Supreme settles bus suit

Supreme  Industries (NYSE MKT: STS) reached an agreement with King County,  Washington, to settle litigation that could have cost the company in excess of  $10.5 million.

On February  22, 2012, King County, Washington filed a complaint against a subsidiary of  Supreme seeking to revoke the county's acceptance of a fleet of 35 buses which  had been manufactured and delivered to King County beginning in 2009.  King County alleged breach of contract and  breach of implied warranties. As of February 28, 2013, King County claimed its  damages were then $10,594,113. The county subsequently moved to add a consumer  protection act claim which would permit an award of attorney's fees, in addition  to its damages, if successful.

Supreme’s  bus division and King County entered into a settlement and release agreement June  14.  Under the terms of the agreement, the  lawsuit will be dismissed and mutual releases granted in exchange for payment  of the sum of $4,737,500 to the county within ninety days of the date of the  agreement.

Through  separate agreements, Supreme’s bus division subsidiary settled third-party  claims against certain party subcontractors who will contribute $520,000 of the  settlement funds.  The bus division will  pay the balance, using approximately 12% of Supreme’s $35,000,000 credit  facility. The settlement, net of third party funds, is $4,217,500 or $2,867,900  net of tax.

The Company  will take possession of the fleet of buses from the county on or before July 9,  2013. The Company will look at ways to resell or repurpose the buses in a way  that maximizes their value.

"In  light of the risks and costs inherent in continuing this suit, the company  determined that it was in its interest to bring this matter to resolution,”  said Mark Weber, president and chief executive officer.  “Supreme remains focused on providing  products and services that meet customer expectations for the truck, armored  vehicle, shuttle bus, mid-size bus, and trolley markets."

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