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EXHIBIT 10(k)
AGREEMENT
This Agreement is made effective this 19 day of August, 1998 by and between
Texas Equipment Co., Inc., hereinafter referred to as "TEC, Inc.", a corporation
duly organized and existing under the laws of the State of Texas and a wholly
owned subsidiary of Texas Equipment Corporation ("TE Corp."), a Nevada
corporation and a reporting company under the Securities Exchange Act; Xxxx
Xxxxxx and his sons (or certain family trusts established by such persons), who
are collectively the principal shareholders of TE Corp. (collectively "Xxxxxx")
and Xxxx Deere Company - A Division of Deere & Company ("Deere"), a corporation
duly organized and existing under the laws of the State of Delaware.
Whereas TEC, Inc., has acquired the dealership assets of Romney Implement Co.,
and desires to obtain an appointment as a Deere dealer for the area of
responsibility formerly assigned to Romney Implement Co.; and
Whereas the size and geographic diversity of TEC, Inc.'s Deere dealership
operations as presently constituted and its parent corporation's current status
as a publicly traded corporation make them unlike Deere's other North American
dealers; and
Whereas addition of the Romney Implement Co., area of responsibility to TEC,
Inc.'s dealership operations would make TEC, Inc.'s Deere dealership operations
even more unlike any of Deere's other North American dealers; and
Whereas the uniqueness of TEC, Inc.'s circumstances and the additional risks
involved for
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Deere warrant the application, to TEC, Inc., of performance requirements beyond
those imposed on other Deere dealers, as well as certain modifications to the
dealer agreements now in effect between TEC, Inc., and Deere; and
Whereas Deere is willing to appoint TEC, Inc., a dealer for the Romney Implement
Co., area of responsibility, and to approve certain future public offerings of
TE Corp., stock for the benefit of TEC, Inc., and its shareholders, both upon
agreement of the parties to the terms hereof; and
Whereas TEC, Inc. and Xxxxxx are willing to agree to and be bound by the terms
hereof in order to obtain an appointment as a dealer for the Romney Implement
Co. area of responsibility;
Now Therefore, in consideration of the premises and mutual covenants and
agreements contained herein, the parties hereto agree as follows:
1. Restrictions on Equity:
a. TEC, Inc., on a consolidated basis with TE Corp., will have an
equity to assets ratio of (computed in the manner provided in
this Section 1.a and wherever referenced herein) of 30% or
greater:
(1) no later than December 31, 2000 if a public offering of TE
Corp. stock involving gross proceeds of at least $20 million
does not occur on or before that date;
(2) within 120 days following any public offering of TE Corp.
stock involving gross proceeds of at least $20 million: and
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(3) immediately following any further expansion of TE Corp.'s
agricultural area of responsibility.
The balance sheet effect of any distribution to shareholders occurring
or to occur in connection with a public offering of TE Corp., stock
shall be included in the calculation of TEC, Inc.'s equity to assets
ratio for the purposes of section l. a (2) above.
b. TEC, Inc., will not pay any dividends, effect any stock repurchase, or
make any other distributions to shareholders if:
(1) TEC, Inc.'s equity to assets ratio is below 30%; or
(2) TEC, Inc.'s equity to assets ratio would fall below 30% as a result
of such dividend, repurchase, or distribution.
c. Unless specifically approved in advance in writing by Deere, TEC, Inc.,
will not make any acquisitions or initiate new business activities if:
(1) TEC, Inc.'s equity to assets ratio is below 30%; or
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(2) TEC, Inc.'s equity to assets ratio would fall below 30% as a result of
such actions.
d. Any business operation that TEC, Inc., desires to capitalize at less
than a 30% equity to assets ratio will be contained in a corporation
separate from TEC, Inc. TEC, Inc., will remain the Deere dealership
corporation.
e. Provided, however, that the term "affiliated company" for the purposes
hereof shall not include, and TEC, Inc. shall not be restricted in its
dealings with, TE Corp. and subsidiaries of TEC Inc. or of TEC Corp.
whose business is limited to the operation of Deere dealerships and the
sale of goods and performance of services related thereto. TEC, Inc.,
will not guarantee or otherwise be liable for any debt or other
obligation of any affiliated company, provided, however, that this
sentence shall not apply to financing arrangements arising from the
procurement, from TEC, Inc.'s dealerships by a company affiliated with
TEC, Inc., of goods and services offered to the public by TEC, Inc., in
the ordinary course of TEC, Inc.'s business. All inter-company
transactions between TEC, Inc., and affiliated companies will be
conducted on an arms-length basis, on reasonable commercial terms. TEC,
Inc., will maintain its assets, bank accounts, and credit facilities
separately from the assets, bank accounts, and credit facilities of
affiliated companies, and TEC, Inc.'s assets and funds (and records
relating thereto) will not be commingled with those of any affiliated
company.
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2. Restrictions on Share Ownership:
a. Under Section 2(b) of the Dealer Agreement, it shall be a
basis for cancellation of the Agreement if: (i) Xxxxxx
Principal(s) identified in Addendum A in the aggregate
beneficially own less than 35% of the capital stock entitled
to vote on the election of directors of TE Corp., or (ii) if
any "person" (as that term is defined under the Securities
Exchange Act of 1934 as amended) other than Xxxxxx
Principal(s) or any person who has not been approved in
writing by Deere, either (x)owns a greater percentage of the
capital stock entitled to vote on the election of directors of
TE Corp. than Xxxxxx Principal(s) in the aggregate, or (y) any
person other than one of the Xxxxxx Principals or any person
who has not been approved in writing by Deere holds the office
of Chairman of the Board, President or Chief Executive Officer
of TEC, Inc. or TE Corp.
b. TEC, Inc., will advise Deere whenever TEC, Inc., becomes aware
that a shareholder owns or controls 5% or more of the
outstanding shares of any class of stock of TEC, Inc. or TE
Corp.
c. The Xxxxxx Principals will not privately sell any TEC, Inc.
or TE Corp. shares to a person or entity not approved by
Deere. However, Xxxxxx Principals may:
1) sell any of their shares in TEC, Inc. or TE Corp., in
broker's transactions, to market makers as
contemplated by SEC Rule 144, or in
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an underwritten public offering or to other Xxxxxx
Principals or to family trusts or entities solely
controlled by them; or
d. Neither TEC, Inc. nor TE Corp., will privately sell any TEC,
Inc. or TE Corp., shares to a person or entity not approved by
Deere. However, TEC, Inc. or TE Corp., may (i) sell any of
their shares in an underwritten public offering, or (ii) in
connection with stock options, restricted stock awards, or
similar equity compensation grants for employees or
consultants of TEC, Inc. or TE Corp., or (iii) in connection
with any acquisition of a dealership otherwise approved by
Deere as long as Xxxxxx Principals continues to satisfy the
requirements set forth in section 2.a above following the,
sale.
e. Deere will have the right to terminate TEC, Inc.'s dealer
appointments, effective immediately, in the event Xxxxxx
Principals cease to comply with either requirement set forth
in section 2.a above, provided, however, that section 4 below
will govern Deere's right of termination on the death of
Xxxxxx Principals. Termination under this section 2.e may be
executed, at Deere's sole discretion, on an overall basis or
by individual area of responsibility.
3. Deere Performance Criteria:
a. Deere will have the right to terminate TEC, Inc.'s
agricultural dealer appointments if TEC, Inc.'s equity to
assets ratio, based on TEC, Inc.'s fiscal year-end audit, is
less than 25%. Such termination will require one year advance
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written notice, and at Deere's sole discretion may be
executed on an overall basis or by individual area of
responsibility. Should Deere give notice of termination under
this section 3.a, TEC, Inc., will have the right to cure its
equity to assets ratio deficiency through the injection of
fresh capital, in the amount deemed necessary by Deere to
raise the year-end percentage to 25%, within 180 days
following TEC, Inc.'s fiscal year end; however, Deere's
approval will be required if TEC, Inc., wishes to cure its
equity to assets ratio deficiency by any other means,
including without limitation reducing its asset levels or
through earnings retained during the cure period.
b. Annually, by a deadline specified, by Deere, TEC, Inc., will
submit and secure Deere's approval of a comprehensive business
plan (for each individual area of responsibility) containing:
(1) specific objectives for market share (whole goods and
parts), Customer Satisfaction Index (CSI), and equity
(as well as any other metric criteria which Deere may
prescribe for dealers generally) for the plan year
which, in each instance, represent at a minimum
meaningful progress toward the metric level specified
by Deere for each criterion;
(2) specific action plans designed to achieve the metric
criteria objectives specified in the plan and, within
a reasonable period of time, the metric levels
specified by Deere; and
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(3) such other elements or metrics as are set forth in
Deere's then-effective Signature Program, or which
Deere may elect to require in dealer business plans
generally.
c. Failure by TEC, Inc., to submit acceptable business plans or
failure to make meaningful progress toward the objectives in
the plans, as determined by Deere in its sole discretion, will
constitute grounds for termination of TEC, Inc.'s agricultural
dealer appointments for the area of responsibility involved.
Termination pursuant to this provision will require one year
advance written notice and TEC, Inc. may cure such deficiency
within 60 days following such notice by submitting an
acceptable business plan or establishing such meaningful
progress, as determined by Deere in its sole discretion,
otherwise Deere will have no obligation to rescind a notice of
termination given under this section 3.c even if TEC, Inc.,
cures the failure(s) in the area of responsibility involved
during the year after the notice is given and the available
cure period has expired.
d. The termination rights provided for Deere in sections 3.a and
3.c above and elsewhere in this Agreement are in addition to,
and shall in no way affect or limit, the termination rights of
Deere under TEC, Inc.'s agricultural dealer agreements or any
other agreement between TEC, Inc., and Deere. Nothing in
sections 3.a and 3.c above shall preclude immediate
termination, or termination on less than one year advance
notice, of TEC, Inc.'s agricultural dealer appointments in any
situation in which another provision in this Agreement or any
other agreement affords Deere a right to terminate immediately
or on less than one year advance notice.
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Termination on Death of Xxxxxx:
a. Deere will not exercise its right, under section 2(b) of the dealer
agreements in effect between TEC, Inc., and Deere, to terminate TEC,
Inc.'s dealer appointments, effective immediately, upon the death of
Xxxx Xxxxxx if the following conditions are satisfied at the time of
Xxxx Xxxxxx'x death:
(1) TEC, Inc., has in place an ownership succession plan that has
been approved in writing by Deere.
(2) TEC, Inc., and Deere have entered into a written agreement
which:
(a) identifies events which, from Xxxx Xxxxxx'x death
forward, will constitute changes in the control of
TEC, Inc. (but from an equity ownership basis, the
provision of section 2.a hereof shall apply); and
(b) provides Deere an additional right to terminate TEC,
Inc.'s dealer appointments, effective immediately, if
such an event occurs without the prior written
approval of Deere.
(3) Neither TEC, Inc., nor Xxxxxx has breached any obligation under TEC,
Inc.'s dealer agreements, this Agreement, or any other agreement with
Deere, and no grounds for termination of an TEC, Inc., dealer
appointment exist under any agreement between TEC, Inc., and Deere.
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(4) TEC, Inc., and each of its locations are under the management of
personnel who have demonstrated performance capabilities, are
acceptable to Deere in its sole discretion, and who will continue to
manage TEC, Inc., and its locations after the death of Xxxx Xxxxxx.
(5) Each area of responsibility assigned to TEC, Inc., under its dealer
agreements justifies, in Deere's sole discretion, the continuation of a
Deere dealership assigned only that area. Should Deere determine that a
particular area of responsibility does not justify the continuation of
a dealership, TEC, Inc., shall retain, for a period of three years
following the death of Xxxx Xxxxxx, a right of first refusal to locate
a dealership in the affected area of responsibility if in that period
Deere rescinds its decision, provided, however, that such right of
first refusal shall terminate if TEC, Inc., breaches an agreement with
Deere, or if grounds arise for termination of any of TEC, Inc.'s
dealer-appointments.
(6) Xxxxxx Principals are in compliance with the requirements set forth in
section 2.a above.
b. Deere may at its sole discretion evaluate compliance with the
conditions set forth In this section 4 and take action, if
any, on an overall basis or by individual area of
responsibility.
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5. Arbitration:
a. Any controversy or claim, whether based on contract, tort,
statute, common law, or other legal theory, between TE Corp.,
TEC, Inc., or Xxxxxx Principal(s) and Deere, or Deere Credit,
Inc. shall be resolved by binding arbitration pursuant to this
section 5 and the then-current Commercial Rules and
supervision of the American Arbitration Association. The duty
to arbitrate shall extend to any officer, employee,
shareholder, principal, agent, trustee in bankruptcy or
otherwise, affiliate, subsidiary, third-party beneficiary, or
guarantor of a party hereto making or defending any claim
which would otherwise be arbitrable hereunder.
b. The arbitration shall be held in Dallas before a panel of
three arbitrators who are knowledgeable regarding, and have
experience as arbitrators of, commercial disputes. The
decision and award of a majority of the panel shall be final
and binding, and judgment thereon may be entered in any court
having jurisdiction thereof. The panel shall not have the
power to award punitive or exemplary damages, or any damages
excluded by, or in excess of any damage limitations expressed
in, any agreement between the parties to the dispute.
c. Each party to the dispute shall bear its own attorney's fees
associated with the arbitration, and other costs and expenses
of the arbitration shall be borne as provided by the rules of
the American Arbitration Association.
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d. If court proceedings to stay litigation or compel arbitration
are necessary, the party who unsuccessfully opposes such
proceedings shall pay all associated costs, expenses, and
attorney's fees, which are reasonably incurred by the other
party.
e. Neither a party to the dispute, a witness, or the panel may
disclose the contents or results of any arbitration hereunder
without the prior written consent of all parties to the
dispute, unless and then only to the extent required to
enforce or challenge the award, as required by law (including
without limitation applicable securities laws and regulations)
or as a result of legal process, or as necessary for financial
and tax reports and audits.
f. Deere may seek judicial remedies, such as (but not limited to)
attachment, replevin, and garnishment, deemed necessary by
Deere in its sole discretion for the enforcement of Deere's
rights regarding any security for the indebtedness of TEC,
Inc., and such action by Deere shall not constitute a waiver
of Deere's rights or a breach of Deere's obligations under
this section 5. For the purposes of this section 5.f only,
"Deere" shall include Deere Credit, Inc. in addition to Deere.
g. If any part of this section 5 is held to be unenforceable, its
unenforceability shall not affect the duty to arbitrate
hereunder or any other part of this section 5.
6. General Provisions:
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a. As used in this Agreement, the term "area of responsibility"
means an individual dealership location.
b. Deere shall have input into the selection and removal of all
TEC, Inc., management personnel down to and including the
managers of TEC, Inc.'s individual locations.
c. TEC, Inc., shall obtain written approval from Deere prior to
discussing (directly or indirectly) with any dealer a possible
purchase of a dealership that would add to TEC, Inc.'s area of
responsibility. Deere shall have the right to reject such a
request or to disapprove additions to TEC, Inc.'s area of
responsibility in its sole discretion.
d. Any grounds for termination of TEC, Inc.'s dealer appointments
under this Agreement, TEC, Inc.'s dealer agreements (as
modified by this Agreement), or any other agreement between
TEC, Inc., and Deere will be sufficient grounds for
termination for the purposes of any applicable law requiring
grounds (or certain grounds) for termination, regardless of
the terminology used in such law to describe the grounds
required thereunder.
e. If any of TEC, Inc.'s dealer appointments are terminated, all
of TEC, Inc.'s indebtedness to Deere in connection with the
terminated appointments which is not due and payable prior to
the effective date of termination shall be due and payable as
of the effective date of termination.
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f. TEC, Inc., Xxxxxx, and Deere will maintain the confidentiality
of one another's confidential information, unless and then
only to the extent disclosure is required by law (including
without limitation applicable securities laws and regulations)
or as a result of legal process. Nothing in this section 6.f
or in section 5.e above shall prohibit the exchange of
information between TEC, Inc. and Xxxxxx, or the exchange of
information within the Deere & Company organization.
g. Nothing contained in this Agreement shall be construed as a
waiver or modification of any terms, conditions, or rights
contained in any existing agreement between Deere and TEC,
Inc., or Xxxxxx except to the extent such terms, conditions,
or rights are in conflict with this Agreement, in which event
this Agreement shall supersede the existing agreements, but
only to the extent of the conflict.
h. Currently TEC, Inc.'s obligations to Deere are all guaranteed
by a personal guaranty from Xxxx Xxxxxx. Deere would accept a
letter of credit in lieu of the personal guaranty from Xxxx
Xxxxxx if the parties hereto can agree upon an acceptable
form, amount, and issuer of the letter of credit.
i. Each party to this Agreement represents and warrants that it
has taken all action required to authorize it to enter into
this Agreement, and each party further represents that it has
neither relied upon nor been induced by any representation,
statement, or disclosure
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of the other party, but has relied upon its own knowledge and
judgment in entering into the Agreement.
j. Because of TEC, Inc.'s unique position within Deere's dealer
organizations, each provision hereof shall be given full
effect in accordance with its terms regardless of how or
whether Deere addresses the provision's subject matter with
other Deere dealers.
k. This Agreement cannot be modified, nor any party's rights
hereunder waived, except in writing, and no waiver of any
provision hereof shall preclude enforcement of any other
provision hereof, or subsequent enforcement of the provision
waived. This Agreement cannot be assigned without the prior
written consent of the parties, which consent may be withheld
with or without cause.
1. Re-incorporation of TEC, Inc., in Delaware or another jurisdiction
shall not affect its rights and obligations under this Agreement.
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XXXX DEERE COMPANY - A DIVISION OF DEERE & COMPANY
BY: /S/ XXX XXXXXX
----------------------------------------
XXX XXXXXX
Title: Division Finance Manager
TEXAS EQUIPMENT CO., INC.
BY: /S/ XXXX X. XXXXXX
----------------------------------------
Title: PRESIDENT & CEO
/S/ Xxxx X. Xxxxxx
--------------------------------------------
XXXX XXXXXX, INDIVIDUALLY
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ADDENDUM A
The Xxxxxx Principals for purposes of this Agreement shall consist of the
following persons:
Xxxx X. Xxxxxx (Sr.)
Xxxx X. Xxxxxx
Xxxx X. Xxxxxx 11
Xxxxxxx X. Xxxxxx
Xxxxxx 1997 Family Trust
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