<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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<PAGE> 2
RUSH ENTERPRISES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 4, 1997
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy are furnished to the
shareholders of Rush Enterprises, Inc., a Texas corporation (the "Company" or
"Rush"), in connection with the solicitation by the Board of Directors of
proxies for use at the Annual Meeting of Shareholders (the "Annual Meeting" or
"Meeting") to be held on June 4, 1997, at 10:00 a.m., C.S.T., at the Plaza
Club, Frost National Bank Building, 100 West Houston St., 21st Floor, San
Antonio, Texas 78205, and at any adjournment or postponement thereof, for the
purposes set forth in the foregoing Notice of Annual Meeting of Shareholders.
Properly executed proxies received in time for the Meeting will be voted.
The securities of the Company entitled to vote at the Annual Meeting
consist of shares of common stock, $.01 par value (the "Common Stock"). At the
close of business on April 11, 1997 (the "Record Date"), there were outstanding
and entitled to vote 6,643,730 shares of Common Stock. The holders of record
of Common Stock on the Record Date will be entitled to one vote per share. The
Company's Articles of Incorporation do not permit cumulative voting in the
election of directors.
The Annual Report to Shareholders for the year ended December 31, 1996
has been or is being furnished with this Proxy Statement, which is being mailed
on or about May 2, 1997, to the holders of record of Common Stock on the Record
Date. The Annual Report to Shareholders does not constitute a part of the
proxy materials.
VOTING AND PROXY PROCEDURES
Properly executed proxies received in time for the Meeting will be
voted. Shareholders are urged to specify their choices on the proxy, but if no
choice is specified, eligible shares will be voted for the election of the six
nominees for director named herein, for approval of the Company's 1997
Non-Employee Director Stock Option Plan and for ratification of the appointment
of Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending December 31, 1997. At the date of this Proxy Statement,
management of the Company knows of no other matters which are likely to be
brought before the Annual Meeting. However, if any other matters should
properly come before the Annual Meeting, the persons named in the enclosed
proxy will have discretionary authority to vote such proxy in accordance with
their best judgment on such matters.
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked by a later-dated proxy or by written notice filed with
the Secretary at the Company's executive offices at any time before the
enclosed proxy is exercised. Shareholders attending the Annual Meeting may
revoke their proxies and vote in person. The Company's executive offices are
located at 8810 I.H. 10 East, San Antonio, Texas 78219 and the Company's
mailing address is P.O. Box 34630, San Antonio, Texas 78265-4630.
The holders of a majority of the total shares of Common Stock issued
and outstanding at the close of business on the Record Date, whether present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. The affirmative vote of a plurality of the
total shares of Common Stock present in person or represented by proxy and
entitled to vote at the Meeting is required for the election of directors, and
the affirmative vote of a majority of the total shares of Common Stock present
in person or represented by proxy and entitled to vote at the Annual Meeting is
required for the approval of the Company's 1997 Non-Employee Director Stock
Option Plan, the ratification of the appointment of Arthur Andersen LLP and any
other matters as may properly come before the Annual Meeting or any adjournment
thereof.
Abstentions are counted toward the calculation of a quorum, but are
not treated as either a vote for or against a proposal. An abstention has the
same effect as a vote against the proposal. Any unvoted position in a
brokerage account will be considered as not voted and will not be counted
toward fulfillment of quorum requirements.
<PAGE> 3
The cost of solicitation of proxies will be paid by the Company. In
addition to solicitation by mail, proxies may be solicited by the directors,
officers and employees of the Company, without additional compensation (other
than reimbursement of out-of-pocket expenses), by personal interview,
telephone, telegram or otherwise. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries who hold the
voting securities of record for the forwarding of solicitation materials to the
beneficial owners thereof. The Company will reimburse such brokers,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith.
OWNERSHIP OF COMMON STOCK
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth as of April 11, 1997, certain
information with respect to the Company's Common Stock beneficially owned by
each shareholder known by the Company to be the beneficial owner of more than
5% of the Company's Common Stock, each of its directors, each executive officer
named in the Summary Compensation Table and by all its directors and executive
officers as a group. Such persons have sole voting power and sole dispositive
power with respect to all shares set forth in the table unless otherwise
specified in the footnotes to the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP PERCENT(2)
------------------------------------ - --------- -------
<S> <C> <C>
W. Marvin Rush . . . . . . . . . . . . . . . . . . . . . . 3,750,000 56.0%
The Kaufman Fund, Inc.(3) . . . . . . . . . . . . . . . . 500,000 7.5%
W. M. "Rusty" Rush . . . . . . . . . . . . . . . . . . . . 3,041 *
Robin M. Rush . . . . . . . . . . . . . . . . . . . . . . 750 *
David C. Orf . . . . . . . . . . . . . . . . . . . . . . . 3,000 *
Brent Hughes . . . . . . . . . . . . . . . . . . . . . . . 1,926 *
J.M. "Spike" Lowe . . . . . . . . . . . . . . . . . . . . 1,811 *
Joseph M. Dunn(4) . . . . . . . . . . . . . . . . . . . . 10,100 *
Ronald J. Krause(4) . . . . . . . . . . . . . . . . . . . 16,000 *
John D. Rock . . . . . . . . . . . . . . . . . . . . . . . 0 *
All executive officers and directors as a group
(nine persons, including the executive officers
and directors listed above) . . . . . . . . . . . . . . 3,786,628 56.8%
</TABLE>
- --------------------
* Represents less than 1% of the issued and outstanding shares of Common
Stock.
(1) Except as otherwise noted, the street address of the named beneficial
owner is 8810 I.H. 10 East, San Antonio, Texas 78219.
(2) Based on a total of 6,643,730 shares of Common Stock issued and
outstanding on April 11, 1997.
(3) The street address of The Kaufman Fund, Inc. is 140 East 45th Street,
43rd Floor, New York, New York 10017.
(4) Includes 10,000 shares which may be acquired pursuant to the Company's
1997 Non-Employee Director Stock Option Plan, subject to approval of
such plan by the shareholders of the Company.
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<PAGE> 4
MATTERS TO COME BEFORE THE ANNUAL MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
Six directors (constituting the entire Board) are to be elected at the
Annual Meeting. All of the persons named below are now directors of the
Company. All nominees have consented to be named and have indicated their
intent to serve if elected.
<TABLE>
<CAPTION>
Served as a
Name Age Positions and Offices with the Company Director Since
---- --- -------------------------------------- --------------
<S> <C> <C> <C>
W. Marvin Rush 57 Chairman of the Board, 1965
Chief Executive Officer and Director
W. M. "Rusty" Rush 38 President and Director 1996
Robin M. Rush 37 Executive Vice President, 1996
Secretary, Treasurer and Director
Joseph M. Dunn 69 Director 1996
Ronald J. Krause 68 Director 1996
John D. Rock 61 Director 1997
</TABLE>
Biographical information on these directors is set forth below under
"Further Information -- Board of Directors and Executive Officers."
It is the intention of the persons named in the enclosed proxy to vote
such proxy for the election of such nominees. Management of the Company does
not contemplate that any of such nominees will become unavailable for any
reason, but if that should occur before the meeting, proxies that do not
withhold authority to vote for directors will be voted for another nominee, or
other nominees, in accordance with the best judgment of the person or persons
appointed to vote the proxy.
The enclosed form of proxy provides a means for the holders of Common
Stock to vote for each of the nominees listed therein, to withhold authority to
vote for one or more of such nominees or to withhold authority to vote for all
nominees. Each properly executed proxy received in time for the Meeting will
be voted as specified therein, or if a shareholder does not specify in his or
her executed proxy how the shares represented by his or her proxy are to be
voted, such shares shall be voted for the nominees listed therein or for other
nominees as provided above. The director nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected as directors. Abstentions and
broker non-votes will not be treated as a vote for or against any particular
director nominee and will not affect the outcome of the election.
COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of its
Board of Directors. The Company's Board of Directors has established two
standing committees: Audit and Compensation.
The Audit Committee recommends the selection of and confers with the
Company's independent accountants regarding the scope and adequacy of annual
audits, reviews reports from the independent accountants and meets with the
independent accountants and with the Company's financial personnel to review
the adequacy of the Company's accounting principles, financial controls and
policies. The Audit Committee consists of three non-employee directors: Joseph
M. Dunn, Ronald J. Krause and John D. Rock.
The Compensation Committee reviews the Company's compensation
philosophy and programs, exercises authority with respect to the payment of
direct salaries and incentive compensation to directors and officers of the
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<PAGE> 5
Company and administers the Company's Long-Term Incentive Plan (the "Incentive
Plan"). The Compensation Committee consists of three non-employee directors:
Joseph M. Dunn, Ronald J. Krause and John D. Rock.
MEETINGS OF THE BOARD OF DIRECTORS
During 1996, the Board of Directors met four times and took action on
four occasions by unanimous written consent. The Compensation Committee and
the Audit Committee did not meet during 1996. Each of the directors of the
Company attended at least 75% of the aggregate of the meetings of the Board of
Directors and committees of which he was a member.
COMPENSATION OF DIRECTORS
During 1996, each outside member of the Board of Directors received
$1,000 per day in which the director rendered services on behalf of the Company
and a quarterly director's fee of $2,500. The members of the Board of
Directors are reimbursed for their travel expenses to and from the meetings.
In March 1997, the Board of Directors adopted the 1997 Non-Employee
Director Stock Option Plan (the "NEDSOP"), which is presented for consideration
and action by the shareholders under "Approval of 1997 Non-Employee Director
Stock Option Plan" below. Pursuant to the NEDSOP, the following options are
automatically granted to non-employee directors: (i) as to each person serving
as a non-employee director at the time of adoption of the NEDSOP, (A) an option
to acquire 10,000 shares as of the adoption of the NEDSOP, and (B) during each
subsequent fiscal year in which such person remains a non-employee director, an
option to acquire an additional 10,000 shares as of the date such director is
reelected as a director of the Company; and (ii) as to each person who becomes
a non-employee director after the date of adoption of the NEDSOP, (A) an option
to purchase 10,000 shares as of the date such director is elected as a director
of the Company, if such election takes place at an annual meeting of
shareholders, and 10,000 shares as of the date of the first annual meeting of
shareholders subsequent to such director's election, if such election does not
occur at an annual meeting of shareholders, and (B) during each subsequent
fiscal year in which such person remains a non-employee director, an option to
acquire an additional 10,000 shares as of the date such director is reelected
as a director of the Company. The aggregate number of shares with respect to
which options may be granted under the NEDSOP shall not, in any event, exceed
100,000 shares. Each option is granted at the closing price of the Common
Stock as reported by The Nasdaq Stock Market on the date of grant and fully
vests on the date of grant. For more information regarding the NEDSOP, see
"Approval of 1997 Non-Employee Director Stock Option Plan" below.
For fiscal year 1997, if the NEDSOP is approved by the shareholders,
each outside member of the Board of Directors will receive options pursuant to
the terms of the NEDSOP in lieu of the quarterly director's fee of $2,500,
$1,000 per day in which the director renders services on behalf of the Company
and reimbursement for travel expenses to and from the meetings.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE INDIVIDUALS NOMINATED FOR ELECTION AS DIRECTORS
PROPOSAL 2: APPROVAL OF 1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
BACKGROUND
The Board of Directors desires to advance the interests of the
Company by providing the directors of the Company who at the time of their
service are not employees of the Company or any of its subsidiaries
("Non-Employee Directors") with additional incentive to serve the Company by
increasing their proprietary interest in the success of the Company.
Therefore, on March 25, 1997, the Board of Directors adopted, subject to
shareholder approval, the Rush Enterprises, Inc. 1997 Non-Employee Director
Stock Option Plan (the "NEDSOP") and reserved 100,000 shares of Common Stock
for issuance thereunder. The following is a summary of the provisions of the
NEDSOP. This summary does not purport to be a complete statement of the
provisions of the NEDSOP and is qualified in its entirety by the provisions of
the NEDSOP, a copy of which is included with this Proxy Statement as Exhibit A.
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<PAGE> 6
ADMINISTRATION
The NEDSOP will be administered by a committee of the Board of
Directors which shall consist solely of directors who are employees of the
Company (the "NEDSOP Committee"). Notwithstanding the above, the selection of
Non- Employee Directors to whom options under the NEDSOP (the "Options") are to
be granted, the number of shares subject to any Option, the exercise price of
any Option and the term of any Option shall be as provided in the NEDSOP and
the NEDSOP Committee shall have no discretion as to such matters.
GRANT OF OPTIONS
Pursuant to the NEDSOP, the following options are automatically
granted to non-employee directors: (i) as to each person serving as a
non-employee director at the time of adoption of the NEDSOP, (A) an option to
acquire 10,000 shares as of the adoption of the NEDSOP, and (B) during each
subsequent fiscal year in which such person remains a non- employee director,
an option to acquire an additional 10,000 shares as of the date such director
is reelected as a director of the Company; and (ii) as to each person who
becomes a non-employee director after the date of adoption of the NEDSOP, (A)
an option to purchase 10,000 shares as of the date such director is elected as
a director of the Company, if such election takes place at an annual meeting of
shareholders, and 10,000 shares as of the date of the first annual meeting of
shareholders subsequent to such director's election, if such election does not
occur at an annual meeting of shareholders, and (B) during each subsequent
fiscal year in which such person remains a non-employee director, an option to
acquire an additional 10,000 shares as of the date such director is reelected
as a director of the Company.
SHARES AVAILABLE FOR GRANT
A total of 100,000 shares of Common Stock have been reserved for
issuance under the NEDSOP. The number of shares available for the grant of
options may be subject to adjustment under certain circumstances. Shares
available for the grant of options are shares of the Company's treasury shares
or authorized but unissued shares. If options expire or terminate unexercised,
new options may thereafter be granted covering such shares.
DURATION OF OPTIONS
Each Option granted under the NEDSOP will be exercisable for a term of
ten years from the date such Option first becomes exercisable, subject to
earlier termination as provided in the NEDSOP.
AMOUNT EXERCISABLE
Each Option granted pursuant to the NEDSOP shall be fully exercisable
on the date of the grant.
EXERCISE OF OPTIONS
Under the NEDSOP, Options may be exercised by the delivery of written
notice to the Company setting forth the number of shares with respect to which
the Option is to be exercised. Payment of the purchase price of the shares of
Common Stock subject to an Option may be made (i) in any combination of cash or
whole shares of Common Stock already owned by the director or (ii) in shares of
Common Stock withheld by the Company from the shares of Common Stock otherwise
issuable to the optionee as a result of the exercise of such Option.
NON-TRANSFERABILITY
Options may be assigned or transferred only by will or under the laws
of descent and distribution and the Options may be exercised only by the
optionee during his lifetime.
TERMINATION
Options, to the extent they have not been exercised previously, shall
normally terminate on the earlier of (i) the last day of the thirty day period
commencing on the date on which the optionee ceases to be a member of the
Company's Board of Directors for any reason other than the optionee's death,
permanent disability or resignation
-5-
<PAGE> 7
from the Board of Directors after at least five years of service; (ii) on the
last day of the one-year period commencing on the date on which the optionee
ceases to be a member of the Board of Directors due to the optionee's death,
permanent disability or resignation from the Board of Directors after at least
five years of service; or (iii) ten years after the date of grant of such
Option.
NO RIGHTS AS SHAREHOLDER
No optionee has any rights as a shareholder with respect to shares
covered by his Option until the date of issuance of a stock certificate for
such shares. No adjustment for dividends, or otherwise, will be made if the
record date therefor is prior to the date of issuance of such certificate.
CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
In the event of any stock dividends, stock splits, recapitalizations,
combinations, exchanges of shares, mergers, consolidation, liquidations,
split-ups, split-offs, spin-offs, or other similar changes in capitalization,
or any distribution to shareholders, including a rights offering, other than
regular cash dividends, changes in the outstanding stock of the Company by
reason of any increase or decrease in the number of issued shares of Common
Stock resulting from a split-up or consolidation of shares or any similar
capital adjustment or the payment of any stock dividend, any share repurchase
at a price in excess of the market price of the Common Stock at the time such
repurchase is announced or other increase or decrease in the number of such
shares, the NEDSOP shall make appropriate adjustment in the number and kind of
shares authorized by the NEDSOP, in the number, price or kind of shares covered
by the Options and in any outstanding Options under the NEDSOP; provided,
however, that no such adjustment shall increase the aggregate value of any
outstanding Option.
In the event of any adjustment in the number of shares covered by any
Option, any fractional shares resulting from such adjustment shall be
disregarded and each such Option shall cover only the number of full shares
resulting from such adjustment.
AMENDMENT OR TERMINATION OF NEDSOP
The Board of Directors may at any time and from time to time amend the
NEDSOP in order that the Options granted may conform to any changes in the law
or in any other respect that the Board of Directors may deem to be in the best
interests of the Company; provided, however, that without approval by the
shareholders of the Company voting the proper percentage of its voting power,
no amendment shall make any change in the NEDSOP for which shareholder approval
is required in order to comply with (i) Rule 16b-3 of the Securities and
Exchange Act of 1934, as amended, (ii) the Internal Revenue Code of 1986, as
amended, or regulatory provisions dealing with incentive stock options, (iii)
any rules for listed companies promulgated by any national stock exchange on
which the Company's Common Stock is traded or (iv) any other applicable rule or
law. All Options granted under the NEDSOP shall be subject to the terms and
provisions of the NEDSOP and any amendment of the NEDSOP shall be deemed to
amend all Options outstanding under the NEDSOP at the time of the amendment.
WRITTEN AGREEMENT
Each Option granted pursuant to the NEDSOP will be embodied in a
written option agreement, which shall be subject to the terms and conditions of
the NEDSOP and which may contain such other provisions as the NEDSOP Committee
in its discretion deems advisable.
EFFECTIVE DATE AND DURATION OF NEDSOP
The NEDSOP will become effective, subject to shareholder approval, as
of March 25, 1997. The NEDSOP, and all Options granted under the NEDSOP prior
to shareholder approval, will be void unless the NEDSOP is approved by the
shareholders. No Option will be granted pursuant to the NEDSOP on or after
March 25, 2007.
Assuming the presence of a quorum, approval of the NEDSOP requires the
affirmative vote of a majority of the votes cast by the holders of shares of
Common Stock entitled to vote in person or by proxy at the Annual
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<PAGE> 8
Meeting. Abstentions and broker non-votes will not be considered as a vote for
or against the proposal and therefore will have no effect on the outcome of the
proposal. Proxies will be voted for or against such approval in accordance
with specifications marked thereon, and if no specification is made, the
proxies will be voted for such approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE
THE 1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee,
has appointed the firm of Arthur Andersen LLP to serve as independent public
accountants of the Company for the fiscal year ending December 31, 1997.
Although shareholder ratification is not required, the Board of Directors has
directed that such appointment be submitted to the shareholders of the Company
for ratification at the Annual Meeting. Arthur Andersen LLP has served as
independent public accountants of the Company with respect to the Company's
consolidated financial statements for the fiscal year ended December 31, 1996
and is considered by management of the Company to be well qualified. If the
shareholders do not ratify the appointment of Arthur Andersen LLP, the Board of
Directors may reconsider the appointment.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. They will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
shareholders.
Assuming the presence of a quorum, ratification of the appointment of
Arthur Andersen LLP requires the affirmative vote of a majority of the votes
cast by the holders of shares of Common Stock entitled to vote in person or by
proxy at the Annual Meeting. Abstentions and broker non-votes will not be
considered as a vote for or against the proposal and therefore will have no
effect on the outcome of the proposal. Proxies will be voted for or against
such approval in accordance with specifications marked thereon, and if no
specification is made, the proxies will be voted for such approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997
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<PAGE> 9
FURTHER INFORMATION
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information with respect to each director and
executive officer of the Company as of April 11, 1997. The executive officers
are elected by the Board of Directors and serve at the discretion of the Board.
<TABLE>
<CAPTION>
Name Age Position
---- ----- --------------------------------------------
<S> <C> <C>
W. Marvin Rush . . . . . . . . . . . . . . . . . . 57 Chairman of the Board, Chief Executive
Officer and Director
W. M. "Rusty" Rush . . . . . . . . . . . . . . . . 38 President and Director
Robin M. Rush . . . . . . . . . . . . . . . . . . . 37 Executive Vice President, Secretary,
Treasurer and Director
David C. Orf . . . . . . . . . . . . . . . . . . . 47 Senior Vice President -- Sales and
Marketing
Daryl J. Gorup . . . . . . . . . . . . . . . . . . 48 Senior Vice President -- Dealership
Operations
Martin A. Naegelin, Jr. . . . . . . . . . . . . . . 33 Vice President -- Chief Financial Officer
B. J. Janner . . . . . . . . . . . . . . . . . . . 52 Vice President -- Parts and Service
Brent Hughes . . . . . . . . . . . . . . . . . . . 54 Vice President -- Financial Services
J. M. "Spike" Lowe . . . . . . . . . . . . . . . . 53 Vice President -- Corporate Development
Donald Teague . . . . . . . . . . . . . . . . . . . 55 Vice President -- California Operations
Ralph West . . . . . . . . . . . . . . . . . . . . 50 Vice President -- Leasing and Rental
Operations
John Hiltabiddle . . . . . . . . . . . . . . . . . 52 Controller
Joseph M . Dunn . . . . . . . . . . . . . . . . . . 70 Director(1)(2)
Ronald J. Krause . . . . . . . . . . . . . . . . . 69 Director(1)(2)
John D. Rock . . . . . . . . . . . . . . . . . . . 61 Director(3)
</TABLE>
- --------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Appointed as a member of the Audit Committee and the Compensation
Committee effective April 15, 1997.
W. MARVIN RUSH founded the Company in 1965. He served as President
from inception until November 1995, and has served as Chairman of the Board and
Chief Executive Officer since November 1995. He also served on the Peterbilt
dealer council from 1984-1987 and was elected its Chairman in 1987. He was
also active on the PacLease Executive Committee from 1989-1992 and was Chairman
in 1992. Other honors include the Peterbilt Dealer of the Year in 1986, 1987
and 1988, as well as the Midranger Dealer of the Year in 1989. His highest
Peterbilt honor was being named North American Peterbilt Dealer of the Year for
the 1993-1994 year. Mr. Rush also serves as a director of TexStar National
Bank.
W. M. "RUSTY" RUSH served as Vice President and Executive Vice
President of the Company from 1990 until November 1995 and has served as
President of the Company since November 1995. For the past several years he
has overseen the sales and finance departments. He is responsible for the
total operations of the Company in Texas, California and Louisiana.
ROBIN M. RUSH has been with the Company since 1991, and served as Vice
President and general manager of the Company from 1993 until November 1995.
Mr. Rush has served as Secretary and Treasurer of the Company
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<PAGE> 10
since October 1995 and as Executive Vice President of the Company since
November 1995. He is presently the general manager of the San Antonio
Peterbilt dealership. In addition, he oversees the administrative department
of the Company which includes Human Resources, Environmental and Corporate
Development.
MARTIN A. NAEGELIN, JR. has served as Vice President and Chief
Financial Officer since January 1997. Prior to joining the Company, Mr.
Naegelin served as Vice President of Investor Relations and Corporate
Development of Norwood Promotional Products, Inc. Mr. Naegelin had seven years
of public accounting experience prior to joining Norwood in 1993.
DAVID C. ORF has served as Vice President of Sales and Marketing of
the Company since 1993 and in October 1996 Mr. Orf was promoted to Senior Vice
President of Sales and Marketing. Mr. Orf was the general manager of the
Company's Houston, Texas facilities until January 1996. Prior to joining the
Company, Mr. Orf served as the Southeast region manager of Peterbilt Motors
Company, a division of PACCAR.
DARYL J. GORUP has served as Senior Vice President of Dealership
Operations of the Company since January 1997. Prior to joining the Company,
Mr. Gorup had served for 15 years in various executive positions with Peterbilt
Motors Company, including General Sales Manager.
B. J. JANNER has been with the Company since 1969 and has served as
Vice President of the Company since 1993. Mr. Janner is currently the director
of parts and services for all of the Company's truck centers.
BRENT HUGHES has served as Vice President of Financial Services since
1993. He is in charge of all secured lending in Oklahoma and Texas and
supervises California financing. Mr. Hughes was with Associates Commercial
Corporation for 22 years, was Branch Manager in New York City, and later in San
Antonio, and was Senior Vice President of the Western Region when he left to
join the Company in 1992.
J. M. "SPIKE" LOWE has been with the Company since 1968, and has
served as a Vice President of the Company since 1994. Currently he is
responsible for acquisitions and all open account and unsecured lending for the
Company.
DONALD TEAGUE has been with the Company since 1991 and has been a Vice
President since 1995. Mr. Teague has served as the general manager at several
of the Company's full-service truck centers, including the Lufkin, Texas
facility, and is currently Vice President responsible for all of the Company's
California operations. Prior to joining the Company, Mr. Teague was the
manager of an unrelated Peterbilt dealership.
RALPH WEST has been with the Company since 1994 and has served as a
Vice President of the Company responsible for all leasing and rental operations
since that time. Prior to joining the Company, Mr. West had been with Ryder
Truck Rentals. During his 28 years at Ryder Truck Rentals, Mr. West served in
various executive positions, with the last 14 years as Vice President.
JOHN HILTABIDDLE, CPA has served as the Controller of the Company
since December 1993. Mr. Hiltabiddle served as the Controller of two large
automobile dealerships from 1989 until December 1993, and from 1984 until 1989,
respectively. Mr. Hiltabiddle had 12 years of public accounting experience
prior to joining the automobile dealership in 1984.
JOSEPH M. DUNN has served as a director of the Company since June
1996. Mr. Dunn has over 30 years of experience in the heavy-duty truck sales
industry. Mr. Dunn joined PACCAR in 1964, and served as President and as a
member of the Board of Directors of PACCAR from 1987 until his retirement in
January 1992. Mr. Dunn is currently a director of SeaFirst Corporation and
Seattle First National Bank and was a member of Western Highway Institute as
Vice President at Large, Western Region.
RONALD J. KRAUSE has served as a director of the Company since June
1996. Mr. Krause served as President of Associates Commercial Corporation from
1976 until 1981 and President and Chief Operating Officer of Associates
Corporation of North America from 1981 until 1989. Mr. Krause also was Vice
Chairman of the Board of Directors of Associates of North America from 1988
until his retirement in 1989.
-9-
<PAGE> 11
JOHN D. ROCK has served as a director of the Company since April 1997.
Mr. Rock served as a Vice President of General Motors Corporation from 1991
until his retirement from General Motors Corporation after over 36 years of
service. While at General Motors Corporation, Mr. Rock held various executive
positions in sales, service and marketing. Mr. Rock has also served as a
member of the Board of Directors of Volvo - GM Heavy Truck Corporation.
W. M. "Rusty" Rush and Robin M. Rush are brothers and the sons of W.
Marvin Rush. There are no other family relationships among the executive
officers and directors of the Company.
All directors of the Company hold office until the next annual meeting
of shareholders and the election and qualification of their successors. Each
officer of the Company was chosen by the Board of Directors and serves at the
pleasure of the Board of Directors until his or her successor is appointed or
until his or her earlier resignation or removal in accordance with applicable
law.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for making all compensation
decisions for the named executives including determining base salary and annual
incentive compensation amounts and granting stock options and other stock-
based compensation under the Company's 1996 Long-Term Incentive Plan (the
"Incentive Plan").
Overall Objectives of the Executive Compensation Program
The purpose of the Company's compensation plan is to attract, retain
and motivate key management employees. It is the philosophy of the Company to
pay its executives at levels commensurate with both Company and individual
performance. A primary consideration in developing the Company's executive
compensation programs is to link the long- term financial interests of
executives with those of the Company and its shareholders. The Compensation
Committee reviews compensation for comparable organizations in order to
establish the Company's total compensation program and determine awards under
the Incentive Plan.
In 1996, the total compensation program for the Company's top
executives, approved by the Company's Board of Directors, consisted of a base
salary and bonus for each of such executives.
Base Salary Program
It is the Company's policy to establish salaries at a level
approximating the average of the competitive levels in comparable organizations
and to provide annual salary increases reflective of the executive's
performance, level of responsibility and position with the Company. Prior to
the Company's initial public offering in June 1996, the Company was taxed as a
Subchapter S corporation, with Mr. Rush receiving corporate distributions based
on the profits of the Company in addition to his annual base salary.
Subsequent to the Company's initial public offering in June 1996, Mr. Rush's
annual base salary was increased from $263,860 to $525,000 to more accurately
reflect the compensation of chief executive officers of comparable publicly
traded companies.
Annual Incentive
Each year, the Compensation Committee evaluates the performance of the
Company as a whole, as well as the performance of each individual executive.
Factors considered include revenue growth, net profitability and cost control.
The Compensation Committee does not utilize formalized mathematical formulae,
nor does it assign weightings to these factors. The Compensation Committee, in
its sole discretion, determines the amount, if any, of incentive payments to
each executive. The Compensation Committee believes that the Company's growth
in revenue and profitability requires subjectivity on the part of the Committee
when determining incentive payments. The Compensation Committee believes that
specific formulae restrict flexibility. W. Marvin Rush received a $212,500
bonus from the Company for services performed on behalf of the Company during
1996. During 1996, the Company gave each of its executive officers the option
to convert up to 15% of his 1996 annual incentive bonus into stock options of
the Company at $2.00 per option share, exercisable at the fair market value of
the Common Stock on the date of grant.
-10-
<PAGE> 12
Long-Term Incentive Plan
The Company adopted its Incentive Plan in 1996 which permits the
Company to make grants of stock options, restricted stock, performance shares
and other awards to employees as part of the Company's overall incentive
compensation program. The Incentive Plan is intended to attract, retain and
motivate key management personnel and to align the interest of the executives
with those of shareholders. The overall long-term incentive grant levels are
established by reviewing the number of shares reserved for such plans by
comparable organizations. Individual long-term incentive grants are based on
the employee's position in the Company and responsibility level. No awards
were made to W. Marvin Rush in 1996 under the Incentive Plan.
Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), currently imposes a $1 million limitation on the deductibility of
certain compensation paid to each of the Company's five highest paid
executives. Excluded from this limitation is compensation that is "performance
based." For compensation to be performance based it must meet certain
criteria, including being based on predetermined objective standards approved
by shareholders. In general, the Company believes that compensation relating
to options granted under the Incentive Plan should be excluded from the $1
million limitation calculation. Compensation relating to the Company's
incentive compensation awards do not currently qualify for exclusion from the
limitation, given the discretion that is provided to the Committee in
establishing the performance goals for such awards. The Committee believes
that maintaining the discretion to evaluate the performance of the Company's
management is an important part of its responsibilities and inures to the
benefit of the Company's shareholders. The Committee, however, intends to take
into account the potential application of Section 162(m) with respect to
incentive compensation awards and other compensation decisions made by it in
the future.
Conclusion
The Compensation Committee believes these executive compensation
policies serve the interests of the shareholders and the Company effectively.
The Committee believes that the various pay vehicles offered are appropriately
balanced to provide increased motivation for executives to contribute to the
Company's overall future successes, thereby enhancing the value of the Company
for the shareholders' benefit.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Joseph M. Dunn
Ronald J. Krause
-11-
<PAGE> 13
EXECUTIVE COMPENSATION
The following table summarizes all compensation awarded to, earned by
or paid for services rendered to the Company in all capacities during the years
ended December 31, 1995 and 1996 by the Company's Chief Executive Officer and
the Company's four other most highly compensated executive officers during
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- -------------
FISCAL SECURITIES
------- OTHER ANNUAL UNDERLYING All Other
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) OPTIONS (#) Compensation(3)
----------------------------- ------- --------- ---------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W. Marvin Rush . . . . . . 1996 $416,192(1) $212,500 $18,365 -- $2,375
Chairman of the Board and 1995 $236,860 -- $20,278 -- $2,310
Chief Executive Officer
W. M. "Rusty" Rush . . . . 1996 $143,200 $123,086 -- 3,041 $2,375
President 1995 $ 65,900 $150,000 $ 3,525 -- $2,044
David C. Orf . . . . . . . 1996 $125,850 $123,086 -- 3,284 $2,375
Senior Vice President 1995 $ 91,200 $ 62,000 -- -- $2,310
Brent Hughes . . . . . . . 1996 $131,400 $ 89,134 -- 1,926 $2,375
Vice President 1995 $131,400 $ 95,000 -- -- $2,310
J.M. "Spike" Lowe . . . . . 1996 $138,000 $ 42,444 -- 811 $2,375
Vice President 1995 $138,000 $ 40,000 -- -- $2,310
</TABLE>
- -----------------
(1) Of such amount, $62,174 represents amounts paid with respect to salary
and benefits of employees of the Company performing personal services
exclusively for Mr. Rush.
(2) Consists of personal use of the Company's corporate aircraft paid for
by the Company.
(3) Consists of matching contributions to the Company's 401(k) plan.
-12-
<PAGE> 14
STOCK OPTION GRANTS IN FISCAL 1996
The following table provides certain information related to options
granted by the Company to the named executive officers during fiscal 1996
pursuant to the Incentive Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
% OF TOTAL APPRECIATION FOR
NUMBER OF OPTIONS OPTION TERM(1)(2)
SECURITIES GRANTED TO EXERCISE OR ---------------------------
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL 1996 ($/SH) DATE 5% ($) 10% ($)
---- ----------- ----------- ------------ ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
W. Marvin Rush . . . . -- -- -- -- -- --
W. M. "Rusty" Rush . . 3,041 16.0% $10.80 07/06/96 $3,930 $4,209
David C. Orf . . . . . 3,284 17.3% $10.80 07/06/96 $4,243 $4,546
Brent Hughes . . . . . 1,926 10.1% $10.80 07/06/96 $2,489 $2,666
J.M. "Spike" Lowe . . . 811 4.3% $10.80 07/06/96 $1,048 $1,123
</TABLE>
- --------------------
(1) The potential realizable value is calculated based on the term of the
option and is calculated by assuming that the fair market value of
Common Stock on the date of the grant as determined by the Board
appreciates at the indicated annual rate compounded annually for the
entire term of the option and that the option is exercised and the
Common Stock received therefor is sold on the last day of the term of
the option for the appreciated price. The 5% and 10% rates of
appreciation are derived from the rules of the Commission and do not
reflect the Company's estimate of future stock price appreciation.
The actual value realized may be greater than or less than the
potential realizable values set forth in the table.
(2) Options were granted April 11, 1996. Calculation is based on an
assumed market price on the date of grant equal to the initial public
offering price of $12.00 per share.
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to options exercised
by the named executive officers of the Company during fiscal 1996 and the
number and value of options held at fiscal year end.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT FY-END (#) FY-END($)
----------------------------- -----------------------------
SHARES ACQUIRED
UPON OPTION VALUE
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Marvin Rush . . -- -- -- -- -- --
W. M. "Rusty" Rush 3,041 $3,649 -- -- -- --
David C. Orf . . . 3,000(1) $4,350 -- -- -- --
Brent Hughes . . . 1,926 $2,311 -- -- -- --
J.M. "Spike" Lowe . 1,723 $3,068 -- -- -- --
</TABLE>
- -------------------------
(1) Mr. Orf exercised his option to purchase 3,000 shares and let
his option to purchase the remaining 284 shares expire
unexercised.
-13-
<PAGE> 15
EMPLOYEE BENEFIT PLANS
Incentive Plan
In April 1996, the Board of Directors and shareholders adopted the
Rush Enterprises, Inc. Long-Term Incentive Plan. The Incentive Plan is
intended to advance the best interests of the Company and its shareholders by
attracting, retaining and motivating employees, advisors and consultants of the
Company. The Incentive Plan provides for the grant of stock options (which may
be non-qualified 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, thereby increasing
the personal stake of participants in the continued success and growth of the
Company.
The Incentive Plan is administered by the Compensation Committee or
other designated committee of the Board of Directors (the "Committee"), which
consists solely of two or more non-employee directors of the Company who are
disinterested within the meaning of Rule 16b-3 under the Securities and
Exchange Act of 1934, as amended. The Committee has broad authority to
interpret and administer the Incentive Plan, including the power to grant and
modify awards and the power to limit or eliminate its discretion as it may deem
advisable to comply with or obtain preferential treatment under any applicable
tax or other law, rule or regulation. The Committee also has broad authority
to accelerate the vesting of an award or the time at which any award is
exercisable or to waive any condition or restriction on the vesting, exercise
or receipt of any award. The Board of Directors may at any time amend,
suspend, discontinue or terminate the Incentive Plan without shareholder
approval or approval of participants, subject to certain limitations.
Initially, 500,000 shares of Common Stock will be available for
issuance under the Incentive Plan. In addition, as of January 1 of each year
the Incentive Plan is in effect, if the total number of shares of Common Stock
issued and outstanding, not including any shares issued under the Incentive
Plan, exceeds the total number of shares of Common Stock issued and outstanding
as of January 1 of the preceding year, the number of shares available will be
increased by an amount such that the total number of shares available for
issuance under the Incentive Plan equals 5% of the total number of shares of
Common Stock outstanding, not including any shares issued under the Incentive
Plan. Lapsed, forfeited or canceled awards do not count against these limits.
Cash exercises of SARs and cash settlement of other awards are also not counted
against these limits but the total number of SARs and other awards settled in
cash shall not exceed the total number of shares authorized for issuance under
the Incentive Plan (without reduction for issuances).
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 shall be 100,000. The aggregate number of shares of
Common Stock that may be granted to any one participant in any one year in
respect of restricted stock is 100,000. The aggregate number of shares of
Common Stock that may be received by any one participant in any one year in
respect of a performance award is 100,000 and the aggregate amount of cash that
may be received by any one participant in any one year in respect to a
performance award is $500,000.
401(k) Plan and Other Employee Benefits
The Company provides a 401(k) Plan to its employees in California (the
"California 401(k) Plan") and in the other areas of its operations (the
"Principal 401(k) Plan"). The plans provide that employees who have completed
at least one year of service and attain the age of 21 are eligible to
participate, subject to certain other conditions. Eligible participants under
the Principal 401(k) Plan may elect to defer receipt of up to a maximum of 10%
of their annual compensation (up to a maximum dollar amount established in
accordance with Section 401(k) of the Internal Revenue Code of 1986, as
amended) and have such deferred amounts contributed to the Principal 401(k)
Plan. The Company makes matching contributions under the Principal 401(k) Plan
equal to 25% each year, with such participants always being 100% vested in
their contributions with employer contributions vesting over a five-year
period. Under the California 401(k) Plan, the Company contributes an amount
equal to 2.5% of the eligible employee's compensation and participating
employees do not make contributions. The aggregate amount of the Company's
contributions for 1996 under these plans was $351,000. Eligible employees in
California are also entitled to contribute to a separate 401(k) plan to which
the Company does not make any matching contributions.
-14-
<PAGE> 16
EMPLOYMENT AGREEMENTS AND CHANGE-OF-CONTROL ARRANGEMENTS
The Company has entered into employment agreements with W. Marvin
Rush, W. M. "Rusty" Rush and Robin M. Rush which provide a four-year term,
subject to automatic extension for an additional one year on each one-year
anniversary of the agreements. These employment agreements are subject to
early termination as provided therein, including termination by the Company for
"cause" (as defined in the employment agreements) or termination by W. Marvin
Rush, W. M. "Rusty" Rush or Robin M. Rush, as applicable, for "good reason"
(as defined in the employment agreements). The employment agreements provide
for annual base salaries as follows: W. Marvin Rush -- $525,000, W. M. "Rusty"
Rush -- $150,000 and Robin M. Rush -- $108,000. The employment agreements also
provide for bonuses at the discretion of the Compensation Committee of the
Board.
The employment agreements with W. Marvin Rush, W. M. "Rusty" Rush and
Robin M. Rush provide that if the Company terminates their employment without
cause (including the Company's election to not extend the employment agreements
at any renewal date) or within two years of a change in control, or if they
resign their employment for "good reason" ("good reason" is defined in the
employment agreements), they will be entitled to receive, at their election,
either a lump-sum payment in the amount equal to their base salary for the
unexpired term of their agreements or continuation of their base salary and
benefits through the unexpired term of their agreements. A change of control
is deemed to have occurred if (i) more than 30% of the combined voting power of
the Company's then outstanding securities is acquired, directly or indirectly,
or (ii) at any time during the 24-month period after a tender offer, merger,
consolidation, sale of assets or contested election, or any combination of such
transactions, at least a majority of the Company's Board of Directors shall
cease to consist of "continuing directors" (meaning directors of the Company
who either were directors prior to such transaction or who subsequently became
directors and whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least two-thirds of the directors
then still in office who were directors prior to such transaction), or (iii)
the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation that
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 60% of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement of sale or disposition by
the Company of all of the Company's assets.
The Company has also entered into employment agreements with David C.
Orf, Brent Hughes and J. M. "Spike" Lowe, which provide for annual base
salaries as follows: David C. Orf -- $129,000, Brent Hughes -- $131,400 and J.
M. "Spike" Lowe -- $138,000. The employment agreements also provide for
incentive bonuses at the discretion of the Compensation Committee of the
Company. The employment agreements for these executives do not contain any
change in control arrangements and are terminable by the Company upon 12
months' prior written notice or, in lieu thereof, immediately terminable upon
the payment to the employee of 12 months of his then effective base salary and
an amount equal to a percentage of the bonus received by the employee during
the preceding year, with such percentage determined according to the number of
years of service of the employee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to June 1996, compensation of executive officers of the Company
was determined by W. Marvin Rush, Chairman of the Board and Chief Executive
Officer of the Company. Simultaneously with the completion of the Company's
initial public offering in June 1996, the Company established a Compensation
Committee to review the performance of executive officers, establish overall
employee compensation policies and recommend to the Board of Directors major
compensation programs. The members of the Compensation Committee during 1996
were Joseph M. Dunn and Ronald J. Krause. In addition to Mr. Dunn and Mr.
Krause, John D. Rock was appointed as a member of the Compensation Committee in
April 1997.
-15-
<PAGE> 17
PERFORMANCE GRAPH
The Company's Common Stock has been traded publicly since June 6,
1996. Prior to such date, there was no established market for its Common
Stock. The following Performance Graph compares the Company's cumulative total
shareholder return on its Common Stock from June 6, 1996 (the first day which
the Common Stock was publicly traded), through December 31, 1996, to the
Standard Poor's 500 Stock Index and to a Peer Group of other public companies
over the same period. The Peer Group is comprised of the following companies:
Cross Continent Auto Retailers, Inc., Holiday RV Superstores, Inc., Lithia
Motors, Inc., Paccar, Inc., Travis Boats & Motors, Inc., United Auto Group,
Inc. and Werner Enterprises, Inc.
COMPARISON OF CUMULATIVE TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
Data Company Index Market Index Peer Index
<S> <C> <C> <C>
06/07/96 100.000 100.000 100.000
06/20/96 88.393 99.747 104.080
07/31/96 88.393 95.301 98.154
08/30/96 89.286 97.393 98.939
09/30/96 87.500 102.851 112.542
10/31/96 88.393 105.673 117.007
11/29/96 89.732 113.749 120.099
12/31/96 85.714 111.503 128.430
</TABLE>
The foregoing graph is based on historical data and is not necessarily
indicative of future performance. This graph shall not be deemed to be
"soliciting material" or to be "filed" with the Commission or subject to
Regulations 14A and 14C under the Exchange Act or to the liabilities of Section
18 under the Exchange Act.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company's
directors, executive officers and persons who own more than 10 percent of a
registered class of the Company's equity securities file with the Commission
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Directors, executive
officers and greater than 10 percent shareholders are required by Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
-16-
<PAGE> 18
To the Company's knowledge, based solely on a review of the copies of
the Section 16(a) reports furnished to the Company and written representations
that no other reports were required, during the fiscal year ended December 31,
1996, all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than 10 percent beneficial owners were complied
with, except that Ronald J. Krause filed one Form 4 late reporting one
transaction.
CERTAIN TRANSACTIONS
Prior to January 1, 1997, W. Marvin Rush, Chairman of the Board and
Chief Executive Officer of the Company, and J. M. "Spike" Lowe, Vice President
of the Company, owned 65% and 10%, respectively of the outstanding capital
stock of Ruel Smith Transportation Services ("Ruel Smith"), a trucking company
that leased office space ($45,000, $60,000 and $52,800 in rent paid to the
Company in 1994, 1995 and 1996, respectively) and purchased $535,000, $770,000
and $939,000 of products and services from the Company in 1994, 1995 and 1996,
respectively. Messrs. Rush and Lowe sold their respective interests in Ruel
Smith on January 1, 1997.
Prior to January 1, 1997, the Company invested funds belonging to Ruel
Smith on Ruel Smith's behalf under the Company's arrangement with GMAC pursuant
to which the Company receives the prime rate on overnight funds.
W. Marvin Rush formerly owned 45% of San Marcos Pontiac GMC Trucks,
Inc. ("SMP"), a retailer of GMC trucks and automobiles. In April 1996, Mr.
Rush disposed of his interest in SMP. During 1995, the Company had
approximately $770,000 of outstanding loans to SMP and the Company purchased
$146,000 of delivery trucks from SMP. Mr. Rush also formerly owned a 52 1/2%
interest in Hill Country Enterprises, Inc. ("HCE"). During 1995, the Company
had approximately $400,000 in outstanding loans to HCE. In February 1996, Mr.
Rush disposed of his interest in HCE. The Company does not currently have any
outstanding loans to SMP or HCE.
Under Article 21.14 of the Texas Insurance Code ("TIC"), every
officer, director and shareholder of a corporation licensed to act as a local
recording agent must be individually licensed to act as an insurance agent. An
insurance agent is required to be a resident of the State of Texas and pass an
examination for a local recording insurance agent's license. W. Marvin Rush,
Chairman of the Board and Chief Executive Officer of the Company, is licensed
to act as an insurance agent in the State of Texas and is therefore qualified
to act as the shareholder, director and officer of Associated Acceptance, Inc.
("AA"), the corporation currently affiliated with the Company that is licensed
to act as a local recording agent. The Company has acquired as a wholly-owned
subsidiary, a managing general agent (the "MGA") licensed under Article 21.07-3
of the TIC to manage all of the operations of AA. In addition to managing AA,
the MGA is qualified to receive any and all commission income which is
otherwise payable to AA. The MGA, Mr. Rush and AA have entered into agreements
pursuant to which (i) the MGA manages all operations of AA, (ii) all of the
income of AA is transferred to MGA, (iii) the Company transfers such funds to
AA as are necessary for its operation, and (iv) Mr. Rush granted the MGA the
right to transfer legal ownership of the shares of capital stock of AA to a
properly licensed local recording agent of MGA's choice in the event of any
attempted disposition of such shares by Mr. Rush, including death, divorce,
voluntary transfer, pledge or otherwise. Mr. Rush continues to own all of the
outstanding stock of AA, subject to his agreements with MGA prohibiting the
transfer of such capital stock.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock intended to be presented at
the Annual Meeting of Shareholders of the Company to be held in 1998 must be
received by the Company, addressed to the Secretary of the Company at P. O. Box
34630, San Antonio, Texas 78265, no later than January 2, 1998, to be
considered for inclusion in the Proxy Statement and form of proxy relating to
that meeting.
-17-
<PAGE> 19
OTHER MATTERS
As of the date of this Proxy Statement, management does not intend to
present any other items of business and is not aware of any matters to be
presented for action at the Annual Meeting other than those described above.
However, if any other matters should come before the Annual Meeting, it is the
intention of the persons named as proxies in the accompanying proxy card to
vote in accordance with their best judgment on such matters.
By order of the Board of Directors,
ROBIN M. RUSH
Corporate Secretary
San Antonio, Texas
May 2, 1997
-18-
<PAGE> 20
EXHIBIT "A"
RUSH ENTERPRISES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This 1997 Non-Employee Director Stock Option Plan
(the "Plan") of Rush Enterprises, Inc., a Texas corporation (the "Company"), is
adopted for the benefit of the directors of the Company who at the time of
their service are not employees of the Company or any of its subsidiaries
("Non-Employee Directors"), and is intended to advance the interests of the
Company by providing the Non-Employee Directors with additional incentive to
serve the Company by increasing their proprietary interest in the success of
the Company.
2. Administration. The Plan shall be administered by a committee
of the Board of Directors of the Company (the "Committee"), the members of
which shall consist solely of directors who are employees of the Company. For
the purposes of the Plan, a majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of those members present at any meeting shall decide any question brought
before that meeting. In addition, the Committee may take any action otherwise
proper under the Plan by the affirmative vote, taken without a meeting, of a
majority of its members. No member of the Committee shall be liable for any
act or omission of any other member of the Committee or for any act or omission
on his own part, including but not limited to the exercise of any power or
discretion given to him under the Plan, except those resulting from his own
gross negligence or willful misconduct. Except as otherwise expressly provided
for herein, all questions of interpretation and application of the Plan, or as
to options granted hereunder (the "Options"), shall be subject to the
determination, which shall be final and binding, of a majority of the whole
Committee. Notwithstanding the above, the selection of Non-Employee Directors
to whom Options are to be granted, the number of shares subject to any Option,
the exercise price of any Option and the term of any Option shall be as
hereinafter provided and the Committee shall have no discretion as to such
matters.
3. Option Shares. The stock subject to the Options and other
provisions of the Plan shall be shares of the Company's Common Stock, $.01 par
value (or such other par value as may be designated by act of the Company's
shareholders) (the "Common Stock"). The total amount of the Common Stock with
respect to which Options may be granted shall not exceed in the aggregate
100,000 shares; provided, that the class and aggregate number of shares which
may be subject to the Options granted hereunder shall be subject to adjustment
in accordance with the provisions of Paragraph 12 hereof. Such shares may be
treasury shares or authorized but unissued shares.
In the event that any outstanding Option for any reason shall expire
or terminate by reason of the death of the optionee or the fact that the
optionee ceases to be a director, the surrender of any such Option, or any
other cause, the shares of Common Stock allocable to the unexercised portion of
such Option may again be subject to an Option under the Plan.
4. Grant of Options. Subject to the provisions of Paragraph 16
and the availability under the Plan of a sufficient number of shares of Common
Stock that may be issuable upon the exercise of outstanding Options, there
shall be granted the following Options:
(a) To each Non-Employee Director as of March 25, 1997,
an Option to purchase 10,000 shares of Common Stock at a purchase
price per share of Common Stock equal to the fair market value of the
Common Stock as defined in Paragraph 7 hereof as of the date of grant
(the "Option Price") ;
(b) To each Non-Employee Director who is elected at the
Annual Meeting of Shareholders of the Company held in 1997 (other than
Non-Employee Directors receiving options under subparagraph (a)
above), an Option to purchase 10,000 shares of Common Stock at the
Option Price on the date of such Annual Meeting of Shareholders of the
Company; and
(c) To each Non-Employee Director who is elected or
reelected as a director of the Company at an Annual Meeting of
Shareholders of the Company held in 1998 or thereafter, an Option to
purchase
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<PAGE> 21
10,000 shares of Common Stock at the Option Price on the date of each
such Annual Meeting of Shareholders of the Company.
No Option shall be granted pursuant to the Plan after March 25, 2007.
5. Duration of Options. Each Option granted under the Plan shall
be exercisable for a term of ten years from the date of grant, subject to
earlier termination as provided in Paragraph 9 hereof.
6. Amount Exercisable. Each Option granted pursuant to the Plan
shall be fully exercisable on the date of grant.
7. Exercise of Options. Payment of the purchase price of the
shares of Common Stock subject to an Option granted hereunder may be made (i)
in any combination of cash or whole shares of Common Stock already owned by the
optionee or (ii) in shares of Common Stock withheld by the Company from the
shares of Common Stock otherwise issuable to the optionee as a result of the
exercise of such Option ("cashless exercise"). Subject to the terms and
conditions of this Agreement, such Option may be exercised by written notice to
the Company at its principal office, attention of the Secretary. Such notice
shall (a) state the election to exercise such Option, the number of shares in
respect of which it is being exercised and the manner of payment for such
shares and (b) be signed by the person or persons so exercising such Option
and, in the event such Option is being exercised pursuant to Paragraph 9 by any
person or persons other than the optionee, accompanied by appropriate proof of
the right of such person or persons to exercise such Option. Such notice shall
either (i) elect cashless exercise or be accompanied by payment of the full
purchase price of such shares, in which event the Company shall issue and
deliver a certificate or certificates representing such shares as soon as
practicable after the notice is received, or (ii) fix a date (not more than 10
business days from the date of such notice) for the payment of the full
purchase price of such shares at the Company's principal office, against
delivery of a certificate or certificates representing such shares. Cash
payments of such purchase price shall, in case of clause (i) or (ii) above, be
made by cash or check payable to the order of the Company. Common Stock
payments (valued at fair market value on the date of exercise, as determined by
the Committee), shall be made by delivery of stock certificates in negotiable
form. All cash and Common Stock payments shall, in either case, be delivered
to the Company at its principal office, attention of the Secretary. Shares of
Common Stock withheld pursuant to a cashless exercise election shall be valued
at the fair market value on the date of exercise, as determined by the
Committee. If certificates representing Common Stock are used to pay all or
part of the purchase price of an Option granted hereunder, a replacement
certificate shall be delivered by the Company representing the number of shares
delivered but not so used, and an additional certificate shall be delivered
representing the additional shares to which the holder of such Option is
entitled as a result of the exercise of such Option. The certificate or
certificates for the shares as to which such Option shall have been so
exercised shall be registered in the name of the person or persons so
exercising the Option and shall be delivered as aforesaid to or upon the
written order of the person or persons exercising such Option. All shares
issued as provided herein will be fully paid and nonassessable.
For purposes of this Paragraph 7, the "fair market value" of a share
of stock as of any particular date shall mean the closing sale price of a share
of Common Stock on that date as reported by the principal national securities
exchange on which the Common Stock is listed if the Common Stock is then listed
on a national securities exchange, or if the Common Stock is not so listed, the
average of the bid and asked price of a share of Common Stock on that date and
reported in the National Association of Securities Dealers Automated Quotation
system (the "NASDAQ System"); provided that if no such closing price or quotes
are so reported on that date or if in the discretion of the Committee another
means of determining the fair market value of a share of stock at such date
shall be necessary or advisable, the Committee may provide for another means
for determining such fair market value.
8. Transferability of Options. Options shall not be transferable
by the optionee otherwise than by will or under the laws of descent and
distribution, and shall be exercisable, during his lifetime, only by him.
9. Termination. Except as may be otherwise expressly provided
herein, each Option, to the extent it shall not previously have been exercised,
shall terminate on the earlier of the following:
(a) On the last day within the thirty day period commencing on the
date on which the optionee ceases to be a member of the
Company's Board of Directors, for any reason other than the
death or
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<PAGE> 22
disability of the optionee or his resignation after five years
of service, during which period the optionee shall be entitled
to exercise all Options fully vested as described in Paragraph
6 by the optionee on the date on which the optionee ceased be
a member of the Company's Board of Directors;
(b) On the last day within the one year period commencing on the
date on which the optionee ceases to be a member of the
Company's Board of Directors because of permanent disability,
during which period the optionee shall be entitled to exercise
all Options fully vested as described in Paragraph 6 by the
optionee on the date on which the optionee ceased to be a
member of the Company's Board of Directors because of such
disability;
(c) On the last day within the one year period commencing on the
date of the optionee's death while serving as a member of the
Company's Board of Directors, during which period the executor
or administrator of the optionee's estate or the person or
persons to whom the optionee's Option shall have been
transferred by will or the laws of descent or distribution,
shall be entitled to exercise all Options in respect of the
number of shares that the optionee would have been entitled to
purchase had the optionee exercised such Options on the date
of his death;
(d) On the last day within the one year period commencing on the
date an optionee who has had at least five years of service on
the Board of Directors of the Company resigns from the Board
of Directors of the Company, during which period the optionee,
or the executor or administrator of the optionee's estate or
the person or persons to whom such Option shall have been
transferred by the will or the laws of descent or distribution
in the event of the optionee's death within such one year
period, as the case may be, shall be entitled to exercise all
Options in respect of the number of shares that the optionee
would have been entitled to purchase had the optionee
exercised such Options on the date of such resignation; and
(e) Ten years after the date of grant of such Option.
10. Requirements of Law. The Company shall not be required to
sell or issue any shares under any Option if the issuance of such shares shall
constitute a violation by the optionee or the Company of any provisions of any
law or regulation of any governmental authority. Each Option granted under the
Plan shall be subject to the requirements that, if at any time the Board of
Directors of the Company or the Committee shall determine that the listing,
registration or qualification of the shares subject thereto upon any securities
exchange or under any state or federal law of the United States or of any other
country or governmental subdivision thereof, or the consent or approval of any
governmental regulatory body, or investment or other representations, are
necessary or desirable in connection with the issue or purchase of shares
subject thereto, no such Option may be exercised in whole or in part unless
such listing, registration, qualification, consent, approval or representation
shall have been effected or obtained free of any conditions not acceptable to
the Board of Directors. If required at any time by the Board of Directors or
the Committee, an Option may not be exercised until the optionee has delivered
an investment letter to the Company. In addition, specifically in connection
with the Securities Act of 1933 (as now in effect or hereafter amended), upon
exercise of any Option, the Company shall not be required to issue the
underlying shares unless the Committee has received evidence satisfactory to it
to the effect that the holder of such Option will not transfer such shares
except pursuant to a registration statement in effect under such Act or unless
an opinion of counsel satisfactory to the Company has been received by the
Committee to the effect that such registration is not required. Any
determination in this connection by the Committee shall be final, binding and
conclusive. In the event the shares issuable on exercise of an Option are not
registered under the Securities Act of 1933, the Company may imprint on the
certificate for such shares the following legend or any other legend which
counsel for the Company considers necessary or advisable to comply with the
Securities Act of 1933:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any state and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an opinion of
counsel satisfactory, in form and substance to the Corporation, that
registration is not required for such sale or transfer."
A-3
<PAGE> 23
The Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act of 1933 (as now in effect or as
hereafter amended) and, in the event any shares are so registered, the Company
may remove any legend on certificates representing such shares. The Company
shall not be obligated to take any other affirmative action in order to cause
the exercise of an Option or the issuance of shares pursuant thereto to comply
with any law or regulation of any governmental authority.
11. No Rights as Shareholder. No optionee shall have rights as a
shareholder with respect to shares covered by his Option until the date of
issuance of a stock certificate for such shares; and, except as otherwise
provided in Paragraph 12 hereof, no adjustment for dividends, or otherwise,
shall be made if the record date therefor is prior to the date of issuance of
such certificate.
12. Changes in the Company's Capital Structure. In the event of
any stock dividends, stock splits, recapitalizations, combinations, exchanges
of shares, mergers, consolidation, liquidations, split-ups, split-offs, spin-
offs, or other similar changes in capitalization, or any distribution to
shareholders, including a rights offering, other than regular cash dividends,
changes in the outstanding stock of the Company by reason of any increase or
decrease in the number of issued shares of Common Stock resulting from a
split-up or consolidation of shares or any similar capital adjustment or the
payment of any stock dividend, any share repurchase at a price in excess of the
market price of the Common Stock at the time such repurchase is announced or
other increase or decrease in the number of such shares, the Committee shall
make appropriate adjustment in the number and kind of shares authorized by the
Plan, in the number, price or kind of shares covered by the Options and in any
outstanding Options under the Plan; provided, however, that no such adjustment
shall increase the aggregate value of any outstanding Option.
In the event of any adjustment in the number of shares covered by any
Option, any fractional shares resulting from such adjustment shall be
disregarded and each such Option shall cover only the number of full shares
resulting from such adjustment.
13. Amendment or Termination of Plan. The Board of Directors may
at any time and from time to time modify, revise or amend the Plan in such
respects as the Board of Directors may deem advisable in order that the Options
granted hereunder may conform to any changes in the law or in any other respect
that the Board of Directors may deem to be in the best interests of the
Company; provided, however, that without approval by the shareholders of the
Company voting the proper percentage of its voting power, no such amendment
shall make any change in the Plan for which shareholder approval is required in
order to comply with (i) Rule 16b-3, (ii) the Internal Revenue Code of 1986, as
amended, or regulatory provisions dealing with Incentive Stock Options, (iii)
any rules for listed companies promulgated by any national stock exchange on
which the Company's Common Stock is traded or (iv) any other applicable rule or
law. All Options granted under the Plan shall be subject to the terms and
provisions of the Plan and any amendment, modification or revision of the Plan
shall be deemed to amend, modify or revise all Options outstanding under the
Plan at the time of the amendment, modification or revision.
14. Written Agreement. Each Option granted hereunder shall be
embodied in a written option agreement, which shall be subject to the terms and
conditions prescribed above, and shall be signed by the optionee and by the
appropriate officer of the Company for and in the name and on behalf of the
Company. Such an option agreement shall contain such other provisions as the
Committee in its discretion shall deem advisable.
15. Indemnification of Committee. The Company shall indemnify
each present and future member of the Committee against, and each member of the
Committee shall be entitled without further act on his part to indemnity from
the Company for, all expenses (including the amount of judgments and the amount
of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably incurred
by him in connection with or arising out of any action, suit or proceeding in
which he may be involved by reason of his being or having been a member of the
Committee, whether or not he continues to be such member of the Committee at
the time of incurring such expenses; provided, however, that such indemnity
shall not include any expenses incurred by any such member of the Committee (a)
in respect of matters as to which he shall be finally adjudged in any such
action, suit or proceeding to have been guilty of gross negligence or willful
misconduct in the performance of his duty as such member of the Committee, or
(b) in respect of any matter in which any settlement is effected, to an amount
in excess of the amount approved by the Company on the advice of its legal
counsel; and provided further, that no right of indemnification under the
provisions set forth herein shall be available to or enforceable by any such
member of the Committee unless, within sixty (60) days after institution
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<PAGE> 24
of any such action, suit or proceeding, he shall have offered the Company, in
writing, the opportunity to handle and defend same at its own expense. The
foregoing right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each such member of the Committee and shall be
in addition to all other rights to which such member of the Committee may be
entitled to as a matter of law, contract, or otherwise. Nothing in this
Paragraph 15 shall be construed to limit or otherwise affect any right to
indemnification, or payment of expense, or any provisions limiting the
liability of any officer or director of the Company or any member of the
Committee, provided by law, the Certificate of Incorporation of the Company or
otherwise.
16. Effective Date of Plan. The Plan shall become effective and
shall be deemed to have been adopted on March 25, 1997, if within one year of
that date it has been approved by the holders of at least a majority of the
outstanding shares of voting stock of the Company voting in person or by proxy
at a duly held shareholders' meeting, or if the provisions of the corporate
charter, bylaws or applicable state law prescribe a greater degree of
shareholder approval for this action, the approval by the holders of that
percentage, at a duly held meeting of shareholders. No Options which are
incentive stock options shall be granted pursuant to the Plan after March 25,
2007.
A-5
<PAGE> 25
P RUSH ENTERPRISES, INC.
R
O PROXY -- ANNUAL MEETING OF SHAREHOLDERS -- JUNE 4,
X 1997
Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please mark, sign, date and return in the enclosed envelope.
The undersigned shareholder of Rush Enterprises, Inc. (the "Company") hereby
appoints Robin M. Rush and Martin A. Naegelin, Jr., or each of them, proxies of
the undersigned with full power of substitution to vote at the Annual Meeting
of Shareholders of the Company to be held on Wednesday, June 4, 1997, at 10:00
a.m., Central Standard Time, at the Plaza Club, Frost National Bank Building,
100 West Houston St., 21st Floor, San Antonio, Texas, and at any adjournment
thereof, the number of votes which the undersigned would be entitled to cast if
personally present:
(1) ELECTION OF DIRECTORS
[ ] FOR [ ] WITHHOLD AUTHORITY
all nominees listed below to vote for all nominees listed
(except as marked below) below
W. Marvin Rush W.M. "Rusty" Rush Robin M. Rush
John D. Rock Joseph M. Dunn Ronald J. Krause
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
DRAW A LINE THROUGH OR STRIKE OUT THAT NOMINEE'S NAME AS
SET FORTH ABOVE.
(2) PROPOSAL TO APPROVE THE COMPANY'S 1997 NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1997
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) To consider and act upon any other matter which may properly come
before the meeting or any adjournment thereof;
all as more particularly described in the Proxy Statement dated
May 2, 1997, relating to such meeting, receipt of which is hereby
acknowledged.
<PAGE> 26
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction is
made, this proxy will be voted FOR the nominees listed in Proposal 1,
FOR Proposal 2 and FOR Proposal 3.
----------------------------------------------
----------------------------------------------
Signature of Shareholder(s)
Please sign your name exactly as it appears
hereon. Joint owners must each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give your full
title as it appears hereon.
Dated __________________________, 1997.
