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Exhibit 10.19
LETTER AGREEMENT - FINAL
March 29, 2000
Via: Facsimile
000-000-0000
Xx. Xxxxxx Xxxx, Chairman
Rush Enterprises
P O Box 346630
Xxx Xxxxxxx, Xxxxx 00000-0000
Dear Xxxxxx:
PACCAR Financial Corp. is pleased to offer this Letter Agreement confirming the
2000/2001 "financing plan" for the Rush Enterprises' Peterbilt dealerships
listed below. In consideration of this preferred finance plan, our mutual
expectation is to reach at least 20% new Peterbilt finance penetration (units
financed/units sold) in the year 2000 (about $110 million in finance volume) and
at least 25% in 2001. The program described below is intended for "day to day"
business, and the parties are free to negotiate terms for other transactions as
needs arise.
PROGRAM PERIOD
January 1, 2000 through December 31, 2001, unless terminated by either party
prior to its conclusion.
RATES
New
5 year Treasuries plus 3.40 percent
Used
3 year Treasuries plus 4.25 percent
(1) Three Year Treasury Rates for new and used, respectively, will be based on
the weekly H-15 Treasury Interest Rate report. The rates appearing on the
last Tuesday of the preceding month will be used for the following month.
(2) The above rate structure will also be used for PFC's owner operator lease
program (stream rate). 60-month leases with 10% residual will be at a .25%
premium due to the longer amortization. The cost of PFC's liability
insurance will be added to this rate structure, for owner operator leases.
DEALER LIABILITY
8% New Non Fleet
5%* New Transactions of 10 or more units
10% Used
* 5% fixed, all other liability amounts based on the declining balance.
Parties are free to negotiate LL of other amounts as conditions warrant.
Nonrecourse is available for qualified credits.
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Xx. Xxxxxx Xxxx, President
March 29, 2000 - Final
Page Two
ANNUAL LOSS CAP
The annual loss cap for the program period (2000 and 2001) will be $500,000 per
year, plus any additional recourse agreed to by the parties. This will be an
aggregate cap for all the Rush Peterbilt dealerships.
DEALERSHIPS
Rush Truck Centers of Texas, Inc.
Rush Truck Centers of California, Inc.
Rush Truck Centers of Colorado, Inc.
Rush Truck Centers of Louisiana, Inc.
Rush Truck Centers of Oklahoma, Inc.
Rush Truck Centers of Arizona, Inc.
Rush Truck Centers of New Mexico, Inc.
DEALER RESERVE
Dealer reserve will be paid 100% upfront on new trucks up to a 3% dealer reserve
and up to a 5% dealer reserve on used trucks. Reserve amounts above 3% and 5%
will be split pro rata 75% for Rush and 25% for PFC. PFC's 25% will be added to
the program rate. The following illustrates this concept:
Dealer Reserve
Used New PFC Rate
--------------- -------- ---------
Up to 5% Up to 3% No change
5.4% 3.4% +.1%
5.8% 3.8% +.2%
Etc. Etc. Etc.
Dealer fees on the owner operator lease program in excess of 10% of the
capitalized equipment cost will be split 50/50 with PFC.
The dealer's reserve payment and dealer fee on leases will be paid on the 15 th
of the following month. The difference in payment methods will be used on all
finance transactions. Dealer fees on leases will be expressed as a percentage of
the capitalized equipment cost.
CHARGEBACKS
Early terminations of any retail finance contract or modification of terms due
to a bankruptcy proceeding will result in a chargeback of unearned dealer
reserve to Rush Enterprises based on current PFC practices, where dealer reserve
is earned using the same method as interest earned on the underlying retail
contract.
On owner operator lease transactions, 100% of unearned dealer fees will be
charged back on a straight line basis throughout the term of the lease on all
early termination defaults, repossessions and bankruptcies where terms are
amended.
Transactions will be evaluated based on PFC's credit underwriting standards. PFC
will provide standard administrative services including contract administration
and collections.
This Letter Agreement shall be and hereby is incorporated into the Agreement for
Acquisition of Secured Retail Installment Paper between
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Xx. Xxxxxx Xxxx, President
March 29, 2000 - Final
Page Three
Rush Truck Centers of Texas, Inc., Rush Truck Centers of California,
Inc., Rush Truck Centers of Colorado, Inc., Rush Truck Centers of
Louisiana, Inc., and Rush Truck Centers of Oklahoma, Inc., and PACCAR
Financial Corp., dated September 14, 1998, as well as any amendments
thereto (including work to incorporate the dealerships in New Mexico
and Arizona), and the Lease Marketing Agreement between the same
parties and of even date therewith, as well as any amendments and
attachments thereto (collectively, the "Rush Dealer Agreements").
Except for the modifications stated herein, the Rush Dealer Agreements
shall remain in full force and effect unchanged.
INSURANCE
PFC is pleased to offer the following commission structure for physical
damage insurance for the year 2000:
o Standard Commission - 12.5% of Net Written Premium for all business (fleet
and non-fleet) paid monthly.
o Quarterly Bonus - 3.25% of Net Written Premium on volume over $300k (not
retroactive) paid quarterly.
o Annual Bonus - 1.25% of Net Written Premium on volume over $1.5 million
(retroactive) paid annually.
o Contingency Income - PFC's standard contingency program will remain in
effect, allowing up to 8% of annual earned premium based on loss ratios.
Contingency income is paid annually.
It is anticipated that the quarterly and annual targets will increase in 2001
and beyond and as our insurance relationship develops. Other Items:
1. Other insurance in PFC contracts - With PFC's competitive commission
structure outlined above, there should be little need to place other
physical damage insurance in PFC contracts. However, PFC will consider
exceptions when specific customer needs or market conditions warrant those
exceptions.
2. Specified perils versus comprehensive coverage - At this point in time, PFC
does not offer comprehensive coverage. To manage your E&O exposure, we
understand that you have the customer sign an acknowledgement in cases
where specified perils is sold.
3. Claims service - PFC's dedicated claims group, part of AIG, provides
outstanding claims service. The utilization of independent appraisers
allows for quick authorization of repairs and fast overall service. As we
experience claims over the next year, we will review this service together.
If the service is not satisfactory, we can develop a program similar to the
Rapid Repair program used by Associates.
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Xx. Xxxxxx Xxxx, President
March 29, 2000 - Final
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We appreciate the opportunity to provide this program to Rush Enterprises, Inc.
and look forward to supporting your efforts to provide financial services to
truck owners in your territories. This proposal contains proprietary information
and may not be disclosed to anyone outside Rush Enterprises, Inc. without prior
written consent of PACCAR Financial Corp.
Please call me if you have any questions.
Sincerely,
Xxxxxx X. Xxxx
President
AJW:ejb
rushltragreement
Acknowledged and Agreed to this ______ day of January, 2000.
By:
-------------------------------------
Rush Truck Centers of Texas, Inc.
Rush Truck Centers of California, Inc.
Rush Truck Centers of Colorado, Inc.
Rush Truck Centers of Louisiana, Inc.
Rush Truck Centers of Oklahoma, Inc.
Rush Truck Centers of Arizona, Inc.
Rush Truck Centers of New Mexico, Inc.
