SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 30, 1996
BIG O TIRES, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-12964 87-0392481
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(State or other (Commission File (I.R.S. Employer
jurisdiction No.) Identification
of incorporation) No.)
11755 East Peakview Avenue, Englewood, Colorado 80111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (303) 790-2800
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ITEM 5. OTHER EVENTS.
Effective April 30, 1996, Big O Tires, Inc. (the "Company") entered into an
Agreement and Plan of Merger ("Merger Agreement") with TBC Corporation ("TBC")
and TBCO Acquisition, Inc. ("TBCO"). The Merger Agreement provides that TBC,
through its subsidiary, TBCO, will acquire the Company in a merger in which the
Company's stockholders will receive a cash price of $16.50 per share of the
Company's Common Stock. The cash price is subject to a possible reduction based
on a final tabulation of transaction costs and other expenses, which is not
expected to result in a material adjustment. The merger is subject to certain
regulatory approvals and the approval of the Company's stockholders. Among other
conditions, the consummation of the merger also is subject to TBC obtaining
satisfactory financing.
Effective April 30, 1996, prior to executing the Merger Agreement, the
Company also amended the Rights Agreement dated August 26, 1994 between the
Company and Interwest Transfer Co., Inc., to specifically exclude from the
definition of an "Acquiring Person," TBC, TBCO, and any other person who may be
deemed to be the beneficial owner of the Company's Common Stock because of the
execution and delivery of the Merger Agreement, so long as such persons are not
the beneficial owners of any capital stock of the Company other than (a)
pursuant to the Merger Agreement, (b) Common Stock owned by such persons prior
to April 30, 1996, (c) Common Stock acquired by any of such persons from any
other of such persons, (d) Common Stock or other securities acquired by such
persons in transactions or types of transactions that are approved in advance by
the Investment Committee of the Board of Directors of the Company and (e) Common
Stock other than as described above not exceeding 1% of the shares of Common
Stock then outstanding; and any other person that beneficially owns Common Stock
as of April 30, 1996, but does not thereafter become the beneficial owner of any
additional Common Stock exceeding 1% of the shares of Common Stock then
outstanding. The Rights Agreement was filed as Exhibit 1 to the Company's
Current Report on Form 8-K dated September 2, 1994. An Amendment dated as of
July 24, 1995, to the Rights Agreement was filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K dated July 25, 1995.
Effective April 30, 1996, the Company entered into agreements with John E.
Siipola, the Chairman of the Company, and with Horst K. Mehlfeldt, the Vice
Chairman of the Company, that provide that if the above described merger is
consummated, Messrs. Siipola and Mehlfeldt will resign their positions with the
Company and will receive lump sum payments of $208,613 and $186,654,
respectively, rather than fifteen (15) months of severance pay in accordance
with the Company's previously adopted Executive Management Severance Pay Policy.
In addition, the Company agreed that the Company would repurchase the 66,648
units under each of the Stock Appreciation Rights Agreements of Messrs. Siipola
and Mehlfeldt for a total amount of $174,951 each and that the Company would
continue to provide medical and dental insurance benefits to Messrs. Siipola and
Mehlfeldt and their eligible dependents for fifteen (15) months after the
effective date of the merger or until they obtain other employment, whichever is
earlier. The agreements also provide that the stock options held by Messrs.
Siipola and Mehlfeldt will be repurchased in accordance with the Merger
Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(10.1) Agreement and Plan of Merger dated as of April 30, 1996, between TBC
Corporation, a Delaware corporation, TBCO Acquisition, Inc., a Nevada
corporation and a wholly-owned subsidiary of TBC Corporation, and Big O Tires,
Inc. The Exhibits (Form of Indemnification Agreement and Form of Opinion) and
the Disclosure Certificate to the Agreement and Plan of Merger are not being
filed. The Company agrees to furnish supplementally copies of these documents to
the Securities and Exchange Commission upon request.
(10.2) Amendment No. 2 to Rights Agreement dated as of April 30, 1996,
between Big O Tires, Inc., a Nevada corporation and Interwest Transfer Co.,
Inc., a Utah corporation, as the Rights Agent.
(10.3) Separation Agreement dated April 30, 1996, between John E. Siipola
and Big O Tires, Inc.
(10.4) Separation Agreement dated April 30, 1996, between Horst K.
Mehlfeldt and Big O Tires, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 7, 1996
BIG O TIRES, INC.
By /s/ Philip J. Teigen
-------------------------------
General Counsel and Secretary
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EXHIBIT INDEX
Exhibit Description Page No.
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(10.1) Agreement and Plan of Merger dated as of April 30, 1996,
between TBC Corporation, a Delaware corporation, TBCO
Acquisition, Inc., a Nevada corporation and a wholly-owned
subsidiary of TBC Corporation, and Big O Tires, Inc. The Exhibits
(Form of Indemnification Agreement and Form of Opinion) and the
Disclosure Certificate to the Agreement and Plan of Merger are
not being filed. The Company agrees to furnish supplementally
copies of these documents to the Securities and Exchange
Commission upon request.
(10.2) Amendment No. 2 to Rights Agreement dated as of April 30, 1996,
between Big O Tires, Inc., a Nevada corporation and Interwest
Transfer Co., Inc., a Utah corporation, as the Rights Agent.
(10.3) Separation Agreement dated April 30, 1996, between John E.
Siipola and Big O Tires, Inc.
(10.4) Separation Agreement dated April 30, 1996, between Horst K.
Mehlfeldt and Big O Tires, Inc.
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AGREEMENT AND PLAN OF MERGER
by and among
TBC CORPORATION,
TBCO ACQUISITION, INC.,
and
BIG O TIRES, INC.
Dated as of April 30, 1996
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TABLE OF CONTENTS
ARTICLE I - THE MERGER...................................................... 2
1.1 The Merger..................................................... 2
1.2 Effects of the Merger.......................................... 2
1.3 Consummation of the Merger..................................... 2
1.4 Articles; Bylaws; Directors and Officers; Name................. 2
1.5 Conversion of Shares........................................... 3
1.6 Stock Options.................................................. 4
1.7 Adjustment of the Merger Consideration ........................ 4
1.8 Exchange of Certificates....................................... 5
1.9 Taking of Necessary Action; Further Action..................... 6
1.10 Certain Definitions ........................................... 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF PARENT AND
THE PURCHASER............................................... 8
2.1 Organization and Qualification................................. 8
2.2 Capitalization................................................. 9
2.3 Authorization; Binding Agreement............................... 9
2.4 Compliance..................................................... 9
2.5 Brokers and Finders........................................... 10
2.6 Proxy Statement............................................... 10
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 11
3.1 Subsidiaries, Joint Ventures, Organization and
Qualification....................................................... 11
3.2 Capitalization................................................ 12
3.3 Authorization; Binding Agreement............................... 13
3.4 Compliance..................................................... 14
3.5 Commission Filings............................................. 15
3.6 Changes........................................................ 15
3.7 Approval by Board of Directors
and Investment Committee....................................... 17
3.8 Prior Transaction Costs........................................ 17
3.9 Litigation..................................................... 17
3.10 Material Contracts............................................. 17
3.11 Proprietary Rights............................................. 19
3.12 Taxes.......................................................... 20
3.13 Employee Benefit Plans......................................... 22
3.14 Proxy Statement ............................................... 24
3.15 Compliance with Laws and Orders ............................... 25
3.16 Labor Matters ................................................. 26
3.17 Undisclosed Liabilities ....................................... 26
3.18 Title to Properties; Absence of Liens, Etc. ................... 26
3.19 Receivables; Inventory ........................................ 27
3.20 Insurance ..................................................... 27
3.21 Environmental Matters ......................................... 28
3.22 Disclosure ................................................... 29
ARTICLE IV - CONDUCT OF BUSINESS PENDING THE MERGER......................... 29
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ARTICLE V - ADDITIONAL AGREEMENTS........................................... 31
5.1 Proxy Statement.................................................... 31
5.2 Meeting of Stockholders of the Company ............................ 32
5.3 Cancellation of Stock Options and Stock
Appreciation Rights; Certain Employee Terminations................. 33
5.4 Fees and Expenses.................................................. 33
5.5 Further Assurances................................................. 35
5.6 No Solicitation.................................................... 36
5.7 Notification of Certain Matters.................................... 36
5.8 Access to Information.............................................. 37
5.9 Directors' Indemnification......................................... 37
ARTICLE VI - CONDITIONS..................................................... 38
6.1 Conditions to Obligation of Each Party to
Effect the Merger.................................................. 38
6.2 Additional Conditions to the Obligation of
the Parent and Purchaser to Effect the Merger ..................... 39
6.3 Additional Condition to the Obligation of
the Company to Effect the Merger .................................. 42
ARTICLE VII - CLOSING....................................................... 42
7.1 Time and Place..................................................... 42
7.2 Deliveries at the Closing.......................................... 42
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER............................ 43
8.1 Termination........................................................ 43
8.2 Effect of Termination.............................................. 44
8.3 Amendment.......................................................... 45
8.4 Waiver............................................................. 45
ARTICLE IX - GENERAL PROVISIONS ............................................ 45
9.1 Public Statements ................................................. 45
9.2 Notices ........................................................... 45
9.3 Interpretation .................................................... 47
9.4 Representations and Warranties .................................... 47
9.5 Headings .......................................................... 47
9.6 Successors and Assigns ............................................ 47
9.7 Counterparts ...................................................... 47
9.8 Miscellaneous ..................................................... 47
EXHIBIT A - Form of Indemnification Agreement
EXHIBIT B - Form of Opinion of Lionel Sawyer & Collins/Hopper
and Kanouff
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INDEX TO DEFINED TERMS
Defined Term Defined in Section
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Acquisition Proposal ................................. 5.6(a)
Agreement ............................................ Introduction
Another Person ....................................... 5.4(b)
Articles of Merger ................................... 1.3
BOTI ................................................. 1.10(a)
Certificates ......................................... 1.8(a)
Closing .............................................. 1.3
Closing Date ......................................... 7.1
Code ................................................. 3.12(e)
Commission ........................................... 1.10(a)
Company .............................................. Introduction
Constituent Entities ................................. 1.1
Corporation Law ...................................... Recitals
Current Financial Statements 3.5
Current Transactions ................................. 1.10(b)
Current Transaction Costs ............................ 1.10(f)
Disclosure Certificate ............................... 1.10(h)
Dissenting Shares .................................... 1.5(d)
Effective Time ....................................... 1.3
Employee Benefit Plans ............................... 3.13(a)
Environmental Law .................................... 3.21(a)
ERISA ................................................ 3.13(a)
ERISA Affiliate ...................................... 3.13(j)
Exchange Act ......................................... 2.4
Exchange Agent ....................................... 1.8(a)
Fairness Opinion .................................... 6.1(e)
Franchise Laws ....................................... 3.15(b)
Hart-Scott-Rodino Act ................................ 1.10(f)
Hazardous Substance .................................. 3.21(b)
Interested Parties ................................... 1.10(c)
IRS .................................................. 3.13(e)
Investment Committee ................................. Recitals
Joint Venture ........................................ 3.1(a)
Letter of Intent ..................................... 5.4(d)
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Mailing Date ......................................... 1.7(a)
Material Adverse Effect .............................. 3.1(b)
Material Contracts ................................... 3.10(b)
Merger ............................................... Recitals
Merger Consideration ................................. 1.5(a)
Merger Law ........................................... Recitals
Multiemployer Plan ................................... 3.13(b)
Options .............................................. 1.6
Option Plans ......................................... 1.6
Option Settlement Amount ............................. 1.6
Parent ............................................... Introduction
Payments ............................................. 1.10(d)
Pension Pan .......................................... 3.13(a)
Post-September 30 Transaction Expenses ............... 1.10(g)
Prior Merger Agreement ............................... 1.10(a)
Prior Transactions ................................... 1.10(a)
Prior Transaction Costs .............................. 1.10(e)
Proprietary Rights ................................... 3.11
Proxy Statement ...................................... 5.1(a)
Purchaser ............................................ Introduction
Real Property ........................................ 3.18(a)
Representatives ...................................... 5.8
Rights ............................................... 3.2(e)
Rights of Purchase ................................... 3.2(e)
SAR Agreements ....................................... 3.2(c)
SEC Filings .......................................... 3.5
Shares ............................................... 1.5(a)
Special Meeting ...................................... 5.2
Stock Appreciation Rights ............................ 3.2(c)
Subsidiary ........................................... 3.1(a)
Surviving Corporation ................................ 1.1
Taxes ................................................ 3.12(h)
Welfare Plan ......................................... 3.13(a)
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DISCLOSURE CERTIFICATE
CONTENTS
Description Section Reference
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Subsidiaries, Organization,
and Qualification ..................................... 3.1
Capitalization ........................................ 3.2
Compliance ............................................ 3.4
Changes ............................................... 3.6
Approval .............................................. 3.7
Prior Transaction Costs ............................... 3.8
Litigation ............................................ 3.9
Material Contracts .................................... 3.10
Proprietary Rights .................................... 3.11
Taxes ................................................. 3.12
Employee Benefit Plans ................................ 3.13
Compliance with Laws and Orders ....................... 3.15
Labor Matters ......................................... 3.16
Properties ............................................ 3.18
Insurance ............................................. 3.20
Environmental Matters ................................. 3.21
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of April 30,
1996, is among TBC Corporation, a Delaware corporation with principal executive
offices at 4770 Hickory Hill Road, Memphis, Tennessee 38141 ("Parent"), TBCO
Acquisition, Inc., a Nevada corporation and a wholly owned subsidiary of Parent,
with principal executive offices at 4770 Hickory Hill Road, Memphis, Tennessee
38141 (the "Purchaser"), and BIG O Tires, Inc., a Nevada corporation with
principal executive offices at 11755 East Peakview Avenue, Englewood, Colorado
80111 (the "Company").
RECITALS
A. The respective Boards of Directors of the Purchaser, Parent and the
Company have approved Parent's acquisition of the Company pursuant to the terms
of this Agreement.
B. A special committee appointed by the Board of Directors of the Company
and consisting of four directors who are not employed by the Company (the
"Investment Committee") has recommended that the Board of Directors of the
Company approve the merger of the Purchaser into the Company, in accordance with
the General Corporation Law of the State of Nevada (the "Corporation Law") and
the Merger and Exchanges of Interest Law of the State of Nevada (the "Merger
Law"), upon the terms and subject to the conditions set forth herein (the
"Merger"), and has determined that the Merger is in the best interests of and
fair to the stockholders of the Company.
C. The respective Boards of Directors of the Purchaser, Parent and the
Company have duly approved the Merger, and the Board of Directors of the Company
has resolved to recommend the Merger to the Company's stockholders.
AGREEMENT
This Agreement constitutes the Plan of Merger referred to in Section
92A.100 of the Merger Law.
In consideration of the premises and the mutual covenants herein contained
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Parent, the Purchaser and the Company hereby agree as
follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.3 hereof),
in accordance with this Agreement, the Corporation Law, and the Merger Law, the
Purchaser shall be merged with and into the Company, the separate existence of
the Purchaser (except as may be continued by operation of law) shall cease, and
the Company shall continue as the surviving corporation (the "Surviving
Corporation"). The Surviving Corporation is a corporation organized under the
laws of the State of Nevada whose address is 11755 East Peakview Avenue,
Englewood, Colorado 80111. The Company and the Purchaser are sometimes referred
to herein as the "Constituent Entities."
1.2 Effects of the Merger. The Merger shall have the effects set forth in
the Merger Law. As of the Effective Time, the Company shall be a wholly owned
subsidiary of Parent.
1.3 Consummation of the Merger. As soon as is practicable after the
satisfaction or waiver of the conditions set forth in Article VI hereof, the
parties hereto will cause the Merger to be consummated by filing with the
Secretary of State of the State of Nevada articles of merger in such form as
required by, and executed in accordance with, the relevant provisions of the
Corporation Law and the Merger Law (the "Articles of Merger") and take all such
further actions as may be required by law to make the Merger effective. The
Merger shall occur immediately upon the filing of the Articles of Merger with
the Secretary of State of the State of Nevada (the date and time of such filing
being referred to herein as the "Effective Time"). As contemplated by Section
92A.200 of the Merger Law, the Articles of Merger shall refer to this Agreement
for the procedure set forth in Section 1.8 below regarding the exchange of
certificates representing the Company's Common Stock. The closing of the Merger
and the transactions contemplated by this Agreement (the "Closing") shall take
place as specified in Article VII.
1.4 Articles; Bylaws; Directors and Officers; Name. At the Effective Time,
(a) the Articles of Incorporation of the Purchaser, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation, until thereafter amended as provided by law, the Articles
of Incorporation of the Surviving Corporation shall be amended and restated
accordingly, and a statement to this effect shall be included in the Articles of
Merger; (b) the Bylaws of the Purchaser, as in effect immediately prior to the
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Effective Time, shall be the Bylaws of the Surviving Corporation, until
thereafter amended as provided by law; (c) the directors of the Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, until their successors are elected; (d) the officers of
the Purchaser shall be the initial officers of the Surviving Corporation, in
each case, until their successors are elected and qualified; and (e) the
corporate name of the Company immediately prior to the Effective Time shall be
the name of the Surviving Corporation.
1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of the Purchaser, the Company, the Surviving
Corporation or the holders of any of the following securities:
(a) Each share of the Company's Common Stock, par value $0.10 per
share (the "Shares"), which is issued and outstanding immediately prior to the
Effective Time (other than (i) Dissenting Shares (as defined below in Section
1.5(d)), if any, and (ii) Shares held by, or which are under contract to be
acquired by Parent or the Purchaser) shall be cancelled and extinguished and be
converted into and become a right to receive from Parent a cash payment of
$16.50 per Share, without interest (which payment shall include $0.01 per share
for the redemption of the Rights, as defined in Section 3.2(e) hereof). Such per
share cash payment, which is hereinafter referred to as the "Merger
Consideration," shall be subject to reduction as provided in Section 1.7 hereof.
(b) Each Share which is issued and owned by the Company or by any
Subsidiary (as defined in Section 3.1(a) hereof) immediately prior to the
Effective Time shall be cancelled, and no payment shall be made with respect
thereto.
(c) Each share of Common Stock, par value $0.01 per share, of the
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into and become one validly issued, fully paid and nonassessable
share of Common Stock, par value $0.10 per share, of the Surviving Corporation.
(d) Notwithstanding anything to the contrary in this Agreement, if
appraisal rights are available to holders of the Shares pursuant to Sections
92A.300-92A.500 of the Merger Law, each outstanding Share, the holder of which
has demanded and perfected his rights for appraisal of such Shares in accordance
with all of the requirements of the Merger Law and has not effectively withdrawn
or lost his right to such appraisal (the "Dissenting Shares"), shall not be
converted into the Merger Consideration, but shall be deposited with the
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Surviving Corporation (which is the "subject corporation" under Section 92A.440
of the Merger Law) and the holders of any Dissenting Shares shall be entitled
only to such rights as are granted by the Merger Law.
1.6 Stock Options. The Company shall have entered into binding agreements
with the holders of all options to purchase Shares (collectively, the "Options")
which have been granted and are then outstanding under any stock option plan or
other option arrangement of the Company (collectively, the "Option Plans"),
pursuant to which agreements the holders of such Options agree that the Options
shall be cancelled immediately prior to the Effective Time and settled by cash
payment to the holders to be mailed within three business days after the
Effective Time. The cash payment to the holder of each cancelled Option shall be
an amount equal to the excess, if any, of the Merger Consideration (which shall
be subject to reduction as provided in Section 1.7) over the per Share exercise
price of such Option, multiplied by the number of Shares for which such Option
was granted, regardless of whether such Option is then exercisable (the "Option
Settlement Amount"), less all deductions required by the respective Option Plan
and any income tax withholding required in connection therewith; provided,
however, that if the terms of any Option Plan or any Option allow such Option to
be cancelled for an amount less than the Option Settlement Amount, then the
Company shall cancel such Option for a cash payment of such lesser amount.
1.7 Adjustment of the Merger Consideration. (a) In the event that the
Company's Post-September 30 Transaction Expenses (as defined in 1.10(g) below)
exceed $1,900,000, the Merger Consideration shall be reduced by an amount equal
to the amount of such excess divided by the sum of the number of issued and
outstanding Shares on the date of this Agreement and the number of Shares
subject to Options outstanding on the date of this Agreement. Any reduction of
the Merger Consideration pursuant to this Section 1.7 shall be calculated not
later than three business days prior to the date the Company's definitive Proxy
Statement (as defined in Section 5.1(a) hereof) is first mailed to its
stockholders (the "Mailing Date"), and no further reductions pursuant to this
Section 1.7 shall thereafter be made.
(b) To enable the parties to determine whether any reduction of the
Merger Consideration is to be made pursuant to this Section 1.7, the Company
shall, no later than four business days prior to the Mailing Date, furnish to
Parent and Purchaser a true and complete list of all Post-September 30
Transaction Expenses known to the Company as of such date, together with (i) all
information then available to the Company with respect to any other
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Post-September 30 Transaction Expenses which the Company may incur or for which
any Interested Party (as defined in Section 1.10(c) hereof) has indicated an
intention to present a claim, and (ii) letters or other correspondence from each
Interested Party to whom any known Post-September 30 Transaction Expenses were
paid or are payable, which letters or other correspondence shall confirm the
amount thereof and that the Company has no other liability or obligation to such
Interested Party except as the Parent and Purchaser shall have consented to in
writing.
1.8 Exchange of Certificates. (a) From and after the Effective Time, a bank
or trust company to be designated by the Purchaser and approved by the
Investment Committee (the "Exchange Agent") shall act as exchange agent in
effecting the exchange of the Merger Consideration for certificates representing
Shares entitled to payment pursuant to Section 1.5 (the "Certificates"). As part
of the closing of the Merger, the Purchaser shall deposit with the Exchange
Agent an amount necessary to enable the Exchange Agent to exchange the Merger
Consideration for all Shares to be converted into Merger Consideration.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each record holder of Shares as of the Effective Time a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass only upon proper delivery of the Certificates to
the Exchange Agent) and instructions for use in surrendering Certificates and
receiving the Merger Consideration therefor. Upon the surrender of each
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor an amount equal to
the Merger Consideration multiplied by the number of Shares represented by such
Certificate, and such Certificate shall be cancelled. Until so surrendered and
exchanged, each Certificate shall represent solely the right to receive an
amount equal to the Merger Consideration multiplied by the number of Shares
represented by such Certificate. No interest shall be paid or accrued on the
Merger Consideration upon the surrender of the Certificates. If any Merger
Consideration is to be paid to a person other than the person in whose name the
Certificate surrendered in exchange therefor is registered, it shall be a
condition to such exchange that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required by reason of the payment
of such Merger Consideration to a person other than that of the registered
holder of the Certificate surrendered, or such person shall establish to the
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satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Shares for any Merger Consideration
delivered to a public official pursuant to applicable abandoned property,
escheat and similar laws.
(c) Promptly following the date which is 180 days after the Effective
Time, the Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate may surrender the Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar laws) receive in
exchange therefor an amount equal to the Merger Consideration multiplied by the
number of Shares represented by such Certificate, without any interest thereon,
but shall have no greater rights against the Surviving Corporation than may be
accorded to general unsecured creditors of the Surviving Corporation.
(d) After the Effective Time, there shall be no transfers of any
Shares on the stock transfer books of the Surviving Corporation. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent, they shall be cancelled and exchanged for the applicable Merger
Consideration, as provided in this Article I.
1.9 Taking of Necessary Action; Further Action. The Purchaser and the
Company shall each take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger as promptly as
possible. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to and of all
assets, property, rights, privileges, powers, and franchises of either of the
Constituent Entities, the officers and directors of such corporations are fully
authorized in the name of their respective corporation or otherwise to take, and
shall take, all such lawful and necessary action.
1.10 Certain Definitions. As used in this Agreement:
(a) "Prior Transactions" shall mean and include any proposals made by
any stockholder of the Company since 1992; the transactions contemplated by the
Agreement and Plan of Merger, dated July 24, 1995, as amended (the "Prior Merger
Agreement"), among the Company and BOTI Acquisition Corp. and BOTI Holdings,
Inc. (collectively, "BOTI"); the financing commitments sought or obtained by any
person or entity in connection with the transactions contemplated by the Prior
Merger Agreement; and any other matters or events described under the heading
"Background and Reasons for the Merger" in the Company's preliminary proxy
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statement filed with the Securities and Exchange Commission (the "Commission")
on February 21, 1996 in connection with the transactions contemplated by the
Prior Merger Agreement.
(b) "Current Transactions" shall mean and include the discussions
between the Company and Parent occurring after December 11, 1995; the
negotiation and execution of the letter of intent between Parent and the
Company, dated March 13, 1996; the negotiation and execution of this Agreement;
and the consummation of the transactions contemplated hereby.
(c) "Interested Parties" shall mean and include each and every broker,
finder, investment banking firm, accounting firm, valuation company, law firm,
other consultant or adviser, bank or financial institution, printer or other
person or entity involved in, or providing services to the Company or any other
person or entity in connection with, any Prior Transaction or Current
Transaction. Interested Parties shall include, without limitation, BOTI, Big O
Tire Dealers of America, and each and every director, officer, stockholder, or
partner of any of them.
(d) "Payments" shall mean and include all amounts paid or payable for
or in connection with services rendered to the Company or any Interested Party
and shall include, without limitation, fees, commissions, costs, expenses, and
"topping," "breakup," or "bust-up" fees or similar payments or compensation.
(e) "Prior Transaction Costs" shall mean and include all Payments
which the Company has made or is obligated to make to any Interested Party in
connection with or arising out of any Prior Transaction or for which the Company
has reimbursed or agreed to reimburse any Interested Party in connection with or
arising out of any Prior Transaction.
(f) "Current Transaction Costs" shall mean and include all Payments
which the Company has made or is obligated to make to any Interested Party in
connection with or arising out of any Current Transaction or for which the
Company has reimbursed or agreed to reimburse any Interested Party in connection
with or arising out of any Current Transaction, other than filing fees (if any)
of the Company under the Hart-Scott- Rodino Antitrust Improvements Act of 1976
and the rules and regulations thereunder (the "Hart-Scott-Rodino Act") and the
costs of the accountant's letter described in Section 6.2(n) of this Agreement.
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(g) "Post-September 30 Transaction Expenses" shall mean the sum of (i)
all Prior Transaction Costs which were not reflected in the Company's financial
statements appearing in its Report on Form 10-Q for the quarter ended September
30, 1995 or had not been reflected in the Company's financial statements for
periods ended prior to September 30, 1995; (ii) all Current Transaction Costs;
and (iii) all amounts paid or payable by the Company or any Subsidiary to
Messrs. Siipola or Mehlfeldt with respect to the cancellation and settlement of
their SAR Agreements (as defined in Section 3.2(c) hereof) and with respect to
any severance or other obligation owing to them as a result of their employment
by the Company or any Subsidiary or the termination of that employment as
contemplated by Section 5.3(d), other than amounts paid in cancellation and
settlement of outstanding Options.
(h) "Disclosure Certificate" shall mean the certificate of the Company
of even date herewith which is being delivered simultaneously with the execution
and delivery of this Agreement. The Disclosure Certificate sets forth data
relevant to the Merger, in each case identified by the Section of this Agreement
to which the same pertains. The Disclosure Certificate is signed on behalf of
the Company, and individually, by John E. Siipola, Horst K. Mehlfeldt and Steven
P. Cloward, who are all of the members of the Office of Chief Executive Officer
of the Company, and by John B. Adams, Chief Financial Officer of the Company,
provided that each such officer shall have no liability to Parent and Purchaser
after the Closing except as provided in Section 6.2(m) hereof. The Disclosure
Certificate constitutes a part of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Each of Parent and the Purchaser represents and warrants to the Company as
follows (i) as of the date of this Agreement and (ii) as of the time of the
Closing (as defined in Section 7.1) with the same force and effect as if such
representations and warranties were made at and as of the time of the Closing:
2.1 Organization and Qualification. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent and
the Purchaser is duly qualified as a foreign corporation to do business, and is
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in good standing, in each jurisdiction where the character of its properties,
owned or leased, or the nature of its activities makes such qualification
necessary, except for failures to be so qualified or in good standing which
would not, in the aggregate, have a material adverse effect on Parent or the
Purchaser. Each of Parent and the Purchaser has delivered to the Company
complete and correct copies of their respective Certificate or Articles of
Incorporation and Bylaws, as in effect on the date hereof.
2.2 Capitalization. The authorized capital stock of the Purchaser consists
of 250,000 shares of Common Stock, par value $0.10 per share, 100 shares of
which are issued and outstanding. All issued and outstanding shares of
Purchaser's Common Stock are validly issued, fully paid, nonassessable and free
of preemptive rights, and are owned by Parent.
2.3 Authorization; Binding Agreement. Each of Parent and the Purchaser has
the requisite corporate power and authority to enter into this Agreement and to
perform its respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
the Purchaser and the consummation by Parent and the Purchaser of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action of their respective Boards of Directors and stockholders, and
no other corporate proceeding on the part of Parent or the Purchaser is
necessary to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Parent and the Purchaser and constitutes a
legal, valid and binding obligation of Parent and the Purchaser, enforceable
against each of them in accordance with its terms.
2.4 Compliance. Neither the execution and delivery of this Agreement by
Parent or the Purchaser nor the consummation of the transactions contemplated
hereby nor compliance by Parent or the Purchaser with any of the provisions
hereof will (i) violate, conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Parent or the
Purchaser under, any of the terms, conditions or provisions of (x) the
Certificate or Articles of Incorporation or Bylaws of Parent or the Purchaser,
or (y) any material note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Parent or the
Purchaser is a party or to which it, or any of its properties or assets,
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may be subject, or (ii) subject to compliance with the statutes and regulations
referred to in the last sentence of this paragraph, violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation applicable
to Parent or the Purchaser or any of their respective properties or assets,
except in the case of each of clauses (i) and (ii) above, for such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances, which, in the aggregate,
would not have a material adverse effect on the financial condition, business or
operations of Parent and the Purchaser and their subsidiaries taken as a whole,
or which are cured, waived or terminated prior to the Effective Time. Other than
in connection with or in compliance with the provisions of the Corporation Law,
the Merger Law, the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act"), the "takeover" or "blue sky"
laws of various states, and the Hart- Scott-Rodino Act, no notice to, filing
with, or authorization, consent or approval of, any domestic or foreign public
body or authority is necessary for the consummation by Parent or the Purchaser
of the transactions contemplated by this Agreement.
2.5 Brokers and Finders. Neither Parent nor the Purchaser has engaged any
broker, finder or other intermediary which engagement would require the payment
of any brokerage, finder's or other similar fees or commissions by Parent or the
Purchaser in connection with this Agreement or the transactions contemplated
hereby.
2.6 Proxy Statement. None of the information supplied or to be supplied in
writing by Parent or Purchaser for inclusion or included or incorporated by
reference in (a) the Proxy Statement (as defined in Section 5.1(a) hereof),
including any amendment or supplement thereto, or (b) any other documents to be
filed with the Commission or any other governmental agency in connection with
the transactions contemplated hereby, will, at the respective time such
documents are filed, and at the time of the Special Meeting (as defined in
Section 5.2) or at the time of mailing of the Proxy Statement to the Company's
stockholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not false or misleading or necessary to correct any statement in any
earlier communication which has become false or misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows (i)
as of the date of this Agreement and (ii) as of the time of the Closing with the
same force and effect as if such representations and warranties were made at and
as of the time of the Closing:
3.1 Subsidiaries, Joint Ventures, Organization, and Qualification. (a) Set
forth in the Disclosure Certificate is the name, jurisdiction of organization,
and percentage of ownership by the Company, of (i) each corporation (a
"Subsidiary") of which the Company owns, directly or indirectly, 50% or more of
the capital stock or other equity interests therein, the holders of which are
generally entitled to vote for the election of directors or other governing body
thereof; and (ii) each joint venture or other partnership in which the Company
or any Subsidiary holds, directly or indirectly, an equity interest (a "Joint
Venture"). Except as set forth in the Disclosure Certificate, the Company does
not, directly or indirectly, have any investment in or own any securities of any
corporation, business, enterprise, joint venture, partnership, entity, or
organization other than (i) its interests in the Subsidiaries and the Joint
Ventures listed in the Disclosure Certificate, or (ii) certificates of deposit,
commercial paper, or similar instruments.
(b) Each of the Company, the Subsidiaries, and the Joint Ventures is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the requisite power and authority to
own, lease and operate its properties and assets and to carry on its business as
it is now being conducted. Each of the Company, the Subsidiaries, and the Joint
Ventures is duly qualified as a foreign corporation or partnership to do
business, and is in good standing, in the respective jurisdictions listed for
each in the Disclosure Certificate, which jurisdiction are the only
jurisdictions where the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except for failures
to be so qualified or in good standing which would not, in the aggregate, have a
material adverse effect on the condition (financial or otherwise), business,
operation or prospects of the Company, the Subsidiaries, and the interests of
the Company and the Subsidiaries in the Joint Ventures, all taken as a whole
("Material Adverse Effect").
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(c) The Company has heretofore made available, and will upon request
deliver, to Parent true and complete copies of the Certificate or Articles of
Incorporation and Bylaws of the Company and of each Subsidiary, all as currently
in effect. The respective minute books of the Company and each of the
Subsidiaries have been made available to Parent by the Company. Such minute
books contain accurate and complete records of all meetings and other corporate
actions of the respective stockholders and directors (and committees thereof).
The respective stock books maintained by the Company and each of the
Subsidiaries are complete and accurately disclose all issuances and transfers of
stock of the Company and each of the Subsidiaries.
3.2 Capitalization. (a) The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, par value $0.10 per share. As of
the date of this Agreement, (i) 3,317,916 Shares were issued and outstanding;
(ii) 31,261 Shares were held in the treasuries of the Company and the
Subsidiaries; and (iii) 216,232 Shares are issuable upon the exercise of
outstanding Options heretofore granted under the Option Plans. All of the issued
and outstanding Shares were validly issued and are fully paid, nonassessable,
and free of preemptive rights. Since June 30, 1995, the Company has not issued
(i) any shares of Common Stock, except pursuant to the exercise of Options, or
(ii) any Options.
(b) Set forth on the Disclosure Certificate is a complete list of all
holders of Options, the number of Options held by each holder, the Option Plan
under which such Options were granted, the number of Shares subject thereto, per
share exercise prices, and the dates of grant and expiration. True and complete
copies of all Option Plans and any other agreements or instruments defining the
rights of holders of Options have been made available, and will upon request be
delivered, to Parent.
(c) Set forth on the Disclosure Certificate is a complete list of all
outstanding agreements or commitments of the Company or any Subsidiary ("SAR
Agreements") which entitle the holders thereof to receive payments based upon
the amount of appreciation occurring in the value of the Shares or any other
Subsidiary (collectively, "Stock Appreciation Rights"), together with the names
of the holders thereof, the number of Stock Appreciation Rights held by each
holder, the SAR Agreement under which such Stock Appreciation Rights were
granted, the number of Shares subject thereto, the base value per share
established under each SAR Agreement, and the dates of grant and expiration.
True and complete copies of all SAR Agreements and any other agreements or
instruments defining the rights of holders of any Stock Appreciation Rights have
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been made available, and will upon request be delivered, to Parent. All of the
SAR Agreements provide that any appreciation in value payable to the holders
thereof will be paid in cash, not in Shares or other equity securities of the
Company, and neither the Company nor any Subsidiary is a party to any agreement
which entitles any party to receive amounts payable thereunder in Shares or
other equity securities of the Company or any Subsidiary.
(d) Except as set forth in the Disclosure Certificate, all issued and
outstanding shares of capital stock of each of the Subsidiaries and the
interests of the Company and the Subsidiaries in the Joint Ventures are owned by
the Company or another wholly owned Subsidiary free and clear of all liens,
charges, encumbrances, claims and options of any nature.
(e) Except for rights outstanding pursuant to the Rights Agreement
dated as of August 26, 1994, between the Company and Interwest Transfer Co.,
Inc. as Rights Agent (the "Rights"), and except as set forth in the Disclosure
Certificate, there are no, and at the Effective Time there will be no, (i)
Shares or other equity securities of the Company outstanding other than the
Shares referred to in Section 3.2(a) and any Shares issued pursuant to the
Options described in Section 3.2(b), and no outstanding options, warrants,
rights to subscribe (including any preemptive rights), calls or commitments of
any character whatsoever to which the Company, any of its Subsidiaries, or any
of the Joint Ventures is a party or may be bound requiring the issuance or sale
of Shares, other equity securities of the Company or any of the Subsidiaries,
ownership interests in any of the Joint Ventures, or securities or rights
convertible into or exchangeable for such shares, other equity securities, or
ownership interests (collectively, "Rights of Purchase"); and (ii) contracts,
commitments, understandings or arrangements by which the Company, any of the
Subsidiaries, or any of the Joint Ventures is or may become bound (x) to issue,
sell or transfer any Right of Purchase or (y) which restrict the transfer of or
otherwise encumber any Shares, other than restrictions pursuant to securities
laws and restrictions in regard to 37,698 restricted Shares issued pursuant to
the Company's Long Term Incentive Plan.
3.3 Authorization; Binding Agreement. The Company has the requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and, subject to stockholder approval, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Company, and except for the approval of the Merger by the
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Company's stockholders in accordance with the Corporation Law and the Merger
Law, no other corporate proceeding on the part of the Company is necessary to
authorize the execution, delivery and performance of this Agreement and the
transactions contemplated hereby. The Board of Directors of the Company has
taken all action necessary to cause the provisions of Sections 78.411 to 78.444
of the Corporation Law to be inapplicable to the Parent's acquisition of the
Shares pursuant to the Merger or any of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
3.4 Compliance. Except as set forth in the Disclosure Certificate, neither
the execution and delivery of this Agreement by the Company, nor the
consummation of the transactions contemplated hereby, nor compliance by the
Company with any of the provisions hereof will (i) violate, conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of the Subsidiaries or Joint Ventures
under, any of the terms, conditions or provisions of (x) the Certificate or
Articles of Incorporation or Bylaws of the Company or any Subsidiary, or (y) any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company, any Subsidiary, or any
Joint Venture is a party or to which they or any of their respective properties
or assets may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in the last sentence of this paragraph, violate any
judgment, ruling, order, writ, injunction, decree, statute or law, rule or
regulation applicable to the Company, the Subsidiaries, or the Joint Ventures,
or any of their respective properties or assets, except in the case of each of
clauses (i) and (ii) above, for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests, charges
or encumbrances which, in the aggregate, would not have a Material Adverse
Effect. Other than in connection with or in compliance with the provisions of
the Corporation Law, the Merger Law, the Exchange Act, the "takeover" or "blue
sky" laws of the various states, and the Hart-Scott- Rodino Act, no notice to,
filing with, or authorization, consent or approval of, any domestic or foreign
public body or authority is necessary for the consummation by the Company of the
transactions contemplated by this Agreement.
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3.5 Commission Filings. Since January 1, 1993, the Company has filed all
reports, registrations and statements, including amendments thereto, that the
Company was required to file with the Commission. The Company has made available
to the Parent and Purchaser the Company's (i) Annual Reports on Form 10- K for
the years ended December 31, 1993, December 31, 1994, and December 31, 1995, as
filed with the Commission, (ii) Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1995, (iii) proxy statements relating
to all of the Company's meetings of stockholders (whether annual or special)
since January 1, 1994, (iv) all other reports or registration statements filed
by the Company with the Commission since January 1, 1995, and (v) all amendments
and supplements to the foregoing (collectively, the "SEC Filings"). As of their
respective dates, the SEC Filings (including all exhibits and schedules thereto
and documents incorporated by reference therein) complied in all material
respects with all rules and regulations promulgated by the Commission and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
The audited consolidated financial statements and unaudited consolidated interim
financial statements of the Company and the Subsidiaries included or
incorporated by reference in the SEC Filings, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto),
and fairly present the consolidated assets, liabilities and financial position
of the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended. The audited consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 are
hereinafter referred to as the "Current Financial Statements."
3.6 Changes. Except as expressly contemplated by this Agreement or as
disclosed in the Disclosure Certificate, since December 31, 1995 the Company,
the Subsidiaries, and the Joint Ventures have carried on their respective
businesses in the ordinary and usual course consistent with their prior
practices, and none of the following has occurred:
(a) anything which has had, or would be reasonably likely to have, a
Material Adverse Effect;
(b) a change in accounting methods, principles or practices by the
Company materially affecting its assets, liabilities, or business or the
valuation thereof;
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(c) any damage, destruction or loss of any assets used in the business
of the Company or any of the Subsidiaries or Joint Ventures, which damage,
destruction or loss has had or would be reasonably likely to have a Material
Adverse Effect;
(d) any declaration, setting aside for payment or payment of dividends
or distributions, redemption, purchase or other acquisition by the Company or
any Subsidiary of any capital stock of the Company or any Subsidiary;
(e) any issuance or sale by the Company or any Subsidiary of any
capital stock of the Company or any Subsidiary;
(f) any issuance or grant of any Option, Stock Appreciation Right, or
other Right of Purchase with respect to the capital stock of the Company or any
Subsidiary or the equity of any Joint Venture which is not listed in the
Disclosure Certificate; or any agreement giving any holder the right to exercise
any Option or Stock Appreciation Right prior to the dates specified in the
original instrument creating the same;
(g) any sale, assignment, transfer, or other disposition by the
Company, any Subsidiary, or any Joint Venture of any of its properties or assets
having a book value of $25,000 or more, other than sales of inventory in the
ordinary course of business;
(h) any purchase or other acquisition by the Company, any Subsidiary,
or any Joint Venture of assets constituting any other line of business or any
properties or assets having a book value of $25,000 or more, other than the
purchase of inventory in the ordinary course of business;
(i) any increase in the rate of compensation of, or payment of any
bonus to, any director or officer or, except in the ordinary course of business
and in compliance with existing practice and procedure, any other employee, of
the Company or any Subsidiary not required under existing Employee Benefit Plans
(as defined in Section 3.13); any collateralization or funding of any Employee
Benefit Plan not previously collateralized or funded; or any termination or
material modification of any Employee Benefit Plan;
(j) any execution, termination, or material amendment or modification
of any Material Contract (as defined in Section 3.10) outside the ordinary
course of business;
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(k) any existing, pending, or threatened termination or cancellation
of or change in the business relationship of the Company, any Subsidiary, or
Joint Venture with any supplier or customer which would be reasonably likely to
have a Material Adverse Effect;
(l) any agreement by the Company, any Subsidiary, or any Joint Venture
to do any of the things described in the preceding clauses (a) through (k) other
than as expressly provided for herein.
3.7 Approval by Board of Directors and Investment Committee. The Board of
Directors of the Company and the Investment Committee each has duly and
unanimously, except as otherwise indicated in the Disclosure Certificate, (i)
approved and adopted this Agreement, the Merger and the other transactions
contemplated hereby on the material terms and conditions set forth herein (or,
in the case of the Investment Committee, has recommended that the Board of
Directors of the Company do so), (ii) determined that the Merger Consideration
is in the best interests of and fair to the Company's stockholders and (iii)
recommended that the Company's stockholders approve and adopt this Agreement and
the transactions contemplated hereby.
3.8 Prior Transaction Costs. Set forth in the Disclosure Certificate is a
complete description of all Prior Transaction Costs known to the Company on the
date hereof, together with the name of the Interested Party to whom the Payment
thereof has been made or is owing, and the amount of the same.
3.9 Litigation. Except as set forth in the Company's Form 10-K for the year
ended December 31, 1995 or in the Disclosure Certificate, there are no actions,
suits or proceedings pending or, to the best knowledge of the Company,
threatened against the Company or any of the Subsidiaries or Joint Ventures, nor
is the Company or any of the Subsidiaries or Joint Ventures subject to any
order, judgment or decree, except for individual matters in which the only
relief sought is damages from the Company, the Subsidiary, or the Joint Venture
which, in the aggregate, would not have a Material Adverse Effect.
3.10 Material Contracts. (a) Set forth in the Disclosure Certificate is a
complete list of all Material Contracts (as defined in Section 3.10(b)) of the
Company and its Subsidiaries and Joint Ventures in force and effect on the date
of this Agreement. The Company has made available, and will upon request
deliver, to Parent true and complete copies of all such Material Contracts and
will make available and upon request deliver to Parent true and complete copies
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of all MaterialContracts executed after the date of this Agreement. To the best
knowledge of the Company, except as set forth in the Disclosure Certificate, all
of the Material Contracts are valid, binding, and in full force and effect.
Neither the Company, any Subsidiary, nor any Joint Venture nor, to the best
knowledge of the Company, any other party thereto is in default under any
Material Contract, which default is reasonably likely to have, in the aggregate,
a Material Adverse Effect, and there has not occurred any event that with the
lapse of time or the giving of notice or both would constitute such a default.
Except as set forth in the Disclosure Certificate, the Company's execution and
delivery of this Agreement and the consummation of the Merger will not violate
or breach any Material Contract, will not place the Surviving Corporation in
breach of or default under any Material Contract, and do not require the consent
of any party to any Material Contract in order to avoid any such violation or
breach.
(b) As used in this Agreement, "Material Contracts" shall mean and
include all of the following which the Company or any Subsidiary or Joint
Venture is a party to, is bound or affected by, receives any benefits under, or
by which any property or assets of any of them may be bound: (i) all real
property leases; (ii) all leases of equipment having an original acquisition
cost in excess of $25,000; (iii) all franchise, dealer, or other distribution
agreements pursuant to which the Company or any Subsidiary or Joint Venture
sells or otherwise distributes its products or services or pursuant to which any
person sells or otherwise distributes products or services of the Company or any
Subsidiary or Joint Venture; (iv) all supply contracts or other such agreements
or understandings pursuant to which the Company or any Subsidiary or Joint
Venture purchased in its last fiscal year, or expects to purchase in this fiscal
year, in excess of $50,000 worth of products; (v) any agreement, arrangement, or
commitment which materially restricts the conduct of any line of business,
including without limitation, all standstill or noncompete agreements; (vi) any
contract, agreement or other arrangement (other than pursuant to the Employee
Benefit Plans, as defined in Section 3.13(a) hereof) providing for the
furnishing of services to or by, providing for the rental of real or personal
property to or from, or otherwise requiring payments to or from, any director,
officer, or one percent (1%) stockholder of the Company or any Subsidiary, any
family member of any such director, officer or stockholder, or any entity in
which any of the foregoing holds, directly or indirectly, a substantial
interest; (vii) any agreement, indenture or other instrument relating to the
borrowing of money by the Company or any Subsidiary or Joint Venture (other than
trade payables and instruments relating to transactions entered into in the
ordinary course of business); (viii) any agreement pursuant to which the
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Company or any Subsidiary or Joint Venture is obligated to lend money or make
advances, or has lent money or made advances which are still outstanding, to any
person (other than routine travel advances to any employee not to exceed $5,000
or deposits or advances in respect of products purchased in the ordinary course
of business); (ix) any agreement, arrangement, or commitment to indemnify or
exonerate from liability any Interested Party in connection with any Prior
Transaction or Current Transaction; (x) any other agreement, arrangement or
commitment to guarantee the obligations of or to indemnify or exonerate from
liability any person, including any Subsidiary or Joint Venture, or the
directors or officers of the Company or any Subsidiary (other than pursuant to
the Certificate or Articles of Incorporation or Bylaws of the Company or the
Subsidiary, or applicable law), or any partner or co-joint venturer; (xi) any
power of attorney presently in effect giving any person or entity the right to
act on behalf of the Company or any Subsidiary or Joint Venture; (xii) any
partnership or joint venture agreement to which the Company or any Subsidiary or
Joint Venture is a party; (xiii) any confidentiality or secrecy agreement to
which the Company or any Subsidiary or Joint Venture is a party; (xiv) any
consulting agreement to which the Company or any Subsidiary or Joint Venture is
a party; (xv) any other contract, commitment, agreement, or understanding,
whether written or oral, which involves more than $25,000 and is not terminable
without penalty upon not more than 90 days' notice; and (xvi) any other contract
or agreement that would be required to be filed as an exhibit to a Form 10-K
filed by the Company with the Commission.
3.11 Proprietary Rights. Set forth in the Disclosure Certificate is a
complete list of all patents, trademarks, trade names, and copyrights, and all
pending applications for any of the same, used in or necessary for the conduct
of the businesses of the Company or the Subsidiaries or Joint Ventures
(collectively, "Proprietary Rights"), together with a summary description of and
full information concerning the filing, registration, issuance, or licensing
thereof. Except as set forth in the Disclosure Certificate, the Company owns all
such Proprietary Rights, the use of the Proprietary Rights by the Company and
the Subsidiaries and Joint Ventures does not infringe upon the rights of any
other party, and no claim of such infringement is pending or, to the best
knowledge of the Company, threatened. No licenses, sublicenses, or agreements
with respect to the Proprietary Rights have been granted or entered into by the
Company or the Subsidiaries or Joint Ventures except as described in the
Disclosure Certificate. Except as set forth in the Disclosure Certificate, to
the best knowledge of the Company, no third party is infringing upon any of the
Proprietary Rights.
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3.12 Taxes. (a) Except as set forth in the Disclosure Certificate, the
Company and each of the Subsidiaries and Joint Ventures have, since December 31,
1990 (i) timely filed all returns, schedules and declarations (including
withholding and information returns) relating to Taxes (as defined in Section
3.12(h) hereof), required to be filed by any jurisdictions to which they are or
have been subject, all of which Tax returns, schedules and declarations are
complete, accurate and correct, (ii) paid in full all Taxes required to be paid
in respect of the periods covered by such returns and made any deposits of Tax
required by such taxing authorities, (iii) fully accrued on the Company's
financial statements or, in the case of the Joint Ventures, on the Joint
Venture's financial statements, all Taxes for any prior period that are not yet
due, the information set forth on such financial statements being accurate and
correct, and (iv) made timely payments of the Taxes required to be deducted and
withheld from the wages paid to their respective employees or contractors. The
Company has made available, and will upon request deliver, to the Parent and
Purchaser true and complete copies of all Tax returns of the Company and each
Subsidiary and Joint Venture filed with any federal or state taxing authority
since December 31, 1990.
(b) Except as set forth in the Disclosure Certificate, since December
31, 1990, neither the Company nor any Subsidiary or Joint Venture has been
delinquent in the payment of any Tax or has requested any extension of time
within which to file any Tax returns that have not been filed, and no
deficiencies for any Tax have been claimed, proposed or assessed. Except as
disclosed in the Disclosure Certificate, neither the Company nor any Subsidiary
or Joint Venture has agreed to any currently effective extension of time for the
assessment or payment of, or has waived any applicable statute of limitations
with respect to, any Taxes payable by it.
(c) Except as set forth in the Disclosure Certificate, there are no
pending or, to the best of the Company's knowledge, threatened Tax audits,
investigations or claims for or relating to any liability in respect of Taxes,
and there are no matters under discussion with any governmental authorities with
respect to Taxes that, in the reasonable judgment of the Company, are likely to
result in a further Tax liability.
(d) The Disclosure Certificate sets forth, since December 31, 1990 (i)
those Tax years for which the Tax returns of the Company and the Subsidiaries
and Joint Ventures have been reviewed or audited by applicable federal, state,
local and foreign taxing authorities, (ii) those Tax years for which such Tax
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returns have received clearances or other indications of approval from
applicable federal, state, local and foreign taxing authorities; (iii) those Tax
years which remain subject to review or audit by applicable federal, state,
local or foreign taxing authorities. Except as set forth in the Disclosure
Certificate, since December 31, 1990, to the best knowledge of the Company, no
issue or issues have been raised in connection with any prior or pending review
or audit of any Tax return that have not been resolved or which the Company
reasonably believes may be expected to be raised in the future by such taxing
authorities in connection with the audit or review of the Tax returns of the
Company or any Subsidiary or Joint Venture.
(e) The Disclosure Certificate lists (i) all elections with respect to
Taxes that have been made by the Company or any Subsidiary, including without
limitation, any election under Section 341(f) of the Internal Revenue Code of
1986, as amended, and the rules and regulations thereunder (the "Code"); (ii)
the amount of any net operating loss, net capital loss, unused investment,
minimum, or other credit, or excess charitable contribution deduction of the
Company or any Subsidiary; (iii) all expenses that have been paid or accrued
through December 31, 1995 but have not yet been deducted for Tax purposes; and
(iv) the aggregate amount of net Section 1231 losses incurred since January 1,
1991 under the Code that has been deducted or is expected to be deducted by the
Company or any Subsidiary.
(f) Except as otherwise set forth on the Disclosure Certificate: (i)
the Company and each Subsidiary has not made any payments, is not obligated to
make any payments and is not a party to any agreement that could obligate it to
make any payments, that will not be deductible under Sections 280G or 162(m) of
the Code or such other compensation that must be capitalized under Section 263
of the Code; (ii) the Company and the Subsidiaries have not taken any position
on their federal income Tax returns (and are not considering taking a position
on a federal income Tax return required to be filed before or after the Closing
Date) that would subject them to an underpayment of federal income Tax within
the meaning of Section 6662 of the Code or any corresponding provision of state,
local, or foreign tax law; (iii) the Company and the Subsidiaries are not
parties to any Tax allocation or Tax sharing agreement; (iv) the Company and the
Subsidiaries have not agreed to make, nor are they required to make, any
adjustment under Section 481 of the Code by reason of a change in accounting
method, accounting period, or otherwise; (v) the Company and the Subsidiaries
have not engaged in a transfer of assets with a Subsidiary that would have
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resulted in gain pursuant to Section 311 of the Code, but which gain was treated
as a deferred intercompany gain pursuant to the Code; and (vi) the Company and
the Subsidiaries have not deferred any gain from the sale of assets pursuant to
Section 453 of the Code.
(g) After the date of this Agreement, neither the Company nor any
Subsidiary or Joint Venture shall make any election with respect to Taxes
without the prior written consent of the Parent.
(h) As used in this Agreement, "Taxes" shall mean all federal, state,
local, or foreign income, franchise, sales, use, excise, real and personal
property, transfer, employment, social security, unemployment, withholding, and
other taxes, assessments, charges, fees, or levies, and any interest or
penalties on any of the foregoing.
3.13 Employee Benefit Plans. (a) The Disclosure Certificate lists each (i)
employee pension benefit plan within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974 and the rules and regulations thereunder
("ERISA"), covered by Part 2 of Title I of ERISA ("Pension Plan") in which
employees of the Company or any of the Subsidiaries or Joint Ventures
participate, (ii) employee welfare benefit plan within the meaning of Section
3(1) of ERISA ("Welfare Plan") in which employees of the Company or any of the
Subsidiaries or Joint Ventures participate and (iii) each other employee stock
ownership, stock purchase, savings, severance, profit sharing, group insurance,
bonus, deferred compensation, stock option, severance pay, insurance, pension or
retirement plan or written agreement relating to employment or fringe benefits
for or of employees, officers or directors of the Company or any Subsidiary or
Joint Venture (together with the Pension Plans and Welfare Plans, the "Employee
Benefit Plans"). The Company has provided Purchaser with access to true and
complete copies of all Employee Benefit Plans, including amendments thereto.
Except as disclosed in the Disclosure Certificate, no individual will accrue or
receive additional benefits (other than additional accruals under the normal
formula in effect prior to and without regard to the transactions contemplated
hereby) as a direct result of the transactions contemplated by this Agreement.
(b) There are no qualified defined benefit plans (as defined in
Section 414(j) of the Code), voluntary employees beneficiary associations, as
described in Section 501(c)(9) of the Code, or multiemployer plans within the
meaning of Section 3(37) of ERISA ("Multiemployer Plans") in which employees of
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the Company, any Subsidiary, any Joint Venture, or any ERISA Affiliate (as
defined in Section 3.13(j) below) have participated or to which the Company or
any ERISA Affiliate currently has an obligation to contribute.
(c) Each Employee Benefit Plan has been maintained, operated and
administered in substantial compliance with its terms. None of the Employee
Benefit Plans has participated in, engaged in or been a party to any prohibited
transaction, as defined in Section 406 of ERISA or Section 4975 of the Code,
and, to the best knowledge of the Company, no officer, director or employee of
the Company or any Subsidiary or Joint Venture or fiduciary of any such Plan has
committed a material breach of any of the responsibilities or obligations
imposed upon fiduciaries by Title I of ERISA.
(d) Except as set forth in the Disclosure Certificate, there are no
claims, pending or overtly threatened, involving any Employee Benefit Plan by a
current or former employee (or beneficiary thereof) of the Company or any
Subsidiary or Joint Venture or a current or former ERISA Affiliate, nor is there
any reasonable basis to anticipate any claims involving any such Plans which
would likely be successfully maintained against the Company, the Subsidiaries,
or the Joint Ventures.
(e) Each Employee Benefit Plan currently complies, and has at all
relevant times complied, in all material respects with ERISA and the Code. There
are no violations of any material reporting and disclosure requirements with
respect to any Employee Benefit Plans and no such Plans have violated applicable
law, including but not limited to ERISA and the Code.
(f) The Company has delivered or made available to the Purchaser a
copy of the most recently filed IRS Form 5500, if applicable, and accountant's
opinion, if applicable, of the three most recent plan years for each Employee
Benefit Plan disclosed in the Disclosure Certificate. All information provided
by the Company or any Subsidiary or Joint Venture to any actuary in connection
with the preparation of such actuarial valuation report was true, correct and
complete in all material respects.
(g) The Company has delivered or made available to the Purchaser a
copy of (i) in the case of each Pension Plan described in the Disclosure
Certificate intended to qualify under Section 401(a) of the Code, the most
recent IRS letter as to the qualification of such Plan under Section 401(a) of
the Code; (ii) in the case of each Welfare Plan described in the Disclosure
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Certificate, the most recent IRS letter as to the tax exempt status of such Plan
under Section 501(c)(9) of the Code, if applicable; and (iii) the current
summary plan description, if applicable, for each Employee Benefit Plan
disclosed in the Disclosure Certificate and evidence that the same has been
filed with the U.S. Department of Labor.
(h) Except as set forth in the Disclosure Certificate, no current or
former Employee Benefit Plan provides benefits, including without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company or any Subsidiary or Joint Venture beyond their
retirement or other termination of service, other than (i) temporary coverage
mandated by applicable law, (ii) death benefits or retirement benefits under any
Pension Plan, (iii) deferred compensation benefits accrued as liabilities on the
books of the Company or the Subsidiary or Joint Venture, or (iv) benefits the
full cost of which are borne by the current or former employee (or his or her
beneficiary).
(i) With respect to each Employee Benefit Plan, all required
contributions have been made, except for current contributions not yet due and
payable, all of which have been accrued and are reflected on the Company's
financial statements, and all other employee benefit liabilities are reflected
on the Company's financial statements in a manner satisfying the requirements of
Financial Accounting Standards No. 87 and 88.
(j) For purposes of this Section 3.13, "ERISA Affiliate" shall mean
any company which, as of the relevant measuring date under ERISA, is a member of
a controlled group of corporations or trades or businesses (as defined in
Sections 414(b) and (c) of the Code) of which the Company or any Subsidiary or
Joint Venture is a member.
(k) With respect to each Employee Benefit Plan, (i) no event has
occurred and no condition exists that would subject the Company or the
Subsidiaries or Joint Ventures to any Tax under Section 4971 through 4980B of
the Code or to a fine or liability under Section 502 of ERISA; (ii) no provision
of such Plan prevents the Company or the Subsidiaries or Joint Ventures from
terminating or amending it; and (iii) all forms, documents and other materials
have been filed with the Commission or otherwise distributed as required by the
Securities Act of 1933 or any regulation promulgated thereunder or the Exchange
Act.
3.14 Proxy Statement. With the exception of the information supplied or to
be supplied in writing by Parent or Purchaser (as to which the Company makes no
representation or warranty), the Proxy Statement and any other documents to be
filed with the Commission or any other governmental agency in connection with
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the transactions contemplated hereby will not, at the respective time such
documents are filed, and at the time of the Special Meeting or at the time of
mailing of the Proxy Statement to the Company's stockholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not false or misleading or
necessary to correct any statement in any earlier communication which has become
false or misleading.
3.15 Compliance with Laws and Orders. (a) Except as disclosed in the
Disclosure Certificate, the businesses of the Company and the Subsidiaries and
Joint Ventures are not being conducted, and to the best knowledge of the
Company, have not been conducted since December 31, 1990, in violation of any
law, ordinance, regulation, judgment, order, decree, license or permit of any
governmental entity (including without limitation, federal and state franchise,
business opportunity, dealer protection, and similar laws and regulations
(collectively, "Franchise Laws"), zoning ordinances, building codes,
Environmental Laws (as defined in Section 3.21(b) below), wages and hours law,
and occupational health and safety laws and regulations), except for possible
violations which in the aggregate do not, and, insofar as reasonably can be
foreseen, in the future will not, have a Material Adverse Effect. Except as set
forth in the Disclosure Certificate, no investigation or review by any
governmental entity with respect to the Company or any Subsidiary or Joint
Venture is pending, or to the best knowledge of the Company, threatened, nor has
the Company received notice that any governmental entity intends to conduct the
same.
(b) Set forth in the Disclosure Certificate is a true and complete
list of all registrations, exemptions, and other filings under the Franchise
Laws of any and all states in which the Company or any of its Subsidiaries or
Joint Ventures has sold or solicited the sales of franchises, business
opportunities, or similar arrangements since January 1, 1995, together with the
status, effective date, and expiration date of such filings. The Company has
made available, and will upon request deliver, to Parent true and complete
copies of all offering circulars, disclosure documents, earnings claims, and any
other disclosure materials currently in use in connection with any and all
applicable Franchise Laws. To the best knowledge of the Company, neither the
Company nor any Subsidiary or Joint Venture violated any Franchise Law in
soliciting or entering into any Material Contract.
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(c) None of the Company, a Subsidiary, a Joint Venture or any
stockholder, director, officer, agent, employee or other person or entity
associated with or acting on behalf of any of the foregoing has used any
corporate funds for unlawful contributions, payments, gifts, entertainment or
other unlawful expenses relating to political activity or made any direct or
indirect unlawful payments to governmental officials or others.
3.16 Labor Matters. Except as shown on the Disclosure Certificate, there
are no controversies pending between the Company or any Subsidiary or Joint
Venture and any of their respective employees, other than routine individual
grievances which will not have a Material Adverse Effect. No employee of the
Company or any Subsidiary or Joint Venture is represented by any labor union
and, to the best knowledge of the Company, no labor union is attempting any such
representation.
3.17 Undisclosed Liabilities. (a) Except as and to the extent disclosed,
reflected or reserved against in the Current Financial Statements, the Company
and the Subsidiaries did not have, as of the respective dates thereof, any
material liabilities or obligations (whether known or unknown, accrued,
absolute, contingent or otherwise) of the type required to be reflected on a
balance sheet prepared in accordance with generally accepted accounting
principles or disclosed in the notes thereto, and there was no material loss
contingency, as defined in paragraph 1 of Statement of Financial Accounting
Standards No. 5, of the Company or any Subsidiary which was not so reflected or
disclosed as required by paragraphs 8 to 12, inclusive, of such Statement. Since
December 31, 1995, neither the Company nor any Subsidiary has incurred any such
material liability or obligation, and no such material loss contingency has
arisen.
(b) To the best knowledge of the Company, the warranty reserve set
forth on the most recent balance sheet included in the SEC Filings is adequate
to satisfy in full all present and future warranty claims with respect to
products or services sold by the Company and the Subsidiaries prior to the date
of such balance sheet.
3.18 Title to Properties; Absence of Liens, Etc. (a) Set forth in the
Disclosure Certificate is a complete list of all real property owned by the
Company or any Subsidiary or Joint Venture (collectively, the "Real Property").
(b) Except as disclosed in the Disclosure Certificate, the Company and
the Subsidiaries and Joint Ventures have good and marketable title to all the
Real Property and all of their other properties and assets, including without
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limitation, those assets and properties reflected in the Current Financial
Statements, free and clear of all liens, except (i) the lien of current taxes
not yet due and payable; (ii) properties and assets disposed of since the dates
of such Current Financial Statements in the ordinary course of business; (iii)
the lien of such secured indebtedness as is disclosed in the SEC Filings or the
Current Financial Statements; and (v) liens and imperfections of title which are
not substantial in character, amount or extent. The Company and the Subsidiaries
and Joint Ventures own, or have valid and enforceable rights as lessees to
possess and use, all properties and assets used in the conduct of their
respective businesses since January 1, 1995, other than any properties or assets
disposed of since such date in the ordinary course of business.
(c) Except as disclosed in the Disclosure Certificate, all buildings
and other improvements located on any Real Property or any real property leased
by the Company or any Subsidiary or Joint Venture conform in all material
respects to all applicable building codes, zoning ordinances, other statutes and
regulations, restrictive covenants, and deed restrictions applicable thereto.
3.19 Receivables; Inventory. (a) All of the accounts, notes and other
receivables which are reflected in the most recent balance sheet included in the
SEC Filings were acquired in the ordinary and regular course of business and,
except to the extent reserved against on such balance sheet, have been collected
in full, or, to the best knowledge of the Company, will be collected in full, in
the ordinary and regular course of business.
(b) All of the inventory reflected on the most recent balance sheet
included in the SEC Filings consisted or, to the best knowledge of the Company,
will consist, except as indicated thereon, of items of a quantity and quality
useable or saleable without discount in the ordinary and regular course of
business.
3.20 Insurance. Set forth in the Disclosure Certificate is a list
(including applicable deductible amounts and limitations) of all insurance
maintained by the Company or any Subsidiary or under which any of them is
entitled to coverage or benefits. True and complete copies of such insurance
policies have previously been made available, and will upon request be
delivered, to Parent and Purchaser. Except as set forth in the Disclosure
Certificate, to the best knowledge of the Company, the Company has in place
adequate insurance coverage with respect to all litigation pending against the
Company or any Subsidiary.
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3.21 Environmental Matters. (a) For purposes of this Agreement,
"Environmental Law" means any applicable federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity related to (i) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
ground water, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances (as defined in
Section 3.21(b) below). The term Environmental Law includes, without limitation:
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. ss.9601, et seq.; the Resource Conservation and Recovery Act,
as amended, 42 U.S. C. ss.6901, et seq.; the Clean Air Act, as amended, 42
U.S.C. ss.7401, et seq.; the Federal Water Pollution Control Act, as amended, 33
U.S. C. ss.1251, et seq.; the Toxic Substances Control Act, as amended, 15
U.S.C. ss.2601, et seq.; the Emergency Planning and Community Right to Know Act,
42 U.S.C. ss.11001, et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et
seq.; all comparable state and local laws; and any common law (including without
limitation, common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Substance.
(b) As used in this Agreement, "Hazardous Substance" means any
substance presently listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any Environmental
Law, whether by type or by quantity, including any material containing any such
substance as a component. Hazardous Substances include, without limitation,
petroleum or any derivative or by-product thereof, asbestos, radioactive
material, polychlorinated biphenyls, and battery acids.
(c) Except as set forth in the Disclosure Certificate, (i) neither the
Company nor any Subsidiary or Joint Venture nor any real property previously or
currently owned by any of them, has been or is in violation of, or liable for
remediation costs or any other damages or penalties under, any Environmental
Law, except for any such violations or liabilities which would not reasonably be
expected, in the aggregate, to have a Material Adverse Effect; and (ii) to the
best knowledge of the Company, there are no actions, suits, demands, notices,
claims, investigations or proceedings under any Environmental Law pending or
threatened against the Company or any Subsidiary or Joint Venture or relating to
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any real property previously or currently owned or occupied by the Company or
any Subsidiary or Joint Venture or at which Hazardous Substances alleged to have
been generated by the Company or any Subsidiary or Joint Venture were treated,
stored, or disposed, including without limitation, any notices, demand letters
or requests for information from any governmental entity making inquiries
relating to any Environmental Law.
(d) Set forth in the Disclosure Certificate is a complete list of all
reports, assessments, evaluations, surveys, or other such documents relating to
the Company's compliance with any Environmental Law, any Subsidiary's compliance
with any Environmental Law, any Joint Venture's compliance with any
Environmental Law, or Environmental Law matters affecting or involving any real
property previously or currently owned or occupied by the Company or any
Subsidiary or Joint Venture which, to the best knowledge of the Company, have
been prepared since December 31, 1990. The Company has made available, and will
upon request deliver, to Parent true and complete copies of all such reports,
assessments, evaluations, surveys, or other such documents in the Company's
possession.
3.22 Disclosure. All information and documents provided prior to the date
of this Agreement, and all information and documents subsequently provided, to
Parent or Purchaser or their Representatives (as defined in section 5.8) by or
on behalf of the Company or the Subsidiaries or Joint Ventures, to the best
knowledge of the Company, are or contain, or will be or will contain as to
subsequently provided information or documents, true, accurate and complete
information with respect to the subject matter thereof and are, or will be as to
subsequently provided information or documents, fully responsive to any specific
request made by or on behalf of Parent or Purchaser or their Representatives. In
furtherance and not in limitation of the foregoing, the representations and
warranties of the Company contained in this Agreement and the information set
forth in the Disclosure Certificate do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
The Company covenants and agrees that, prior to the Effective Time, unless
Parent and Purchaser shall otherwise agree in writing, or except as disclosed in
the Disclosure Certificate as of the date hereof or as otherwise expressly
contemplated by this Agreement:
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(a) Neither the Company nor any of the Subsidiaries or Joint Ventures
shall take any action except in the ordinary course of business and consistent
with past practices, and the Company shall use its best efforts to maintain and
preserve its business organization, franchisee network, assets, prospects,
employees and advantageous business relationships.
(b) Neither the Company nor any of the Subsidiaries or Joint Ventures
shall, directly or indirectly, do any of the following: (i) incur any expenses
in contemplation of a reorganization or restructuring of the Company; (ii) amend
its Certificate or Articles of Incorporation or Bylaws or similar organizational
documents; (iii) split, combine or reclassify any shares of its capital stock or
declare, set aside or pay any dividend or make any distribution, payable in
cash, stock, property or otherwise with respect to its capital stock; (iv)
transfer any stock or any assets or liabilities of any Subsidiary or Joint
Venture except in the ordinary course of business and consistent with past
practice; (v) adopt a plan of liquidation or resolutions providing for the
liquidation, dissolution, merger, consolidation or other reorganization of the
Company except the Merger; or (vi) authorize or propose any of the foregoing, or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing.
(c) Neither the Company nor any of the Subsidiaries or Joint Ventures
shall, directly or indirectly: (i) issue, sell, pledge, encumber or dispose of,
or authorize, propose or agree to the issuance, sale, pledge, encumbrance or
disposition of, any shares of its capital stock or any other equity securities
or any Rights of Purchase with respect thereto, except for Shares issuable upon
exercise of Options outstanding on the date hereof and which by their terms are
or become exercisable at or prior to the Effective Time; (ii) acquire (by
merger, consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or make any
material investment either by purchase of stock or securities, contributions to
capital, property transfer or purchase of any material amount of property or
assets, in any other individual or entity; (iii) other than as set forth in the
Disclosure Certificate or other than indebtedness incurred from borrowings made
pursuant to existing lending arrangements set forth in the Disclosure
Certificate, incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee, endorse (other than to a Company account) or
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otherwise as an accommodation become responsible for, the obligations of any
other individual or entity, or make any loans or advances, including without
limitation, advances to dealers or franchisees and guarantees of leases,
regardless of whether made in the ordinary course of business or consistent with
past practice; (iv) release or relinquish any Material Contract right; (v)
settle or compromise any pending or threatened suit, action or claim by or
against the Company involving a payment by the Company exceeding $25,000; (vi)
take any action involving possible expenditures, contingent liabilities or the
acquisition or disposition of assets other than the purchase or sale of
inventory in the ordinary course of business, in each case in excess of $25,000;
or (vii) authorize or propose any of the foregoing, or enter into or modify any
contract, agreement, commitment or arrangement to do any of the foregoing.
(d) Each of the Company and the Subsidiaries and Joint Ventures shall
use its best efforts to keep in place its current insurance policies, including
but not limited to director and officer liability insurance, which are material
(either individually or in the aggregate); and notwithstanding such efforts, if
any such policy is cancelled, the Company shall use its best efforts to replace
such policy or policies.
(e) Except in accordance with the provisions of this Article IV,
neither the Company nor any of the Subsidiaries or Joint Ventures shall enter
into any agreement or otherwise agree to do anything, which to the Company's
best knowledge at the time of such action, would make any representation or
warranty of the Company in this Agreement untrue or incorrect in any material
respect as of the date hereof and as of the Closing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement. (a) As promptly as practicable after execution of this
Agreement, the Company shall prepare a proxy statement for use in connection
with the Special Meeting (the "Proxy Statement") and file a preliminary copy of
the same with the Commission. The Company will notify the Parent and Purchaser
promptly of the receipt of any comments from the Commission or its staff and of
any request by the Commission or its staff for amendments or supplements to the
Proxy Statement or for additional information and will supply the Parent and
Purchaser with copies of all correspondence between the Company or any of its
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representatives, on the one hand, and the Commission or its staff, on the other
hand, with respect to the Proxy Statement or the Merger. If at any time prior to
the Effective Time there shall occur any event that should be set forth in an
amendment of, or supplement to, the Proxy Statement, the Company will promptly
prepare and mail to its stockholders such an amendment or supplement. The
Company will not distribute or file the Proxy Statement, or any amendment
thereof or supplement thereto, to which the Parent and Purchaser reasonably
objects; provided that the Company shall have the right to distribute or file
any amendments or supplements required in the written opinion of counsel to the
Company to be made by applicable law. The Company shall take all reasonable
action required so that the Proxy Statement and all amendments and supplements
thereto will comply as to form in all material respects with the provisions of
the Exchange Act.
(b) The Company shall cause the definitive Proxy Statement to be
mailed to the Company's stockholders at the earliest practicable time.
5.2 Meeting of Stockholders of the Company. The Company shall promptly take
all action necessary, in accordance with the Corporation Law, the Merger Law,
and its Articles of Incorporation and Bylaws, to convene a special meeting of
the stockholders of the Company as promptly as practicable to consider and vote
upon the Merger pursuant to the terms of this Agreement (the "Special Meeting").
Neither the Company nor the Board of Directors shall take any action which would
make any approval of the Merger necessary, other than the approval of the
holders of Shares representing a majority of the outstanding Shares. The Proxy
Statement shall contain at all times up to and including the date of the Special
Meeting, the recommendation of the Board of Directors of the Company and of the
Investment Committee that the stockholders of the Company vote to adopt and
approve the Merger, subject to the right of the Investment Committee and the
Board of Directors to withdraw such recommendations if, by a majority vote,
either the Investment Committee or the Board of Directors in the exercise of its
fiduciary duties makes a good faith judgment, based as to the legal issues
involved on the written advice of legal counsel, that failure to withdraw such
recommendation would constitute a breach of its fiduciary duties. Subject to
such right of the Investment Committee and the Board of Directors to withdraw
its recommendation of the Merger in accordance with the exercise of its
fiduciary duties, the Company and the Board of Directors shall use their best
efforts to obtain the necessary approvals of the stockholders of the Company and
shall take all other action necessary or, in the reasonable judgment of the
Parent and Purchaser, helpful to secure the vote or consent of stockholders of
the Company.
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5.3 Cancellation of Stock Options and Stock Appreciation Rights; Certain
Employee Terminations. (a) The Company shall cancel all outstanding Options
issued pursuant to the Option Plans or otherwise to the extent required by
Section 1.6 hereof, and shall comply with all requirements regarding income tax
withholding in connection therewith.
(b) The Company shall cancel and settle all SAR Agreements effective
as of the Effective Date and shall comply with all requirements regarding income
tax withholding in connection therewith.
(c) The Company shall cause the Option Plans to be terminated
effective as of the Effective Time and shall establish to the reasonable
satisfaction of the Parent and Purchaser that no person or entity (whether or
not a participant in any Option Plan or SAR Agreement) has or will have any
right to acquire any interest in the Company, the Surviving Corporation or the
Purchaser as a result of the exercise of Options, Stock Appreciation Rights or
other Rights of Purchase on or after the Effective Time.
(d) Effective as of the Effective Time, the Company shall terminate
the employment of (i) John E. Siipola, as Chairman and a Member of the Office of
Chief Executive Officer of the Company, and (ii) Horst K. Mehlfeldt, as Vice
Chairman and Member of the Office of Chief Executive Officer of the Company.
5.4 Fees and Expenses. (a) Except as provided in Section 5.4(c), all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(b) (i) If this Agreement is terminated (A) by Purchaser and the
Parent pursuant to Section 8.1(b)(ii) or 8.1(d)(iii), but limited only to a
termination based solely on a failure of the condition set forth in Section
6.2(b) or the failure by the Company to fulfill any of its obligations
hereunder, or (B) by the Company pursuant to Section 8.1(c)(iii), or (C) by
Purchaser and the Parent pursuant to Section 8.1(d)(i), 8.1(d)(ii), or
8.1(d)(iv), and (ii) within one year from the date of this Agreement (A) any
corporation, partnership, person, entity or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act), including the Company or any of the
Subsidiaries but excluding Parent, the Purchaser or any of their affiliates and
excluding any group of which Parent, the Purchaser or any of their affiliates is
a member ("Another Person"), shall have acquired or agreed to acquire all or a
substantial portion of the assets of the Company or consummated or agreed to
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consummate a merger or consolidation with, or other acquisition of, the Company,
(B) Another Person shall have acquired or agreed to acquire beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of 35% or more of the Shares
then outstanding, or (C) a "change in control," within the meaning of Item 1 of
Form 8-K under the Exchange Act, of the Company involving Another Person shall
have occurred, the Company shall, within five business days after consummation
of the transaction referred to in clause (ii) above, pay to Parent and Purchaser
(by transfer of same-day funds to an account designated by Parent for such
purpose) an amount equal to $1,000,000, less any funds paid by the Company to
the Parent or Purchaser pursuant to Section 5.4(c); provided such amount shall
be payable by the Company with respect to any such transaction only if (y) the
transaction provides for the Company or the holders of any Shares being
purchased in such transaction to receive consideration per Share having an
indicated value per Share which is equal to or greater than the Merger
Consideration (as the same may have been reduced as provided in Section 1.7), or
(z) the amount of consideration received or to be received in such transaction
is not readily determinable on a per Share basis and the Investment Committee or
another committee of disinterested members of the Board of Directors of the
Company fails to make a good faith determination that, to the stockholders of
the Company from a financial point of view, the transaction is not comparable to
the Merger or more favorable than the Merger.
(c) If this Agreement is terminated (i) by Purchaser and the Parent
pursuant to Section 8.1(b)(ii) or 8.1(d)(iii), but limited only to a termination
based solely on (A) a failure of the condition set forth in Section 6.2(b)
otherwise than by an act of God occurring subsequent to the date of this
Agreement, or (B) the failure by the Company to fulfill any of its obligations
hereunder, or (ii) by the Company pursuant to Section 8.1(c)(iii), or (iii) by
Purchaser and the Parent pursuant to Section 8.1(d)(i), 8.1(d)(ii), or
8.1(d)(iv), the Company will, within five business days after notice by the
Parent and the Purchaser to the Company, reimburse the Parent and the Purchaser
for all reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable commitment fees, reasonable termination fees, reasonable
attorney fees and expenses incurred by potential lenders which the Parent or
Purchaser is obligated to reimburse, and other fees and expenses incurred in
connection with arranging financing for the Merger, legal fees and expenses,
appraisal fees, fees and expenses of financial advisors and fees and expenses of
accountants) incurred by the Purchaser or Parent or on their behalf in
connection with the preparation or negotiation of this Agreement or of the
transactions contemplated hereby or otherwise incurred in contemplation of this
Agreement, the Merger or the other transactions contemplated by this Agreement;
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provided that (y) the Company shall not be obligated to pay any additional
amounts under this Section 5.4(c) if Parent and Purchaser have been paid the
amount provided in Section 5.4(b) above, and (z) the Company shall have the
right to review all expense receipts (other than receipts which contain
privileged or confidential information).
(d) Notwithstanding anything to the contrary set forth in Section
5.4(c), the Company shall not be obligated to pay any amounts under Section
5.4(c) if this Agreement is terminated by the Purchaser and the Parent pursuant
to Section 8.1(d)(iii) as a result of the failure by Parent and Purchaser to (i)
approve the terms and conditions of either (y) any employment agreement
described in Section 6.2(g) pursuant to which the employee would receive a
salary and incentive bonus opportunities which are substantially similar to
those presently afforded to him as an employee of the Company, or (z) any
indemnification and release contemplated by Section 6.2(o) that contains
provisions which are not inconsistent with those set forth in paragraph 5 of the
letter of intent between Parent and the Company, dated March 13, 1996 and
thereafter amended (the "Letter of Intent"); or (ii) fulfill the condition set
forth in Section 6.2(c).
5.5 Further Assurances. Subject to the terms and conditions herein
provided, including those contained in Section 5.6, each of the parties hereto
agrees to use all reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, and to cooperate with each other in connection
with the foregoing, including, but not limited to, using reasonable efforts (a)
to obtain all necessary waivers, consents and approvals from other parties to
Material Contracts, (b) to obtain all necessary consents, approvals and
authorizations as are required to be obtained under any federal, state or
foreign law or regulations, (c) to defend all lawsuits or other legal
proceedings challenging this Agreement or the transactions contemplated hereby,
(d) to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby, (e) to effect all necessary filings, including, but not
limited to, filings with the Commission, under the Hart-Scott-Rodino Act and
under the rules or regulations of any other governmental authorities, (f) to
fulfill all conditions to this Agreement and to any agreements related to the
financing contemplated by Section 6.2(c), and (g) to keep the other parties
reasonably apprised of the status of all such efforts.
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5.6 No Solicitation. (a) The Company, each Subsidiary, and their respective
directors, officers, and authorized agents shall not, and shall not authorize or
direct any other person to, directly or indirectly, (i) participate in
discussions or negotiations with or provide any confidential information
regarding the Company to any person for the purpose of soliciting, encouraging,
or enabling Another Person to propose an acquisition of any of the capital stock
of the Company (other than pursuant to the presently outstanding Options) or all
or any substantial portion of the assets or business of the Company
(collectively, an "Acquisition Proposal"), or (ii) solicit from, encourage,
negotiate with, or accept from Another Person an Acquisition Proposal.
(b) Notwithstanding the foregoing, if the Board of Directors of the
Company, in the exercise of its fiduciary duties, makes a good faith
determination that the Board of Directors' failure to permit the Company to take
any action described in Section 5.6(a) would constitute a breach of its
fiduciary duties (based as to the legal issues involved on the written opinion
of legal counsel), the Company shall so advise Parent and Purchaser and,
thereafter, the taking of any such action shall not be a violation of Section
5.6(a). In the event that the Company receives an Acquisition Proposal or any
communication with respect thereto from Another Person or in the event that the
Company takes any action described in Section 5.6(a), the Company shall
immediately give to Parent and Purchaser written notice of the substance of such
Acquisition Proposal or communication, or the nature and substance of the
information furnished or the action taken, as the case may be, and thereafter
keep Parent and Purchaser fully informed with respect thereto.
5.7 Notification of Certain Matters. The Company shall give prompt notice
to the Parent and Purchaser, and the Parent and Purchaser shall give prompt
notice to the Company, of (a) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time, (b) any material
failure of the Company or the Parent or Purchaser or any of their respective
affiliates, as the case may be, or of any of their respective officers,
directors, employees or agents, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, (c) any material claims, actions, proceedings or investigations
commenced or, to the best of its or their knowledge, threatened, involving or
affecting the Company or any of the Subsidiaries or Joint Ventures or any of
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their properties or assets, or, to the best of its or their knowledge, against
any employee, consultant, director, officer or stockholder of the Company or any
of the Subsidiaries or Joint Ventures, in his, her or its capacity as such and
(d) any material adverse change in the condition (financial or otherwise),
business or prospects of the Company and the Subsidiaries and Joint Ventures,
taken as a whole, or the occurrence of an event known to the Company which, so
far as reasonably can be foreseen at the time of its occurrence, would result in
any such change; provided, however, that no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
5.8 Access to Information. From the date hereof to the Effective Time, the
Company shall, and shall cause the Subsidiaries and Joint Ventures and the
officers, directors, employees and agents of the Company and each Subsidiary and
Joint Venture to, afford the officers, employees, advisors and agents of the
Parent or Purchaser and the banks or other financial institutions arranging or
providing the financing contemplated by Section 6.2(c) (collectively, the
"Representatives") complete access at all reasonable times to its officers,
employees, agents, properties, books, records and contracts, and shall furnish
the Parent, Purchaser, and the Representatives with such operating and other
data and information as they may reasonably request. Subject to the requirements
of law, the Parent and Purchaser shall, and shall use reasonable efforts to
cause the Representatives to, hold in confidence and not use all such nonpublic
information until such time as such information is otherwise publicly available
other than through a breach of this Section 5.8, and, if this Agreement is
terminated, the Parent and Purchaser will, and will use reasonable efforts to
cause the Representatives to, deliver to the Company all documents, work papers
and other material (including copies, extracts and summaries thereof) obtained
by or on behalf of any of them directly or indirectly from the Company as a
result of this Agreement or in connection herewith, whether so obtained before
or after the execution hereof. No investigation pursuant to this Section 5.8
shall affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
5.9 Directors' Indemnification. The Parent and the Surviving Corporation
will enter into Indemnification Agreements, substantially in the form set forth
in Exhibit A hereto (with such changes therein as the Company and the Purchaser
may agree) with each present director of the Company as of the Effective Time.
The Company shall, to the fullest extent permitted under applicable law and
regardless of whether the Merger becomes effective, provide like indemnification
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for each present and former director and officer of the Company or any of the
Subsidiaries, including, without limitation, each member of the Investment
Committee; provided, however, that such indemnification shall not be available
to those officers of the Company specified in Section 6.2(m) for liability
incurred as a result of such officer's knowledge that his Certificate under
Section 6.2(m) was false in any material respect when executed.
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Closing of the following
conditions:
(a) Stockholder Approval. The Merger pursuant to the terms of this
Agreement shall have been approved and adopted by the requisite vote of the
stockholders of the Company.
(b) Hart-Scott-Rodino Act. Any waiting period (and any extension
thereof) applicable to the consummation of the Merger under the
Hart-Scott-Rodino Act shall have expired or been terminated.
(c) No Injunction or Proceedings. No preliminary or permanent
injunction or other order, decree or filing issued by a court of competent
jurisdiction or by a governmental agency or commission, nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, shall be in effect which materially adversely affects the Merger, and
no suit, action, or proceeding shall be pending by or with any court or other
governmental agency which seeks to have declared illegal or would make illegal
or otherwise prevent the consummation of the Merger or seeks damages with
respect thereto.
(d) Consents. The Company, Parent, and the Purchaser shall have
obtained such licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to Material
Contracts as are necessary for consummation of the Merger, excluding licenses,
permits, consents, approvals, authorizations, qualifications or orders which the
failure to obtain will not, in the aggregate, have a Material Adverse Effect.
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(e) Fairness Opinion(s). If requested by the Company prior to the
Mailing Date, the Company shall have received from PaineWebber Incorporated a
written opinion addressed to the Company for inclusion in the Proxy Statement
that the Merger Consideration is fair, from a financial point of view, to the
stockholders of the Company (the "Fairness Opinion"). Such Fairness Opinion, if
any, and the fairness opinion delivered to the Company by PaineWebber
Incorporated on November 14, 1995 shall not have been withdrawn.
6.2 Additional Conditions to the Obligation of the Parent and Purchaser to
Effect the Merger. The obligation of the Parent and Purchaser to effect the
Merger is also subject to the satisfaction at or prior to the Closing of the
following additional conditions, unless waived by the Parent and Purchaser:
(a) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations and agreements required to be
performed by it under this Agreement prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement which are qualified as to materiality
shall be true and correct, and any such representations and warranties not so
qualified shall be true and correct in all material respects, at and as of the
time of the Closing as if made at and as of such time, except as expressly
contemplated by this Agreement.
(c) Financing. The Parent and Purchaser shall have obtained financing
or other sources of funds necessary to pay the aggregate Merger Consideration
and to replace certain of the existing indebtedness of the Company on terms
acceptable to Parent in its sole discretion.
(d) Cancellation of Stock Options and SARs. The Company shall have
cancelled and settled all Options and Stock Appreciation Rights as required by
Sections 1.6 and 5.3(a) and (b).
(e) Redemption of Rights. The Company shall have taken all necessary
actions to cause the Rights to be extinguished or redeemed effective at the
Effective Time.
(f) Compliance with the Nevada Business Combination Statute. The
Purchaser shall be satisfied in its sole discretion that the Board of Directors
of the Company shall have taken all actions required under the Corporation Law
to render the restrictions on combinations with interested stockholders of
Section 78.438 of such Law inapplicable to the Merger.
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(g) Employment Agreements. Employment agreements between the Company
and each of Messrs. Steven P. Cloward, John B. Adams, and Thomas L. Staker, upon
terms and conditions acceptable to Parent and Purchaser, shall be in full force
and effect. Such terms and conditions shall include, in the case of Mr. Cloward,
his agreement to the cancellation and settlement of his Stock Appreciation
Rights in consideration for the execution of the employment agreement.
(h) Post-September 30 Transaction Expenses. The Company shall have
furnished to Parent and Purchaser a true and complete list of the Company's
Post-September 30 Transaction Expenses, together with letters or other
correspondence from each Interested Party to whom such Expenses were paid or are
payable, which letters or other correspondence shall confirm the amount thereof
and that the Company has no other liability or obligation to such Interested
Party except as the Parent and Purchaser shall have consented to in writing.
(i) Legal Opinion(s). Parent and Purchaser shall have received an
opinion of Lionel Sawyer & Collins or Hopper and Kanouff, counsel to the
Company, dated the Closing Date and addressed to Parent and Purchaser,
substantially in the form of Exhibit B to this Agreement.
(j) Resignations and Releases. Parent and Purchaser shall have
received letters of resignation, effective as of the Closing, executed and
tendered by (i) each of the then incumbent directors of the Company and the
Subsidiaries, (ii) any non-employee officers of the Company and the
Subsidiaries, and (iii) Messrs. Siipola and Mehlfeldt, as required by Section
5.3(d) hereof. Each such resignation shall contain an acknowledgment that the
director or officer has been paid all amounts owing to him by the Company or any
Subsidiary in connection with his services as a director or officer and, in the
cases of Messrs. Siipola and Mehlfeldt, as an employee of the Company or any
Subsidiary (including without limitation, severance obligations), and shall
release the Company and the Subsidiaries from any further liability of any
nature whatsoever to the director, officer, and/or employee, except as otherwise
provided in Section 5.9 of this Agreement.
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3.21 Environmental Matters. (a) For purposes of this Agreement,
"Environmental Law" means any applicable federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity related to (i) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
ground water, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances (as defined in
Section 3.21(b) below). The term Environmental Law includes, without limitation:
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. ss.9601, et seq.; the Resource Conservation and Recovery Act,
as amended, 42 U.S. C. ss.6901, et seq.; the Clean Air Act, as amended, 42
U.S.C. ss.7401, et seq.; the Federal Water Pollution Control Act, as amended, 33
U.S. C. ss.1251, et seq.; the Toxic Substances Control Act, as amended, 15
U.S.C. ss.2601, et seq.; the Emergency Planning and Community Right to Know Act,
42 U.S.C. ss.11001, et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et
seq.; all comparable state and local laws; and any common law (including without
limitation, common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Substance.
(b) As used in this Agreement, "Hazardous Substance" means any
substance presently listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any Environmental
Law, whether by type or by quantity, including any material containing any such
substance as a component. Hazardous Substances include, without limitation,
petroleum or any derivative or by-product thereof, asbestos, radioactive
material, polychlorinated biphenyls, and battery acids.
(k) Dissenter's Rights. The number of Shares as to which dissenters'
rights shall have been properly asserted and not withdrawn or forfeited under
applicable law shall not exceed 5% of the then outstanding Shares.
(l) Transfer Agent Certificate. Parent shall have received a
certificate of the Company's transfer agent, dated the Closing Date, setting
forth the number of issued and outstanding Shares.
(m) Officers' Certificates. The Company shall have furnished to Parent
and Purchaser Certificates, signed on behalf of the Company by Messrs. Siipola,
Mehlfeldt and Cloward, as members of its Office of Chief Executive Officer, and
by Mr. Adams, its Chief Financial Officer, and by each of them individually,
that each such person has made reasonable inquiry and based thereon certifies
that, to the best of his knowledge and belief, the conditions set forth in
Sections 6.2(a) and (b) have been satisfied as of the Closing Date and that he
understands that Parent and Purchaser are relying thereon in consummating the
Merger. Each such officer shall have no liability to Parent or Purchaser after
the Closing except to the extent, if any, that he knew that a matter, as
represented, was false in any material respect when his Certificate was
delivered.
(n) Accountant's Update Letter. At the Closing, Parent and Purchaser
shall have received a letter from Deloitte & Touche, dated the Closing Date and
addressed to Parent and Purchaser, which sets forth the results of the
procedures conducted by Deloitte & Touche on the financial statements of the
Company in accordance with S.A.S. No. 72 and 76 with respect to the period from
the last day of the then most recently completed fiscal quarter for which the
Company has filed a Quarterly Report on Form 10-Q with the Commission, to a
specified date not more than five business days prior to the Effective Time.
(o) BOTI Release. The Company and BOTI shall have executed a full and
final settlement and release with respect to all matters between them. In
connection therewith, the Company may agree to indemnify BOTI and their
directors, officers, stockholders, and agents (collectively, the "Indemnified
Parties") in connection with any legal proceedings relating to or arising out of
the Prior Merger Agreement, its termination, or the proposed acquisition of the
Company by Parent which are brought against the Company by any stockholder of
the Company who is not an Indemnified Party and in which such Indemnified Party
is joined as a party, provided that the Indemnified Party has not engaged in any
wrongful act or omission in that connection, that the Company is given prompt
notice of the involvement of such Indemnified Party, and the Company has
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been given control of the representation of such Indemnified Party therein and
the full cooperation of such Indemnified Party. Such indemnification may not
extend to amounts or claims which would be Prior Transaction Costs or which
arise under any contract or agreement to which the Company is not a party. The
form of the indemnification shall have been approved by Parent prior to its
execution by the Company, and BOTI shall have agreed that all prior
indemnification obligations of the Company to BOTI and/or the Indemnified
Parties will be superseded by the indemnification contemplated by this Section.
The Company shall also obtain BOTI's agreement that Parent shall have no
liability of any nature whatsoever to BOTI in any event, including without
limitation, in the event that the Merger is not consummated.
(p) Other Documents. Parent and Purchaser shall have received such
other certificates and documents (customary in similar transactions) relating to
the satisfaction of the conditions to the obligations of Parent and Purchaser as
either of them or their counsel shall have reasonably requested.
(q) Approval of Documents. All certificates, agreements, instruments,
and other documents required by this Agreement to be delivered by the Company or
any Subsidiary to Parent and Purchaser at the Closing shall have been approved
by counsel for Parent and Purchaser, which approval shall not be unreasonably
withheld.
6.3 Additional Condition to the Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the condition that the Parent and Purchaser shall have made the deposit
described in Section 1.8(a).
ARTICLE VII
CLOSING
7.1 Time and Place. The Closing shall take place at the offices of Holme
Roberts & Owen LLC, 1700 Lincoln, Denver, Colorado, at 2:00 p.m., local time, as
soon as practicable after satisfaction or waiver of all of the conditions
contained in Article VI or at such other place or at such other time as Parent
and the Company may mutually agree (the date of the Closing being referred to
herein as the "Closing Date").
7.2 Deliveries at the Closing. At the Closing, Parent, Purchaser and the
Company shall cause the Articles of Merger to be filed in accordance with the
applicable provisions of the Merger Law and shall take any and all other lawful
actions and do all other lawful things called for by this Agreement or necessary
to cause the Merger to become effective and to consummate the transactions
contemplated by this Agreement.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether prior to or after approval of the Merger by the
stockholders of the Company:
(a) By mutual written consent of the Boards of Directors of the
Parent, the Purchaser, and the Company (which, in the case of the Company, shall
include the approval of the Investment Committee); or
(b) By the Company or the Parent and Purchaser if (i) the Effective
Time shall not have occurred on or before July 31, 1996, or (ii) any of the
conditions set forth in Section 6.1 hereof shall not be met at the Effective
Time; provided, however, that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date.
(c) By the Company:
(i) If the Parent or Purchaser fails to perform in any material
respect any of its obligations under this Agreement;
(ii) If the representations and warranties of the Parent and
Purchaser set forth in this Agreement are not true and correct in any
material respect at any time prior to the Effective Time;
(iii) If the Company's Board of Directors, in the exercise of its
fiduciary duty under the circumstances described in Section 5.2, shall
withdraw its recommendation to the stockholders of the Company to
adopt and approve the Merger or change such recommendation in any
manner adverse to Parent and Purchaser;
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(iv) If, at least three business days prior to the Mailing Date,
the Parent and Purchaser shall have failed to deliver to the Company
copies of executed commitment letters relating to the financing
described in Section 6.2(c); or
(v) If the condition set forth in Section 6.3 hereof shall not be
satisfied at the Effective Time.
(d) By the Parent and Purchaser:
(i) If the Company takes any action described in Section 5.6(a),
regardless of whether Section 5.6(b) permits the taking of such action
in the exercise of the fiduciary duties of the Company's Board of
Directors;
(ii) If there occurs, or the Company enters into or publicly
announces its intention to enter into an agreement with Another Person
to cause to occur, a transaction of the type described in clauses (i),
(ii) or (iii) of Section 5.4(b) hereof, or Another Person shall have
commenced or publicly announced an intention to commence a tender or
exchange offer for the Company's Shares;
(iii) If any of the conditions set forth in Section 6.2 hereof
shall not be satisfied at the Effective Time; or
(iv) If the Company's Post-September 30 Transaction Expenses,
less the total amount by which the aggregate Merger Consideration
payable for all Shares was previously reduced pursuant to Section 1.7,
exceed $1,900,000.
8.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of the Company or
Parent and Purchaser or their affiliates except (i) as set forth in Sections 5.4
and 5.8, and (ii) that a party shall be liable for willful defaults of its
obligations hereunder. Notwithstanding the foregoing, if this Agreement is
terminated by the Company pursuant to Section 8.1(c)(iv) or (c)(v), neither
Parent nor Purchaser nor their affiliates shall be liable to the Company as a
result thereof if Parent and Purchaser were unable to obtain financing or other
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sources of funds necessary to pay the aggregate Merger Consideration and to
replace certain of the existing indebtedness of the Company on terms acceptable
to Parent in its sole discretion or, in the case of any termination pursuant to
Section 8.1(c)(iv), commitments for the same.
8.3 Amendment. This Agreement may not be amended except by action of the
Boards of Directors of each of the parties hereto (which, in the case of the
Company, shall include the approval of the Investment Committee) set forth in an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that after approval of the Merger by the stockholders of the Company,
no amendment may be made without the further approval of the stockholders of the
Company which would alter or change any of the terms or conditions of this
Agreement if any of the alterations or changes, alone or in the aggregate, would
materially adversely affect the stockholders of the Company.
8.4 Waiver. At any time prior to the Effective Time, whether before or
after approval of the Merger by stockholders of the Company, any party hereto,
by action taken by its Board of Directors (which, in the case of the Company,
shall include the approval of the Investment Committee), may (i) extend the time
for the performance of any of the obligations or other acts of any other party
hereto or (ii) subject to the provision contained in Section 8.3, waive
compliance with any of the agreements of any other party or with any conditions
to its own obligations. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party by a duly authorized officer.
ARTICLE IX
GENERAL PROVISIONS
9.1 Public Statements. The parties agree to consult with each other and
their respective counsel prior to issuing any press release or public
announcement with respect to this Agreement, the Merger, or the transactions
contemplated hereby. Each shall use all reasonable efforts to give to the other
parties sufficient opportunity to review any such press release or other public
announcement in advance of release.
9.2 Notices. All notices and other communications hereunder shall be in
writing, shall be delivered personally or sent by U.S. mail, telecopy, or
overnight delivery service, to
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<PAGE>
the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice, and shall be deemed given when received
by the party for whom intended:
(a) If to Parent or the Purchaser:
TBC Corporation
4770 Hickory Hill Drive
P.O. Box 18342
Memphis, Tennessee 38181-0342
Attn: Louis S. DiPasqua
Fax #: (901) 541-3639
with a copy to:
Thompson Hine & Flory P.L.L.
2000 Courthouse Plaza N.E.
P.O. Box 8801
Dayton, Ohio 45401-8801
Attn: Stanley A. Freedman, Esq.
Fax #: (513) 443-6635
(b) If to the Company:
Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
Attn: John E. Siipola
Fax #: (303) 790-0225
with a copy to:
Holme Roberts & Owen
1700 Lincoln
Suite 4100
Denver, Colorado 80203
Attn: W. Dean Salter, Esq.
Fax #: (303) 866-0200
and
Hopper and Kanouff, P.C.
1610 Wynkoop Street, Suite 200
Denver, Colorado 80202
Attn: Thomas S. Smith, Esq.
Fax #: (303) 892-0457
The sending party shall have the burden of proving receipt.
-46-
<PAGE>
9.3 Interpretation. As used in this Agreement, (i) the masculine, feminine
and neuter genders and the plural and singular numbers shall be deemed to
include the others in all cases where they would so apply; and (ii) the phrase
"to the best knowledge" of any party shall mean to the knowledge of such party
after due and appropriate inquiry.
9.4 Representations and Warranties. The respective representations and
warranties of the Company and the Parent and Purchaser contained herein shall
expire with, and be terminated and extinguished upon, consummation of the
Merger, and thereafter neither the Company nor the Parent or the Purchaser nor
any officer, director, or employee thereof shall be under any liability
whatsoever with respect to any such representation or warranty, except the
persons named in Section 6.2(m) to the extent, if any, that the Certificate of
any such person described therein was known by such person to be false when it
was made or delivered to Parent or Purchaser.
9.5 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
9.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
9.7 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
9.8 Miscellaneous. This Agreement (including the Exhibits, the Disclosure
Certificate and instruments referred to herein): (i) constitutes the entire
agreement and supersedes all other prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, including without limitation, the Letter of Intent; (ii) except
for Section 5.9 hereof, is not intended to confer upon any person other than a
party hereto any rights or remedies hereunder; (iii) shall not be assigned,
except by the Purchaser or Parent to a directly or indirectly wholly owned
subsidiary of the Purchaser or Parent which, in a written instrument shall agree
to assume all of such party's obligations hereunder and be bound by all of the
terms and conditions of this Agreement; and (iv) shall be governed in all
respects, including validity, interpretation and effect, by the internal laws of
the State of Nevada, without giving effect to the principles of conflict of laws
thereof.
-47-
<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their duly
authorized respective officers.
PARENT: TBC CORPORATION
By:/s/ Louis S. DiPasqua
Louis S. DiPasqua,
President and Chief
Executive Officer
PURCHASER: TBCO ACQUISITION, INC.
By:/s/ Louis S. DiPasqua
Louis S. DiPasqua,
President
COMPANY: BIG O TIRES, INC.
By:/s/ John E. Siipola
John E. Siipola,
Chairman and Member of the
Office of Chief Executive
Officer
And:/s/ Horst K. Mehlfeldt
Horst K. Mehlfeldt,
Vice Chairman and Member
of the Office of Chief
Executive Officer
And:/s/ Steven P. Cloward
Steven P. Cloward,
President and Member
of the Office of Chief
Executive Officer
-48-
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
THIS AMENDMENT NO. 2 TO RIGHTS AGREEMENT, dated as of April 30, 1996, is
between BIG O TIRES, INC., a Nevada corporation (the "Company"), and INTERWEST
TRANSFER CO., INC., a Utah corporation (the "Rights Agent").
Recitals
A. The Company and the Rights Agent are parties to a Rights Agreement dated
as of August 26, 1994, as amended (the "Rights Agreement").
B. Pursuant to Section 2.6 of the Rights Agreement, the Company and the
Rights Agent desire to amend the Rights Agreement as set forth below.
Accordingly, the parties agree that clauses (iii) and (iv) of Section 1(a)
of the Rights Agreement are amended to read in their entirety as follows:
(iii) TBC Corporation, a Delaware corporation, TBCO Acquisition, Inc.,
a Nevada corporation, and any other Person who may be deemed to be the
Beneficial Owner of Common Stock because of the execution and delivery of
the Agreement and Plan of Merger dated as of April 30, 1996 among TBC
Corporation, TBCO Acquisition, Inc. and the Company (the "Merger
Agreement") so long as such Persons are not the Beneficial Owners of any
Capital Stock of the Company other than (A) pursuant to the Merger
Agreement, (B) Common Stock owned by such Persons prior to the date of the
Merger Agreement, (C) Common Stock acquired by any of such Persons from any
other of such Persons, (D) Common Stock or other securities acquired by
such Persons in transactions or types of transactions that are approved in
advance by the Investment Committee of the Board of Directors of the
Company and (E) Common Stock other than as described above in this clause
(iii) not exceeding 1% of the shares of Common Stock from time to time
outstanding; and
(iv) any other Person that Beneficially Owns Common Stock as of April
30, 1996; provided that, such Person does not thereafter become the
Beneficial Owner of any additional Common Stock exceeding 1% of the shares
of Common Stock then outstanding.
<PAGE>
IN WITNESS WHEREOF, the Company and the Rights Agent have executed and
delivered this Amendment No. 2 as of the date first above written.
Attest: BIG O TIRES, INC.
/s/ Susan D. Hendee By: /s/ John E. Siipola
- ---------------------------------- ---------------------------------
Name: Susan D. Hendee Name: John E. Siipola
Title: Assistant Secretary Title: Chairman and Member of the
Office of the Chief Executive
Attest: INTERWEST TRANSFER CO., INC.
/s/ Melinda K. Orth By: /s/ Kurtis D. Hughes
- ---------------------------------- ---------------------------------
Name: Melinda K. Orth Name: Kurtis D. Hughes
Title: Account Executive Title: Vice President
2
SEPARATION AGREEMENT
This Separation Agreement ("Agreement") is entered into by and between Big
O Tires, Inc. ("Company") and John E. Siipola ("Employee"). This Agreement shall
become effective upon the effective date of the merger of Company with a
subsidiary of TBC Corporation ("TBC") or with TBC. Such merger is hereinafter
referred to as the "Merger" and the effective date of the Merger is hereinafter
referred to as the"Effective Date."
WHEREAS, Employee is employed by Company as Chairman and Member of the
Office of Chief Executive; and
WHEREAS, Employee is a Director of the Company; and
WHEREAS, Company is currently engaged in efforts to consummate the Merger;
and
WHEREAS, in the event of the Merger occurring not later than February 15,
1997, the Company and Employee have resolved to terminate the employment of
Employee by Company; and
WHEREAS, Employee has certain vested rights pertaining to his employment by
Company and his service as a Director of Company; and
WHEREAS, the covenants contained herein are good and valuable consideration
for the execution of this Agreement by Company and Employee;
NOW, THEREFORE, in consideration of the foregoing premises, Company and
Employee agree as follows:
1. This Agreement is expressly conditioned upon the Effective Date
occurring not later than February 15, 1997.
2. Effective on the Effective Date, Employee hereby resigns from his
employment by Company and as Chairman and Member of the Office of Chief
Executive.
3. Effective on the Effective Date, Employee hereby resigns his position as
Director of Company.
4. Company shall purchase Employee's 66,648 stock appreciation rights
("SAR") under that certain Stock Appreciation Rights Agreement between Company
and Employee dated February 15, 1995 ("SARA") at $16.50 per share, for a total
purchase price of $174,951.00. Such amount will be delivered to Employee on the
Effective Date. Subject to the payment of such sum to Employee by Company, the
SARA will be deemed automatically terminated as of the Effective Date.
<PAGE>
5. Company shall purchase from Employee the options to purchase 4,193
shares of Company's common stock held by Employee. Such purchase shall be made
in accordance with the Agreement and Plan of Merger among the Company, TBC and
TBCO Acquisition, Inc. ("Merger Agreement").
6. The amounts set forth in paragraphs 4 and 5 of this Agreement will be
reduced or increased to reflect any reduction or increase in the $16.50 per
share amount to be paid the Company's shareholders in connection with the
Merger.
7. In lieu of continued payments of base salary to Employee under Company's
Executive Management Severance Pay Policy ("Severance Policy"), Company shall
pay to Employee a lump sum payment of $208,613, which will be delivered to
Employee on the Effective Date.
8. Employee's right to receive regular base salary shall terminate as of
the Effective Date.
9. Employee shall receive any vacation pay accumulated from January 1,
1996, to the Effective Date. Such amount will be delivered to Employee within
three business days after the Effective Date.
10. Company shall continue to provide medical and dental insurance benefits
to Employee and Employee's eligible dependents at the same level provided during
Employee's employment for fifteen (15) months after the Effective Date (the
"Severance Period") unless Employee, within that time, obtains other employment,
at which time the Severance Period shall terminate. Such benefits shall be paid
in the same percentages by Employee and Company as are being paid on the date of
this Agreement. Employee agrees to provide Company by the first (1st) day of
each month the total amount payable by Employee for such medical and dental
insurance for such month. The failure of Employee to make such payment on or
before such day shall be deemed an election by Employee to discontinue any such
benefit effective on the date such payment is due.
11. All other benefits and perquisites currently provided to Employee,
including short-and long-term disability insurance, participation in Company's
401(k) Plan, participation in Company's 125 Flex Plan, use of Company vehicles
and vehicle allowance shall terminate on the Effective Date. Company's Employee
Stock Ownership Plan and other plan documents shall govern distribution of the
benefits to Employee under all such plans.
12. In further consideration of the rights and obligations created by this
Agreement, Employee for himself, his heirs, personal representatives, successors
and assigns, hereby fully and forever releases and discharges Company, its
subsidiaries, affiliates, and each of them, as well as their officers,
directors, shareholders, employees, agents, attorneys, successors, and assigns,
from any and all claims, demands, obligations, actions, liabilities, and damages
of every kind and nature whatsoever, at law or in equity, known or unknown,
2
<PAGE>
suspected or unsuspected, that Employee may now have or claim at any future time
to have, based in whole or in part upon any act or omission through the date of
Employee's termination of employment with Company, including without limitation
those claims, demands, obligations, actions, liabilities, and damages arising
from, relating to or based upon Employee's employment with Company and
Employee's separation from employment with Company except as provided herein.
Employee does not release Company from obligations under this Agreement.
Employee agrees that this release includes, but is not limited to, an
express waiver of rights and claims under federal and state statutes that
prohibit employment discrimination on the basis of sex, race, national origin,
religion, disability and age, such as the Age Discrimination in Employment Act
of 1987, Title VII of the Civil Rights Act of 1964, as amended, the
Rehabilitation Act of 1973, the Americans with Disabilities Act, the Family and
Medical Leave Act, the Equal Pay Act, and the Colorado Civil Rights Act, as well
as all common law rights and claims, such as breach of contract, express or
implied, tort, whether negligent or intentional, constructive discharge, and
wrongful discharge. Employee agrees that the consideration under this Agreement,
which Employee accepts by signing this Agreement, has value to Employee.
Employee, after having been advised to consult with an attorney, affirms that
Employee has been offered at least twenty-one (21) days in which to consider
executing this Agreement. Employee is aware of Employee's right to revoke the
waiver of claims within (7) days after signing this Agreement. If Employee
revokes the waiver of claims contained in this paragraph within (7) days after
signing this Agreement, Employee shall immediately return to Company all sums
Employee has received pursuant to this Agreement and in that event this
Agreement shall be of no further force or effect.
13. In consideration of the rights and obligations created by this
Agreement, Company for itself, its subsidiaries, affiliates, and each of them as
well as their officers, directors, shareholders, employees, agents, attorneys,
successors and assigns, hereby fully and forever releases and discharges
Employee, Employee's heirs, personal representatives, successors and assigns,
from any and all claims, demands, obligations, actions, liabilities and damages
of every kind and nature whatsoever, at law or in equity, known or unknown,
suspected or unsuspected that Company may now have or claim at any future time
to have based in whole or in part upon any act or omission through the date of
Employee's separation from employment with Company, including without
limitation, those claims, demands, obligations, actions, liabilities, and
damages arising from, relating to or based upon Employee's employment with
Company or separation from employment with Company.
14. It is intended that the releases contained in paragraphs 12 and 13 of
this Agreement be construed in the broadest possible manner, to further the
intention of the parties that all potential disputes between them arising out of
or connected to Employee's employment with Company be forever resolved. The
releases contained in paragraphs 12 and 13 of this Agreement shall not supersede
or abrogate any indemnification to which Employee may be entitled pursuant to
the provisions of the Merger Agreement.
3
<PAGE>
15. Employee agrees that Employee will treat as private and privileged any
Company trade secrets and other Company information, data, figures, projections,
estimates, customer lists, price lists, internal procedures, and the like and
will not release any such information to any person, firm, corporation or other
entity, either by statement, deposition or as a witness, except upon court order
or upon direct written authority of the President of Company, and Company shall
be entitled to an injunction by any competent court to enjoin and restrain the
unauthorized disclosures of such information. This information will also
include, without limitation, that which has been furnished to Employee by
Company with respect to its products and their marketing, distribution, pricing
and application, that is confidential or proprietary and/or which is subject to
Copyright and Trademark protections.
Employee agrees that Employee will not at any time talk about, write about
or otherwise publicize the terms or existence of this Agreement with Company or
any fact concerning its negotiation, execution or implementation except as may
be necessary to discuss with Employee's spouse, attorney or tax advisor or
unless required by law. Employee shall not testify or give evidence in any forum
concerning Employee's employment or termination of employment with Company
unless required by law.
BIG O TIRES, INC.
By: /s/ Horst K. Mehlfeldt /s/ John E. Siipola
------------------------------------ -----------------------------
Its: Vice Chairman John E. Siipola
Dated: April 30, 1996 Dated: April 30, 1996
4
SEPARATION AGREEMENT
This Separation Agreement ("Agreement") is entered into by and between Big
O Tires, Inc. ("Company") and Horst K. Mehlfeldt ("Employee"). This Agreement
shall become effective upon the effective date of the merger of Company with a
subsidiary of TBC Corporation ("TBC") or with TBC. Such merger is hereinafter
referred to as the "Merger" and the effective date of the Merger is hereinafter
referred to as the"Effective Date."
WHEREAS, Employee is employed by Company as Vice Chairman and Member of the
Office of Chief Executive; and
WHEREAS, Employee is a Director of the Company; and
WHEREAS, Company is currently engaged in efforts to consummate the Merger;
and
WHEREAS, in the event of the Merger occurring not later than February 15,
1997, the Company and Employee have resolved to terminate the employment of
Employee by Company; and
WHEREAS, Employee has certain vested rights pertaining to his employment by
Company and his service as a Director of Company; and
WHEREAS, the covenants contained herein are good and valuable consideration
for the execution of this Agreement by Company and Employee;
NOW, THEREFORE, in consideration of the foregoing premises, Company and
Employee agree as follows:
1. This Agreement is expressly conditioned upon the Effective Date
occurring not later than February 15, 1997.
2. Effective on the Effective Date, Employee hereby resigns from his
employment by Company and as Vice Chairman and Member of the Office of Chief
Executive.
3. Effective on the Effective Date, Employee hereby resigns his position as
Director of Company.
4. Company shall purchase Employee's 66,648 stock appreciation rights
("SAR") under that certain Stock Appreciation Rights Agreement between Company
and Employee dated February 15, 1995 ("SARA") at $16.50 per share, for a total
purchase price of $174,951.00. Such amount will be delivered to Employee on the
Effective Date. Subject to the payment of such sum to Employee by Company, the
SARA will be deemed automatically terminated as of the Effective Date.
<PAGE>
5. Company shall purchase from Employee the options to purchase 4,522
shares of Company's common stock held by Employee. Such purchase shall be made
in accordance with the Agreement and Plan of Merger among the Company, TBC and
TBCO Acquisition, Inc. ("Merger Agreement").
6. The amounts set forth in paragraphs 4 and 5 of this Agreement will be
reduced or increased to reflect any reduction or increase in the $16.50 per
share amount to be paid the Company's shareholders in connection with the
Merger.
7. In lieu of continued payments of base salary to Employee under Company's
Executive Management Severance Pay Policy ("Severance Policy"), Company shall
pay to Employee a lump sum payment of $186,654, which will be delivered to
Employee on the Effective Date.
8. Employee's right to receive regular base salary shall terminate as of
the Effective Date.
9. Employee shall receive any vacation pay accumulated from January 1,
1996, to the Effective Date. Such amount will be delivered to Employee within
three business days after the Effective Date.
10. Company shall continue to provide medical and dental insurance benefits
to Employee and Employee's eligible dependents at the same level provided during
Employee's employment for fifteen (15) months after the Effective Date (the
"Severance Period") unless Employee, within that time, obtains other employment,
at which time the Severance Period shall terminate. Such benefits shall be paid
in the same percentages by Employee and Company as are being paid on the date of
this Agreement. Employee agrees to provide Company by the first (1st) day of
each month the total amount payable by Employee for such medical and dental
insurance for such month. The failure of Employee to make such payment on or
before such day shall be deemed an election by Employee to discontinue any such
benefit effective on the date such payment is due.
11. All other benefits and perquisites currently provided to Employee,
including short-and long-term disability insurance, participation in Company's
401(k) Plan, participation in Company's 125 Flex Plan, use of Company vehicles
and vehicle allowance shall terminate on the Effective Date. Company's Employee
Stock Ownership Plan and other plan documents shall govern distribution of the
benefits to Employee under all such plans.
12. In further consideration of the rights and obligations created by this
Agreement, Employee for himself, his heirs, personal representatives, successors
and assigns, hereby fully and forever releases and discharges Company, its
subsidiaries, affiliates, and each of them, as well as their officers,
directors, shareholders, employees, agents, attorneys, successors, and assigns,
from any and all claims, demands, obligations, actions, liabilities, and damages
of every kind and nature whatsoever, at law or in equity, known or unknown,
2
<PAGE>
suspected or unsuspected, that Employee may now have or claim at any future time
to have, based in whole or in part upon any act or omission through the date of
Employee's termination of employment with Company, including without limitation
those claims, demands, obligations, actions, liabilities, and damages arising
from, relating to or based upon Employee's employment with Company and
Employee's separation from employment with Company except as provided herein.
Employee does not release Company from obligations under this Agreement.
Employee agrees that this release includes, but is not limited to, an
express waiver of rights and claims under federal and state statutes that
prohibit employment discrimination on the basis of sex, race, national origin,
religion, disability and age, such as the Age Discrimination in Employment Act
of 1987, Title VII of the Civil Rights Act of 1964, as amended, the
Rehabilitation Act of 1973, the Americans with Disabilities Act, the Family and
Medical Leave Act, the Equal Pay Act, and the Colorado Civil Rights Act, as well
as all common law rights and claims, such as breach of contract, express or
implied, tort, whether negligent or intentional, constructive discharge, and
wrongful discharge. Employee agrees that the consideration under this Agreement,
which Employee accepts by signing this Agreement, has value to Employee.
Employee, after having been advised to consult with an attorney, affirms that
Employee has been offered at least twenty-one (21) days in which to consider
executing this Agreement. Employee is aware of Employee's right to revoke the
waiver of claims within (7) days after signing this Agreement. If Employee
revokes the waiver of claims contained in this paragraph within (7) days after
signing this Agreement, Employee shall immediately return to Company all sums
Employee has received pursuant to this Agreement and in that event this
Agreement shall be of no further force or effect.
13. In consideration of the rights and obligations created by this
Agreement, Company for itself, its subsidiaries, affiliates, and each of them as
well as their officers, directors, shareholders, employees, agents, attorneys,
successors and assigns, hereby fully and forever releases and discharges
Employee, Employee's heirs, personal representatives, successors and assigns,
from any and all claims, demands, obligations, actions, liabilities and damages
of every kind and nature whatsoever, at law or in equity, known or unknown,
suspected or unsuspected that Company may now have or claim at any future time
to have based in whole or in part upon any act or omission through the date of
Employee's separation from employment with Company, including without
limitation, those claims, demands, obligations, actions, liabilities, and
damages arising from, relating to or based upon Employee's employment with
Company or separation from employment with Company.
14. It is intended that the releases contained in paragraphs 12 and 13 of
this Agreement be construed in the broadest possible manner, to further the
intention of the parties that all potential disputes between them arising out of
or connected to Employee's employment with Company be forever resolved. The
releases contained in paragraphs 12 and 13 of this Agreement shall not supersede
or abrogate any indemnification to which Employee may be entitled pursuant to
the provisions of the Merger Agreement.
3
<PAGE>
15. Employee agrees that Employee will treat as private and privileged any
Company trade secrets and other Company information, data, figures, projections,
estimates, customer lists, price lists, internal procedures, and the like and
will not release any such information to any person, firm, corporation or other
entity, either by statement, deposition or as a witness, except upon court order
or upon direct written authority of the President of Company, and Company shall
be entitled to an injunction by any competent court to enjoin and restrain the
unauthorized disclosures of such information. This information will also
include, without limitation, that which has been furnished to Employee by
Company with respect to its products and their marketing, distribution, pricing
and application, that is confidential or proprietary and/or which is subject to
Copyright and Trademark protections.
Employee agrees that Employee will not at any time talk about, write about
or otherwise publicize the terms or existence of this Agreement with Company or
any fact concerning its negotiation, execution or implementation except as may
be necessary to discuss with Employee's spouse, attorney or tax advisor or
unless required by law. Employee shall not testify or give evidence in any forum
concerning Employee's employment or termination of employment with Company
unless required by law.
BIG O TIRES, INC.
By: /s/ John E. Siipola /s/ Horst K. Mehlfeldt
---------------------------------- --------------------------------
Its: Chairman Horst K. Mehlfeldt
Dated: April 30, 1996 Dated: April 30, 1996
4
