Exhibit 10.1
RUSH ENTERPRISES, INC.
EXECUTIVE TRANSITION PLAN
1.
Purpose
. The
purpose of the Executive Transition Plan (the “Plan”)
is to provide certain protections to covered executives in the
event their employment is involuntarily terminated, including in
connection with a Change in Control of the Company. It is intended
that having the protections provided by the Plan will alleviate
personal concerns that Participants might otherwise have about
uncertainties that may arise in the face of certain business
exigencies and opportunities the Company may have from time to time
and, in turn, provide greater assurance to the Company and its
shareholders that the covered executives will be able to maintain
their undivided focus on and attention to the business and
interests of the Company and the enhancement of shareholder
value.
2.
Certain
Definitions .
(a)
“Affiliate” means
any entity at least 50% of the voting, capital or
profit interests of which are owned directly or indirectly by the
Company.
(b)
“Annual
Cash Bonus” means the amount payable to a Participant under
the terms of any bonus program sponsored by the Company in which
the Participant is eligible to participate.
(c)
“Base
Salary” means with respect to a Participant, an amount equal
to the Participant’s rate of basic pay for the period in
question, excluding amounts for overtime, bonuses, or allowances,
as determined by the Committee in its sole discretion.
(d)
“Board” means the
board of directors of the Company.
(e)
“Cause” means a
Participant’s (i) conviction or plea of guilty or nolo
contendre to a felony or other crime involving moral turpitude;
(ii) commission of fraud or a material act or omission
involving dishonesty with respect to the Company, as reasonably
determined by the Board; (iii) willful failure or refusal to
carry out the material responsibilities of his or her employment,
as reasonably determined by the Board; or (iv) gross
negligence, willful misconduct, or engaging in a pattern of
behavior which has had or is reasonably likely to have a
significant adverse effect on the Company, as reasonably determined
by the Board.
(f)
“Change in
Control” means the occurrence of any of the
following:
(i)
any
“person” (as such term is used in
Section 13(d) and 14(d) of the Exchange Act, other
than (1) the Company, (2) any trustee or other fiduciary
holding securities under an employee benefit plan of the Company,
(3) any entity owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions
as their ownership of stock of the Company, (4) W. Marvin
Rush, W.M. “Rusty” Rush and their immediate family
members (i.e., brothers and sisters (whether by whole or half
blood), spouse, ancestors, and lineal descendants); or (5) any
person who becomes a “beneficial owner” (as defined
below) in connection with a
transaction
described in clause (1) of subparagraph (iii) below) is
or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such person any securities acquired directly from the Company)
representing 40% or more of the combined voting power of the
Company’s then outstanding voting securities;
(ii)
Incumbent
Directors cease for any reason to constitute a majority of the
directors then serving;
(iii)
there is
consummated a merger or consolidation of the Company or any direct
or indirect subsidiary of the Company with any other entity, other
than (1) a merger or consolidation which results in the
directors of the Company immediately prior to such merger or
consolidation continuing to constitute at least a majority of the
board of directors of the Company, the surviving entity or any
parent thereof or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no person is or becomes the beneficial owner,
directly or indirectly, of securities of the Company (not including
in the securities beneficially owned by such person any securities
acquired directly from the Company) representing 40% or more of the
combined voting power of the Company’s then outstanding
voting securities;
(iv)
the shareholders
of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for
the sale or disposition by the Company of all or substantially all
of the Company’s assets, other than a sale or disposition by
the Company of all or a majority of the Company’s assets,
income or revenue to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by shareholders
of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale or
disposition; or
(v)
any other
transaction or event occurs that is resolved by the Company’s
Board to be a “Change in Control” for purposes of this
Agreement.
(g)
“Code” means the
Internal Revenue Code of 1986, as amended.
(h)
“Committee” means
the Compensation Committee of the Board.
(i)
“Company” means
Rush Enterprises Inc., a Texas corporation, its Affiliates and any
successor or assignee thereof.
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(j)
“Disability”
means the inability of a Participant to perform the material duties
of his or her employment by reason of a medically determinable
physical or mental impairment that can be expected to result in
death or that has lasted or is expected to last for a continuous
period of at least 12 months, as determined by a duly licensed
physician selected by the Committee.
(k)
“Good
Reason” means (i) prior to or following a Change in
Control, a material adverse change in a Participant’s status
or position, including, without limitation, any material adverse
change resulting from a diminution in the Participant’s
position, duties, responsibilities or authority or the assignment
to the Participant of duties or responsibilities that are
materially inconsistent with his or her status or position;
(ii) prior to or following a Change in Control, a reduction in
the Participant’s annual base salary or a failure to pay same
absent similar reductions in the base salary of similarly situated
employees for legitimate business purposes; (iii) following a
Change in Control, a reduction in the Participant’s target
incentive award opportunities; (iv) following a Change in
Control, the relocation of the Participant’s principal place
of employment by more than 50 miles from the current location;
(v) in connection with a Change in Control, the successor or
acquiring company fails or refuses to assume the obligations of the
Company under this Plan; or (vi) with respect to a Level 1 or
Level 2 Participant, following a Change in Control a Level 1 or
Level 2 Participant disagrees with the philosophy or policies of
the successor or acquiring Company. Before terminating
employment for Good Reason, a Participant must specify in writing
to the Company the nature of the act or omission that the
Participant deems to constitute Good Reason and provide the Company
30 days after receipt of such notice to review and, if required,
correct the situation (and thus prevent the Participant’s
termination for Good Reason).
(l)
“Incumbent
Director” means any one of the following:
(i)
any member of the
Board on March 31, 2008; or
(ii)
any individual
appointed or elected to the Board after March 31, 2008, if and
only if both:
(A)
such
individual’s initial assumption of office is not in
connection with an actual or threatened election contest, including
but not limited to a consent solicitation relating to the election
of directors of the Company, and
(B)
the appointment
or election by the Board or the nomination for election by the
Company’s shareholders of such individual was approved or
recommended by a vote of at least two-thirds of the Incumbent
Directors in office at the time of such approval or
recommendation.
(m)
“Involuntary
Termination” means the termination of a Participant’s
employment with the Company (i) by the Company for any reason
other than Cause, death, or Disability, or (ii) by the
Participant for Good Reason.
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(n)
“Level 1
Participant” means the employees of the Company selected by
the Committee to participate in the Plan as a Level 1 Participant
as listed in Exhibit A, as Exhibit A may be amended from
time to time by the Committee.
(o)
“Level 2
Participant” means the employees of the Company selected by
the Committee to participate in the Plan as a Level 2 Participant
as listed in Exhibit A, as Exhibit A may be amended from
time to time by the Committee.
(p)
“Level 3
Participant” means the employees of the Company selected by
the Committee to participate in the Plan as a Level 3 Participant
as listed as listed in Exhibit A, as Exhibit A may be
amended from time to time by the Committee.
(q)
“Level 4
Participant” means the employees of the Company selected by
the Committee to participate in the Plan as a Level 4 Participant
as listed in Exhibit A, as Exhibit A may be amended from
time to time by the Committee.
(r)
“Participant”
means any employee of the Company selected by the Committee to
participate in the Plan.
3.
Administration
.
(a)
The
Committee . The Plan shall be
administered by the Committee. Subject to the provisions of the
Plan, the Committee, acting in its sole and absolute discretion,
shall have full power and authority to interpret, construe and
apply the provisions of the Plan and to take such actions as it
deems necessary or appropriate in order to carry out the provisions
of the Plan. The decision of the Committee as to any question or
issue arising under or in connection with the Plan or an
individual’s participation in the Plan shall be final and
conclusive on all persons. The Committee may delegate to other
persons such duties and functions as it deems appropriate in
connection with the administration of the Plan.
(b)
Indemnification
. The
Company shall indemnify and hold harmless each member of the
Committee and any employee or director of the Company to whom any
duty or function relating to the administration of the Plan is
delegated from and against any loss, cost, liability (including any
sum paid in settlement of a claim with the approval of the Board),
damage and expense (including legal and other expenses incident
thereto) arising out of or incurred in connection with the Plan,
unless and except to the extent attributable to such person’s
fraud or willful misconduct.
4.
Participation
.
(a)
The Committee
shall, in its sole and absolute discretion, from time to time
designate the employees of the Company eligible to participate in
the Plan and whether such individual shall be a Level 1, Level 2,
Level 3, or Level 4 Participant.
(b)
Each Participant
shall be provided, together with a copy of the Plan, a
participation certificate, in such form as the Committee may from
time to time prescribe, specifying that the individual is a
Participant and whether the individual is a Level 1, Level 2 level
3, or Level 4 Participant.
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(c)
An
employee’s status as a Participant shall terminate at such
time as may be determined by the Committee, in its sole discretion,
provided that such Participant shall be given written notice of
such termination of his or her status as a Participant by the
Committee at least 60 days prior to the effective date of such
termination of participation, and provided further that no employee
who is a Participant immediately prior to a Change in Control shall
have his status as a Participant terminated at any time within the
two year period following such Change in Control without the
Participant’s prior written consent.
5.
Involuntary
Termination of Participant’s Employment - General
. Subject to
Section 10 (imposing additional conditions with respect to
receipt of payments and benefits under the Plan, including the
elimination of duplicate payments and benefits due to other
agreements that may be applicable, restoration of payments due to a
terminated Participant’s violation of restrictive covenants
and the execution and delivery of a release) and except as
otherwise provided in Section 6 (relating to an Involuntary
Termination in conjunction with a Change in Control), if a
Participant experiences an Involuntary Termination, the Participant
shall be entitled to receive the payments and benefits set forth in
the following Sections 5(a) – (f).
(a)
A single lump sum
cash payment equal to the sum of any unpaid base salary earned by
the terminated Participant through the effective date of his or her
Involuntary Termination, if any.
(b)
Payment of any
business expenses that were incurred prior to the effective date of
the Participant’s Involuntary Termination, but which were not
reimbursed and are otherwise eligible for reimbursement as the
effective date of the Participant’s Involuntary Termination,
if any.
(c)
Any payments or
benefits that are payable to the terminated Participant or any
covered spouse, dependent or beneficiary of the terminated
Participant, under and in accordance with the provisions of any
employee benefit plan, program or arrangement of the Company (other
than this Plan).
(d)
A cash payment as
follows:
(i)
if the
Participant is a Level 1 Participant equal to four (4) times
the Participant’s current Base Salary.
(ii)
if the
Participant is a Level 2 Participant or a Level 3 Participant equal
to one (1) times the Participant’s current Base Salary
plus one-half (1/2) times the Annual Cash Bonus, if any, the
Participant received for the calendar year prior to the calendar
year in which the Participant is Involuntarily
Terminated.
(iii)
if the
Participant is a Level 4 Participant equal to one-half (1/2) times
the Participant’s current Base Salary plus one-half (1/2)
times the Annual Cash Bonus, if any, the Participant received for
the calendar year prior to the calendar year in which the
Participant is Involuntarily Terminated.
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Any such cash payment provided for in this
Section 5(d) to a Level 1 Participant shall be paid in a
single lump sum in cash as soon as administratively practicable
after the Participant is Involuntarily Terminated, but in all
cases, no later than 2½ months following the fiscal year in
which the Level 1 Participant is Involuntarily Terminated.
Any such cash payment provided for in this
Section 5(d) to a Level 2 or Level 3 Participant shall be
paid in equal monthly installments over a one-year period beginning
with the first month following the month in which the Participant
was Involuntarily Terminated; provided, however, to the extent a
Level 2 Participant is a “specified employee” as set
forth in Section 409A of the Code, then no more than two
times’ the compensation limit under Section 401(a)(17)
of the Code ($460,000 for 2008) may be paid to such specified
employee in the first six months following the month in which he is
Involuntarily Terminated. Any such cash payment provided for
in this Section 5(d) to a Level 4 Participant shall be
paid in equal monthly installments over a six-month period
beginning with the first month following the month in which the
Participant was Involuntarily Terminated. Payments provided
for under this Sections 5(a), (b) and (c) will be paid in
accordance with normal payroll practices.
(e)
If applicable,
the Participant will continue to participate at the Company’s
expense in any group term life insurance program sponsored by the
Company in which the Participant was eligible to participate
immediately prior to his Involuntary Termination as if the
Participant’s employment had continued at the
Participant’s highest annual rate of Base Salary in effect at
any time during the 12 months preceding the effective date of the
Participant’s Involuntary Termination. The
Participant’s participation in the group term life insurance
program will continue until the earlier (i) (A) 48 months
following the effective date of the Participant’s Involuntary
Termination if the Participant is a Level 1 Participant,
(B) 12 months following the effective date of the
Participant’s Involuntary Termination if the Participant is a
Level 2 or Level 3 Participant, or (C) 6 months following the
effective date of the Participant’s Involuntary Termination
if the Participant is a Level 4 Participant, (ii) the date
that the Participant is eligible for coverage under a group term
life insurance plan sponsored by the Participant’s successor
employer, or (iii) the Participant’s death.
(f)
If the
Participant and/or any spouse or dependent participates in a group
health plan sponsored by the Company (other than pursuant to
continuation coverage under the Consolidated Omnibus Reconciliation
Act of 1985 (“COBRA”)) as of the effective date of the
Participant’s Involuntary Termination, then, the Participant
and/or any spouse and/or dependents may elect to continue
participating in the group health plan sponsored by the Company at
the same benefit levels as are available for similarly situated
active employees at the Company’s expense until the earlier
of (i) (A) 48 months following the effective date of the
Participant’s Involuntary Termination if the Participant is a
Level 1 Participant, (B) 12 months following the effective
date of the Participant’s Involuntary Termination if the
Participant is a Level 2 or Level 3 Participant, or (C) 6
months following the effective date of the Participant’s
Involuntary Termination if the Participant is a Level 4
Participant, or, if such coverage is not permitted by the group
health plan sponsored by the Company or under applicable law, the
Company will provide COBRA continuation coverage to such terminated
Participant and/or any spouse or dependents, at the Company’s
sole expense, if and to the extent any of such persons elects and
is entitled to receive COBRA continuation coverage, (ii) the
date that the Participant is eligible for coverage under a group
health plan sponsored by the Participant’s successor
employer, or (iii) the Participant’s death. This
continuation coverage shall be in addition to and not in lieu of
COBRA
6
to the extent continuation
coverage is permitted by the group health plan sponsored by the
Company and applicable law. Any reimbursement to Participants
under this Section 5(f) must be made not later than the
calendar year following the year in which the expense is
incurred. Following the benefits continuation period provided
herein, the Participant, and/or any spouse and/or other qualified
beneficiary, as defined under Section 4980B of the Code, shall
be eligible to commence continued medical coverage in accordance
with and for the applicable period required by COBRA. If the
continuation coverage described above ends as a result of the
Participant’s death, the Participant’s spouse and/or
dependents who would otherwise be considered qualified
beneficiaries, as defined under Section 4980B of the Code,
shall be eligible to commence continued medical coverage in
accordance with and for the applicable period required by
COBRA.
6.
Involuntary
Termination of a Participant’s Employment in Conjunction with
a Change in Control . Subject to Section 10
(imposing additional conditions with respect to receipt of payments
and benefits under the Plan, including the elimination of duplicate
payments and benefits due to other agreements that may be
applicable, restoration of payments due to a terminated
Participant’s violation of restrictive covenants and the
execution and delivery of a release), if a Participant experiences
an Involuntary Termination during the period beginning six months
prior to the date of a Change in Control or, if earlier, the date a
definitive agreement is signed with respect to the Change in
Control, and ending on the second
anniversary of the Change in Control, then the Participant shall be
entitled to receive the payments and benefits set forth in the
following Sections 6(a) – (g).
(a)
A single lump sum
cash payment equal to the sum of any unpaid base salary earned by
the terminated Participant through the effective date of his or her
Involuntary Termination, if any.
(b)
Payment of any
business expenses that were incurred prior to the effective date of
the Participant’s Involuntary Termination, but which were not
reimbursed and are otherwise eligible for reimbursement as the
effective date of the Participant’s Involuntary Termination,
if any.
(c)
Any payments or
benefits that are payable to the terminated Participant or any
covered spouse, dependent or beneficiary of the terminated
Participant, under and in accordance with the provisions of any
employee benefit plan, program or arrangement of the Company (other
than this Plan).
(d)
A Cash payment as
follows:
(i)
If the
Participant is a Level 1 Participant, the Participant shall receive
a payment equal to four (4) times the Participant’s current
Base Salary.
(ii)
If the
Participant is a Level 2 Participant or a Level 3 Participant, the
Participant shall receive a payment equal to two (2) times the
Participant’s current Base Salary plus two (2) times the
highest Annual Cash Bonus, if any, the Participant received in any
of the
7
previous five
(5) calendar year prior to the calendar year in which the
Participant is Involuntarily Terminated.
(iii)
if the
Participant is a Level 4 Participant, the Participant shall receive
a payment a payment equal to one-half (1/2) times the
Participant’s current Base Salary plus one-half (1/2) times
the highest Annual Cash Bonus, if any, the Participant received in
any of the previous five (5) calendar year prior to the
calendar year in which the Participant is Involuntarily
Terminated.
Any such cash payment provided for in this
Section 6(d) shall be paid in a single lump sum in cash
as soon as administratively practicable, but no later than 2½
months following the year in which the Participant is Involuntarily
Terminated. Payments provided for under this Sections 6(a),
(b) and (c) will be paid in accordance with normal
payroll practices. If a Participant is entitled to receive
payments and benefits under this Section 6 due to an
Involuntary Termination prior to but in conjunction with a Change
in Control and if, with respect to such Involuntary Termination,
the Participant receives payments or benefits under Section 5,
then, in order to avoid duplication, the payments and benefits to
which the Participant is entitled under this Section 6 will be
reduced by the payments and benefits which the Participant has
received under Section 5.
(e)
If applicable,
the Participant will continue to participate at the Company’s
expense in any group term life insurance program sponsored by the
Company in which the Participant was eligible to participate
immediately prior to the Change in Control or the
Participant’s Involuntary Termination as if the
Participant’s employment had continued at the
Participant’s highest annual rate of Base Salary in effect at
any time during the 12 months preceding the effective date of the
Change in Control or Participant’s Involuntary
Termination. The Participant’s participation in the
group term life insurance program will continue until the earlier
(i) (A) 48 months following the effective date of the
Participant’s Involuntary Termination if the Participant is a
Level 1 Partic
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