interest expense was also due to the financing
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of higher inventory levels to support sales growth as well as increases in
interest rates on the Company's variable-rate borrowings and higher average
outstanding debt balances.
Income from Continuing Operations
Income from continuing operations increased by $3.0 million, or 87.2%,
from $3.4 million to $6.4 million from 1994 to 1995, as a result of the factors
described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term cash needs are primarily for working capital,
including inventory requirements, expansion of existing facilities and
acquisitions of new facilities. These short-term cash needs have historically
been financed with retention of profits and borrowings under credit facilities
available to the Company.
At December 31, 1996, the Company had working capital of approximately
$24.7 million, including $23.1 million in accounts receivable and $36.7 million
in inventories, offset by $5.2 million of accounts payable and $42.2 million
outstanding under floor plan financing. The aggregate maximum borrowing limits
under working capital lines of credit with its primary lender are approximately
$6.0 million. The Company's floor plan agreements with its primary lender limit
the aggregate amount of borrowings based on the number of new and used trucks.
As of December 31, 1996, the Company's floor plan arrangements permit the
financing of up to 888 new trucks and 349 used trucks.
For 1996, operating activities resulted in net cash provided by
operations of approximately $109,000. The cash provided by operations was
primarily due to higher levels of income and non-cash related depreciation and
amortization offset by increases in accounts receivable and other current
assets. Accounts receivable increased by $6.7 million during 1996, primarily as
a result of the acquisition of the Oklahoma facilities and several medium sized
fleet sales made at the end of the year. Prepaid and other current assets
increased by $1.2 million during 1996 as the Company escrowed a down payment of
$1.0 million for the acquisition of Denver Peterbilt, Inc.
During 1996, the Company used $8.1 million of net cash in investing
activities, including capital expenditures of $8.5 million in 1996 that were
principally related to the expansion of its various facilities.
Net cash provided by financing activities in 1996 amounted to $27.4
million. Cash flows from financing activities included proceeds of $31.4
million from the Company's initial public offering and exercise of stock
options, a net increase of $7.9 million in floor plan financings and net
proceeds from notes payable of $3.1 million. The Company paid dividends of
$10.2 million to its shareholder to distribute approximately $6.0 million of
previously taxed subchapter S earnings and approximately $4.2 million to enable
its shareholder to make required tax payments.
For 1995, operating activities resulted in net cash used in operations
of approximately $5.5 million. The use of cash in operations was primarily due
to higher levels of accounts receivable
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33
and inventories. Accounts receivable increased by $7.4 million during 1995,
primarily as a result of a large fleet sale made at the end of the year.
Inventories increased by $10.6 million during 1995 as the Company returned to
normal inventory levels required to support increased sales volume and
expansion and due to the acquisition of the Oklahoma operations.
During 1995, the Company used $4.6 million of net cash in investing
activities, including capital expenditures of $6.3 million in 1995 that were
principally related to the expansion of its San Antonio facilities, the
purchase of trucks for its lease fleet, the purchase of a new corporate
aircraft and other capital spending. The Company also used net cash of $2.7
million in the acquisition of its Oklahoma operations in December 1995 and
received $3.6 million from the sale of discontinued operations.
Net cash provided by financing activities in 1995 amounted to $11.4
million. Cash flows from financing activities included a net increase of $13.1
million in floor plan financings and net proceeds from notes payable of $2.8
million. The Company paid dividends of $3.6 million on the Company's S
corporation earnings to enable its shareholder to make required tax payments.
During 1996, the Company arranged financing for approximately 31% of
its total new and used truck sales, with approximately 64% related to new truck
sales and the remaining 36% of financing related to used truck sales. The
Company's new and used truck financing is typically provided through Associates
and PACCAR Financial. The Company financed approximately $76.4 million of new
and used truck purchases in 1996. The Company's contracts with Associates and
PACCAR Financial provide for payment to the Company of all finance charges in
excess of a negotiated discount rate within 30 days of the date of financing,
with such payments subject to offsets resulting from the early pay-off, or
defaults under, installment contracts previously sold to Associates and PACCAR
Financial by the Company. The Company's agreements with Associates and PACCAR
Financial limit the aggregate liability of the Company for defaults under the
installment contracts sold to Associates and PACCAR Financial to $400,000 and
$200,000 per year, respectively.
Substantially all of the Company's truck purchases from PACCAR are
made on terms requiring payment within 15 days or less from the date of
shipment of the trucks from the factory. The Company finances all, or
substantially all, of the purchase price of its new truck inventory, and 75% of
the loan value of its used truck inventory, under a floor plan arrangement with
GMAC under which GMAC pays PACCAR directly with respect to new trucks. The
Company makes monthly interest payments on the amount financed but is not
required to commence loan principal repayments prior to sale on new vehicles to
GMAC for a period of 12 months and for used vehicles for a period of three
months. At December 31, 1996, the Company had $42.2 million outstanding under
its floor plan financing arrangement with GMAC. GMAC permits the Company to
earn, for up to one-half of the amount borrowed under its floor plan financing
arrangement with GMAC, interest at the prime rate on overnight funds deposited
by the Company with GMAC. Following this offering GMAC will increase the amount
of funds that the Company can earn interest at the prime rate to include
one-half of the outstanding floor plan financing, real estate financing and the
line of credit extended by GMAC.
33
34
Seasonality
The Company's business is moderately seasonal. Seasonal effects on new
truck sales related to the seasonal purchasing patterns of any single customer
type are mitigated by the Company's diverse customer base, including small and
large fleets, governments, corporations and owner operators. However, truck,
parts and service operations historically have experienced higher volumes of
sales in the second and third quarters. The Company has historically received
benefits from volume purchases and meeting vendor sales targets in the form of
cash rebates, which are typically recognized when received. Approximately 40%
of such rebates are typically received in the fourth quarter, resulting in a
seasonal increase in gross profit.
Cyclicality
The Company's business, as well as the entire retail heavy-duty truck
industry, is dependent on a number of factors relating to general economic
conditions, including fuel prices, interest rate fluctuations, economic
recessions and customer business cycles. In addition, unit sales of new trucks
have historically been subject to substantial cyclical variation based on such
general economic conditions. Although industry-wide domestic retail sales of
heavy-duty trucks exceeded 200,000 units for the first time in 1995 according
to R.L. Polk, new order volume declined toward the end of that year and the
industry recorded approximately 185,000 new truck registrations in 1996. The
industry forecasts a decline of approximately 8% in heavy-duty new truck sales
in 1997. Although the Company believes that its geographic expansion and
diversification into truck-related services, including financial services,
leasing, rentals and service and parts, will reduce the overall impact to the
Company resulting from general economic conditions affecting heavy-duty truck
sales, the Company's operations may be materially and adversely affected by any
continuation or renewal of general downward economic pressures or adverse
cyclical trends.
Effects of Inflation
The Company believes that the relatively moderate inflation over the
last few years has not had a significant impact on the Company's revenue or
profitability. The Company does not expect inflation to have any near-term
material effect on the sales of its products, although there can be no
assurance that such an effect will not occur in the future.
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35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Rush Enterprises, Inc.
Annual Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1995 and 1996.
Consolidated Statements of Income for the years ended December 31, 1994, 1995
and 1996.
Consolidated Statements of Shareholder's Equity for the years ended December
31, 1994, 1995 and 1996
Consolidated Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996.
Notes to Consolidated Financial Statements
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36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Rush Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of Rush
Enterprises, Inc. (a Texas corporation), and subsidiaries as of December 31,
1995 and 1996, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rush Enterprises, Inc., and
subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Antonio, Texas
March 3, 1997
36
37
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(In Thousands, Except Shares and Per Share Amounts)
1995 1996
---- ----
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 2,149 $ 21,507
Accounts receivable, net 16,411 23,064
Inventories 36,517 36,688
Prepaid expenses and other 266 1,503
-------- ---------
Total current assets 55,343 82,762
PROPERTY AND EQUIPMENT, net 17,560 23,222
OTHER ASSETS, net 3,176 3,233
-------- ---------
Total assets $ 76,079 $109,217
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Floor plan notes payable $ 34,294 $ 42,228
Current maturities of long-term debt 3,600 2,115
Advances outstanding under lines of credit 10 20
Trade accounts payable 7,591 5,157
Dividends payable 1,615 -
Accrued expenses 7,607 8,566
-------- ---------
Total current liabilities 54,717 58,086
-------- ---------
LONG-TERM DEBT, net of current maturities 13,677 13,412
-------- ---------
DEFERRED INCOME TAXES - 1,027
-------- ---------
COMMITMENTS AND CONTINGENCIES (Note 17)
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares
outstanding in 1995 and 1996 - -
Common stock, par value $.01 per share; 25,000,000 shares authorized;
3,750,000 shares outstanding in 1995 and 6,643,730 in 1996 (Note 3) 38 66
Additional paid-in capital 735 33,342
Retained earnings 6,912 3,284
-------- ---------
Total shareholders' equity 7,685 36,692
-------- ---------
Total liabilities and shareholders' equity $ 76,079 $ 109,217
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
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RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(In Thousands, Except Per Share Amounts)
1994 1995 1996
---- ---- ----
REVENUES:
New and used truck sales $ 143,569 $ 192,949 $ 258,613
Parts and service 46,516 53,368 64,505
Lease and rental 5,476 10,058 13,426
Finance and insurance 3,774 3,980 5,855
Other 1,936 1,279 1,262
--------- --------- ---------
Total revenues 201,271 261,634 343,661
COST OF PRODUCTS SOLD 168,254 219,059 289,143
--------- --------- ---------
GROSS PROFIT 33,017 42,575 54,518
SELLING, GENERAL AND ADMINISTRATIVE 25,789 31,238 40,552
DEPRECIATION AND AMORTIZATION 1,615 1,846 2,416
--------- --------- ---------
OPERATING INCOME 5,613 9,491 11,550
--------- --------- ---------
INTEREST INCOME (EXPENSE):
Interest income - - 1,118
Interest expense 2,048 2,886 4,171
--------- --------- ---------
Total interest expense 2,048 2,886 3,053
--------- --------- ---------
MINORITY INTEREST 123 162 -
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
3,442 6,443 8,497
--------- --------- ---------
PROVISION FOR INCOME TAXES - - 2,295
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 3,442 6,443 6,202
--------- --------- ---------
DISCONTINUED OPERATIONS:
Operating income (loss) 283 (224) -
Gain on disposal - 1,785 -
--------- --------- ---------
INCOME FROM DISCONTINUED OPERATIONS 283 1,561 -
--------- --------- ---------
NET INCOME $ 3,725 $ 8,004 $ 6,202
========= ========= =========
UNAUDITED PRO FORMA DATA (Note 5):
Income from continuing operations before income taxes $ 6,443 $ 8,497
Pro forma adjustments to reflect federal and state income taxes 2,448 3,229
--------- ---------
Pro forma income from continuing operations after provision for income
taxes $ 3,995 $ 5,268
========= =========
Pro forma income from continuing operations per share $ .93 $ .94
========= =========
Weighted average shares outstanding used in the pro forma income from
continuing operations per share calculation 4,297 5,590
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
38
39
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(In Thousands)
Common Stock,
Rush Enterprises, Inc.
--------------------------
Shares Additional
Issued and $.01 Paid-In Retained
Outstanding Par Value Capital Earnings
----------- --------- ---------- --------
BALANCE, December 31, 1993 3,750 $ 38 $ 735 $ 1,933
NET INCOME - - - 3,725
DIVIDENDS DECLARED - - - (2,055)
----- ------- -------- --------
BALANCE, December 31, 1994 3,750 38 735 3,603
NET INCOME - - - 8,004
DIVIDENDS DECLARED - - - (4,695)
----- ------- -------- --------
BALANCE, December 31, 1995 3,750 38 735 6,912
NET INCOME, January 1, 1996, through June 11, 1996 - - - 2,918
DIVIDENDS DECLARED - - - (8,559)
REORGANIZATION FROM S CORPORATION TO
C CORPORATION - - 1,271 (1,271)
OPTIONS EXERCISED 19 - 205 -
ISSUANCE OF COMMON STOCK, net of issuance costs 2,875 28 31,131 -
NET INCOME, June 12, 1996, through December 31, 1996 - - - 3,284
--------- ------- -------- --------
BALANCE, December 31, 1996 6,644 $ 66 $33,342 $ 3,284
====== ======= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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RUSH ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(In Thousands)
1994 1995 1996
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations $ 3,442 $ 6,443 $ 6,202
Adjustments to reconcile net income from continuing operations to net
cash provided by (used in) operating activities-
Depreciation and amortization 1,615 1,846 2,416
Provision for deferred income tax expense - - 1,027
Minority interest 123 162 -
Change in receivables (5,685) (7,407) (6,653)
Change in inventories 1,738 (10,591) (171)
Change in other current assets 14 18 (1,237)
Change in accounts payable 2,140 599 (2,434)
Change in accrued liabilities 2,989 2,678 959
--------- --------- ---------
Net cash provided by (used in) continuing operations 6,376 (6,252) 109
Net cash provided by (used in) discontinued operations (479) 785 -
--------- --------- ---------
Net cash provided by (used in) operating activities 5,897 (5,467) 109
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (2,368) (6,311) (8,491)
Proceeds from the sale of property and equipment - 1,229 682
Acquisitions of dealerships and leasing operations (8,878) (2,690) -
Proceeds from the sale of discontinued operations - 3,601 -
Investment by (purchase of) minority interest 150 (435) -
Change in other assets (265) (27) (326)
--------- --------- ---------
Net cash used in investing activities (11,361) (4,633) (8,135)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock, net of issuance costs - - 31,364
Proceeds from notes payable 2,356 9,629 3,150
Principal payments on notes payable (2,620) (6,811) (4,900)
Draws (payments) on floor plan financing, net 6,677 13,053 7,934
Draws (payments) on line of credit, net (90) (850) 10
Dividends paid (1,512) (3,623) (10,174)
--------- --------- ---------
Net cash provided by financing activities 4,811 11,398 27,384
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (653) 1,298 19,358
CASH AND CASH EQUIVALENTS, beginning of year 1,504 851 2,149
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 851 $ 2,149 $ 21,507
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 2,272 $ 2,552 $ 4,254
========= ========= =========
Income taxes $ - $ - $ 1,332
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
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RUSH ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
1. ORGANIZATION AND OPERATIONS:
_
Rush Enterprises, Inc. (the Company), was incorporated in June 1996 under the
laws of the State of Texas.
The Company, founded in 1965, operates a regional network of 14 truck centers
that provide an integrated one-stop source for the trucking needs of its
customers, including retail sales of new Peterbilt and used heavy-duty trucks;
parts, service and body shop facilities; and financial services, including
assisting in the financing of new and used truck purchases, insurance products
and truck leasing and rentals. The Company's truck centers are located in areas
on or near major highways in Texas, California, Oklahoma and Louisiana.
In February 1994, the Company acquired a 90 percent interest in South Coast
Peterbilt (South Coast) and Translease- California. In August 1995, the Company
purchased the remaining 10 percent minority interest (see Note 17).
In March 1995, the Company sold its Rush Pontiac-GMC dealership to a third
party. Rush Pontiac-GMC sold passenger automobiles and small- to medium-used
trucks to the general public. The results of operations and net assets of this
division have been presented as discontinued operations for all years presented
(see Note 4).
In December 1995, the Company purchased substantially all the assets of Kerr
Consolidated, Inc. (Kerr), and began operations of Oklahoma Trucks, Tulsa
Trucks and Translease-Oklahoma. Kerr's primary line of business is the sale of
new Peterbilt and used heavy-duty trucks, parts, leasing and service (see Note
17).
As part of the corporate reorganization on June 12, 1996 (see Note 3),
Associated Acceptance, Inc. (Associates), came under the control of the Company
and, thus, 100 percent of the financial position and results of operations of
Associates has been included in the Company's consolidated financial statements
as of December 31, 1996. The Company has restated 1994 and 1995's shareholders'
equity to reflect Associates as part of the Company's consolidated
shareholders' equity consistent with the 1996 financial statement presentation.
The restatement was not material to the Company's shareholders' equity.
All significant interdivision and intercompany accounts and transactions have
been eliminated. Certain prior period amounts have been reclassified for
comparative purposes.
2. SIGNIFICANT ACCOUNTING POLICIES:
Estimates in Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
Inventories
Inventories are stated at the lower of cost or market value. Cost is determined
by specific identification for new and used truck inventory and by utilizing
the first-in, first-out methods for tires, parts and accessories.
41
42
Property and Equipment
Property and equipment are being depreciated over their estimated useful lives.
Leasehold improvements are amortized over the useful life of the improvement,
or the term of the lease, whichever is shorter. Both the straight-line and
double declining-balance methods of depreciation are used. The cost,
accumulated depreciation and amortization and estimated useful lives are
summarized as follows (in thousands):
December 31 Estimated
----------------------
1995 1996 Life (Years)
-------- --------- ------------
Land $ 2,874 $ 4,714 -
Buildings and improvements 5,384 8,004 31 - 39
Leasehold improvements 980 1,569 7 - 10
Machinery and shop equipment 2,219 3,035 5 - 7
Furniture and fixtures 1,692 2,907 5 - 7
Transportation equipment 3,386 3,792 2 - 5
Leased vehicles 5,337 4,769 3 - 7
Accumulated depreciation and amortization (4,312) (5,568)
-------- ---------
$ 17,560 $ 23,222
======== =========
Allowance for Doubtful Receivables
and Repossession Losses
The Company provides an allowance for doubtful receivables and repossession
losses after considering historical loss experience and other factors, which
might affect the collectibility of accounts receivable and the ability of
customers to meet their obligations on finance contracts sold by the Company.
Other Assets
Other assets primarily consist of approximately $2,800,000 of goodwill acquired
by the Company as part of the Kerr acquisition in 1995 and long-term deposits.
The goodwill is being amortized on a straight-line basis over an estimated
useful life of 30 years. Accumulated amortization at December 31, 1995 and
1996, was approximately $8,000 and $140,000, respectively. Periodically, the
Company assesses the appropriateness of the asset valuations of goodwill and
the related amortization period.
Income Taxes
Effective with the corporate reorganization on June 12, 1996 (see Note 3), the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in a company's financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the differences between the financial statement
and tax bases of assets and liabilities using currently enacted tax rates in
effect for the years in which the differences are expected to reverse.
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43
Revenue Recognition Policies
Income on the sale of vehicles is recognized when the seller and customer
execute a purchase contract and there are no significant uncertainties related
to financing or delivery. Finance income related to the sale of a vehicle is
recognized over the period of the respective finance contract on the effective
interest rate method if the finance contract is retained by the Company. During
1994, 1995 and 1996, no finance contracts were retained for any significant
length of time by the Company but were generally sold, with limited recourse,
to certain finance companies concurrent with the sale of the related vehicle.
Gain or loss is recognized by the Company upon the sale of such finance
contracts to the finance companies, net of a provision for estimated
repossession losses and early repayment penalties. Leasing income is recognized
over the period of the related lease agreement. Parts and services revenue is
earned at the time the Company sells the parts to its customers, or at the time
the Company completes the service work order related to service provided to the
customer's vehicle.
Statement of Cash Flows
Cash and cash equivalents generally consist of cash and other money market
instruments. The Company considers any temporary investments that mature in
three months or less when purchased to be cash equivalents for reporting cash
flows.
Noncash activities during the periods indicated were as follows (in thousands):
Year Ended December 31
----------------------
1994 1995 1996
---- ---- ----
Liabilities incurred in connection with property and
equipment acquisitions $ - $ 2,022 $2,901
Liabilities incurred in connection with acquisitions of
dealerships and leasing operations 984 3,550 -
New Accounting Pronouncements
In March 1995, Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" (FAS 121), was issued. Under FAS 121, an impairment loss must be
recognized, for long-lived assets and certain identifiable intangibles to be
held and used by an entity, whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. FAS 121
is effective for financial statements issued for fiscal years beginning after
December 15, 1995, and must be adopted on a prospective basis. Restatement of
previously issued financial statements is not permitted. The Company adopted
FAS 121 prospectively in the first quarter of 1996. The adoption of FAS 121 did
not have a material effect on the financial condition or results of operations
of the Company.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," in June 1996 (SFAS 125).
This statement provides accounting and reporting standards for, among other
things, the transfer and servicing of financial assets, such as factoring
receivables with recourse. This statement is effective for transfers and
servicing of financial assets occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted. The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125" (SFAS 127). SFAS 127 moves forward some, but not all,
of the provisions of SFAS 125 to December 31, 1997. The Company believes the
adoption of this statement will not have an impact on the financial condition
or results of operations of the Company.
43
44
In March 1997, Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" (SFAS 128), was issued. SFAS 128 specifies the computation,
presentation and disclosure requirements for earnings per share (EPS) for
entities with publicly held common stock or potential common stock. SFAS 128 is
effective for fiscal years ending after December 15, 1997, including interim
periods. Earlier application is not permitted. SFAS 128 requires restatement of
all prior period EPS data presented. The Company believes the adoption of this
statement will not have an impact on the financial condition or results of
operations of the Company.
3. INITIAL PUBLIC OFFERING AND
CORPORATE REORGANIZATION:
The Company filed a Registration Statement with the Securities and Exchange
Commission for an underwritten offering of 2,875,000 shares of common stock,
including underwriters' overallotment option, which became effective on June
12, 1996 (the Offering). The Company used the net proceeds of the Offering to
retire certain debt obligations, fund potential acquisition opportunities which
may arise in the future and for general corporate purposes.
As part of the Offering on June 12, 1996, the Company terminated its S
corporation federal tax election and was subject to federal and certain state
income taxes from that date forward. On June 12, 1996, the Company paid the S
corporation shareholder approximately $8.6 million representing the
undistributed accumulated earnings of the S corporation prior to June 12, 1996.
Following the Offering, there were 6,625,000 common shares outstanding,
including 3,750,000 owned by the shareholder of the predecessor S corporation.
The weighted average number of shares of common stock outstanding as of
December 31, 1996, was 5,345,192.
Dividends declared, paid or payable for the years ended December 31, 1994, 1995
and 1996, were related to the Company's sole shareholder prior to the
reorganization and Offering.
As part of the reorganization, the Company acquired, as a wholly owned
subsidiary, a managing general agent (the MGA) to manage all of the operations
of Associated Acceptance, Inc. (AA). The MGA is responsible for funding the
operations of AA, directing the use of AA's assets and incurring liabilities on
AA's behalf in exchange for the MGA receiving any and all net income of AA. W.
Marvin Rush, the sole shareholder of AA, is prohibited from the sale or
transfer of the capital stock of AA under the MGA agreement, except as
designated by the Company. Therefore, the financial position and operations of
AA have been included as part of the Company's consolidated financial position
and results of operations.
4. DISCONTINUED OPERATIONS:
In March 1995, the Company sold its Pontiac-GMC Truck division and, therefore,
has accounted for these operations as discontinued operations. Under the terms
of the sales agreement, the Buyer purchased the new car and truck inventory.
The Company received approximately $3,601,000 for the sale of the dealership.
The results of the division's operations and cash flows have been classified as
discontinued operations for all periods presented in the consolidated
statements of income and cash flows. All assets and liabilities of the
Pontiac-GMC Truck division were sold prior to December 31, 1995.
Sales revenues applicable to Rush Pontiac-GMC were $30,305,000 and $6,435,000
for the years ended December 31, 1994 and 1995, respectively.
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45
5. PRO FORMA INFORMATION (UNAUDITED):
Pro Forma Income From Continuing Operations and
Income From Continuing Operations Per Share (Unaudited)
Pro forma income from continuing operations and pro forma income from
continuing operations per share have been determined assuming that the Company
had been taxed as a C corporation for federal and certain state income tax
purposes since January 1, 1995.
Pro forma income from continuing operations per share had been computed using
the weighted average number of common shares outstanding of the Company.
Weighted average common shares for all periods presented prior to the Offering
have been increased by 547,400 shares to reflect the number of shares that
would have to have been sold at the offering price per share to repay an
approximate $6,000,000 distribution of undistributed S corporation earnings as
of December 31, 1995.
Pro Forma Balance Sheet (Unaudited)
The balance sheet at December 31, 1995, would have been effected by the
following transactions, as if such transactions occurred on that date:
(1) The payment of a distribution of $6,000,000 which represented
substantially all of the Company's undistributed S corporation
earnings at December 31, 1995. Such distribution of undistributed
earnings would be funded by draws on the Company's line of credit
which would be repaid by a portion of the proceeds from the Offering.
(2) An estimated $520,000 deferred tax liability, which would be required
as a reduction of retained earnings had the Company terminated its S
corporation status at December 31, 1995. (See Note 15.)
(3) The reclassification of the remaining balance of retained earnings to
additional paid-in capital.
6. SUPPLIER AND CUSTOMER CONCENTRATION:
Major Suppliers and Dealership Agreements
The Company has entered into dealership agreements with various companies
(Distributors). These agreements are nonexclusive agreements that allow the
Company to stock, sell at retail and service trucks and products of the
Distributors in the Company's defined market. The agreements allow the Company
to use the Distributor's name, trade symbols and intellectual property and
expire as follows:
Distributor Expiration Dates
----------- ----------------
PACCAR April 1997 to
March 2000
GMC October 2000
Volvo March 2000
These agreements impose a number of restrictions and obligations on the
Company, including restrictions on a change in control of the Company and the
maintenance of certain required levels of working capital. Violation of such
restrictions could result in the loss of the Company's right to purchase the
Distributor's products and use the Distributor's trademarks. As of December 31,
1996, the Company's management believes it was in compliance with all the
restrictions of its dealership agreements.
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46
The Company purchases most of its new vehicles and parts from PACCAR, the maker
of Peterbilt trucks and parts, at prevailing prices charged to all franchised
dealers. Sales of new Peterbilt trucks accounted for 95 percent of the
Company's new vehicle sales for the years ended December 31, 1995 and 1996.
Primary Lender
The Company purchases its new and used truck inventories with the assistance of
a floor plan financing program from a single financial institution. Such
financial institution also provides the Company with lines of credit which
allow borrowings of up to $6,000,000 and various variable interest rate notes.
The loan agreements with this financial institution generally provide that such
agreements may be terminated at the option of the lender with notice of 120
days. Further, the agreements provide that the occurrence of certain events,
including termination of the Company's GMC dealership agreement, will be
considered events of default under agreements. In the event that the Company's
financing becomes insufficient, or its relationship terminates with the current
primary lender, the Company would need to obtain similar financing from other
sources. Management believes it can obtain additional floor plan financing or
alternative financing if necessary. (See Note 9.)
The Company is currently renegotiating the loan agreement which the Company
believes will increase the line-of-credit borrowing limit to $8,000,000.
Concentrations of Credit Risks
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable.
The Company places its cash and cash equivalents with what it considers to be
quality financial institutions. At December 31, 1996, the Company had deposits
in excess of federal insurance totaling approximately $4,400,000.
Concentrations of credit risk with respect to trade receivables are reduced
because a large number of geographically diverse customers make up the
Company's customer base, thus, spreading the trade credit risk. A majority of
the Company's business, however, is concentrated in the United States
heavy-duty trucking market and related aftermarkets. The Company controls
credit risk through credit approvals and by selling certain trade receivables
without recourse. Related to the Company's finance contracts, after the
finance contract is entered into, the Company generally sells the contracts to
a third party. The finance contracts are sold with recourse, but the annual
amount of recourse losses which can be put to the Company is contractually
limited. (See Note 16.) Historically, bad debt expense associated with the
Company's accounts receivable and finance contracts has not been material.
7. ACCOUNTS RECEIVABLE:
The Company's accounts receivable, net, consisted of the following as of
December 31, 1995 and 1996 (in thousands).
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1995 1996
-------- --------
Trade accounts receivable from sale of vehicles $ 12,428 $ 19,771
Other trade receivables 1,925 1,673
Warranty claims 706 1,610
Related parties 784 -
Other accounts receivable 856 617
Less- Allowance for doubtful receivables and
repossession losses (288) (607)
-------- --------
Total $ 16,411 $ 23,064
======== ========
Accounts receivables-related parties represents receivables with entities in
which the stockholder and/or key members of the Company's management have a
controlling interest. These receivables are primarily related to short-term
advances made by the Company or receivables as a result of arm's-length
transactions between the Company and the related parties. For the years ended
December 31, 1994, 1995 and 1996, the Company had sales to one of its related
parties of approximately $535,000, $770,000 and $939,000, respectively.
8. INVENTORIES:
The Company's inventories consisted of the following as of December 31, 1995
and 1996 (in thousands):
1995 1996
-------- ---------
New vehicles $ 21,870 $ 17,514
Used vehicles 5,490 7,926
Parts and accessories 8,744 10,360
Tires 413 888
-------- ---------
Total $ 36,517 $ 36,688
======== =========
9. FLOOR PLAN NOTES PAYABLE AND LINES OF CREDIT:
Floor Plan Notes Payable
Floor plan notes are financing agreements to facilitate the Company's purchase
of new and used trucks. These notes are collateralized by the inventory
purchased and accounts receivable arising from the sale thereof. The Company's
floor plan notes have interest rates at prime plus a percentage rate as
determined by the finance provider, as defined in the agreement. The interest
rate applicable to these agreements was 8.25 percent at December 31, 1995 and
1996. The amounts borrowed under these agreements are due when the related
truck inventory (collateral) is sold and the sales proceeds are collected by
the Company. These lines are discretionary and may be modified, suspended or
terminated at the election of the lender, at any time.
The Company's floor plan agreements with its primary lender limit the borrowing
capacity based on the number of new and used trucks that may be financed. As of
December 31, 1996, the aggregate amounts of unit capacity for new and used
trucks are 888 and 349, respectively, and the availability for new and used
trucks is 379 and 125, respectively.
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Amounts of collateral as of December 31, 1996, are as follows (in thousands):
Inventories, new and used vehicles at cost based on specific
identification $ 25,440
Truck sale related accounts receivable 19,770
--------
Total $ 45,210
========
Floor plan notes payable $ 42,228
========
Lines of Credit
The Company has a separate line-of-credit agreement with a financial
institution which provides for an aggregate maximum borrowing of $6,000,000,
with advances generally limited to 75 percent of new parts inventory and
eligible accounts receivable (as defined). Advances bear interest at prime.
Advances under the line-of-credit agreement are secured by new parts inventory.
The line-of-credit agreement contains financial covenants which include the
maintenance of a certain level of tangible net worth (as defined). The Company
was in compliance with these covenants at December 31, 1996. Either party may
terminate the agreement with 60 days written notice. As of December 31, 1995
and 1996, advances outstanding under the various line-of-credit agreements
amounted to $20,000. As of December 31, 1996, $5,980,000 was available for
future borrowings. This line is discretionary and may be modified, suspended or
terminated at the election of the lender.
10. LONG-TERM DEBT:
Long-term debt is comprised of the following as of December 31, 1995 and 1996
(in thousands):
1995 1996
-------- ---------
Variable interest rate term notes $ 5,139 $ 5,305
Fixed interest rate term notes 11,248 10,222
Advance from related party 890 -
-------- ---------
Total debt 17,277 15,527
Less- Current maturities (3,600) (2,115)
-------- ---------
$ 13,677 $ 13,412
======== =========
Advance from related party was a short-term advance from a company controlled
by the Company's sole shareholder. The advance carried interest at prime rate
and was paid in 1996.
As of December 31, 1996, debt maturities are as follows (in thousands):
1997 $ 2,115
1998 2,615
1999 1,660
2000 1,720
2001 3,358
Thereafter 4,059
--------
$ 15,527
========
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The Company's variable interest rate notes are with the Company's primary
lender and have an interest rate of prime, which was 8.25 percent at December
31, 1996. Monthly payments of these notes range from $2,708 to $9,922, plus
interest. Maturities of these notes range from January 1999 to February 2011.
The Company's fixed interest rate notes are primarily with financial
institutions and have interest rates ranging from 7.5 percent to 10.5 percent
at December 31, 1996. Monthly payments on the notes range from $223 to $26,662,
including principal and interest. Maturities of these notes range from January
1997 to November 2012.
The proceeds from the issuance of the variable and fixed rate notes were used
primarily to acquire land, buildings and improvements, transportation equipment
and leased vehicles. The notes are secured by the assets acquired by the
proceeds of such notes.
11. DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS:
In December 1991, Statement of Financial Accounting Standards No. 107 (SFAS
107), "Disclosures About Fair Value of Financial Instruments," was issued. SFAS
107 requires disclosures of the fair value of financial instruments. The
following methods and assumptions were used to estimate the fair value of each
class of financial instrument held by the Company:
Current assets and current liabilities- The carrying value
approximates fair value due to the short maturity of these items.
Long-term debt - The fair value of the Company's long-term debt is
based on secondary market indicators. Since the Company's debt is
not quoted, estimates are based on each obligation's
characteristics, including remaining maturities, interest rate,
credit rating, collateral, amortization schedule and liquidity. The
carrying amount approximates fair value.
12. DEFINED CONTRIBUTION PENSION PLANS:
The Company has a defined contribution pension plan (the Rush Plan) which is
available to all Company employees and the employees of certain affiliates,
except employees of South Coast, a wholly owned subsidiary of the Company. As
of December 31 of every year, each employee who has completed one year of
continuous service is entitled to enter the Rush Plan. Participating employees
may contribute from 2 percent to 10 percent of total gross compensation. The
Company, at its discretion, contributed an amount equal to 25 percent of the
employees' contributions. During the years ended December 31, 1994, 1995 and
1996, the Company incurred expenses of approximately $115,000, $127,000 and
$166,000, respectively, related to the Rush Plan.
South Coast also has a defined contribution pension plan (the South Coast Plan)
which is available to all employees of South Coast. As of January 1 and July 1
of every year, each employee who has completed one year of continuous service
is entitled to enter the South Coast Plan. Participating employees do not
contribute. South Coast, at its discretion, contributes an amount equal to 2.5
percent of the employees' compensation. During the years ended December 31,
1994, 1995 and 1996, South Coast incurred expenses of approximately $117,000,
$166,000 and $185,000, respectively, related to the South Coast Plan.
The Company currently does not provide any postretirement benefits other than
pensions nor does it provide any postemployment benefits.
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13. LEASES:
Vehicle Leases
The Company leases vehicles primarily over periods ranging from one to six
years under operating lease arrangements. This equipment is subleased to
customers under various agreements in its own leasing operation. Generally, the
Company is required to incur all operating costs and pay a minimum rental and
an excess mileage charge based on maximum mileage over the term of the lease.
Vehicle lease expenses for the years ended December 31, 1994, 1995 and 1996,
were approximately $2,600,000, $4,076,000 and $5,528,000, respectively.
Minimum rental commitments for noncancelable vehicle leases in effect at
December 31, 1996, are as follows (in thousands):
1997 $ 6,320
1998 5,516
1999 4,294
2000 2,773
2001 1,508
Thereafter 1,344
--------
Total $ 21,755
========
Customer Vehicle Leases
A Company division leases both owned and leased vehicles to customers primarily
over periods of one to six years under operating lease arrangements. The leases
require a minimum rental and a contingent rental based on mileage. Rental
income during the years ended December 31, 1994, 1995 and 1996, consisted of
minimum payments of approximately $3,600,000, $5,915,000 and $10,250,000,
respectively, and contingent rentals of approximately $600,000, $2,076,000 and
$4,188,000, respectively. Minimum lease payments to be received for
noncancelable leases and subleases in effect at December 31, 1996, are as
follows (in thousands):
1997 $ 7,592
1998 6,544
1999 5,071
2000 3,284
2001 1,983
Thereafter 1,714
-------
Total $26,188
=======
Other Leases - Land and Buildings
The Company leases various facilities under operating leases which expire at
various times through 2006. Rental expense for the years ended 1994, 1995 and
1996 was $712,000, $762,000 and $937,000, respectively. Future minimum lease
payments under noncancelable leases at December 31, 1996, are as follows (in
thousands):
1997 $ 461
1998 455
1999 429
2000 415
2001 335
Thereafter 1,516
-------
Total $ 3,611
=======
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14. STOCK OPTIONS AND STOCK PURCHASE WARRANTS:
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), was issued. SFAS 123
defines a fair value based method of accounting for employee stock options or
similar equity instruments and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. Under the fair
value based method, compensation cost is measured at the grant date based on
the value of the award and is recognized over the service period of the award,
which is usually the vesting period. However, SFAS 123 also allows entities to
continue to measure compensation costs for employee stock compensation plans
using the intrinsic value method of accounting prescribed by APB Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25). The Company has
adopted SFAS 123 effective January 1, 1996, and has elected to remain with the
accounting prescribed by APB 25. The Company has not presented the pro forma
information required by SFAS 123 as the pro forma net income and net income per
share would not have been materially different than actual results.
In April 1996, the Board of Directors and shareholders adopted the Rush
Enterprises, Inc. Long-Term Incentive Plan (the Incentive Plan). The Incentive
Plan provides for the grant of stock options (which may be nonqualified stock
options or incentive stock options for tax purposes), stock appreciation rights
issued independent of or in tandem with such options (SARs), restricted stock
awards and performance awards.
The aggregate number of shares of common stock subject to stock options or SARs
that may be granted to any one participant in any one year under the Incentive
Plan is 100,000 shares. The Company has 500,000 shares of common stock reserved
for issuance upon exercise of any awards granted under the Company's Incentive
Plan.
In connection with the Offering, the Company agreed to issue to the
Representatives of the Underwriters and their designees, for their own
accounts, warrants to purchase an aggregate of 250,000 shares of common stock.
The warrants are exercisable during the four-year period commencing June 12,
1997, at an exercise price per share equal to $14.40.
In April 1996, the Company granted options under the Incentive Plan to purchase
an aggregate of 19,403 shares to 18 employees, all of which are fully vested.
The options were exercisable at $10.80, the fair value of the options at the
date of grant. During the year, 18,730 options were exercised and 673 options
were forfeited. All transactions were valued at the weighted average exercise
price of $10.80.
On April 8, 1996, the Board of Directors of the Company declared a dividend of
one common share purchase right (a Right) for each share of common stock
outstanding. Each Right entitles the registered holder to purchase from the
Company one share of common stock at a price of $35.00 per share (the Purchase
Price). The Rights are not exercisable until the distribution date, as defined.
The Rights will expire on April 7, 2006 (the Final Expiration Date), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company.
15. INCOME TAXES:
Prior to the Offering of the Company's common stock, the Company maintained the
status of S corporation for federal and certain state income tax purposes. As
an S corporation, the Company was generally not responsible for income taxes.
Upon the closing of the Offering, the Company's S corporation election
terminated and the Company was reorganized as described in Note 3. Accordingly,
the Company became subject to federal and state income taxes from that date
forward.
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Prior to consummation of the Offering, the Company made distributions of the
Company's undistributed S corporation earnings to its shareholder. As of
December 31, 1995, such undistributed S corporation earnings aggregated
approximately $6,000,000 (excluding accrued dividends payable of $1,615,000 as
of December 31, 1995). The Company paid the undistributed S corporation
earnings through draws on the Company's lines of credit which were repaid from
the proceeds of the Offering.
In addition, upon the Company's termination of its S corporation status, the
Company provided deferred income taxes for cumulative temporary differences
between the tax basis and financial reporting basis of its assets and
liabilities at the date of termination. If the termination had occurred at
December 31, 1995, the net deferred income tax liability, calculated in
accordance with SFAS 109, "Accounting for Income Taxes," would have
approximated $520,000 (unaudited). The tax liability is primarily due to basis
differences of $920,000 related to property and equipment, net of $400,000, in
deferred tax assets associated with inventories and with accruals and reserves
deducted for financial reporting purposes but not for tax purposes. This
deferred tax liability is charged against income from continuing operations in
the period the Company's tax status changes.
Provision for Income Taxes
The unaudited pro forma provision for income taxes represents the estimated
income taxes on income from continuing operations that would have been reported
under SFAS 109 had the Company been a taxable entity for both state and federal
income tax purposes as of the beginning of the years ended December 31, 1995
and 1996. The pro forma income tax provision for the years ended December 31,
1995 and 1996, and actual tax provision for the year ended December 31, 1996,
are summarized as follows (in thousands):
Pro Forma Actual
---------
1995 1996 1996
---- ---- ----
(Unaudited)
Current provision-
Federal $ 1,945 $ 2,189 $ 1,002
State 230 257 266
------- ------- -------
2,175 2,446 1,268
------- ------- -------
Deferred provision-
Federal 245 714 1,035
State 28 69 (8)
------- ------- -------
273 783 1,027
------- ------- -------
Provision for income taxes $ 2,448 $ 3,229 $ 2,295
======= ======= =======
The following summarizes the tax effect of significant cumulative temporary
differences that are included in the net deferred income tax liability as of
December 31, 1996 (in thousands):
Differences in depreciation and amortization $ 1,392
Accruals and reserves not deducted for tax purposes until paid (240)
Other, net (125)
-------
$ 1,027
=======
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A reconciliation of taxes based on the federal statutory rate of 34 percent and
the unaudited pro forma and actual provisions for income taxes for the years
ended December 31, 1995 and 1996, are summarized as follows (in thousands):
Pro Forma Actual
---------
1995 1996 1996
---- ---- ----
(Unaudited)
Income taxes at the federal statutory rate $ 2,191 $ 2,889 $1,897
State income taxes, net of federal benefit 170 216 230
Other, net 87 124 168
------- ------- ------
Provision for income taxes $ 2,448 $ 3,229 $2,295
======= ======= ======
16. COMMITMENTS AND CONTINGENCIES:
The Company is contingently liable to finance companies for the notes sold to
such finance companies related to the sale of trucks. The Company's recourse
liability related to sold finance contracts is limited to 15 to 25 percent of
the outstanding amount of each note sold to the finance company with the
aggregate recourse liability for 1996 being limited to $600,000. The Company
provides an allowance for repossession losses and early repayment penalties.
Finance contracts sold with recourse during the years ended December 31, 1994,
1995 and 1996, were $45,453,000, $53,165,000 and $76,390,000, respectively.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. The Company believes it is unlikely that the final
outcome of any of the claims or proceedings to which the Company is a party
would have a material adverse effect on the Company's financial position or
results of operations, however, due to the inherent uncertainty of litigation,
there can be no assurance that the resolution of any particular claim or
proceeding would not have a material adverse effect on the Company's results of
operations for the fiscal period in which such resolution occurred.
The Company has consulting agreements with individuals for an aggregate monthly
payment of $15,725. The agreements expire in 1999 through 2001.
17. ACQUISITIONS:
In February 1994, South Coast acquired substantially all of the operations of
an existing Peterbilt truck dealership in Southern California. The purchase
price was approximately $9,562,000 consisting of $3,139,000 in cash, $5,439,000
in floor plan financing for inventory and a note to the seller in the amount of
$984,000. South Coast was initially owned 90 percent by the Company and 10
percent was owned by a minority interest owner.
In June 1994, South Coast acquired substantially all of the operations of an
existing truck leasing company in Southern California. The purchase price was
$300,000.
The acquisitions have been accounted for as purchases; operations of the
businesses acquired have been included in the accompanying consolidated
financial statements from their respective dates of acquisition. The purchase
price has been allocated based on the fair values of the assets at the date of
acquisition as follows (in thousands).
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Inventories $ 8,310
Property and equipment 1,327
Leased assets 225
-------
Total $ 9,862
=======
In August 1995, the Company purchased the minority interest in South Coast. The
Company paid approximately $435,000 for the remaining 10 percent ownership
interest.
In December 1995, the Company acquired substantially all of the assets and
leasing operations of Kerr, an existing Peterbilt truck dealership in Oklahoma.
The purchase price was approximately $10,155,000 consisting of approximately
$2,690,000 in cash, floor plan financing for inventory of $3,915,000, a note
payable to a financial institution of $750,000 and a note to the seller for
$2,800,000. During the first quarter of 1996, the Company acquired land and
buildings related to the acquisition of certain assets of Kerr for
approximately $1,700,000. The Company paid approximately $425,000 in cash and
entered into mortgage notes payable of approximately $1,275,000 due in monthly
installments of principal and interest over approximately 10 years. Also,
concurrent with the closing of this transaction, the Company entered into a
construction loan of approximately $638,000 for new buildings to be constructed
at the Oklahoma operation beginning in 1996.
The acquisition has been accounted for as a purchase; operations of the
business acquired have been included in the accompanying consolidated financial
statements from the respective date of acquisition. The purchase price has been
allocated based on the fair values of the assets at the date of acquisition as
follows (in thousands):
Inventories $ 6,981
Property and equipment 345
Leased assets 29
Goodwill 2,800
--------
Total $ 10,155
========
The following unaudited pro forma summary presents information as if the Kerr
acquisitions, and the minority interest in South Coast acquisition and the sale
of the Rush Pontiac-GMC dealership (see Note 4) had occurred at the beginning
of fiscal year 1995. The pro forma information is provided for information
purposes only. It is based on historical information and does not necessarily
reflect the actual results that would have occurred nor is it necessarily
indicative of future results of operations of the Company. In preparing the pro
forma data, adjustments have been made to reflect the impact of income tax
expense for the respective periods and the weighted average common shares
outstanding used in the computation of income from continuing operations per
share has been increased to reflect the number of shares at the Offering price
necessary to fund repayment of the line of credit drawn to pay the $6 million
distribution of undistributed S corporation earnings. The following summary is
for the year ended December 31, 1995 (unaudited) (in thousands, except per
share amounts):
Revenues from continuing operations $ 333,279
=========
Income from continuing operations after pro forma
provision for income taxes $ 4,277
==========
Income from continuing operations per share $ 1.00
=======
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18. UNAUDITED QUARTERLY FINANCIAL DATA:
(In thousands, except per share amounts.)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1996
----
Operating revenues $78,671 $84,492 $ 87,132 $ 93,366
Operating income 2,392 2,961 3,000 3,197
Income from continuing operations before income taxes 1,452 2,006 2,447 2,592
Pro forma income from continuing operations after provision
for income taxes 880 1,244 1,537 1,607
Pro forma income from continuing operations per share $.21 $.26 $.23 $.24
1995
----
Operating revenues $63,323 $65,340 $ 64,673 $ 68,298
Operating income 1,758 2,165 2,247 3,321
Income from continuing operations before income taxes 1,128 1,454 1,506 2,355
Income from discontinued operations 1,560 1 - -
Pro forma income from continuing operations after provision
for income taxes 699 902 934 1,460
Pro forma income from continuing operations per share $.16 $.21 $.22 $.34
19. SUBSEQUENT EVENTS:
On March 3, 1997, the Company caused its wholly owned subsidiary, Rush Truck
Centers of Colorado, Inc., to acquire substantially all of the assets of Denver
Peterbilt, Inc., for total consideration of approximately $7.9 million
consisting of approximately $6.5 million in cash and floor plan financing for
inventory of $1.4 million. The Company will account for the acquisition as a
purchase.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by item 10 of Form 10-K is incorporated
herein by reference to such information included in the Company's Proxy
Statement for the 1997 Annual Meeting of Shareholders, under the captions
"Election of Directors" and "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
The information called for by item 11 of Form 10-K is incorporated
herein by reference to such information included in the Company's Proxy
Statement for the 1997 Annual Meeting of Shareholders, under the caption
"Compensation of Executive Officers."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by item 12 of Form 10-K is incorporated
herein by reference to such information included in the Company's Proxy
Statement for the 1997 Annual Meeting of Shareholders, under the caption
"Principal Shareholders and Stock Ownership of Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by item 13 of Form 10-K is incorporated
herein by reference to such information included in the Company's Proxy
Statement for the 1997 Annual Meeting of Shareholders, under the caption
"Certain Transactions."
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Index to Financial Statements
(a) The following documents are filed as part of this Annual Report or are
incorporated by reference as indicated:
1. The following financial statements are included under Item 8:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1995 and 1996
Consolidated Statements of Income for the years ended December 31, 1994,
1995 and 1996
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1994, 1995 and 1996.
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996.
Notes to Consolidated Financial Statements.
2. The following financial statement schedules are included under Item
14:
Exhibit 11.1 Computation of net income and pro forma earnings per
share
3. Exhibits.
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
- ----- -------------------------
3.1. Amended and Restated Articles of Incorporation of the Registrant (incorporated herein by reference to Exhibit
3.1 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
3.2. Bylaws of the Registrant, as amended (incorporated herein by reference to Exhibit 3.2 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
4.1. Specimen of certificate representing Common Stock, $.01 par value, of the Registrant (incorporated herein by
reference to Exhibit 4.1 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
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4.2. Form of Representatives' Warrant Agreement, including form of Representatives' Warrant (incorporated herein
by reference to Exhibit 4.2 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
4.3. Rights Agreement dated April 8, 1996 between Rush Enterprises, Inc. and American Stock Transfer & Trust
Company, Trustee (incorporated herein by reference to Exhibit 4.3 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.1. Dealer Sales and Service Agreement (heavy-duty truck) dated October 5, 1995, between Peterbilt Motors Company
and Rush Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by reference to
Exhibit 10.1 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.2. Dealer Sales and Service Agreement (heavy-duty truck) dated November 1, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba South Coast Peterbilt (incorporated herein by reference to Exhibit
10.2 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.3. Dealer Sales and Service Agreement (heavy-duty truck) dated October 10, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Ark-La-Tex Peterbilt, Inc. (incorporated herein by reference to
Exhibit 10.3 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.4. Dealer Sales and Service Agreement (heavy-duty truck) dated October 30, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Houston Peterbilt, Inc. (incorporated herein by reference to Exhibit
10.4 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.5. Dealer Sales and Service Agreement (heavy-duty truck) dated December 1, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Oklahoma Trucks (incorporated herein by reference to Exhibit 10.5 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.6. Amendment to Dealer Sales and Service Agreements (heavy-duty truck) dated April 1, 1996, between Peterbilt
Motors Company and Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 10.6 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.7. Dealer Sales and Service Agreement (medium-duty truck) dated October 5, 1995 between Peterbilt Motors Company
and Rush Enterprises, Inc. dba San Antonio Peterbilt -- GMC Trucks, Inc. (incorporated herein by reference to
Exhibit 10.7 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.8. Dealer Sales and Service Agreement (medium-duty truck) dated February 2, 1994 between Peterbilt Motors Company
and Rush Enterprises, Inc. dba South Coast Peterbilt (incorporated herein by reference to Exhibit 10.8 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
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10.9. Dealer Sales and Service Agreement (medium-duty truck) dated January 10, 1995 between Peterbilt Motors Company
and Rush Enterprises, Inc. dba Ark-La-Tex Peterbilt, Inc. (incorporated herein by reference to Exhibit 10.9 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.10. Dealer Sales and Service Agreement (medium-duty truck) dated December 30, 1994 between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Houston Peterbilt, Inc. (incorporated herein by reference to Exhibit
10.10 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.11. Dealer Sales and Service Agreement (medium-duty truck) dated December 1, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Oklahoma Trucks (incorporated herein by reference to Exhibit 10.11 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.12. Amendment to Dealer Sales and Service Agreements (medium-duty truck) dated April 1, 1996 between Peterbilt
Motors Company and Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 10.12 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.13. GMC Truck Division Dealer Sales and Service Agreement dated July 9, 1992 between General Motors Corporation,
GMC Truck Division and Rush Enterprises, Inc. dba Rush Pontiac -- GMC Truck Center (incorporated herein by
reference to Exhibit 10.13 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.14. GMC Truck Division Dealer Sales and Service Agreement dated January 17, 1996 between General Motors
Corporation, GMC Truck Division and Rush Enterprises, Inc. dba Oklahoma Trucks, Inc. (incorporated herein by
reference to Exhibit 10.14 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.15. Dealer Sales and Service Agreement dated January 26, 1996 between Volvo GM Heavy Truck Corporation and Rush
Enterprises, Inc. (incorporated herein by reference to Exhibit 10.15 of the Company's Registration Statement
No. 333-03346 on Form S-1 filed April 10, 1996).
10.16. Franchise Agreement dated July 28, 1994 between PACCAR Leasing Corporation and Rush Enterprises, Inc. dba
Translease Corp. (incorporated herein by reference to Exhibit 10.16 of the Company's Registration Statement
No. 333-03346 on Form S-1 filed April 10, 1996).
10.17. Franchise Agreement Addendum dated December 1, 1995 between PACCAR Leasing Corporation and Rush Enterprises,
Inc. dba Translease Corp. (incorporated herein by reference to Exhibit 10.17 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.18. Agreement for Acquisition of Secured Retail Installment Paper dated March 14, 1996 between PACCAR Financial
Corp. and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.18 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.19. Letter Agreement dated January 5, 1996 between Rush Enterprises, Inc. for South Coast Peterbilt and PACCAR
Financial Corp. (incorporated herein by reference to Exhibit 10.19 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
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10.20. Alternative Reserve Program Letter Agreement dated February 1, 1994 between Associates Commercial Corporation
and Rush Enterprises, Inc. dba San Antonio Truck Sales & Service, Inc., Houston Peterbilt, Inc., Lufkin
Peterbilt Inc. and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.20 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.21. Alternative Reserve Program Letter Agreement dated January 1, 1996 between Associates Commercial Corporation
and Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 10.21 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.22. Dealer Agreement for General Motors Retail Truck Financing Plan for GMC and Chevrolet Dealers effective August
1, 1984 between Rush Enterprises, Inc. dba San Antonio Truck Sales & Service, Inc. and Associates Commercial
Corporation (incorporated herein by reference to Exhibit 10.22 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.23. Dealer Agreement dated November 13, 1986 between Associates Commercial Corporation and Rush Enterprises, Inc.
dba San Antonio Truck Sales & Service, Inc. (incorporated herein by reference to Exhibit 10.23 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.24. Associates / Rush Enterprises, Inc. Dealer Agreement Addendum dated December 8, 1986 to Dealer Agreement dated
November 13, 1986 between Associates Commercial Corporation and Rush Enterprises, Inc. dba San Antonio Truck
Sales & Service, Inc. (incorporated herein by reference to Exhibit 10.24 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.25. Dealer Agreement dated January 13, 1988 between Associates Commercial Corporation and Rush Enterprises, Inc.
dba Houston Peterbilt, Inc. (incorporated herein by reference to Exhibit 10.25 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.26. Dealer Agreement dated February 1, 1994 between Associates Commercial Corporation and Rush Enterprises, Inc.
dba Lufkin Peterbilt, Inc. (incorporated herein by reference to Exhibit 10.26 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.27. Dealer Agreement dated February 1, 1994 between Associates Commercial Corporation and Rush Enterprises, Inc.
dba South Coast Peterbilt (incorporated herein by reference to Exhibit 10.27 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.28. Peterbilt Distributor Limited Liability Truck Financing Agreement dated July 21, 1983 between Associates
Commercial Corporation and Rush Enterprises, Inc. dba San Antonio Truck Sales & Service, Inc. (incorporated
herein by reference to Exhibit 10.28 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.29. Peterbilt Distributor Limited Liability Truck Financing Agreement dated January 13, 1988 between Associates
Commercial Corporation and Rush Enterprises, Inc. dba Houston Peterbilt, Inc. (incorporated herein by
reference to Exhibit 10.29 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
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10.30. Peterbilt Distributor Limited Liability Truck Financing Agreement dated February 1, 1994 between Associates
Commercial Corporation and Rush Enterprises, Inc. dba Lufkin Peterbilt, Inc. (incorporated herein by reference
to Exhibit 10.30 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.31. Peterbilt Distributor Limited Liability Truck Financing Agreement dated February 1, 1994 between Associates
Commercial Corporation and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.31 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.32. Dealer Financing Agreement dated July 30, 1993 between Interstate Billing Service, Inc. and Rush Enterprises,
Inc. dba Translease Corp. (incorporated herein by reference to Exhibit 10.32 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.33. Credit Balance Agreement dated April 3, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba Rush Pontiac-GMC Truck Center, San Antonio Peterbilt, ARK-LA-TEX Peterbilt, Houston
Peterbilt, Lufkin Peterbilt, Laredo Peterbilt, Hummer of South Texas and South Coast Peterbilt (incorporated
herein by reference to Exhibit 10.33 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.34. Letter dated March 11, 1996 from General Motors Acceptance Corporation to Rush Enterprises, Inc. (incorporated
herein by reference to Exhibit 10.34 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.35. Loan Agreement dated June 19, 1995 between General Motors Acceptance Corporation and Rush Enterprises, Inc.
dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by reference to Exhibit 10.35 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.36. Promissory Note dated June 19, 1995, in the original principal amount of $5,000,000, payable by Rush
Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. to General Motors Acceptance Corporation
(incorporated herein by reference to Exhibit 10.36 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.37. Wholesale Security Agreement dated June 19, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by reference to Exhibit 10.37
of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.38. Agreement Amending the Wholesale Security Agreement dated June 19, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by
reference to Exhibit 10.38 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.39. Assignment of DPP Vehicle Proceeds dated June 19, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by reference to Exhibit 10.39
of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.40. Guaranty Agreement dated June 19, 1995 by W. Marvin Rush on behalf of Rush Enterprises, Inc. dba San Antonio
Peterbilt-GMC Truck, Inc. and accepted by General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.40 of
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the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.41. Revolving Line of Credit Loan and Security Agreement dated December 1, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba Tulsa Trucks, Inc. in the maximum principal amount of $1,100,000.00
(incorporated herein by reference to Exhibit 10.41 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.42. Promissory Note dated December 1, 1995, in the original principal amount of $1,100,000.00, payable by Rush
Enterprises, Inc. dba Oklahoma Trucks, Inc. to General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.42 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.43. Wholesale Security Agreement dated November 30, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba Oklahoma Trucks, Inc. (incorporated herein by reference to Exhibit 10.43 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.44. Agreement Amending the Wholesale Security Agreement and Conditionally Authorizing the Sale of New Floor Plan
Vehicles on a Delayed Payment Privilege Basis dated November 30, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba Oklahoma Trucks, Inc. (incorporated herein by reference to Exhibit
10.44 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.45. Guaranty dated November 30, 1995 by W. Marvin Rush on behalf of Rush Enterprises, Inc. dba Oklahoma Trucks,
Inc. and accepted by General Motors Acceptance Corporation (incorporated herein by reference to Exhibit 10.45
of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.46. Revolving Line of Credit Loan and Security Agreement dated December 1, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba Tulsa Trucks, Inc. in the maximum principal amount of $900,000.00
(incorporated herein by reference to Exhibit 10.46 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.47. Promissory Note dated December 1, 1995, in the original principal amount of $900,000.00, payable by Rush
Enterprises, Inc. dba Tulsa Trucks, Inc. to General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.47 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.48. Wholesale Security Agreement dated November 30, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba Tulsa Trucks, Inc. (incorporated herein by reference to Exhibit 10.48 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.49. Agreement Amending the Wholesale Security Agreement and Conditionally Authorizing the Sale of New Floor Plan
Vehicles on a Delayed Payment Privilege Basis dated November 30, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba Tulsa Trucks, Inc. (incorporated herein by reference to Exhibit
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10.49 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.50. Guaranty dated November 30, 1995 by W. Marvin Rush on behalf of Rush Enterprises, Inc. dba Tulsa Trucks, Inc.
and accepted by General Motors Acceptance Corporation (incorporated herein by reference to Exhibit 10.50 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.51. Guaranty Agreement dated December 1, 1995 by W. Marvin Rush in favor of General Motors Acceptance Corporation
in the amount of $2,000,000.00 on behalf of Rush Enterprises, Inc. dba Oklahoma Trucks, Inc. and Tulsa Trucks,
Inc. (incorporated herein by reference to Exhibit 10.51 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.52. Revolving Line of Credit Loan and Security Agreement dated December 18, 1995 between Rush Enterprises, Inc.
dba Oklahoma Trucks, Inc. and General Motors Acceptance Corporation in the maximum principal amount of
$800,000.00 (incorporated herein by reference to Exhibit 10.52 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.53. Promissory Note dated December 18, 1995, in the original principal amount of $800,000.00, payable by Rush
Enterprises, Inc. dba Oklahoma Trucks, Inc. to General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.53 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.54. Revolving Line of Credit Loan and Security Agreement dated December 18, 1995 between Rush Enterprises, Inc.
dba Tulsa Trucks, Inc. and General Motors Acceptance Corporation in the maximum principal amount of
$700,000.00 (incorporated herein by reference to Exhibit 10.54 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.55. Promissory Note dated December 18, 1995, in the original principal amount of $700,000.00, payable by Rush
Enterprises, Inc. dba Tulsa Trucks, Inc. to General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.55 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.56. Guaranty Agreement dated December 18, 1995 by W. Marvin Rush in favor of General Motors Acceptance Corporation
in the amount of $1,500,000.00 on behalf of Rush Enterprises, Inc. dba Oklahoma Trucks, Inc. and Tulsa Trucks,
Inc. (incorporated herein by reference to Exhibit 10.56 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.57. Revolving Promissory Note dated March 18, 1993, in the maximum principal amount of $450,000.00, payable by
Rush Enterprises, Inc. to The Frost National Bank of San Antonio (incorporated herein by reference to Exhibit
10.57 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.58. Dealership Purchase Contract dated November 10, 1995 between Kerr Consolidated, Inc. and Rush Enterprises,
Inc. (incorporated herein by reference to Exhibit 10.58 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
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64
10.59. Real Estate Purchase Agreement dated November 10, 1995 between Kerr Consolidated, Inc. and Rush Enterprises,
Inc. (incorporated herein by reference to Exhibit 10.59 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.60. Promissory Note dated December 1, 1995, in the original principal amount of $2,800,000.00 payable by Rush
Enterprises, Inc. to Kerr Consolidated, Inc. (incorporated herein by reference to Exhibit 10.60 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.61. Real Estate Mortgage dated December 1, 1995, in the original principal sum of $2,800,000.00 payable by Rush
Enterprises, Inc. to Kerr Consolidated, Inc. (incorporated herein by reference to Exhibit 10.61 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.62. Real Estate Lease Agreement effective December 1, 1995 between Kerr Consolidated, Inc. and Rush Enterprises,
Inc. (incorporated herein by reference to Exhibit 10.62 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.63. Escrow Instructions dated February 24, 1994 to Commerce Escrow Company regarding purchase of assets from Engs
Motor Truck Company by Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 10.63 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.64. Secured Purchase Money Promissory Note dated February 1, 1994, in the original principal amount of
$984,000.00, payable by Rush Enterprises, Inc. to Engs Motor Truck Company, Inc. (incorporated herein by
reference to Exhibit 10.64 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.65. Continuing Unlimited Guaranty dated February 24, 1994 by W. M. Rush and Thomas McKellar in favor of Engs Motor
Truck Company, Edward W. Engs and Stewart R. Engs on behalf of South Coast Peterbilt (incorporated herein by
reference to Exhibit 10.65 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.66. Lease Modification Agreement dated February 1, 1994 between Richard R. Shade and Barbara S. Lateer, Trustees
of the Ruth R. Shade Trust, et al, Engs Motor Truck Company and South Coast Peterbilt (incorporated herein by
reference to Exhibit 10.66 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.67. Lease Modification Agreement dated February 1, 1994 between Angelus Block Company, Inc., Engs Motor Truck
Company and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.67 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.68. Lease Modification Agreement dated February 1, 1994 between Angelus Block Company, Inc., Engs Motor Truck
Company and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.68 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
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10.69. Lease dated February 1, 1994 between Edward W. Engs and Stuart R. Engs, and South Coast Peterbilt
(incorporated herein by reference to Exhibit 10.69 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.70. Lease dated February 1, 1994 between Engs Motor Truck Company and South Coast Peterbilt (incorporated herein
by reference to Exhibit 10.70 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April
10, 1996).
10.71. Contract Termination and Release dated September 29, 1995 by and among South Coast Peterbilt, Rush
Enterprises, Inc., Tom McKellar, Inc. and Tom McKellar (incorporated herein by reference to Exhibit 10.71 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.72. Termination Agreement dated September 29, 1995 by and among Rush Enterprises, Inc., Tom McKellar, Inc. and
South Coast Peterbilt (incorporated herein by reference to Exhibit 10.72 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.73. Lease Agreement effective November 1, 1992, between Pete Gallegos and Rush Enterprises, Inc. dba Laredo
Peterbilt, Inc., as amended August 31, 1994 (incorporated herein by reference to Exhibit 10.73 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.74. Commercial Lease dated July 31, 1992, between R. L. Lehman and Rush Enterprises, Inc. dba Lufkin Peterbilt,
Inc., as amended through June 1, 1995 (incorporated herein by reference to Exhibit 10.74 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.75. Lease Agreement dated September 17, 1993 between McBray Realty, Inc. and Rush Enterprises, Inc. dba Ark-La-Tex
Peterbilt (incorporated herein by reference to Exhibit 10.75 of the Company's Registration Statement No. 333-
03346 on Form S-1 filed April 10, 1996).
10.76. Right of First Refusal dated April 1, 1996 between Peterbilt Motors Company and W. Marvin Rush (incorporated
herein by reference to Exhibit 10.76 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.77. Right of First Refusal dated April 1, 1996 between Peterbilt Motors Company and Barbara Rush (incorporated
herein by reference to Exhibit 10.77 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.78. Right of First Refusal dated April 1, 1996 between Peterbilt Motors Company and W. M. "Rusty" Rush
(incorporated herein by reference to Exhibit 10.78 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.79. Right of First Refusal dated April 1, 1996 between Peterbilt Motors Company and Robin Rush (incorporated
herein by reference to Exhibit 10.79 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.80. Form of Indemnity Agreement between Rush Enterprises, Inc. and the members of its Board of Directors
(incorporated herein by reference to Exhibit 10.80 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.81. Form of Employment Agreement between W. Marvin Rush, W.M. "Rusty" Rush and Robin M. Rush (incorporated herein
by reference to Exhibit 10.81 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April
10, 1996).
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66
10.82. Form of Employment Agreement between Rush Enterprises, Inc., D. Jeffery Michell, David C. Orf, B.J. Tanner,
Brent Hughes, J.M. "Spike" Lowe, Donald Teague, Ralph West and John Hiltabiddle (incorporated herein by
reference to Exhibit 10.82 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.83. Tax Indemnification Agreement between Rush Enterprises, Inc., Associated Acceptance, Inc. and W. Marvin Rush
(incorporated herein by reference to Exhibit 10.83 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.84. Rush Enterprises, Inc. Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.84 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.85. Form of Rush Enterprises, Inc. Long-Term Incentive Plan Stock Option Agreement (incorporated herein by
reference to Exhibit 10.85 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.86. Revolving Line of Credit Loan and Security Agreement dated February 24, 1994, between General Motors
Acceptance Corporation and Rush Enterprises, Inc. dba South Coast Peterbilt in the maximum principal amount of
$3,000,000.00 (incorporated herein by reference to Exhibit 10.86 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.87. Demand Promissory Note dated February 24, 1994, in the original principal amount of $3,000,000.00, payable by
Rush Enterprises, Inc. dba South Coast Peterbilt to General Motors Acceptance Corporation (incorporated herein
by reference to Exhibit 10.87 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April
10, 1996).
10.88. General Security Agreement dated February 2, 1994 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba South Coast Peterbilt (incorporated herein by reference to Exhibit 10.88 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.89. Guaranty dated February 2, 1994 between General Motors Acceptance Corporation and Rush Enterprises, Inc. dba
South Coast Peterbilt (incorporated herein by reference to Exhibit 10.89 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.90. Real Estate Lien Note dated July 1, 1993, in the principal amount of $1,238,000.00, payable by Rush
Enterprises, Inc. to Associates Commercial Corporation (incorporated herein by reference to Exhibit 10.90 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.91. Promissory Note dated December 7, 1995, in the original principal amount of $1,900,000.00, payable by Rush
Enterprises, Inc. to General Electric Capital Corporation (incorporated herein by reference to Exhibit 10.91
of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.92. Aircraft Chattel Mortgage dated December 4, 1995, as amended, between Rush Enterprises, Inc. as Mortgagor and
General Electric Capital Corporation as Mortgagee (incorporated herein by reference to Exhibit 10.92 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
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67
10.93. Individual Guaranty dated December 4, 1995, between General Electric Capital Corporation and Rush Enterprises,
Inc. (incorporated herein by reference to Exhibit 10.93 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.94. Dealership Purchase Contract dated December 9, 1996 by and among Rush Truck Centers of Colorado, Inc., Rush
Enterprises, Inc., Denver Peterbilt, Inc., and Greg Lessing. (Filed herewith).
11.1 Computation of pro forma earnings per share.
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21.1 Subsidiaries of the Company.
Names Under
State of Which Subsidiary
Name Incorporation Does Business
-------------------------------------- ----------------- ----------------------------------------
Rush Truck Centers of Texas, Inc. Delaware Creative Concepts Advertising Agency
Hou-Tex Industrial and Truck Supply
Houston Peterbilt, Inc.
Laredo Peterbilt, Inc.
Lufkin Peterbilt, Inc.
Rush Truck Center
San Antonio Peterbilt, Inc.
San Antonio Peterbilt-GMC Truck, Inc.
Translease
World Wide Tires
Rush Truck Centers of Oklahoma, Inc. Delaware Oklahoma Trucks, Inc.
Translease
Tulsa Trucks, Inc.
Rush Truck Centers of California, Inc., Delaware South Coast Peterbilt
Which Will do Business in California as Translease
Complete Rush Truck Centers World Wide Tires
Rush Truck Centers of Louisiana, Inc. Delaware Ark-La-Tex Peterbilt, Inc.
Translease
Los Cuernos, Inc. Delaware Los Cuernos Ranch
Rush Administrative Services, Inc. Delaware None
AiRush, Inc. Delaware None
Rush Truck Leasing, Inc. Delaware None
Rush Truck Centers of Colorado, Inc. Delaware Rush Truck Centers, Inc.
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule.
(a) Reports on Form 8-K:
None
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69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
RUSH ENTERPRISES, INC.
By: /s/ W. MARVIN RUSH Date: March 25, 1997
------------------------
W. Marvin Rush
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities on the dates indicated:
Signature Capacity Date
- --------- -------- ----
/s/ W. MARVIN RUSH Chairman and Chief Executive Officer, March 25, 1997
- ------------------
W. Marvin Rush Director (Principal Executive Officer)
/s/ W. M. "RUSTY" RUSH President, Director March 25, 1997
- ----------------------
W. M. "Rusty" Rush
/s/ ROBIN M. RUSH Executive Vice President, Secretary, March 25, 1997
- -----------------
Robin M. Rush Treasurer and Director
/s/ RONALD J. KRAUSE Director March 25, 1997
- --------------------
Ronald J. Krause
/s/JOSEPH M. DUNN Director March 25, 1997
- -----------------
Joseph M. Dunn
/s/MARTIN A NAEGELIN, JR. Vice President and March 25, 1997
- ------------------------
Martin A. Naegelin, Jr. Chief Financial Officer
(Principal Financial and
Accounting Officer)
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INDEX TO EXHIBITS
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
- ----- -------------------------
3.1. Amended and Restated Articles of Incorporation of the Registrant (incorporated herein by reference to Exhibit
3.1 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
3.2. Bylaws of the Registrant, as amended (incorporated herein by reference to Exhibit 3.2 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
4.1. Specimen of certificate representing Common Stock, $.01 par value, of the Registrant (incorporated herein by
reference to Exhibit 4.1 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
4.2. Form of Representatives' Warrant Agreement, including form of Representatives' Warrant (incorporated herein
by reference to Exhibit 4.2 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
4.3. Rights Agreement dated April 8, 1996 between Rush Enterprises, Inc. and American Stock Transfer & Trust
Company, Trustee (incorporated herein by reference to Exhibit 4.3 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.1. Dealer Sales and Service Agreement (heavy-duty truck) dated October 5, 1995, between Peterbilt Motors Company
and Rush Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by reference to
Exhibit 10.1 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.2. Dealer Sales and Service Agreement (heavy-duty truck) dated November 1, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba South Coast Peterbilt (incorporated herein by reference to Exhibit
10.2 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.3. Dealer Sales and Service Agreement (heavy-duty truck) dated October 10, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Ark-La-Tex Peterbilt, Inc. (incorporated herein by reference to
Exhibit 10.3 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.4. Dealer Sales and Service Agreement (heavy-duty truck) dated October 30, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Houston Peterbilt, Inc. (incorporated herein by reference to Exhibit
10.4 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.5. Dealer Sales and Service Agreement (heavy-duty truck) dated December 1, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Oklahoma Trucks (incorporated herein by reference to Exhibit 10.5 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.6. Amendment to Dealer Sales and Service Agreements (heavy-duty truck) dated April 1, 1996, between Peterbilt
Motors Company and Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 10.6 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
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71
10.7. Dealer Sales and Service Agreement (medium-duty truck) dated October 5, 1995 between Peterbilt Motors Company
and Rush Enterprises, Inc. dba San Antonio Peterbilt -- GMC Trucks, Inc. (incorporated herein by reference to
Exhibit 10.7 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.8. Dealer Sales and Service Agreement (medium-duty truck) dated February 2, 1994 between Peterbilt Motors Company
and Rush Enterprises, Inc. dba South Coast Peterbilt (incorporated herein by reference to Exhibit 10.8 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.9. Dealer Sales and Service Agreement (medium-duty truck) dated January 10, 1995 between Peterbilt Motors Company
and Rush Enterprises, Inc. dba Ark-La-Tex Peterbilt, Inc. (incorporated herein by reference to Exhibit 10.9 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.10. Dealer Sales and Service Agreement (medium-duty truck) dated December 30, 1994 between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Houston Peterbilt, Inc. (incorporated herein by reference to Exhibit
10.10 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.11. Dealer Sales and Service Agreement (medium-duty truck) dated December 1, 1995, between Peterbilt Motors
Company and Rush Enterprises, Inc. dba Oklahoma Trucks (incorporated herein by reference to Exhibit 10.11 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.12. Amendment to Dealer Sales and Service Agreements (medium-duty truck) dated April 1, 1996 between Peterbilt
Motors Company and Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 10.12 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.13. GMC Truck Division Dealer Sales and Service Agreement dated July 9, 1992 between General Motors Corporation,
GMC Truck Division and Rush Enterprises, Inc. dba Rush Pontiac -- GMC Truck Center (incorporated herein by
reference to Exhibit 10.13 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.14. GMC Truck Division Dealer Sales and Service Agreement dated January 17, 1996 between General Motors
Corporation, GMC Truck Division and Rush Enterprises, Inc. dba Oklahoma Trucks, Inc. (incorporated herein by
reference to Exhibit 10.14 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.15. Dealer Sales and Service Agreement dated January 26, 1996 between Volvo GM Heavy Truck Corporation and Rush
Enterprises, Inc. (incorporated herein by reference to Exhibit 10.15 of the Company's Registration Statement
No. 333-03346 on Form S-1 filed April 10, 1996).
10.16. Franchise Agreement dated July 28, 1994 between PACCAR Leasing Corporation and Rush Enterprises, Inc. dba
Translease Corp. (incorporated herein by reference to Exhibit 10.16 of the Company's Registration Statement
No. 333-03346 on Form S-1 filed April 10, 1996).
10.17. Franchise Agreement Addendum dated December 1, 1995 between PACCAR Leasing Corporation and Rush Enterprises,
Inc. dba Translease Corp. (incorporated herein by reference to Exhibit 10.17 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
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72
10.18. Agreement for Acquisition of Secured Retail Installment Paper dated March 14, 1996 between PACCAR Financial
Corp. and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.18 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.19. Letter Agreement dated January 5, 1996 between Rush Enterprises, Inc. for South Coast Peterbilt and PACCAR
Financial Corp. (incorporated herein by reference to Exhibit 10.19 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.20. Alternative Reserve Program Letter Agreement dated February 1, 1994 between Associates Commercial Corporation
and Rush Enterprises, Inc. dba San Antonio Truck Sales & Service, Inc., Houston Peterbilt, Inc., Lufkin
Peterbilt Inc. and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.20 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.21. Alternative Reserve Program Letter Agreement dated January 1, 1996 between Associates Commercial Corporation
and Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 10.21 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.22. Dealer Agreement for General Motors Retail Truck Financing Plan for GMC and Chevrolet Dealers effective August
1, 1984 between Rush Enterprises, Inc. dba San Antonio Truck Sales & Service, Inc. and Associates Commercial
Corporation (incorporated herein by reference to Exhibit 10.22 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.23. Dealer Agreement dated November 13, 1986 between Associates Commercial Corporation and Rush Enterprises, Inc.
dba San Antonio Truck Sales & Service, Inc. (incorporated herein by reference to Exhibit 10.23 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.24. Associates / Rush Enterprises, Inc. Dealer Agreement Addendum dated December 8, 1986 to Dealer Agreement dated
November 13, 1986 between Associates Commercial Corporation and Rush Enterprises, Inc. dba San Antonio Truck
Sales & Service, Inc. (incorporated herein by reference to Exhibit 10.24 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.25. Dealer Agreement dated January 13, 1988 between Associates Commercial Corporation and Rush Enterprises, Inc.
dba Houston Peterbilt, Inc. (incorporated herein by reference to Exhibit 10.25 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.26. Dealer Agreement dated February 1, 1994 between Associates Commercial Corporation and Rush Enterprises, Inc.
dba Lufkin Peterbilt, Inc. (incorporated herein by reference to Exhibit 10.26 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.27. Dealer Agreement dated February 1, 1994 between Associates Commercial Corporation and Rush Enterprises, Inc.
dba South Coast Peterbilt (incorporated herein by reference to Exhibit 10.27 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.28. Peterbilt Distributor Limited Liability Truck Financing Agreement dated July 21, 1983 between Associates
Commercial Corporation and Rush Enterprises, Inc. dba San
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Antonio Truck Sales & Service, Inc. (incorporated herein by reference to Exhibit 10.28 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.29. Peterbilt Distributor Limited Liability Truck Financing Agreement dated January 13, 1988 between Associates
Commercial Corporation and Rush Enterprises, Inc. dba Houston Peterbilt, Inc. (incorporated herein by
reference to Exhibit 10.29 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.30. Peterbilt Distributor Limited Liability Truck Financing Agreement dated February 1, 1994 between Associates
Commercial Corporation and Rush Enterprises, Inc. dba Lufkin Peterbilt, Inc. (incorporated herein by reference
to Exhibit 10.30 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.31. Peterbilt Distributor Limited Liability Truck Financing Agreement dated February 1, 1994 between Associates
Commercial Corporation and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.31 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.32. Dealer Financing Agreement dated July 30, 1993 between Interstate Billing Service, Inc. and Rush Enterprises,
Inc. dba Translease Corp. (incorporated herein by reference to Exhibit 10.32 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.33. Credit Balance Agreement dated April 3, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba Rush Pontiac-GMC Truck Center, San Antonio Peterbilt, ARK-LA-TEX Peterbilt, Houston
Peterbilt, Lufkin Peterbilt, Laredo Peterbilt, Hummer of South Texas and South Coast Peterbilt (incorporated
herein by reference to Exhibit 10.33 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.34. Letter dated March 11, 1996 from General Motors Acceptance Corporation to Rush Enterprises, Inc. (incorporated
herein by reference to Exhibit 10.34 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.35. Loan Agreement dated June 19, 1995 between General Motors Acceptance Corporation and Rush Enterprises, Inc.
dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by reference to Exhibit 10.35 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.36. Promissory Note dated June 19, 1995, in the original principal amount of $5,000,000, payable by Rush
Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. to General Motors Acceptance Corporation
(incorporated herein by reference to Exhibit 10.36 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.37. Wholesale Security Agreement dated June 19, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by reference to Exhibit 10.37
of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.38. Agreement Amending the Wholesale Security Agreement dated June 19, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by
reference to Exhibit 10.38 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
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74
10.39. Assignment of DPP Vehicle Proceeds dated June 19, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba San Antonio Peterbilt-GMC Truck, Inc. (incorporated herein by reference to Exhibit 10.39
of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.40. Guaranty Agreement dated June 19, 1995 by W. Marvin Rush on behalf of Rush Enterprises, Inc. dba San Antonio
Peterbilt-GMC Truck, Inc. and accepted by General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.40 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.41. Revolving Line of Credit Loan and Security Agreement dated December 1, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba Tulsa Trucks, Inc. in the maximum principal amount of $1,100,000.00
(incorporated herein by reference to Exhibit 10.41 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.42. Promissory Note dated December 1, 1995, in the original principal amount of $1,100,000.00, payable by Rush
Enterprises, Inc. dba Oklahoma Trucks, Inc. to General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.42 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.43. Wholesale Security Agreement dated November 30, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba Oklahoma Trucks, Inc. (incorporated herein by reference to Exhibit 10.43 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.44. Agreement Amending the Wholesale Security Agreement and Conditionally Authorizing the Sale of New Floor Plan
Vehicles on a Delayed Payment Privilege Basis dated November 30, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba Oklahoma Trucks, Inc. (incorporated herein by reference to Exhibit
10.44 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.45. Guaranty dated November 30, 1995 by W. Marvin Rush on behalf of Rush Enterprises, Inc. dba Oklahoma Trucks,
Inc. and accepted by General Motors Acceptance Corporation (incorporated herein by reference to Exhibit 10.45
of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.46. Revolving Line of Credit Loan and Security Agreement dated December 1, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba Tulsa Trucks, Inc. in the maximum principal amount of $900,000.00
(incorporated herein by reference to Exhibit 10.46 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.47. Promissory Note dated December 1, 1995, in the original principal amount of $900,000.00, payable by Rush
Enterprises, Inc. dba Tulsa Trucks, Inc. to General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.47 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.48. Wholesale Security Agreement dated November 30, 1995 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba Tulsa Trucks, Inc.
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75
(incorporated herein by reference to Exhibit 10.48 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.49. Agreement Amending the Wholesale Security Agreement and Conditionally Authorizing the Sale of New Floor Plan
Vehicles on a Delayed Payment Privilege Basis dated November 30, 1995 between General Motors Acceptance
Corporation and Rush Enterprises, Inc. dba Tulsa Trucks, Inc. (incorporated herein by reference to Exhibit
10.49 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.50. Guaranty dated November 30, 1995 by W. Marvin Rush on behalf of Rush Enterprises, Inc. dba Tulsa Trucks, Inc.
and accepted by General Motors Acceptance Corporation (incorporated herein by reference to Exhibit 10.50 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.51. Guaranty Agreement dated December 1, 1995 by W. Marvin Rush in favor of General Motors Acceptance Corporation
in the amount of $2,000,000.00 on behalf of Rush Enterprises, Inc. dba Oklahoma Trucks, Inc. and Tulsa Trucks,
Inc. (incorporated herein by reference to Exhibit 10.51 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.52. Revolving Line of Credit Loan and Security Agreement dated December 18, 1995 between Rush Enterprises, Inc.
dba Oklahoma Trucks, Inc. and General Motors Acceptance Corporation in the maximum principal amount of
$800,000.00 (incorporated herein by reference to Exhibit 10.52 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.53. Promissory Note dated December 18, 1995, in the original principal amount of $800,000.00, payable by Rush
Enterprises, Inc. dba Oklahoma Trucks, Inc. to General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.53 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.54. Revolving Line of Credit Loan and Security Agreement dated December 18, 1995 between Rush Enterprises, Inc.
dba Tulsa Trucks, Inc. and General Motors Acceptance Corporation in the maximum principal amount of
$700,000.00 (incorporated herein by reference to Exhibit 10.54 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.55. Promissory Note dated December 18, 1995, in the original principal amount of $700,000.00, payable by Rush
Enterprises, Inc. dba Tulsa Trucks, Inc. to General Motors Acceptance Corporation (incorporated herein by
reference to Exhibit 10.55 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.56. Guaranty Agreement dated December 18, 1995 by W. Marvin Rush in favor of General Motors Acceptance Corporation
in the amount of $1,500,000.00 on behalf of Rush Enterprises, Inc. dba Oklahoma Trucks, Inc. and Tulsa Trucks,
Inc. (incorporated herein by reference to Exhibit 10.56 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.57. Revolving Promissory Note dated March 18, 1993, in the maximum principal amount of $450,000.00, payable by
Rush Enterprises, Inc. to The Frost National Bank of San
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Antonio (incorporated herein by reference to Exhibit 10.57 of the Company's Registration Statement No. 333-
03346 on Form S-1 filed April 10, 1996).
10.58. Dealership Purchase Contract dated November 10, 1995 between Kerr Consolidated, Inc. and Rush Enterprises,
Inc. (incorporated herein by reference to Exhibit 10.58 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.59. Real Estate Purchase Agreement dated November 10, 1995 between Kerr Consolidated, Inc. and Rush Enterprises,
Inc. (incorporated herein by reference to Exhibit 10.59 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.60. Promissory Note dated December 1, 1995, in the original principal amount of $2,800,000.00 payable by Rush
Enterprises, Inc. to Kerr Consolidated, Inc. (incorporated herein by reference to Exhibit 10.60 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.61. Real Estate Mortgage dated December 1, 1995, in the original principal sum of $2,800,000.00 payable by Rush
Enterprises, Inc. to Kerr Consolidated, Inc. (incorporated herein by reference to Exhibit 10.61 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.62. Real Estate Lease Agreement effective December 1, 1995 between Kerr Consolidated, Inc. and Rush Enterprises,
Inc. (incorporated herein by reference to Exhibit 10.62 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.63. Escrow Instructions dated February 24, 1994 to Commerce Escrow Company regarding purchase of assets from Engs
Motor Truck Company by Rush Enterprises, Inc. (incorporated herein by reference to Exhibit 10.63 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.64. Secured Purchase Money Promissory Note dated February 1, 1994, in the original principal amount of
$984,000.00, payable by Rush Enterprises, Inc. to Engs Motor Truck Company, Inc. (incorporated herein by
reference to Exhibit 10.64 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.65. Continuing Unlimited Guaranty dated February 24, 1994 by W. M. Rush and Thomas McKellar in favor of Engs Motor
Truck Company, Edward W. Engs and Stewart R. Engs on behalf of South Coast Peterbilt (incorporated herein by
reference to Exhibit 10.65 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.66. Lease Modification Agreement dated February 1, 1994 between Richard R. Shade and Barbara S. Lateer, Trustees
of the Ruth R. Shade Trust, et al, Engs Motor Truck Company and South Coast Peterbilt (incorporated herein by
reference to Exhibit 10.66 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.67. Lease Modification Agreement dated February 1, 1994 between Angelus Block Company, Inc., Engs Motor Truck
Company and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.67 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.68. Lease Modification Agreement dated February 1, 1994 between Angelus Block Company, Inc., Engs Motor Truck
Company and South Coast Peterbilt (incorporated herein by reference to Exhibit 10.68 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
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77
10.69. Lease dated February 1, 1994 between Edward W. Engs and Stuart R. Engs, and South Coast Peterbilt
(incorporated herein by reference to Exhibit 10.69 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.70. Lease dated February 1, 1994 between Engs Motor Truck Company and South Coast Peterbilt (incorporated herein
by reference to Exhibit 10.70 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April
10, 1996).
10.71. Contract Termination and Release dated September 29, 1995 by and among South Coast Peterbilt, Rush
Enterprises, Inc., Tom McKellar, Inc. and Tom McKellar (incorporated herein by reference to Exhibit 10.71 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.72. Termination Agreement dated September 29, 1995 by and among Rush Enterprises, Inc., Tom McKellar, Inc. and
South Coast Peterbilt (incorporated herein by reference to Exhibit 10.72 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.73. Lease Agreement effective November 1, 1992, between Pete Gallegos and Rush Enterprises, Inc. dba Laredo
Peterbilt, Inc., as amended August 31, 1994 (incorporated herein by reference to Exhibit 10.73 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.74. Commercial Lease dated July 31, 1992, between R. L. Lehman and Rush Enterprises, Inc. dba Lufkin Peterbilt,
Inc., as amended through June 1, 1995 (incorporated herein by reference to Exhibit 10.74 of the Company's
Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.75. Lease Agreement dated September 17, 1993 between McBray Realty, Inc. and Rush Enterprises, Inc. dba Ark-La-Tex
Peterbilt (incorporated herein by reference to Exhibit 10.75 of the Company's Registration Statement No. 333-
03346 on Form S-1 filed April 10, 1996).
10.76. Right of First Refusal dated April 1, 1996 between Peterbilt Motors Company and W. Marvin Rush (incorporated
herein by reference to Exhibit 10.76 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.77. Right of First Refusal dated April 1, 1996 between Peterbilt Motors Company and Barbara Rush (incorporated
herein by reference to Exhibit 10.77 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.78. Right of First Refusal dated April 1, 1996 between Peterbilt Motors Company and W. M. "Rusty" Rush
(incorporated herein by reference to Exhibit 10.78 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.79. Right of First Refusal dated April 1, 1996 between Peterbilt Motors Company and Robin Rush (incorporated
herein by reference to Exhibit 10.79 of the Company's Registration Statement No. 333-03346 on Form S-1 filed
April 10, 1996).
10.80. Form of Indemnity Agreement between Rush Enterprises, Inc. and the members of its Board of Directors
(incorporated herein by reference to Exhibit 10.80 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.81. Form of Employment Agreement between W. Marvin Rush, W.M. "Rusty" Rush and Robin M. Rush (incorporated herein
by reference to Exhibit 10.81 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April
10, 1996).
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10.82. Form of Employment Agreement between Rush Enterprises, Inc., D. Jeffery Michell, David C. Orf, B.J. Tanner,
Brent Hughes, J.M. "Spike" Lowe, Donald Teague, Ralph West and John Hiltabiddle (incorporated herein by
reference to Exhibit 10.82 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.83. Tax Indemnification Agreement between Rush Enterprises, Inc., Associated Acceptance, Inc. and W. Marvin Rush
(incorporated herein by reference to Exhibit 10.83 of the Company's Registration Statement No. 333-03346 on
Form S-1 filed April 10, 1996).
10.84. Rush Enterprises, Inc. Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.84 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.85. Form of Rush Enterprises, Inc. Long-Term Incentive Plan Stock Option Agreement (incorporated herein by
reference to Exhibit 10.85 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10,
1996).
10.86. Revolving Line of Credit Loan and Security Agreement dated February 24, 1994, between General Motors
Acceptance Corporation and Rush Enterprises, Inc. dba South Coast Peterbilt in the maximum principal amount of
$3,000,000.00 (incorporated herein by reference to Exhibit 10.86 of the Company's Registration Statement No.
333-03346 on Form S-1 filed April 10, 1996).
10.87. Demand Promissory Note dated February 24, 1994, in the original principal amount of $3,000,000.00, payable by
Rush Enterprises, Inc. dba South Coast Peterbilt to General Motors Acceptance Corporation (incorporated herein
by reference to Exhibit 10.87 of the Company's Registration Statement No. 333-03346 on Form S-1 filed April
10, 1996).
10.88. General Security Agreement dated February 2, 1994 between General Motors Acceptance Corporation and Rush
Enterprises, Inc. dba South Coast Peterbilt (incorporated herein by reference to Exhibit 10.88 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.89. Guaranty dated February 2, 1994 between General Motors Acceptance Corporation and Rush Enterprises, Inc. dba
South Coast Peterbilt (incorporated herein by reference to Exhibit 10.89 of the Company's Registration
Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.90. Real Estate Lien Note dated July 1, 1993, in the principal amount of $1,238,000.00, payable by Rush
Enterprises, Inc. to Associates Commercial Corporation (incorporated herein by reference to Exhibit 10.90 of
the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.91. Promissory Note dated December 7, 1995, in the original principal amount of $1,900,000.00, payable by Rush
Enterprises, Inc. to General Electric Capital Corporation (incorporated herein by reference to Exhibit 10.91
of the Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
10.92. Aircraft Chattel Mortgage dated December 4, 1995, as amended, between Rush Enterprises, Inc. as Mortgagor and
General Electric Capital Corporation as Mortgagee (incorporated herein by reference to Exhibit 10.92 of the
Company's Registration Statement No. 333-03346 on Form S-1 filed April 10, 1996).
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10.93. Individual Guaranty dated December 4, 1995, between General Electric Capital Corporation and Rush Enterprises,
Inc. (incorporated herein by reference to Exhibit 10.93 of the Company's Registration Statement No. 333-03346
on Form S-1 filed April 10, 1996).
10.94. Dealership Purchase Contract dated December 9, 1996 by and among Rush Truck Centers of Colorado, Inc., Rush
Enterprises, Inc., Denver Peterbilt, Inc., and Greg Lessing. (Filed herewith).
11.1 Computation of pro forma earnings per share.
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21.1 Subsidiaries of the Company.
Names Under
State of Which Subsidiary
Name Incorporation Does Business
-------------------------------------- ----------------- ----------------------------------------
Rush Truck Centers of Texas, Inc. Delaware Creative Concepts Advertising Agency
Hou-Tex Industrial and Truck Supply
Houston Peterbilt, Inc.
Laredo Peterbilt, Inc.
Lufkin Peterbilt, Inc.
Rush Truck Center
San Antonio Peterbilt, Inc.
San Antonio Peterbilt-GMC Truck, Inc.
Translease
World Wide Tires
Rush Truck Centers of Oklahoma, Inc. Delaware Oklahoma Trucks, Inc.
Translease
Tulsa Trucks, Inc.
Rush Truck Centers of California, Inc., Delaware South Coast Peterbilt
Which Will do Business in California as Translease
Complete Rush Truck Centers World Wide Tires
Rush Truck Centers of Louisiana, Inc. Delaware Ark-La-Tex Peterbilt, Inc.
Translease
Los Cuernos, Inc. Delaware Los Cuernos Ranch
Rush Administrative Services, Inc. Delaware None
AiRush, Inc. Delaware None
Rush Truck Leasing, Inc. Delaware None
Rush Truck Centers of Colorado, Inc. Delaware Rush Truck Centers, Inc.
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule.
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1
Exhibit 10.94
ASSET PURCHASE AGREEMENT
DATED DECEMBER 9, 1996
BY AND AMONG
RUSH TRUCK CENTERS OF COLORADO, INC.
RUSH ENTERPRISES, INC.
DENVER PETERBILT, INC.
AND
GREG LESSING
COVERING THE PURCHASE
OF SPECIFIED ASSETS OF
DENVER PETERBILT, INC.
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2
TABLE OF CONTENTS
1. GENERAL DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---------
1.2 Best Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
--------------
1.3 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------
1.4 Environmental Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------------------
1.5 Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
----------------------
1.6 Governmental Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------------------
1.7 Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------------------
1.8 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------
1.9 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------
1.10 Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------
1.11 Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------
1.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Assets to be Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----------------------
2.2 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------
2.3 Delivery of Assets and Transfer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------------------------------
2.4 Closing; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
---------------------
3. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Price and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------
3.2 Assumed Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-------------------
3.3 Payment for Noncompetition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------------------------------------
3.4 Sales and Use Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-----------------
3.5 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----------------------------
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------------
4.2 Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-------------
4.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
--------------------
4.4 Events Since the Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------------------------------
4.5 Customer List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------
4.6 Taxes and Governmental Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------------------------
4.7 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
----------------
4.8 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------------------------
4.9 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------------
4.10 Properties, Assets and Leasehold Estates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----------------------------------------
4.11 Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-------------------
4.12 Suits, Actions and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-------------------------
4.13 Licenses and Permits; Compliance With Governmental Requirements . . . . . . . . . . . . . . . . . . 12
---------------------------------------------------------------
4.14 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-------------
4.15 No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------------
4.16 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-------
4.17 Environmental Protection Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
------------------------------
4.18 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------------------
4.19 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------
4.20 Work Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-----------
4.21 Telephone Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-----------------
-i-
3
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND RUSH . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------
5.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------------
5.4 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------------
5.5 Suits, Actions and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------------------
5.6 Authority and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
----------------------------
5.7 No Defaults or Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------------------
5.8 Subsidiary Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-----------------
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES, REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6A. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES, REPRESENTATIONS AND WARRANTIES OF
PURCHASER AND RUSH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. CONTRACTS PRIOR TO THE CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Approval of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
---------------------
7.2 Contracts Included in Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
----------------------------
8. COVENANTS OF SELLER AND SHAREHOLDER PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------------------
8.2 General Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------------------------
8.3 General Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--------------------------
8.4 Disclosure of Misrepresentations and Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
---------------------------------------------
8.5 Government Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
------------------
8.6 Access to and Inspection of Premises, Facilities and Equipment . . . . . . . . . . . . . . . . . . . 21
--------------------------------------------------------------
8.7 Inspection of Underground Storage Tanks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
---------------------------------------
9. COVENANTS REGARDING THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-------------------
9.2 Covenants of Purchaser and Rush . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-------------------------------
9.3 Inventory Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
---------------
9A. COVENANTS AFTER THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9A.1 Covenants of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
----------------------
10. CONDITIONS TO OBLIGATIONS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.1 Accuracy of Representations and Warranties and Fulfillment of Covenants . . . . . . . . . . . . . . 22
-----------------------------------------------------------------------
10.2 No Governmental Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-----------------------
10.3 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--------------------------
10.4 Update of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-------------------
10.5 No Material Adverse Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-------------------------------
10.6 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--------------------
10.7 Noncompetition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-------------------------
10.8 Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----
10.9 Corporate Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
------------------
10.10 Transfer and Assignment Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------------------------------
10.11 Liens Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--------------
10.12 Ordinary Course of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------------------------
10.13 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------------
10.14 Dealer License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------
10.15 Inventory Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------------
-ii-
4
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.1 Accuracy of Representations and Warranties and Fulfillment of Covenants . . . . . . . . . . . . . . 25
-----------------------------------------------------------------------
11.2 Delivery of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------------------
11.3 Receivables Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------------------
11.4 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
----------------------
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.1 Delivery of Funds and Other Assets Collected by Seller; Power of Attorney . . . . . . . . . . . . . 25
-------------------------------------------------------------------------
12.2 Change of Name of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
------------------------
12.3 Access to Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------------
12.4 Exchange Act Filing; Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------------------------------
13. INDEMNITY BY SELLER AND SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.1 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------
13.2 Notice of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------
13.3 Right of Seller to Participate in Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-----------------------------------------
13.4 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-------
13.5 Limit of Liability of Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
---------------------------------
13.6 Limitations on Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
------------------------
13A. INDEMNITY BY PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13A.1 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
---------
13A.2 Notice of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
---------------
13A.3 Right of Purchaser to Participate in Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------------------------------------
13A.4 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------
13A.5 Limitations on Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------------
14. LEASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
15. NONCOMPETITION AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
16. NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
17. ASSIGNMENT OF CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
18. DAMAGE TO ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
20. FURTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
21. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
22. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
22.1 Governing Law; Interpretation; Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-----------------------------------------------
22.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
------------
22.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
----------------
22.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--------------
22.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
----------
22.6 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------------
22.7 Gender; Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
---------------
22.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------------
22.9 Telecopy Execution and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-------------------------------
22.10 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--------------
-iii-
5
22.11 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------
23. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
23.1 Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
--------------
23.2 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-----------
24. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
24.1 New Employees of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------------------------
24.2 No Hiring Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------------------
24.3 Existing Employee Benefit Plans; Assumption of Vacation and Sick Leave Obligations 36
----------------------------------------------------------------------------------
25. OFFSET PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
26. ADJUSTMENT OF PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
27. GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-iv-
6
SCHEDULES
SCHEDULE 2.1
- ------------
EXCLUDED ASSETS
SCHEDULE 2.3
- ------------
GENERAL WARRANTY BILL OF SALE AND ASSIGNMENT OF CONTRACT RIGHTS
SCHEDULE 4.3
- ------------
FINANCIAL STATEMENTS
SCHEDULE 4.5
- ------------
CUSTOMER LIST
SCHEDULE 4.7A
- -------------
EMPLOYEES
SCHEDULE 4.7B
- -------------
EMPLOYEE BENEFIT PLANS
SCHEDULE 4.8
- ------------
CONTRACTS AND AGREEMENTS
SCHEDULE 4.12
- -------------
SUITS, ACTIONS AND CLAIMS
SCHEDULE 4.13
- -------------
LICENSES AND PERMITS
SCHEDULE 14
- -----------
LEASE AGREEMENT
SCHEDULE 15
- -----------
NONCOMPETITION AGREEMENT
-v-
7
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 9th day of December, 1996, by and among (i) Denver Peterbilt, Inc., a
Colorado corporation ("Seller"), (ii) Greg Lessing, the owner of all of the
capital stock of Seller ("Shareholder"), (iii) Rush Truck Centers of Colorado,
Inc., a Delaware corporation ("Purchaser"), and (iv) Rush Enterprises, Inc., a
Texas corporation ("Rush"), as the sole shareholder of Purchaser and as the
guarantor of all of Purchaser's liabilities, obligations, covenants and
agreements under this Agreement.
W I T N E S S E T H :
WHEREAS, Seller is the owner of all right, title and interest in and
to the assets described in Section 2.1 hereto (the "Assets"), with such Assets
being the assets currently used in the conduct of the heavy duty truck sales
and service business and various related businesses operated by Seller in
Denver and Greeley, Colorado (collectively, the "Business");
WHEREAS, Seller desires to sell the Assets to Purchaser and Purchaser
desires to acquire the Assets from Seller, all pursuant to this Agreement as
hereinafter provided; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the execution and delivery of this Agreement, and to set forth
certain additional agreements related to the transactions contemplated hereby;
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
1.1 Affiliate. "Affiliate" of any Person shall mean any Person
Controlling, Controlled by or under common Control with such Person.
1.2 Best Knowledge. "Best Knowledge" shall mean both what a Person
knew as well as what the Person should have known had the person exercised
reasonable diligence. When used with respect to a Person other than a natural
person, the term "Best Knowledge" shall include matters that are known to the
directors, officers, and employees of the Person.
1.3 Control. "Control" and all derivations thereof shall mean the
ability to either (i) vote (or direct the vote of) 50% or more of the voting
interests in any Person or (ii) direct the affairs of another, whether through
voting power, contract or otherwise.
1.4 Environmental Liability. "Environmental Liability" shall mean
any Damages as that term is defined in Section 13.1 arising from or with
respect to a breach of the warranties and representations in Section 4.17,
Waste Materials, Waste Materials Contamination, any Environmental Claim, any
Environmental Permit or any Requirement of Environmental Law.
1.5 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 panels, and any divisions or instrumentalities thereof,
whether permanent or ad hoc and whether now or hereafter constituted or
existing.
1.6 Governmental Requirement. "Governmental Requirement" shall
mean any and all laws (including, but not limited to, applicable common law
principles), statutes, ordinances, codes, rules, regulations,
1
8
interpretations, guidelines, directions, orders, judgments, writs, injunctions,
decrees, decisions or similar items or pronouncements, promulgated, issued,
passed or set forth by any Governmental Authority.
1.7 Material Adverse Effect. "Material Adverse Effect" shall mean
any matter concerning Seller, the Assets or the Business, other than a change
in general business or industry conditions affecting substantially all
businesses similar to the Business, which results in net income of Seller for
the 12-month period ending February 28, 1997, being less than $1,100,000, or
any damage or destruction to any of the Assets which cannot reasonably be
expected to be repaired within six months.
1.8 Payments. All payments and all dollar amounts required by this
Agreement shall be in United States Dollars.
1.9 Person. "Person" shall mean any natural person, any
Governmental Authority and any entity the separate existence of which is
recognized by any Governmental Authority or Governmental Requirement,
including, but not limited to, corporations, partnerships, joint ventures,
joint stock companies, trusts, estates, companies and associations, whether
organized for profit or otherwise.
1.10 Schedule. "Schedule" shall mean the Schedules to this
Agreement, unless otherwise stated. The Schedules to this Agreement may be
attached to this Agreement or may be set forth in a separate document denoted
as the Schedules to this Agreement, or both.
1.11 Section. "Section" shall mean the Section of this Agreement,
unless otherwise stated.
1.12 Taxes. "Tax" and "Taxes" shall mean any and all income,
excise, franchise or other taxes and all other charges or fees imposed or
collected by any Governmental Authority or pursuant to any Governmental
Requirement, and shall also include any and all penalties, interest,
deficiencies, assessments and other charges with respect thereto.
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE.
2.1 Assets to be Purchased. The Assets to be purchased from Seller
are the following assets held by Seller as of the Closing for use in connection
with the Business:
(a) all new 1996 and 1997 Peterbilt motor vehicles
inventory,
(b) all new, current and returnable parts and accessories
inventory in unbroken lots and original packages and
all chassis kits,
(c) all miscellaneous inventories, including gas, diesel
fuel, oil, grease, paint and body shop materials,
(d) all work in progress and sublet repairs on vehicles
in Seller's parts and service departments,
(e) all of Seller's furniture, fixtures and office
equipment (including related software),
(f) all shop equipment and special tools, and all parts
and accessories equipment,
(g) all company vehicles not included in the Excluded
Assets,
(h) all signs, and all promotional, advertising and
training materials,
(i) all sales files and customer lists, and all warranty
and service and customer service and repair files,
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(j) all intangible assets of Seller to do business in
Denver, Colorado, and Greeley, Colorado, as a Peterbilt dealer,
including any and all Dealer Sales and Service Agreements between
Seller and Peterbilt, and to the extent assignable, the New Motor
Vehicle Dealer's Licenses, and any other permits or licenses issued by
any department or agency of the State of Colorado for Seller's
dealerships and the name "Denver Peterbilt",
(k) subject to agreement on price pursuant to Section
3.1(f) below, all used vehicles,
(l) subject to agreement on price pursuant to Section
3.1(f) below, all new obsolete parts and accessories and all used
parts and accessories,
(m) all accounts receivable from finance companies, and
all related contingent obligations but only to the extent that Seller
shall have received, prior to Closing, written confirmation from
PACCAR Financial Corporation and Associated Commercial Corporation
that the existing Limited Liability Recourse Repurchase Agreements
will survive Closing, and
(n) all customer deposits and agreements to sell
Peterbilt vehicles ordered but not delivered to the customer at the
time of Closing.
All other assets of Seller not described in this Section 2.1,
including the assets described on Schedule 2.1 (the "Excluded Assets"), shall
not be sold by Seller to Purchaser.
2.2 Purchase and Sale. Subject to the terms and conditions herein
contained, Seller agrees to sell, assign, transfer and deliver the Assets to
Purchaser at the Closing (as hereinafter defined), free and clear of any liens
or encumbrances of any nature whatsoever (except for liens, encumbrances or
obligations, if any, expressly assumed by Purchaser hereunder). Subject to the
terms and conditions herein contained, Purchaser agrees to purchase from Seller
the Assets in consideration for the Purchase Price (as hereinafter defined)
payable as set forth in Section 3.
2.3 Delivery of Assets and Transfer Documents. At the Closing,
Seller and the Shareholder shall take all steps necessary to put Purchaser in
possession of the Assets, free and clear of any liens or encumbrances of any
nature whatsoever (except for liens, encumbrances or obligations, if any,
expressly assumed by Purchaser hereunder), and shall deliver to Purchaser (i) a
duly executed general warranty bill of sale covering the Assets, in the form of
and containing substantially the same terms and provisions as the General
Warranty Bill of Sale and Assignment of Contract Rights included in Schedule
2.3, (ii) duly executed title and transfer documents covering any assets for
which there exists a certificate of title, and (iii) such other duly executed
transfer and release documents as Purchaser shall reasonably request to
evidence the transfer of the Assets to Purchaser free and clear of any liens or
encumbrances of any nature whatsoever (except for liens, encumbrances or
obligations, if any, expressly assumed by Purchaser hereunder).
2.4 Closing; Closing Date. Subject to the terms and conditions
herein contained, the consummation of the transactions referenced above shall
take place (the "Closing") on or before March 1, 1997, at 10:00 a.m., local
time, at the offices of Seller in Denver, Colorado, or at such other time, date
and place as Purchaser and Seller shall in writing designate; provided,
however, that Purchaser shall have the right to delay the Closing up to and
including April 30, 1997, in accordance with Sections 8.6 and 8.7 and Seller
shall have the right to delay the Closing up to and including September 1,
1997, in accordance with Article 10. The date of the Closing is referred to
herein as the "Closing Date".
3. PURCHASE PRICE.
3.1 Price and Payment. Subject to adjustment as provided in
Article 26 with respect to prorations, deposits and certain other items, the
aggregate consideration to be paid by Purchaser for the Assets is as follows:
(a) $6,000,000, plus
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(b) an amount equal to Dealer Cost (as defined in Section
3.2 below) for each vehicle of Seller described in Section 2.1(a),
payable, at the option of Purchaser, by the Assumption and Agreement
to pay the floor plan financing obligations of Seller under the
financing arrangements listed on Schedule 4.8 with respect to such
vehicles (and obtaining Seller's release therefrom), plus
(c) an amount equal to the replacement cost of the items
described in Sections 2.1(b) and (c), plus
(d) an amount equal to the Seller's actual cost of the
work in process and sublet repairs described in Section 2.1(d), plus
(e) an amount equal to the depreciated book value
(determined in accordance with generally accepted accounting
principles, consistently applied) at Closing of the items described in
Sections 2.1(e), (f) and (g), less $250,000, plus
(f) an amount to be agreed upon by Seller and Purchaser
for the items described in Sections 2.1(k) and (l) (provided that if
Seller and Purchaser cannot agree on the amount to be paid for any
Asset described in these Sections, such Asset shall be an Excluded
Asset), plus
(g) an amount equal to the book value (determined in
accordance with generally accepted accounting principles, consistently
applied) at Closing of the assets described in Section 2.1(m) subject
to verification of outstanding amounts and such guarantees by Seller
and Shareholder as Purchaser shall reasonably require, plus
(h) $2,000,000, which sum shall become payable in
accordance with the terms of this Section 3.1 when Purchaser shall
have sold its 500th new Peterbilt truck (the "Performance Criteria").
If Purchaser shall default in the payment of any amounts due to Seller
under this Section 3.1(h), Purchaser shall be liable for interest
thereon at the rate of twelve percent (12%) per annum, and all costs
of collection, including reasonable attorneys' fees.
The Purchase Price shall be payable by (a) payment of all amounts
specified in Sections 3.1(b) - (g) above in cash at Closing, (b) $6,000,000 in
cash at Closing (subject to the adjustment provisions in Section 26), and (c)
subject to the offset rights set forth in Section 25, and subject to the
Performance Criteria having been satisfied, payment of the amounts specified in
Section 3.1(h) in cash at the end of the calendar month in which the
Performance Criteria are satisfied, but in no event earlier than at the end of
the 24 month period following the Closing Date.
3.2 Assumed Obligations. At the Closing, Purchaser shall assume
and agree to timely discharge (a) the obligations of Seller under all contracts
and agreements transferred by Seller to Purchaser under this Agreement that are
(i) listed and described on Schedule 4.8 or on the updated list of contracts
required by Section 10.4 and (ii) accepted in writing by Purchaser pursuant to
the provisions of Section 4.8 or Section 7.2 or 10.4, (b) if included in the
Purchase Price under Section 3.1(b), the floor plan financing obligations of
Seller under the financing arrangements listed on Schedule 4.8 with respect to
the vehicles described in Section 2.1(a), but only to the extent of the Dealer
Cost (as defined below) of such vehicles, and Purchaser shall obtain a release
of Seller's liability thereunder, and (c) certain vacation and sick leave
obligations of Seller pursuant to Section 24.3; provided that Purchaser
specifically does not assume any liabilities of Seller under any contracts or
agreements with respect to any breaches of such contracts or agreements
occurring on or before the Closing Date or any damages to third parties
resulting from acts, events or omissions occurring on or before the Closing
Date. "Dealer Cost" shall mean manufacturer's invoice price to Seller, reduced
by the amount of all manufacturer's rebates, allowances and other price
reductions paid or credited to Seller on such vehicle (other than the
manufacturer's reimbursement for dealer preparation and delivery expenses and
any floor plan interest credits for such vehicle), plus Seller's actual cost
and expense of installation of dealer-installed options on such vehicle. Except
as specifically set forth in this Section 3.2, Purchaser shall not assume, and
shall not be treated as having assumed, any liability or obligation of Seller
of any nature whatsoever.
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3.3 Payment for Noncompetition Agreements. As consideration for
the execution and delivery at the Closing of the noncompetition agreement of
Seller and Shareholder as contemplated by Article 15 hereof, Purchaser shall
pay jointly to Seller and Shareholder the amount of $10,000 on the first day of
the calendar month following the Closing Date and continuing on the first day
of each consecutive calendar month thereafter until such time as the amounts
specified in Section 3.1(h) shall have been paid. If Purchaser shall default in
the payment of any amounts due to Seller under this Section 3.3, Purchaser
shall be liable for interest thereon at the rate of twelve percent (12%) per
annum, and all costs of collection, including reasonable attorneys' fees.
3.4 Sales and Use Tax. Purchaser shall pay to any Sales and Use
Tax in connection with consummation of the transactions contemplated by this
Agreement up to a maximum of $35,000, and Seller shall be responsible for
payment to a Governmental Authority of all Sales and Use Tax in excess of
$35,000 in connection with such consummation.
3.5 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets to the extent relevant for income tax purposes in
accordance with Section 1060 of the Internal Revenue Code of 1986, as amended,
and Schedule 3.5 attached hereto. The parties agree to report the transactions
contemplated by this Agreement for tax purposes in accordance with the
allocation shown on Schedule 3.5, and each party will indemnify and hold each
other party harmless from any loss, cost, damage, additional tax or expense
(including attorneys' fees) arising from any failure by the indemnifying party
to so report such transactions.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER.
Seller and the Shareholder hereby jointly and severally represent and warrant
to Purchaser as follows:
4.1 Incorporation. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado, and is
duly authorized, qualified and licensed under all applicable Governmental
Requirements to carry on its business in the places and in the manner as now
conducted. Seller is not qualified as a foreign corporation in any
jurisdiction, and Seller is not required to qualify or otherwise be authorized
to do business as a foreign corporation in any jurisdiction in order to carry
on any of its businesses as now conducted or to own, lease or operate the
Assets.
4.2 Share Capital. The Shareholder in the aggregate owns all of
the outstanding capital stock of Seller, and there are no options, rights or
other grants currently outstanding for the acquisition or purchase of any
shares of the capital stock of Seller.
4.3 Financial Statements. Seller has delivered to Purchaser copies
of the following financial statements for Seller, all of which financial
statements are included in Schedule 4.3 hereto:
(a) Unaudited Balance Sheet of Seller (the "Reference
Balance Sheet") as of October 31, 1996, (the "Balance Sheet Date") and
Unaudited Income Statement of Seller for the ten-month period ended on
the Balance Sheet Date; and
(b) Audited Balance Sheets, Income Statements and Statements
of Changes in Financial Position for each of Seller's two (2) most
recent fiscal years.
All financial statements supplied to Purchaser by Seller, whether or not
included in Schedule 4.3 hereto, are and will be true and accurate in all
respects, have been and will be prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, and do and will present fairly the financial condition of Seller as
of the dates and for the periods indicated thereon. The Reference Balance Sheet
reflects, as of the Balance Sheet Date, all liabilities, debts and obligations
of any nature of Seller, whether accrued, absolute, contingent or otherwise,
and whether due, or to become due, including, but not limited to, liabilities,
debts or obligations on account of Taxes to the extent such items are required
to be reflected on such balance sheet under generally acceptable accounting
principles consistently applied.
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4.4 Events Since the Balance Sheet Date. Since the Balance Sheet
Date, there has not been:
(a) any change in the condition (financial or otherwise)
or in the properties, assets, liabilities, business or prospects of
the Business, except normal and usual changes in the ordinary course
of business, none of which has been adverse and all of which in the
aggregate have not been adverse;
(b) any labor trouble, strike or any other occurrence,
event or condition affecting the employees of Seller that adversely
affects the condition (financial or otherwise) of the Assets or the
Business;
(c) any breach or default by Seller or, to the Best
Knowledge of Seller and Shareholder, by any other party, under any
agreement or obligation included in the Assets or by which any of the
Assets are bound;
(d) any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the Assets or the Business;
(e) to the Best Knowledge of Seller and Shareholder, any
legislative or regulatory change adversely affecting the Assets or the
Business;
(f) any change in the types, nature, composition or
quality of the services of the Business, any adverse change in the
contributions of any of the service lines of the Business to the
revenues or net income of such Business, or any adverse change in the
sales, revenue or net income of the Business;
(g) any transaction related to or affecting the Assets or
the Business other than transactions in the ordinary course of
business of Seller; or
(h) any other occurrence, event or condition that has
adversely affected (or can reasonably be expected to adversely affect)
the Assets or the Business.
4.5 Customer List. Schedule 4.5 sets forth a true, correct and
complete list of all customers of the Business to which Seller has sold or
provided products or services during the two (2) years immediately preceding
the date hereof. Such list provides an accurate statement of the gross revenues
received from each such customer by the Business during the ten-month period
ended October 31, 1996. Two (2) days prior to the Closing Date, Seller will
deliver to Purchaser a true, correct and complete update of this list as of the
three (3) days prior to the Closing Date, and immediately prior to the Closing,
Seller will deliver to Purchaser a true, correct and complete update of this
list as of the Closing Date, in each case noting all deletions therefrom and
additions thereto and updating all information contained thereon, and
conspicuously marking all changes from the previous list or update, as the case
may be.
4.6 Taxes and Governmental Returns. As of the date hereof, all Tax
returns, information returns and governmental reports of every nature required
by any Governmental Authority or Governmental Requirement to be filed by Seller
or which include or should include Seller, including, but not limited to, those
relating to Taxes of any nature to which Seller or any of its business is
subject ("Governmental Returns"), have been filed for all periods ending on or
before the date hereof (except for any returns not yet due), and all Taxes
shown to be due and payable on such Governmental Returns or on any assessments
related to such Governmental Returns have been paid. All such Governmental
Returns and reports and the information and data contained therein have been
properly and accurately compiled and completed, fairly present the information
purported to be shown therein, and reflect all Tax liabilities of Seller for
the periods covered by such Governmental Returns. Except as specifically
disclosed in this Agreement or the Schedules hereto, Seller has no unpaid
liability for any Taxes of any nature whatsoever for any period prior to the
date hereof. The Governmental Returns of Seller or that include Seller have
not been audited, and are not now under audit, by any Governmental Authority.
There are no agreements, waivers or other arrangements providing for an
extension of time with respect to the assessment of any Taxes of any nature
against Seller or with respect to
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any Governmental Return filed by Seller or that include Seller, or any suits or
other actions, proceedings, investigations or claims now pending or threatened
against Seller with respect to any Taxes or any matters under discussion with
any Governmental Authority relating to any Taxes, or any claims for additional
Taxes asserted by any Governmental Authority.
4.7 Employee Matters. Schedule 4.7A sets forth a true and complete
list of the names of and current annual compensation paid by Seller to each
employee of Seller utilized in connection with the operation of the Business.
With respect to each employee hired after November 6, 1986, a copy of the Form
I-9 completed pursuant to the Immigration Reform and Control Act of 1986, and
the rules and regulations promulgated thereunder, has been attached to Schedule
4.7A. Except as specifically described on Schedule 4.7B, Seller has no employee
benefit plans (including, but not limited to, pension plans and health or
welfare plans), arrangements or understandings, whether formal or informal.
Purchaser will have no liability with respect to any such plans as a result of
the transactions contemplated by this Agreement. Seller does not now and has
never contributed to a "multiemployer plan" as defined in section 4001(a)(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Seller has complied with all applicable provisions of ERISA and all rules and
regulations promulgated thereunder and neither Seller nor any trustee,
administrator, fiduciary, agent or employee thereof has at anytime been
involved in a transaction that would constitute a "prohibited transaction"
within the meaning of Section 406 of ERISA. Seller is not a party to any
collective bargaining or other union agreements. Seller has not, within the
last five years, had or been threatened with any union activities, work
stoppages or other labor trouble with respect to its employees which had or
might have had a material adverse effect on any of the Business. To the Best
Knowledge of Seller and the Shareholder, no union activities, work stoppages or
other labor trouble with respect to the employees of any of the customers or
suppliers of the Business are pending or threatened which might have an adverse
effect on the Business. Other than wage increases in the ordinary course of
business, since the Balance Sheet Date Seller has not made any commitment or
agreement to increase the wages or modify the conditions or terms of employment
of any of the employees of Seller used in connection with the Business, and
between the date of this Agreement and the Closing Date, Seller will not make
any agreement to increase the wages or modify the conditions or terms of
employment of any of the employees of Seller used in connection with the
Business without the prior written approval of Purchaser.
4.8 Contracts and Agreements. Schedule 4.8 sets forth a true and
complete list of and briefly describes (including termination date) all of the
following contracts, agreements, leases, licenses, plans, arrangements or
commitments, written or oral, that relate to the Assets or the Business
(including all amendments, supplements and modifications thereto):
(a) all contracts, agreements or commitments in respect
of the sale of products or services or the purchase of raw materials,
supplies or other products or utilities;
(b) all offers, tenders or the like outstanding and
capable of being converted into an obligation of Seller by the passage
of time or by an acceptance or other act of some other person or
entity or both;
(c) all sales, agency or distributorship agreements or
franchises or legally enforceable commitments or obligations with
respect thereto;
(d) all collective bargaining agreements, union
agreements, employment agreements, consulting agreements or agreements
providing for the services of an independent contractor;
(e) all profit-sharing, pension, stock option, severance
pay, retirement, bonus, deferred compensation, group life and health
insurance or other employee benefit plans, agreements, arrangements or
commitments of any nature whatsoever, whether or not legally binding,
and all agreements with any present or former officer, director or
shareholder of Seller;
(f) all loan or credit agreements, indentures, guarantees
(other than endorsements made for collection), mortgages, pledges,
conditional sales or other title retention agreements, and all
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equipment financing obligations, lease and lease-purchase agreements
relating to or affecting the Assets or the Business;
(g) all leases related to the Assets or the Business;
(h) all performance bonds, bid bonds, surety bonds and
the like, all contracts and bids covered by such bonds, and all
letters of credit and guaranties;
(i) all consent decrees and other judgments, decrees or
orders, settlement agreements and agreements relating to competitive
activities, requiring or prohibiting any future action;
(j) all accounts, notes and other receivables, and all
security therefor, and all documents and agreements related thereto;
(k) all contracts or agreements of any nature with
Shareholder, or any Affiliate of Shareholder; and
(l) all contracts, commitments and agreements entered
into outside the ordinary course of the operation of the Business.
All of such contracts, agreements, leases, licenses, plans, arrangements and
commitments and all other such items included in the Assets but not
specifically described above (collectively, the "Contracts") are valid, binding
and in full force and effect in accordance with their terms and conditions and
there is no existing default thereunder or breach thereof by Seller, or, to the
Best Knowledge of Seller and Shareholder, by any other party to the Contracts,
or any conditions which, with the passage of time or the giving of notice or
both, might constitute such a default by Seller, or, to the Best Knowledge of
Seller and Shareholder, by any other party to the Contracts, and the Contracts
will not be breached by or give any other party a right of termination as a
result of the transactions contemplated by this Agreement. To the Best
Knowledge of Seller and Shareholder there is no reason why any of the Contracts
(i) will result in a loss to Purchaser on completion by performance or (ii)
cannot readily be fulfilled or performed by Purchaser with the Assets on time
without undue or unusual expenditure of money or effort. Copies of all of the
documents (or in the case of oral commitments, descriptions of the material
terms thereof) relevant to the Contracts listed in Schedule 4.8 have been
delivered by Seller to Purchaser, and such copies and/or descriptions are true,
complete and accurate and include all amendments, supplements or modifications
thereto. After reviewing the Contracts, Purchaser may, at its sole option,
choose not to assume one or more of the Contracts, and, within 30 days of
receipt by Purchaser of all information reasonably requested by Purchaser with
respect to the Contracts, Purchaser shall notify Seller of which Contracts, if
any, Purchaser does not intend to assume hereunder. Except for Contracts, if
any, that Purchaser notifies Seller that it will not assume, all of the
Contracts are and shall be included in the Assets. All of the Contracts may be
assigned to Purchaser without the approval or consent of any Person, or, if
such approval or consent is required, it will be obtained by Seller and
delivered to Purchaser at or prior to the Closing; provided, however, that if
any Contract is not assignable, Purchaser shall not assume such Contract and
Seller shall remain responsible for the performance thereunder.
4.9 Effect of Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) result in any breach of any of the terms or conditions of, or constitute a
default under, the Articles of Incorporation or other charter documents or
bylaws of Seller, or any commitment, mortgage, note, bond, debenture, deed of
trust, contract, agreement, license or other instrument or obligation to which
Seller is now a party or by which Seller or any of its properties or assets may
be bound or affected; (ii) result in any violation of any Governmental
Requirement applicable to Seller, the Assets or the Business; (iii) cause
Purchaser to lose the benefit of any right or privilege included in the Assets;
(iv) relieve any Person of any obligation (whether contractual or otherwise) or
enable any Person to terminate any such obligation or any right or benefit
enjoyed by Seller or to exercise any right under any agreement in respect of
the Assets or the Business; or (v) require notice to or the consent,
authorization, approval or order of any Person (except as may be contemplated
by the last sentence of Section 4.8). To the Best Knowledge of Seller and
Shareholder, the business relationships of clients, customers and suppliers of
the Business will not be
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adversely affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
4.10 Properties, Assets and Leasehold Estates. Seller owns or has
the right to use (pursuant to a valid lease or license disclosed on Schedule
4.8) all operating assets and properties necessary for Seller to conduct the
Business in the manner presently conducted by Seller, and all of such operating
assets and properties (or, in the case of leased assets, the leases covering
such assets) are included in the Assets. Seller has good and marketable title
to all the Assets, free and clear of all mortgages, liens, pledges, conditional
sales agreements, charges, easements, covenants, assessments, options,
restrictions and encumbrances of any nature whatsoever. The plants, structures,
equipment, vehicles and other tangible properties included in the Assets and
the tangible property leased by Seller under leases included in the Assets are
in good operating condition and repair, normal wear and tear excepted, and are
capable of being used for their intended purpose in the Business as now
conducted. The Assets include all existing warranties and service contracts
with respect to any of the Assets to the extent the same are capable of being
assigned to Purchaser. During the past two years, there has not been any
significant interruption of the Business due to the breakdown or inadequate
maintenance of any of the Assets. All plants, structures, equipment, vehicles
and other tangible properties included in the Assets, and the present use of
all such items, conform to all applicable Governmental Requirements, and no
notice of any violation of any such Governmental Requirements relating to such
assets or their use has been received by Seller. The Assets include all
easements, rights of ingress and egress, and utilities and services necessary
for the conduct of the Business. Neither the whole nor any portion of any real
property to be conveyed to Purchaser hereunder has been condemned or otherwise
taken by any public authority, nor, to the Best Knowledge of Seller and
Shareholder, is any such condemnation or taking threatened or planned.
4.11 Intangible Property. The operation of the Business as now
conducted by Seller does not require the use of or consist of any rights under
any trademarks, trade names, brand names, service marks or copyrights other
than "Peterbilt" and "Denver Peterbilt".
4.12 Suits, Actions and Claims. Except as set forth in Schedule
4.12, (i) there are no suits, actions, claims, inquiries or investigations by
any Person, or any legal, administrative or arbitration proceedings in which
Seller is engaged or which are pending or, to the Best Knowledge of Seller and
Shareholder, threatened against or affecting Seller or any of its properties,
assets or business, or to which Seller is or might become a party, or which
question the validity or legality of the transactions contemplated hereby, (ii)
no basis or grounds for any such suit, action, claim, inquiry, investigation or
proceeding exists, and (iii) there is no outstanding order, writ, injunction or
decree of any Governmental Authority against or affecting Seller or any of its
properties, assets or business. Without limiting the foregoing, neither Seller
nor Shareholder has any Best Knowledge of any state of facts or the occurrence
of any event forming the basis of any present or potential claim against
Seller.
4.13 Licenses and Permits; Compliance With Governmental
Requirements. Schedule 4.13 sets forth a true and complete list of all licenses
and permits necessary for the conduct of the Business. Seller has all such
licenses and permits validly issued to it and in its name, and all such
licenses and permits are in full force and effect. True and correct copies of
all such licenses and permits are included in Schedule 4.13. No violations are
or have been recorded in respect of such licenses or permits and no proceeding
is pending or, to the Best Knowledge of Seller and Shareholder, threatened
seeking the revocation or limitation of any of such licenses or permits. All
such licenses and permits that are subject to transfer are included in the
Assets. Seller has complied with all Governmental Requirements applicable to
its business, and all Governmental Requirements with respect to the
distribution and sale of products and services by it.
4.14 Authorization. Each of Seller and Shareholder has full legal
right, power, and authority to enter into and deliver this Agreement and to
consummate the transactions set forth herein and to perform all the terms and
conditions hereof to be performed by them. The execution and delivery of this
Agreement by Seller and Shareholder and the performance by each of them of the
transactions contemplated herein have been duly and validly authorized by all
requisite corporate action of Seller and by Shareholder, and this Agreement has
been duly and validly executed and delivered by Seller and Shareholder and is
the legal, valid and binding obligation of each of them, enforceable against
each of them in accordance with its terms, except
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as limited by applicable bankruptcy, moratorium, insolvency or other similar
laws affecting generally the rights of creditors or by principles of equity.
4.15 No Untrue Statements. The statements, representations and
warranties of Seller and Shareholder set forth in this Agreement and the
Schedules and in all other documents and information furnished to Purchaser and
its representatives in connection herewith do not include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements, representations and warranties made not misleading. To the Best
Knowledge of Seller and Shareholder, there is no fact or matter that is not
disclosed to Purchaser in this Agreement or the Schedules that materially and
adversely affects or, so far Seller or Shareholder can now reasonably foresee,
could materially and adversely affect the condition (financial or otherwise) of
any of the Assets or the Business or the ability of Seller or Shareholder to
perform their respective obligations under this Agreement.
4.16 Records. The books, records and minutes kept by Seller with
respect to the Assets and the Business, including, but not limited to, all
customer files, service agreements, quotations, correspondence, route sheets
and historic revenue data of Seller, have been kept properly and contain
records of all matters required to be included therein by any Governmental
Requirement or by generally accepted accounting principles, and such books,
records and minutes are true, accurate and complete and (except for corporate
minute books and stock records) are included in the Assets.
4.17 Environmental Protection Laws.
(a) For purposes of this Section 4.17, unless the context
otherwise specifies or requires, the following terms shall have the
meaning herein defined:
(i) "Waste Materials" shall mean
(A) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, 42. U.S.C.
Sections 6901 et seq., as amended from time to time, and
regulations promulgated thereunder;
(B) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Sections 9601, et seq., as
amended from time to time;
(C) asbestos;
(D) polychlorinated biphenyls;
(E) underground storage tanks, whether empty,
filled or partially filled with any substance;
(F) any other substance the presence of which is
prohibited by any Governmental Requirement; and
(G) any other substance which by any Governmental
Requirement requires special handling or notification of any
federal, state or local governmental entity in its collection,
storage, treatment, recycling, or disposal.
(ii) "Waste Materials Contamination" shall mean
the presence of Waste Materials on, in or under any property
whatsoever which is associated with or is in any way related
to the Assets or the Business, including the improvements,
facilities, soil, ground, water or air.
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(b) All business conducted by Seller, including but not
limited to the Business, has been and is being operated, and the
assets of Seller, including but not limited to the Assets, have been
and are being used and were obtained, in all respects in compliance
with all Governmental Requirements.
(c) Seller is not now, and has not been, in violation of
any Governmental Requirement. The Assets, the Business and all of the
operations of Seller are in full compliance with all Governmental
Requirements relating to Waste Materials, and no judicial or
administrative actions, including non-compliance orders or demand
letters, are pending that relate to such Governmental Requirements.
Without in any way limiting the foregoing, Seller and Shareholder
hereby jointly and severally specifically represent and warrant that:
(i) Seller has complied with all applicable
Governmental Requirements relating to pollution and
environmental control;
(ii) Seller is not in violation of any of the
permits described in or required to be described on Schedule
4.13 or any Governmental Requirement regulating emissions,
discharges or releases (including solids, liquids and gases)
into the environment or the proper transportation, handling,
storage, treatment or disposal of materials;
(iii) Seller has received all permits and approvals
with respect to emissions, discharges or releases (including
solids, liquids and gases) into the environment and the proper
transportation, handling, storage, treatment and disposal of
materials required for the operation of the businesses of
Seller as presently conducted;
(iv) Seller has kept all records and made all
filings required by applicable Governmental Requirements with
respect to emissions, discharges or releases (including
solids, liquids and gases) into the environment and the proper
transportation, handling, storage, treatment and disposal of
materials;
(v) All hazardous waste, hazardous materials and
hazardous substances attributable to the Assets, the Business
or the operations of Seller on, in or under any real property
owned or leased by Seller have been removed and no past or
present disposal, spill, or other release of hazardous waste,
hazardous materials or hazardous substances attributable to
the Assets, the Business or the operations of Seller on, in,
under or adjacent to any real property owned or leased by
Seller will subject Purchaser to corrective or response action
or any other liability under any Governmental Requirement or
the common law;
(vi) No investigation, administrative order,
consent order and agreement, litigation or settlement with
respect to Waste Materials or Waste Materials Contamination is
proposed, threatened, anticipated or in existence with respect
to the Assets or the Business. None of the Assets are
currently on, and to the Best Knowledge of Seller and
Shareholder, after diligent investigation and inquiry, have
ever been on, any federal or state "Superfund" or "Superlien"
list.
(vii) Seller does not have any contingent
liabilities under any Governmental Requirement to any Person
and whether or not such contingent liability is required
pursuant to generally accepted accounting principles to be
reflected on the financial statements of Seller, in connection
with any emission, discharge or release of any hazardous or
toxic waste, substance or constituent or any other substance
into the environment; and
(viii) Seller has not handled, treated, stored,
generated, transported or disposed of any Waste Material in
contravention of any Governmental Requirement, and there have
been no acts or omissions of Seller or any of its agents or
employees that would result in liability under any
Governmental Requirement.
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(d) Seller has, and has listed on Schedule 4.13, all
necessary environmental and operations permits for operations relating
to the Business or the Assets.
(e) There have not been nor will there be (i) any
violation of any Requirement of Environmental Law or Environmental
Permits (as those terms are hereinafter defined) of Seller or
Shareholder occurring between December 31, 1986 and the Closing Date,
(ii) any acts, omissions, conditions, facts, or circumstances
occurring or existing between December 31, 1986 and the Closing Date
with respect to the Assets, the Business or the operations of Seller
which give rise to Environmental Claims (as hereinafter defined)
before or after the date hereof, and (iii) any failure of Seller or
Shareholder to obtain or maintain, between December 31, 1986 and the
Closing Date, any Environmental Permit. For purposes of this Section
4.17(e) the term "Environmental Claim" means any action, lawsuit,
claim or proceeding by any Person relating to the Assets or the
Business or the operations or the business of Seller which seeks to
impose liability for (i) noise, (ii) pollution or contamination or
threatened pollution or contamination of the air, surface water,
groundwater or land, (iii) solid, gaseous or liquid waste generation,
handling, treatment, storage, disposal or transportation, (iv)
exposure to hazardous or toxic substances or (v) non-compliance with
any Requirement of Environmental Law. An "Environmental Claim"
includes, without limitation, a proceeding to terminate a permit or
license to the extent that such a proceeding attempts to redress
violations of the applicable permit or license or any Requirement of
Environmental Law as alleged by any Governmental Authority. For
purposes of this Section 4.17(e) the term "Environmental Permit" means
any permit, license, approval or other authorization related to, used
in connection with or necessary for the operation or use of the
Business or the Assets, or the operations or the businesses of Seller
under any applicable Requirement of Environmental Law. For purposes of
this Section 4.17(e)the term "Requirement of Environmental Law" means
all Governmental Requirements related to health or the environment,
including, but not limited to, all Governmental Requirements that
relate to (i) noise, (ii) pollution or protection of the air, surface
water, groundwater or land, (iii) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or transportation,
(iv) exposure to hazardous or toxic substances, or (v) any other
matters related to health or the environment.
4.18 Brokers and Finders. No broker or finder has acted for Seller
or Shareholder in connection with this Agreement or the transactions
contemplated by this Agreement and no broker or finder is entitled to any
brokerage or finder's fee or to any commission in respect thereof based in any
way on agreements, arrangements or understandings made by or on behalf of
Seller or Shareholder.
4.19 Deposits. Seller does not now hold any deposits or prepayments
by third parties with respect to any of the Assets or the Business which are
not reflected as liabilities on the Reference Balance Sheet.
4.20 Work Orders. There are no outstanding work orders or contracts
relating to any portion of the Assets from or required by any policy of
insurance, fire department, sanitation department, health authority or other
governmental authority nor is there any matter under discussion with any such
parties or authorities relating to work orders or contracts.
4.21 Telephone Numbers. All telephone numbers used by Seller in
connection with the Business are included in the Assets and will not be used by
Seller or Shareholder following the Closing. Seller does not guarantee that the
phone company will transfer such telephone numbers to Purchaser.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND RUSH.
Purchaser and Rush jointly and severally represent and warrant to Seller and
Shareholder as follows:
5.1 Incorporation. Purchaser is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware,
and is qualified to do business in the State of Colorado. Purchaser is not
aware of any reason it cannot satisfy all Governmental Requirements in order to
carry on the Business as presently conducted.
5.2 Authorization. Purchaser has full legal right and corporate
power to enter into and deliver this Agreement and to consummate the
transactions set forth herein and to perform all the terms and conditions
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hereof to be performed by it. This Agreement has been duly executed and
delivered by Purchaser and is a legal, valid and binding obligation of
Purchaser enforceable in accordance with its terms, except as limited by
applicable bankruptcy, moratorium, insolvency or other laws affecting generally
the rights of creditors or by principles of equity.
5.3 Brokers and Finders. No broker or finder has acted for
Purchaser in connection with this Agreement or the transactions contemplated by
this Agreement and no broker or finder is entitled to any brokerage or finder's
fee or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Purchaser.
5.4 Effect of Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) result in any breach of any of the terms or conditions of, or constitute a
default under, the Articles of Incorporation or other charter documents or
bylaws of Purchaser, or any commitment, mortgage, note, bond, debenture, deed
of trust, contract, agreement, license or other instrument or obligation to
which Purchaser is now a party or by which Purchaser or any of its properties
or assets may be bound or affected; or (ii) result in any violation of any
Governmental Requirement applicable to Purchaser.
5.5 Suits, Actions and Claims. There are no suits, actions,
claims, inquiries or investigations by any Person, or any legal, pending or, to
the Best Knowledge of Purchaser, threatened against or affecting Purchaser or
any of its properties, assets or business, or to which Purchaser is or might
become a party, or which question the validity or legality of the transactions
contemplated hereby which could result in a material adverse change in the
condition, financial or otherwise, of Purchaser.
5.6 Authority and Enforceability. Rush has the full legal right
and corporate power to enter into and deliver this Agreement and to consummate
the transactions set forth herein, and to perform all of the terms and
conditions hereof to be performed by it. This Agreement constitutes the valid
and binding obligation of Rush, enforceable in accordance with its terms,
except as limited by applicable bankruptcy, moratorium, insolvency and other
laws affecting the rights of creditors or by principles of equity.
5.7 No Defaults or Violations. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) result in any breach of any of the terms and conditions of, or constitute a
default under, the Articles of Incorporation or other charter documents or
bylaws of Rush or any commitment, mortgage, note, bond, debenture, deed of
trust, contract, agreement, license or other instrument or obligation to which
Rush is now a party or by which Rush or any of its properties or assets may be
bound or affected; or (ii) result in any violation of any Governmental
Requirement applicable to Rush, except to the extent that any such breach,
default or violation would not materially adversely affect the condition,
financial or otherwise, of Rush.
5.8 Subsidiary Status. Rush is the sole shareholder of Purchaser
and there are no options, rights or other grants currently outstanding for the
acquisition or purchase of any shares of the capital stock of Purchaser.
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS,
GUARANTEES, REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER. All
statements of fact contained in this Agreement or in any written statement
(including financial statements), certificate, schedule or other document
delivered by or on behalf of Seller or Shareholder pursuant to this Agreement
or in connection with the transactions contemplated hereby shall be deemed
representations and warranties of Seller and Shareholder hereunder. All
indemnifications, guarantees, covenants, agreements, representations and
warranties made by Seller or Shareholder hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the Closing.
6A. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS,
GUARANTEES, REPRESENTATIONS AND WARRANTIES OF PURCHASER AND RUSH. All
statements of fact contained in this Agreement or in any written statement
(including financial statements), certificate, schedule or other document
delivered by or on behalf of Purchaser or Rush pursuant to this Agreement or in
connection with the
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transactions contemplated hereby shall be deemed representations and warranties
of Purchaser and Rush hereunder. All indemnifications, guarantees, covenants,
agreements, representations and warranties made by Purchaser or Rush hereunder
or pursuant hereto or in connection with the transactions contemplated hereby
shall survive the Closing.
7. CONTRACTS PRIOR TO THE CLOSING DATE.
7.1 Approval of Contracts. Except in the ordinary course of
business and consistent with past practice, Seller shall not enter into or
amend any contracts related to the Business or the Assets between the date
hereof and the Closing Date unless approved in writing by Purchaser. Seller
will provide all information relating to each such contract or amendment that
is requested by Purchaser to enable Purchaser to make an informed decision
regarding approval of such contract or amendment. The failure of Purchaser to
respond to any written request by Seller for consent to any of the foregoing
actions within 24 hours after receipt of such request by W. Marvin Rush, W. M.
"Rusty" Rush, Robin M. Rush or David Orf, on behalf of Purchaser, shall be
deemed to be consent by Purchaser to such action. For these purposes a
confirmed fax addressed to any of the foregoing individuals will constitute
receipt at the time of confirmation.
7.2 Contracts Included in Assets. Any contracts, agreements or
commitments (or amendments to such items) related to the Business or the Assets
that are entered into by Seller between the date hereof and the Closing Date
and are approved in writing by Purchaser (after review of true, correct and
accurate copies of such items) shall be included in the Assets (with no
addition to the Purchase Price) and shall be assumed by Purchaser pursuant to
Section 3.2.
8. COVENANTS OF SELLER AND SHAREHOLDER PRIOR TO CLOSING DATE.
Seller and Shareholder hereby covenant and agree that between the date of this
Agreement and the Closing Date:
8.1 Access to Information. Seller shall afford to the officers and
authorized representatives of Purchaser access to the plants, properties, books
and records of Seller related to the Assets and the Business and shall furnish
Purchaser with such financial and operating data and other information
regarding the Assets and the Business and as Purchaser may from time to time
reasonably request.
8.2 General Affirmative Covenants. Seller shall, and Shareholder
shall cause Seller to:
(a) conduct the Business only in the ordinary course;
(b) maintain the Assets in good working order and
condition, ordinary wear and tear excepted;
(c) perform all its obligations under agreements relating
to or affecting the Assets or the Business;
(d) keep in full force and effect adequate insurance
coverage on the Assets and the operation of the Business;
(e) use its best efforts to maintain and preserve the
Business, and retain its present employees, customers, suppliers and
others having business relations with it;
(f) duly and timely file all reports or returns required
to be filed with any Governmental Authority, and promptly pay all
Taxes levied or assessed upon it or its properties or upon any part
thereof;
(g) duly observe and conform to all Governmental
Requirements relating to the Assets or its properties or to the
operation and conduct of its business and all covenants, terms and
conditions upon or under which any of its properties are held;
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(h) remove and have released, by payment or otherwise,
all liens and encumbrances of any nature whatsoever on the Assets
(except for liens and encumbrances, if any, specifically assumed by
Purchaser pursuant to this Agreement);
(i) duly and timely take all actions necessary to carry
out the transactions contemplated hereby;
(j) deliver to Purchaser on or before the 15th day of
each month true and correct unaudited monthly balance sheets and
statements of income for the Business for the immediately preceding
month; and
(k) deliver to Purchaser on or before the Closing Date a
true and correct audited annual balance sheet, statement of income and
statement of changes in financial position for the year ended December
31, 1996, together with any additional financial information
reasonably requested by Purchaser to allow Purchaser to timely comply
with its reporting requirements under the Securities Exchange Act of
1934 (the "Exchange Act"), all in form and substance sufficient to
allow Purchaser to timely comply with such reporting requirements; and
(l) preserve and maintain the goodwill of the Business.
8.3 General Negative Covenants. Seller shall not take, and
Shareholder will not permit Seller to take, any of the following actions
without the prior written consent of Purchaser:
(a) entering into or amending or assuming any contract,
agreement, obligation, lease, license or commitment related to the
Business or the Assets (or of a type included in the Assets) other
than in accordance with the provisions of Section 7.1;
(b) except in the ordinary course of business and
consistent with past practice, selling, leasing, abandoning or
otherwise disposing of any of the fixed Assets, including, but not
limited to, real property, machinery, equipment or other operating
properties;
(c) engaging in any activities or transactions that might
adversely affect the Assets or the Business;
(d) increasing the compensation of any officer or
employee of Seller, other than normal compensation adjustments in the
ordinary course of the Business consistent with past practice; or
(e) selling or agreeing to sell 10 or more new trucks in
any single transaction or any series of related transactions at a
gross margin of less than 3 1/2%, or purchasing or agreeing to
purchase 10 or more used trucks.
The failure of Purchaser to respond to any written request by Seller for
consent to any of the foregoing actions within 24 hours after receipt of such
request by W. Marvin Rush, Rusty Rush, Robin Rush or David Orf, on behalf of
Purchaser, shall be deemed to be consent by Purchaser to such action. For these
purposes a confirmed fax addressed to any of the foregoing individuals will
constitute receipt at the time of confirmation.
8.4 Disclosure of Misrepresentations and Breaches. If any of the
representations or warranties of Seller or Shareholder hereunder are determined
by Seller or Shareholder to have been incorrect when made, or are determined by
Seller or Shareholder to be incorrect as of any date subsequent to the date
hereof, or if any of the covenants of Seller or Shareholder contained in this
Agreement have not been complied with timely, then Seller and Shareholder shall
immediately notify Purchaser to such effect (provided that such notice shall in
no way limit the rights of Purchaser under Articles 10 and 23 to terminate this
Agreement or refuse to consummate the transactions contemplated hereby).
8.5 Government Filings. Seller and Shareholder shall cooperate
with Purchaser and its representatives in the preparation of any documents or
other material that may be required by any
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Governmental Authority in connection with the Assets or the Business or the
transactions contemplated hereby.
8.6 Access to and Inspection of Premises, Facilities and
Equipment. Seller shall afford to the officers and authorized representatives
of Purchaser access to the premises, facilities and tangible assets included in
the Assets for the purpose of inspecting such premises, facilities and
equipment in such manner as Purchaser shall deem appropriate, including, but
not limited to, an environmental inspection and audit. If upon completion of
such inspection Purchaser finds any conditions which Purchaser, in its sole
discretion, considers to be unacceptable, Purchaser may, in addition to its
rights to terminate this Agreement pursuant to Articles 10 and 23, delay the
Closing under Section 2.4 up to and including the earlier of (i) 10 days after
remedy of the condition to Purchaser's satisfaction, or (ii) April 30, 1997.
Purchaser shall provide Seller and Shareholder with a detailed written
description of such unacceptable condition and shall give Seller and
Shareholder a reasonable opportunity to cure such condition before it may elect
to terminate this Agreement.
8.7 Inspection of Underground Storage Tanks. Within five days
prior to the Closing, Seller shall (i) cause all underground storage tanks
located on the premises leased by Purchaser in accordance with Article 14 to be
inspected for leakage and operating condition by independent third party
inspectors acceptable to Purchaser and (ii) deliver to Purchaser a written
report of the inspection as prepared by such inspectors. If Purchaser, in its
sole discretion, considers any items in the inspection report to be
unacceptable, then Purchaser may, in addition to its rights to terminate this
Agreement pursuant to Articles 10 and 23, delay the Closing Date under Section
2.4 up to and including the earlier of (i) 10 days after remedy of the
condition to Purchaser's satisfaction, or (ii) April 30, 1997.
9. COVENANTS REGARDING THE CLOSING.
9.1 Covenants of Seller. Seller and Shareholder hereby covenant
and agree that they shall (i) use commercially reasonable efforts to cause all
of their representations and warranties set forth in this Agreement to be true
on and as of the Closing Date, (ii) use commercially reasonable efforts to
cause all of their obligations that are to be fulfilled on or prior to the
Closing Date to be so fulfilled, (iii) use commercially reasonable efforts to
cause all conditions to the Closing set forth in this Agreement to be satisfied
on or prior to the Closing Date, and (iv) deliver to Purchaser at the Closing
the certificates, updated lists, opinion of counsel, notices, consents,
authorizations, approvals, agreements, leases, transfer documents, receipts,
and amendments contemplated by Article 10 (with such additions or exceptions to
such items as are necessary to make the statements set forth in such items
accurate, provided that if any of such additions or exceptions cause any of the
conditions to Purchaser's obligations hereunder as set forth in Article 10 not
to be fulfilled, such additions and exceptions shall in no way limit the rights
of Purchaser under Articles 10 and 23 to terminate this Agreement or refuse to
consummate the transactions contemplated hereby).
9.2 Covenants of Purchaser and Rush. Purchaser and Rush hereby
covenant and agree that each of them shall (i) use commercially reasonable
efforts to cause all of their respective representations and warranties set
forth in this Agreement to be true on and as of the Closing Date, (ii) use
commercially reasonable efforts to cause all of their respective obligations
that are to be fulfilled on or prior to the Closing Date to be so fulfilled,
(iii) use commercially reasonable efforts to cause all conditions to the
Closing set forth in this Agreement to be satisfied on or prior to the Closing
Date (provided that failure by Purchaser or Rush to comply with a second
requirement for information under the HSR Act or to comply with any requested
divestiture of assets or to enter into any consent or similar order or
agreement shall not constitute a failure of Purchaser or Rush to use
commercially reasonable efforts), and (iv) deliver to Seller at the Closing the
certificate contemplated by Article 11 (with such additions or exceptions to
such certificate as are necessary to make the statements set forth in such
certificate accurate, provided that if any of such additions or exceptions
cause any of the conditions to Seller's obligations hereunder as set forth in
Article 11 not to be fulfilled, such additions and exceptions shall in no way
limit the rights of Seller under Articles 11 and 23 to terminate this Agreement
or to refuse to consummate the transactions contemplated hereby).
9.3 Inventory Audit. Within five days prior to Closing, Seller and
Purchaser shall each appoint one or more representatives knowledgeable in the
heavy duty truck business, and shall cause such representatives to conduct an
audit (in accordance with generally accepted accounting principles,
consistently
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applied) of the inventory of the Assets as of the Closing Date. Each party
shall bear their cost of conducting such audit.
9A. COVENANTS AFTER THE CLOSING.
9A.1 Covenants of Purchaser. Within 30 days after the end of each
calendar month ending prior to payment in full of the portion of the Purchase
Price described in Section 3.1(h), Purchaser shall notify Shareholder of the
number of new Peterbilt motor vehicles sold by Purchaser during such calendar
month.
10. CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser hereunder are, at the option of Purchaser, subject to the
satisfaction, on or prior to the Closing Date, of the following conditions (any
of which may be waived by Purchaser, in its sole discretion):
10.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The representations and warranties of Seller and Shareholder
contained in this Agreement shall be true and correct on and as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date except to the extent any inaccuracy would not
have a Material Adverse Effect. Each and all of the agreements and covenants of
Seller and Shareholder to be performed on or before the Closing Date pursuant
to the terms hereof shall have been performed except to the extent any failure
would not have a Material Adverse Effect. Seller and Shareholder shall have
delivered to Purchaser a certificate dated the Closing Date and executed by
Seller and Shareholder to all such effects or disclosing any such
representation or warranty not so true and correct or any such agreement or
covenant not so performed.
10.2 No Governmental Actions. No action or proceeding before any
Governmental Authority shall have been instituted or threatened to restrain or
prohibit the transactions contemplated by this Agreement, and Seller and
Shareholder shall have delivered to Purchaser a certificate dated the Closing
Date and executed by Seller and Shareholder stating they have no Best Knowledge
of any such items. No Governmental Authority shall have taken any other action
as a result of which the management of Purchaser reasonably deems it
inadvisable to proceed with the transactions contemplated by this Agreement
except to the extent any such action would not have a Material Adverse Effect.
10.3 No Material Adverse Change. No Material Adverse Effect shall
have occurred since the Balance Sheet Date, and Seller shall have delivered to
Purchaser a certificate dated the Closing Date and executed by Seller and
Shareholder to such effect.
10.4 Update of Contracts. Seller and Shareholder shall have
delivered to Purchaser an accurate list, as of the Closing Date, showing (i)
all agreements, contracts and commitments of the type listed on Schedule 4.8
entered into since the date of this Agreement (including, but not limited to,
amendments, if any, to the items listed on Schedule 4.8), and (ii) all other
agreements, contracts and commitments related to the Business or the Assets
entered into since the date of this Agreement, together with true, complete and
accurate copies of all documents (or in the case of oral commitments,
descriptions of the material terms thereof) relevant to the items on the list
(the "New Contracts"). Purchaser shall have the opportunity to review the New
Contracts, and shall have the right to delay the Closing for up to five (5)
days if it in its sole discretion Purchaser deems such a delay necessary to
enable it to adequately review the New Contracts. All of the New Contracts that
are approved in writing by Purchaser prior to the Closing, as it may be
delayed, (whether such approval by Purchaser is given before or after Seller
executes the New Contract) shall be included in the Assets (with no addition to
the Purchase Price) and the future obligations of Seller thereunder shall be
assumed by Purchaser pursuant to Section 3.2. Any New Contracts that are not
approved in writing by Purchaser prior to the Closing, as it may be delayed,
shall remain the sole obligation of Seller and shall not be assumed by
Purchaser, and Purchaser shall have no obligation or liability with respect
thereto.
10.5 No Material Adverse Information. The investigations with
respect to Seller, the Assets and the Business performed by Purchaser's
professional advisors and other representatives shall not have revealed any
Material Adverse Effect.
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10.6 Notices and Consents. No notice to or consent, authorization,
approval or order of any Person shall be required for the consummation of the
transactions contemplated by this Agreement (except for notices that have been
duly and timely given and consents, authorizations and approvals that have been
obtained), and Seller and Shareholder shall have delivered to Purchaser a
certificate dated the Closing Date and executed by Seller and Shareholder to
such effect. True and correct copies of all required notices, consents,
authorizations and approvals shall have been delivered to Purchaser and shall
be satisfactory in form and substance to Purchaser and its counsel.
10.7 Noncompetition Agreements. Each of Seller and Shareholder
shall have entered into and delivered a fully executed Noncompetition Agreement
as contemplated by Article 15.
10.8 Lease. Purchaser shall have received a fully executed and
delivered Lease Agreement as contemplated by Article 14 hereof.
10.9 Corporate Approval. Each of Seller and Shareholder shall have
taken or caused to be taken all necessary or desirable actions, steps and
corporate proceedings (whether by directors, shareholders or otherwise) to
approve and authorize the transfer of the Business and the Assets by Seller to
Purchaser, and to approve and authorize the execution and delivery of this
Agreement by the Seller, and Seller and Shareholder shall have delivered to
Purchaser at Closing a certificate to all such effects.
10.10 Transfer and Assignment Documents. Seller shall have delivered
to Purchaser all documents reasonably necessary or required to effectively
transfer and assign the Business and the Assets to Purchaser (including,
without limitation, all required consents), such transfers and assignments to
convey good and marketable title to the Assets to Purchaser, free and clear of
all liens and encumbrances whatsoever (except for liens, encumbrances and
obligations, if any, specifically assumed by Purchaser pursuant to this
Agreement), and to be in form and substance reasonably satisfactory to
Purchaser and its counsel.
10.11 Liens Released. Each and every lien or encumbrance of any
nature, if any, relating to the Assets shall have been terminated and released
and proof thereof delivered to the Purchaser (except for liens and
encumbrances, if any, specifically assumed by Purchaser pursuant to this
Agreement).
10.12 Ordinary Course of Business. During the period from the date
of this Agreement until Closing, Seller shall have carried on the Business in
accordance with Sections 8.2 and 8.3, except to the extent that violations of
the provisions of any one or more of the provisions of Sections 8.2(a) through
(g) and (l) and 8.3(b) and (c) would not result in a Material Adverse Effect,
and the Seller and Shareholder shall have delivered to Purchaser at Closing a
certificate to that effect.
10.13 Other Documents. Seller and Shareholder shall have delivered
or caused to be delivered all other documents, agreements, resolutions,
certificates or declarations as Purchaser or its attorneys may have reasonably
requested.
10.14 Dealer License. Purchaser shall have obtained written approval
to be licensed as a New Motor Vehicle Dealer by the appropriate department or
agency of the State of Colorado to do business as a Peterbilt dealer at the
present locations of the dealerships; provided, however, that Purchaser shall
use its reasonable best efforts to secure such approval prior to Closing.
10.15 Inventory Audit. The inventory audit contemplated by Section
9.3 shall have been completed.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations
of Seller hereunder are, at its option, subject to the satisfaction, on or
prior to the Closing Date, of the following conditions (any of which may be
waived by Seller in its sole discretion):
11.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The representations and warranties of Purchaser contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date. Each of the agreements and covenants of Purchaser to be performed on
or before the
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Closing Date shall have been performed. Purchaser shall have delivered to
Seller a certificate dated the Closing Date and executed by Purchaser to all
such effects.
11.2 Delivery of Purchase Price. Purchaser shall have paid to
Seller the Purchase Price as required by this Agreement, subject in all
respects to the provisions of Article 26 below.
11.3 Receivables Guarantee. Rush shall have agreed to guarantee any
recourse obligations of Seller required in connection with the sale by Seller
of accounts receivable generated with respect to the Business prior to the
Closing Date in consideration for the agreement of Seller and Shareholder to
reimburse Rush for any amounts paid under such guarantee.
11.4 Governmental Approvals. All necessary government and
regulatory approvals have been obtained, and all required waiting periods under
the HSR Act shall have expired or been terminated.
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
12.1 Delivery of Funds and Other Assets Collected by Seller; Power
of Attorney. To the extent Seller receives any funds or other assets in payment
of receivables, or in connection with any other Assets, being sold to Purchaser
pursuant hereto, Seller shall immediately deliver such funds and assets to
Purchaser and take all steps necessary to vest title to such funds and assets
in Purchaser. Seller hereby designates Purchaser and its officers as Seller's
true and lawful attorney-in-fact, with full power of substitution, to execute
or endorse for the benefit of Purchaser any checks, notes or other documents
included in the Assets or received by Purchaser in payment of or in
substitution or exchange for any of the Assets. Seller hereby acknowledges and
agrees that the power of attorney set forth in the preceding sentence is
coupled with an interest, and further agrees to execute and deliver to
Purchaser from time to time any documents or instruments reasonably requested
by Purchaser to evidence such power of attorney.
12.2 Change of Name of Seller. Immediately upon the occurrence of
the Closing, Seller shall cease using, and thereafter not use, the name "Denver
Peterbilt" and all derivations thereof in connection with any business
enterprise or investment activity, including but not limited to the sale of new
or used trucks or other motor vehicles, except with respect to the filing and
use of the "Denver Peterbilt" tradename in connection with securing dealer
license plates for vehicles of Shareholder and with collection of accounts
receivable of Seller existing on the Closing Date. Within one year after the
Closing Date, Seller will take all actions necessary to change its corporate
name to a name other than "Denver Peterbilt" or a derivation thereof.
12.3 Access to Files. For a period of five years after the Closing
or such longer term as Seller or Shareholder may require if Seller or
Shareholder is then involved in litigation or under investigation or audit by a
governmental agency or bureau relating to Seller or the Assets, Purchaser shall
maintain and give Seller and Shareholder and their respective representatives
full access to, and shall permit Seller and Shareholder and their respective
representatives, at their own expense, to make photocopies of, all originals of
the files and records relating to Seller or the Assets.
12.4 Exchange Act Filing; Cooperation. After the Closing, Seller
shall, at the cost and expense of Purchaser, reasonably cooperate with and
provide information to Purchaser as is necessary for Purchaser to comply with
its reporting obligations under the Exchange Act.
13. INDEMNITY BY SELLER AND SHAREHOLDER.
13.1 Indemnity. Seller and the Shareholder (the "Indemnifying
Parties") shall, and hereby do, jointly and severally indemnify, hold harmless
and defend Purchaser and its officers, directors, employees, agents,
consultants, representatives and Affiliates (collectively, the "Indemnified
Parties") at all times from and after the date of Closing, from and against any
and all penalties, demands, damages, punitive damages, losses, liabilities,
suits, costs, costs of any settlement or judgment, claims of any and every kind
whatsoever, refund obligations (including, without limitation, interest and
penalties thereon), remediation costs and expenses (including, without
limitation, reasonable attorneys' fees and reduced by the amount of any federal
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income tax benefits utilized by Purchaser), of or to any of the Indemnified
Parties ("Damages"), which may now or in the future be paid, incurred or
suffered by or asserted against the Indemnified Parties by any Person resulting
or arising from or incurred in connection with any one or more of the following
(provided that this Section 13.1 shall not apply to any items that have been
expressly assumed by Purchaser under this Agreement):
(a) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) of or
against Seller or Shareholder or related in any way to the business or
assets of any of them;
(b) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related
in any way to the Assets or the Business to the extent such liability
or claim for liability arises in connection with any action, omission
or event occurring on or prior to the Closing Date (including, but not
limited to, claims for product liability with respect to products
manufactured, distributed or sold by Seller on or prior to the Closing
Date);
(c) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related
to any liens, obligations or encumbrances of any nature whatsoever
against or in any way related to the Assets or the Business which have
not been expressly assumed by Purchaser hereunder;
(d) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related
to Taxes of Seller;
(e) any liability or claim for liability (whether or not
successful) related to any lawsuit or threatened lawsuit or claim
involving Seller or Shareholder;
(f) any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of Seller or
Shareholder under this Agreement or from any misrepresentation in or
omission from any list, schedule, certificate or other instrument
furnished or to be furnished to Purchaser pursuant to the terms of
this Agreement, including any such misrepresentation, breach of
warranty or nonfulfillment disclosed to Purchaser in accordance with
Section 10.1 resulting in Damages of less than $200,000;
(g) any liability or claim for liability against Purchaser or
any of the Assets to the extent such liability or claim for liability
arises in connection with the failure of Purchaser and Seller to
comply with any applicable bulk transfer law; and
(h) all actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including costs of court
and reasonable attorneys' fees) incident to any of the foregoing;
but only if such Damages exceed $200,000 in the aggregate.
13.2 Notice of Claim. Purchaser agrees that upon its discovery of
facts giving rise to a claim for indemnity under the provisions of this
Agreement, including receipt by it or any Indemnified Party of notice of any
demand, assertion, claim, action or proceeding, judicial or otherwise, by any
Person with respect to any matter as to which any of the Indemnified Parties
are entitled to indemnity under the provisions of this Agreement (such actions
being collectively referred to herein as the "Claim"), Purchaser will give
prompt notice thereof in writing to Seller together with a statement of such
information respecting any of the foregoing as it shall then have; provided
that any delay in giving or failure to give such notice shall not limit the
rights of Purchaser or any Indemnified Party to indemnity hereunder except to
the extent that the Indemnifying parties are shown to have been damaged by such
delay or failure.
13.3 Right of Seller to Participate in Defense. With respect to any
Claim as to which any of the Indemnified Parties seeks indemnity hereunder,
Purchaser shall provide Seller with the opportunity to participate in the
defense of such Claim with counsel of Seller's choice and at Seller's cost and
expense and
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shall not, without the consent of Seller, which consent shall not be
unreasonably withheld, settle any such Claim, so long as the Indemnifying
Parties shall have unconditionally acknowledged their obligation to indemnify
hereunder with respect to such Claim. To the extent reasonably requested by
Purchaser, Seller shall reasonably cooperate with Purchaser and its
representatives and counsel in any dispute or defense related to any Claim.
13.4 Payment. The Indemnifying Parties shall promptly pay to
Purchaser or such other Indemnified Party as may be entitled to indemnity
hereunder in cash the amount of any Damages to which Purchaser or such
Indemnified Party may become entitled by reason of the provisions of this
Agreement.
13.5 Limit of Liability of Shareholder. Notwithstanding any other
provisions of this Agreement, the liability of Shareholder under this
Agreement, shall be limited in the aggregate to $8,000,000.
13.6 Limitations on Indemnity. Notwithstanding the foregoing
provisions of Article 13:
(a) No action for indemnification shall be brought by the
Indemnified Parties under Article 13 unless a Claim has been delivered
to the Indemnifying Parties prior to the expiration of two years after
the Closing Date; and
(b) No action for indemnification shall be brought by any
Indemnified Party under Article 13 with respect to any matter of which
such Indemnified Party had actual knowledge prior to Closing, other
than from oral communications from Seller or Shareholder.
(c) Neither Seller nor Shareholder shall be liable to any
Indemnified Party under this Agreement for any Damages for any
Environmental Liability with respect to, or relating to, any acts,
omissions, conditions, facts or circumstances occurring or existing
prior to December 31, 1986.
13A. INDEMNITY BY PURCHASER.
13A.1 Indemnity. Purchaser shall, and hereby does indemnify,
hold harmless and defend Seller and Shareholder at all times from and after the
date of this Agreement, from and against any and all penalties, demands,
damages, punitive damages, losses, liabilities, suits, costs, costs of any
settlement or judgment, claims of any and every kind whatsoever, refund
obligations (including, without limitation, interest and penalties thereon),
remediation costs and expenses (including, without limitation, reasonable
attorneys' fees), of or to Seller or Shareholder ("Damages"), which may now or
in the future be paid, incurred or suffered by or asserted against Seller or
Shareholder by any Person resulting or arising from or incurred in connection
with any one or more of the following:
(a) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related
in any way to the Assets or the Business to the extent such liability
or claim for liability arises in connection with any action, omission
or event occurring after the Closing Date (including, but not limited
to, claims for product liability with respect to products
manufactured, distributed or sold by Seller after the Closing Date;
and
(b) any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of Purchaser
under this Agreement or from any misrepresentation in or omission from
any list, schedule, certificate or other instrument furnished or to be
furnished to Seller or Shareholder pursuant to the terms of this
Agreement.
(c) any failure to timely make any payment due to Seller
or Shareholder pursuant to the terms of this Agreement, including but
not limited to the provisions of Sections 3.1(h) and 3.3.
13A.2 Notice of Claim. Seller and Shareholder agrees that upon their
discovery of facts giving rise to a claim for indemnity under the provisions of
this Agreement, including receipt by Seller or Shareholder of notice of any
demand, assertion, claim, action or proceeding, judicial or otherwise, by any
Person with respect to any matter as to which Seller or Shareholder are
entitled to indemnity under the provisions of this
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Agreement (such actions being collectively referred to herein as the "Claim"),
Seller and Shareholder will give prompt notice thereof in writing to Purchaser
together with a statement of such information respecting any of the foregoing
as they shall then have; provided that any delay in giving or failure to give
such notice shall not limit the rights of Seller or Shareholder to indemnity
hereunder except to the extent that the Purchaser is shown to have been damaged
by such delay or failure.
13A.3 Right of Purchaser to Participate in Defense. With respect to
any Claim as to which Seller or Shareholder seeks indemnity hereunder, Seller
and Shareholder shall provide Purchaser with the opportunity to participate in
the defense of such Claim with counsel of Purchaser's choice and at Purchaser's
cost and expense. To the extent reasonably requested by Seller and Shareholder,
Purchaser shall reasonably cooperate with Seller and Shareholder and their
representatives and counsel in any dispute or defense related to any Claim.
13A.4 Payment. Purchaser shall promptly pay to Seller and
Shareholder in cash the amount of any Damages to which Seller and Shareholder
may become entitled by reason of the provisions of this Agreement.
13A.5 Limitations on Indemnity. Notwithstanding the foregoing
provisions of Article 13A:
(a) No action for indemnification shall be brought by Seller
or Shareholder under Article 13A unless a Claim has been delivered to
Purchaser prior to the expiration of two years after the Closing Date
except for claims related to the payments due to Seller and
Shareholder pursuant to Sections 3.1(h) and 3.3.
(b) No action for indemnification shall be brought by Seller
or Shareholder under this Article 13A with respect to any matter of
which Seller or Shareholder had actual knowledge prior to Closing,
other than from oral communications from Purchaser.
14. LEASE AGREEMENT. An appraisal of the property on which
Seller's Denver, Colorado dealership is located (the "Denver Property") will be
completed as of the date of Closing and a "net net" lease between Seller and
Purchaser in the form of and containing the same terms and provisions as the
Lease Agreement included in Schedule 14 (the "Lease Agreement") will be entered
into on such date. The terms of the Lease Agreement will provide that (a)
Purchaser will pay rent to Seller in a monthly amount equal to 1% of the
appraised value of the Denver Property as of the date of Closing, and (b) the
Lease Agreement will be for a period equal to the earlier to occur of (i) 30
months from the Closing, or (ii) at such time as Purchaser is prepared to
relocate the Denver, Colorado dealership and the Denver Property is sold. At
the expiration of such period, Seller and Purchaser shall jointly use their
best efforts to sell the Denver Property. If after a reasonable marketing
period the best bona fide offer to purchase such property is less than 90% of
the amount that such property appraised for on the date of Closing and Seller
desires to sell the Denver Property, Purchaser shall be required to elect to
either (i) purchase the Denver Property for an amount equal to 90% of such
appraised value, or (ii) direct Seller to sell the Denver Property for the
amount of such bona fide offer and pay to Seller an amount equal to the
difference between 90% of the appraised value of the Denver Property on the
date of Closing and the amount for which such property is ultimately sold.
15. NONCOMPETITION AGREEMENTS. On the Closing Date, Seller and
Shareholder shall execute and deliver to Purchaser a Noncompetition Agreement
in the form of and containing the same terms and provisions as the
Noncompetition Agreement included in Schedule 15.
16. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Seller and
Shareholder recognize and acknowledge that they have and will have access to
certain confidential information) of Seller that is included in the Assets
(including, but not limited to, lists of customers, and costs and financial
information) that after the consummation of the transactions contemplated
hereby will be valuable, special and unique property of Purchaser. Seller and
Shareholder agree that they will not disclose, and they will use their best
efforts to prevent disclosure by any other Person of, any such confidential
information to, nor any discussion of any of the terms of this Agreement with,
any Person for any purpose or reason whatsoever, except to authorized
representatives of Purchaser. Seller and Shareholder recognize and agree that
violation of any of the agreements contained in this Article 16 will cause
irreparable damage or injury to Purchaser, the exact amount
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of which may be impossible to ascertain, and that, for such reason, among
others, Purchaser shall be entitled to an injunction, without the necessity of
posting bond therefor, restraining any further violation of such agreements.
Such rights to any injunction shall be in addition to, and not in limitation
of, any other rights and remedies Purchaser may have against Seller or
Shareholder.
17. ASSIGNMENT OF CONTRACTS. Notwithstanding any other provision
of this Agreement, nothing in this Agreement or any related document shall be
construed as an attempt to assign (i) any Contract which, as a matter of law or
by its terms, is nonassignable without the consent of the other parties thereto
unless such consent has been given, or (ii) any Contract or claim as to which
all of the remedies for the enforcement thereof enjoyed by Seller would not, as
a matter of law or by its terms, pass to Purchaser as an incident of the
transfers and assignments to be made under this Agreement. In order, however,
that the full value of every Contract and claim of the character described in
clauses (i) and (ii) above and all claims and demands on such Contracts may be
realized for the benefit of Purchaser, Seller, at the request and expense and
under the direction of Purchaser, shall take all such action and do or cause to
be done all such things as will, in the opinion of Purchaser, be necessary or
proper in order that the obligations of Seller under such Contracts may be
performed in such manner that the value of such Contract will be preserved and
will inure to the benefit of Purchaser, and for, and to facilitate, the
collection of the moneys due and payable and to become due and payable
thereunder to Purchaser in and under every such contract and claim. Seller
shall promptly pay over to Purchaser all moneys collected by or paid to it in
respect of every such contract, claim or demand. Nothing in this Article 17
shall relieve Seller and Shareholder of their obligations to obtain any
consents required for the transfer of the Assets and all rights thereunder to
Purchaser, or shall relieve Seller or Shareholder from any liability to
Purchaser for failure to obtain such consents.
18. DAMAGE TO ASSETS. If, on or before the Closing Date, any of
the Assets are damaged or destroyed, Seller will immediately notify Purchaser
of such damage or destruction. In the event of any such damage or destruction,
Purchaser shall, except as otherwise provided in this Agreement, (i) remove any
or all of the damaged or destroyed asset or assets it does not desire to
purchase from the Assets to be purchased hereunder and reduce the Purchase
Price by an amount equal to the portion of the Purchase Price attributable to
the damaged or destroyed asset or assets so removed and (ii) complete the
purchase of the remainder of the Assets and reduce the Purchase Price by the
loss in fair market value of any damaged or destroyed Assets that are purchased
by Purchaser.
19. EXPENSES. Whether or not the transactions contemplated hereby
are consummated, each of the parties will pay all costs and expenses of its or
his performance of and compliance with this Agreement.
20. 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.
21. NOTICES. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally, given by
prepaid telex or telegram or by facsimile or other similar instantaneous
electronic transmission device or mailed first class, postage prepaid,
certified United States mail, return receipt requested, as follows:
(a) If to Purchaser, at:
Rush Truck Centers of Colorado, Inc.
P. O. Box 34630
San Antonio, Texas 78265
Attention: Robin M. Rush
Facsimile No.: (210) 661-4306
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With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro, Esq.
Facsimile No.: (210) 224-8336
(b) If to Seller, at:
Denver Peterbilt, Inc.
4901 Race Street
Denver, Colorado 80216
Attention: Greg Lessing
Facsimile No.: (303) 292-5377
With a copy to:
Lentz, Evans & King, P.C.
2900 Lincoln Centre Bldg.
1660 Lincoln Street
Denver, Colorado 80264
Attention: Richard Robinson
Facsimile No.: (303) 860-8654
(c) If to Shareholder, at:
Greg Lessing
13506 Travois Trail
Parker, Colorado 80134
With a copy to:
Lentz, Evans & King, P.C.
2900 Lincoln Centre Bldg.
1660 Lincoln Street
Denver, Colorado 80264
Attention: Richard Robinson
Facsimile No.: (303) 860-8654
provided that any party may change its address for notice by giving to the
other party written notice of such change. Any notice given under this Article
21 shall be effective when received at the address for notice for the party to
which the notice is given.
22. GENERAL PROVISIONS.
22.1 Governing Law; Interpretation; Section Headings. This
Agreement shall be governed by and construed and enforced in accordance with
the laws of the State of Colorado, without regard to conflict-of-laws rules as
applied in Colorado. The section headings contained herein are for purposes of
convenience only, and shall not be deemed to constitute a part of this
Agreement or to affect the meaning or interpretation of this Agreement in any
way.
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22.2 Severability. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or the
State of Texas, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intention of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of
this Agreement shall not be affected by any such modification or severance,
except that if any severance materially alters the intentions of the parties
hereto as expressed herein (a modification being permitted only if there is no
material alteration), then the parties hereto shall use commercially reasonable
efforts to agree to appropriate equitable amendments to this Agreement in light
of such severance, and if no such agreement can be reached within a reasonable
time, any party hereto may initiate arbitration under the then current
commercial arbitration rules of the American Arbitration Association to
determine and effect such appropriate equitable amendments.
22.3 Entire Agreement. This Agreement, the Schedules and the
documents and agreements referenced herein set forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersede all prior agreements, arrangements and
understandings related to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by any party hereto
which is not embodied or referenced in this Agreement, the Schedules or the
documents or agreements referenced herein, and no party hereto shall be bound
by or liable for any alleged representation, promise, inducement or statement
of intention not so set forth.
22.4 Binding Effect. All the terms, provisions, covenants and
conditions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
22.5 Assignment. This Agreement and the rights and obligations of
the parties hereto shall not be assigned or delegated by any party hereto
without the prior written consent of the other parties hereto.
22.6 Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms, provisions, representations,
warranties, covenants or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provision, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach of
any other term, provision, representation, warranty or covenant.
22.7 Gender; Numbers. All references in this Agreement to the
masculine, feminine or neuter genders shall, where appropriate, be deemed to
include all other genders. All plurals used in this Agreement shall, where
appropriate, be deemed to be singular, and vice versa.
22.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall be binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the parties reflected hereon as
signatories.
22.9 Telecopy Execution and Delivery. A facsimile, telecopy or
other reproduction of this Agreement may be executed by one or more parties
hereto, and an executed copy of this Agreement may be delivered by one or more
parties hereto by facsimile or similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such party can be
seen, and such execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of any party hereto, all parties
hereto agree to execute an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
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22.10 Press Releases. No press releases or other public announcement
with respect to this Agreement or the transactions contemplated herein shall be
made prior to the Closing Date without the joint approval of Purchaser and
Seller, except as required by law.
22.11 Arbitration. The Parties to this Agreement agree that any
dispute or controversy arising out of or in connection with this Agreement or
any alleged breach hereof shall be settled by arbitration in Denver, Colorado,
pursuant to the rules of the American Arbitration Association. If the two
parties cannot jointly select a single arbitrator to determine the matter, one
arbitrator shall be chosen by each party (or, if a party fails to make a
choice, by the American Arbitration Association on behalf of such party) and
the two arbitrators so chosen will select a third. The decisions of the single
arbitrator jointly selected by the parties, or, if three arbitrators are
selected, the decision of any two of them, will be final and binding upon the
parties and the judgment of a court of competent jurisdiction may be entered
thereon. Fees of the arbitrators and costs of arbitration shall be borne by the
parties in such manner as shall be determined by the arbitrator or arbitrators.
23. TERMINATION. This Agreement may be terminated without further
obligation of the parties, as follows:
23.1 Mutual Consent. This Agreement may be terminated at any time
prior to Closing by mutual written consent of the parties hereto.
23.2 Termination.
(a) Termination by Purchaser. This Agreement may be
terminated by Purchaser upon delivery of a written notice of
termination to Seller and Shareholder if the conditions set forth in
Article 10 of this Agreement have not been fulfilled by Seller, or
waived by Purchaser on or before the Closing Date. Prior to Purchaser
exercising its rights to terminate this Agreement, it shall deliver
written notice of such failure to Seller and to Shareholder describing
such failure in detail, and giving Seller and Shareholder, at their
option, the right to delay the closing for a period of not more than
180 days for the purpose of curing such failure. In the event of such
termination, the Escrowed Funds (as defined in the Escrow Agreement
dated December _, 1996, among Seller, Purchaser and the Escrow Agent
(as defined therein)) shall be delivered to Purchaser, and Purchaser
shall have no further claim or right of action against Seller or
Shareholder as a result of this Agreement, except that if such
termination occurs because of any failure under Sections 9.3, 10.7,
10.9, 10.10, 10.11 or 10.12of the Agreement, then Seller and
Shareholder shall pay to Purchaser cash in the amount of $1,000,000 as
liquidated damages, in full satisfaction of any and all claims or
causes of action against Seller and Shareholder as a result of such
failure.
(b) Termination by Seller. This Agreement may be
terminated by Seller and Shareholder upon delivery of a written notice
of termination to Purchaser, if the conditions set forth in Sections
9.3 or 11 of this Agreement have not been fulfilled by Purchaser or
waived by Seller on or before the Closing Date. Prior to Seller
exercising its rights to terminate this Agreement, it shall deliver
written notice of such failure to Purchaser describing such failure in
detail and giving Purchaser, at its option, the right to delay the
closing for a period of not more than 180 days for the purpose of
curing such failure. In the event of such termination, the Escrowed
Funds shall be delivered to Seller as liquidated damages, and Seller
shall have no further claim or right of action against Purchaser or
Rush as a result of this Agreement.
(c) Exclusivity of Remedies. The termination of the
Agreement and the provisions for liquidated damages set forth in this
Section 23.2 shall be the exclusive remedy of either party for the
other party's failure to satisfy the conditions set forth in Sections
9.3, 10 or 11.
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24. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER.
24.1 New Employees of Purchaser. It is the intention of Purchaser,
and Seller hereby acknowledges and agrees with such position, that any
employees of Seller that Purchaser hires will be new employees of Purchaser as
of the Closing Date or the date of hire, which ever is later. Such new
employees shall be entitled only to such compensation and employees benefits as
are agreed to by such employees and Purchaser, or as are otherwise provided by
Purchaser, in its sole discretion.
24.2 No Hiring Commitment. Purchaser specifically does not commit
to hire any of the employees of the Business, and Seller specifically
understands and acknowledges this fact. However, notwithstanding Purchaser's
position, Purchaser will review its needs in anticipation of the purchase of
the Assets with a view to hiring certain of the employees of Seller as of the
Closing Date. In its review, Purchaser expects to be able to review employee
records and conduct employee interviews. Seller agrees that after the date
hereof it will make, on a confidential basis, its employee records available to
Purchaser and permit Purchaser to contact its employees for the purpose of
conducting employee interviews. Seller further agrees to make employees
designated by Purchaser available to Purchaser for such purpose.
24.3 Existing Employee Benefit Plans; Assumption of Vacation and
Sick Leave Obligations. At the Closing, Purchaser shall assume Seller's
obligations to employees of Seller hired by Purchaser for accrued but unused
vacation and sick leave, and the Purchase Price shall be reduced by the dollar
value of such obligation. Except for vacation and sick leave time assumed by
Purchaser as set forth above, Purchaser shall have no obligation after the
Closing to continue any pension plans or work benefit plans currently offered
by Seller to its employees.
25. OFFSET PROVISIONS. If, following the Closing Date, Seller or
Shareholder becomes obligated to pay any sums to Purchaser or any Indemnified
Party pursuant to the provisions of Section 13 of this Agreement, Purchaser
shall be entitled to and shall have the right to reduce and offset payments due
under this Agreement and the Noncompetition Agreement in such amount or amounts
as Purchaser (and any Indemnified Party that is not promptly paid by Seller) is
entitled to receive from Seller or Shareholder, and any such offset shall be
deemed to be a payment under such Agreements; provided, however, that prior to
any such offset Purchaser shall have provided to the Shareholder a notice of
Claim as described in Section 13.2 or an otherwise reasonably detailed
description of the matter giving rise to such offset.
26. ADJUSTMENT OF PURCHASE PRICE. The Purchase Price shall be
adjusted on the Closing Date (i) to reduce the Purchase Price by the amount
allocated to any damaged or destroyed Assets as contemplated by Article 18;
(ii) to account for a proration of property taxes on the Assets, lease
payments, utilities and other items commonly prorated; and (iii) to reduce the
Purchase Price for the value of any vacation and sick time obligations of
Seller assumed by Purchaser pursuant to Section 24.3. Three (3) days prior to
the Closing Date, Seller will provide Purchaser with a statement of adjustments
showing all proposed adjustments to the Purchase Price, such statement of
adjustments having all reasonable back up documentation for such suggested
adjustments. Purchaser and Seller will work to finalize all required
adjustments prior to the Closing Date.
27. GUARANTEE. Rush hereby (i) unconditionally guarantees the
prompt payment and performance of each and every obligation, liability,
indemnity, covenant and agreement of Purchaser under this Agreement, (ii)
waives any requirement of notice, demand, protest or grace period with respect
thereto; (iii) agrees that neither Seller nor Shareholder shall be required to
either seek recovery from Purchaser or to exhaust their remedies against
Purchaser or any other person before enforcing the provisions of this
guarantee; (iv) waives any defense arising by reason of any disability or other
defense of Purchaser (other than an offset in accordance with Article 25 of
this Agreement), or by reason of cessation of liability from any cause
whatsoever, except full payment or performance thereof; and (v) agrees that
Seller and Shareholder shall be entitled to recover all costs and expenses with
respect to the enforcement of this guarantee, including but not limited to
court costs and reasonable attorneys' fees. Rush hereby agrees and acknowledges
that Seller and Shareholder are relying on this guarantee in entering into and
consummating the transactions contemplated by this Agreement, and that, but for
this guarantee, they would not enter into this Agreement or consummate the
transactions contemplated hereby.
27
34
IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first above written.
PURCHASER:
RUSH TRUCK CENTERS OF
COLORADO, INC.
By: /s/ W. Marvin Rush
---------------------------------------
Name: W. Marvin Rush
------------------------------------
Title: Chief Executive Officer
------------------------------------
SOLE SHAREHOLDER OF PURCHASER:
RUSH ENTERPRISES, INC.
By: /s/ W. Marvin Rush
-------------------------------------------
Name: W. Marvin Rush
-------------------------------------
Title: Chairman of the Board and Chief
Executive Officer
-----------------------------------
SELLER:
DENVER PETERBILT, INC.
By: /s/ Greg Lessing
---------------------------------------
Name: Greg Lessing
-------------------------------------
Title:
-------------------------------------
SOLE SHAREHOLDER OF SELLER:
/s/ Greg Lessing
-------------------------------------------
Greg Lessing
28
1
EXHIBIT 11.1
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME AND PRO FORMA EARNINGS PER SHARE
(in thousands, except per share amounts - unaudited)
Three months ended Year ended
December 31, December 31,
------------------ ------------------
1996 1995 1996 1995
======== ======== ======== ========
PRIMARY EARNINGS PER SHARE CALCULATION
Income from continuing operations $ 1,607 $ 2,355 $ 6,202 $ 6,443
Income from discontinued operations - 0 - - 0 - - 0 - 1,561
-------- -------- -------- --------
Net income $ 1,607 $ 2,355 $ 6,202 $ 8,004
======== ======== ======== ========
Weighted average number of common shares outstanding 6,644 3,750 5,590 3,750
Weighted average number of common share equivalents applicable
to stock options - 0 - - 0 - - 0 - - 0 -
-------- -------- -------- --------
Common shares and common share equivalents 6,644 3,750 5,590 3,750
======== ======== ======== ========
Earnings per share - Primary
From continuing operations $ .24 $ .63 $ 1.11 $ 1.72
From discontinued operations - 0 - - 0 - - 0 - .41
-------- -------- -------- --------
Net income $ .24 $ .63 $ 1.11 $ 2.13
======== ======== ======== ========
FULLY-DILUTED EARNINGS PER SHARE CALCULATION
Income from continuing operations $ 1,607 $ 2,355 $ 6,202 $ 6,443
Income from discontinued operations - 0 - - 0 - - 0 - 1,561
-------- -------- -------- --------
Net income $ 1,607 $ 2,355 $ 6,202 $ 8,004
======== ======== ======== ========
Weighted average number of common shares outstanding 6,644 3,750 5,590 3,750
Weighted average number of common share equivalents applicable
to stock options - 0 - - 0 - - 0 - - 0 -
-------- -------- -------- --------
Common shares and common share equivalents 6,644 3,750 5,590 3,750
======== ======== ======== ========
Earnings per share - Fully diluted (1)
From continuing operations $ .24 $ .63 $ 1.11 $ 1.72
From discontinued operations - 0 - - 0 - - 0 - .41
-------- -------- -------- --------
Net income $ .24 $ .63 $ 1.11 $ 2.13
======== ======== ======== ========
(1) This calculation is submitted in accordance with item 601(b)11 of
regulation S-K although it is not required by APB Opinion No. 15
because it results in dilution of less than 3%.
PRO FORMA EARNINGS PER SHARE
Pro forma income from continuing operations after provision
for income taxes $ 1,460 $ 5,268 $ 3,995
Weighted average shares of common stock outstanding 3,750 5,338 3,750
Pro forma shares issued at offering price to pay undistributed
S corporation earnings 547 252 547
-------- -------- --------
Pro forma weighted average shares outstanding 4,297 5,237 4,297
-------- -------- --------
Pro forma income from continuing operations per share $ .34 $ .94 $ .75
======== ======== ========
1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into the Company's
previously filed Registration Statement (SEC File No. 333-07043).
ARTHUR ANDERSEN LLP
San Antonio, Texas
March 25, 1997
5
1,000
YEAR
DEC-31-1996
JAN-01-1996
DEC-31-1996
21,507
0
23,671
(607)
36,688
82,762
28,790
(5,568)
109,217
58,086
0
0
0
66
36,626
109,217
343,661
343,661
289,143
332,111
0
0
3,053
8,497
2,295
6,202
0
0
0
6,202
0.94
0.94
