BIG O TIRES INC, 10-K/A, 1996-04-29

BIG O TIRES INC
10-K/A, 1996-04-29
MOTOR VEHICLES & MOTOR VEHICLE PARTS & SUPPLIES

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A

/X/ ANNUAL REPORT PURSUANT TO Section 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995

/ / TRANSITION REPORT PURSUANT TO Section 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to ______________.
Commission File Number: 1-8833

BIG O TIRES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)

Nevada 87-0392481
- -------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)

11755 East Peakview Avenue, Suite A
Englewood, Colorado 80111
----------------------------------------------------
(Address of Principal Executive Offices and Zip Code)

Registrant's Telephone Number, Including Area Code: (303) 790-2800

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

$0.10 Par Value Common Stock
----------------------------
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of the registrant's voting stock held as of March
26, 1996 by nonaffiliates of the registrant was $40,214,816.

As of April 19, 1996, the registrant had 3,317,916 shares of its $0.10 par
value common stock outstanding.

The information required by Part III hereof is filed herein as an amendment
to this Annual Report on Form 10-K.

Total Pages 27.

<PAGE>

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) DIRECTORS

In April 1995, the Company's Bylaws were amended to add a fourth class of
director. The Class I, II and III Directors are elected for three year terms
and are to remain as nearly equal in number as possible and each class is to
have such number of directors so that at least one-fourth of the total number
of directors are elected for a three year term at each Annual Meeting of
Shareholders. The Class IV Director serves for a one year term.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DIRECTOR DURING THE LAST FIVE YEARS AND
NAME OF NOMINEE SINCE AGE OTHER POSITION, IF ANY, IN THE COMPANY
- --------------- ----- --- --------------------------------------
<S> <C> <C> <C>
John B. Adams Apr. 90 41 Executive Vice President of the Company since April
(1)(8)(12) 1990; also a part owner of CAPS Tire Limited Liability
Company, a limited liability company that has owned a
franchised Big O Tires retail store in Colorado, since
November 1993; Director of BOTI Holdings, Inc. and
BOTI Acquisition Corp. since January 1995 and
Treasurer of both companies since July 1995; Chief
Financial Officer of the Company since November 1988;
Vice President - Finance of the Company from November
1988 until April 1990; Secretary of the Company from
November 1989 until December 1990, and from April 1987
until June 1989; Treasurer of the Company since April
1987; Assistant Secretary of the Company since
December 1990 and from June 1989 until November 1989.

Ronald D. Asher Dec. 86 59 Owner of interests in 30 franchised Big O Tires retail
(2)(10) stores in California and Arizona that are owned by
C.S.B. Partnership ("C.S.B.") and by a joint venture
consisting of the Company and S.A.N.D.S. Partnership.

Frank L. Carney Dec. 93 58 President of Papa Johns, a limited liability
(3)(4)(5)(6)(10) company, since February 1994; Vice Chairman,
Secretary and Director of TurboChef, Inc., a
company engaged in the design, development,
assembly and marketing of commercial ovens,
since January 1994; Chairman of the Board of
Western SizzliN from November 1988 to December
1993 and served as its President and Chief
Executive Officer from November 1990 to December
1993; Director of Intrust Bank, N.A. since
December 1973, and Intrust Financial Corporation
since August 1982; from 1980 until 1992, the
sole shareholder, officer and director of Carney
Enterprises, Inc., an investor in diversified
business; co-founded Pizza Hut in 1958,
President from 1969 to 1980 and Chairman of the
Board from 1973 until Pizza Hut was purchased by
PepsiCo, Inc. in 1977.
</TABLE>

2
<PAGE>

<TABLE>
<S> <C> <C> <C>
Steven P. Cloward Dec. 86 48 Member of the Office of the Chief Executive
(1)(9)(12) since February 1995 and President of the Company
since 1986; Chief Executive Officer of the
Company from 1986 to February 1995; Director of
BOTI Holdings, Inc. and BOTI Acquisition Corp.
since January 1995 and an Officer of both
companies since July 1995.

Everett H. Johnston Feb. 93 57 Real estate investor since 1989; Chief Financial
(4)(7)(8) Officer, Secretary, Treasurer and a Director of
Simpson Manufacturing Co., Inc., a manufacturer
of structural building products, from 1983 to
1989, at which time Mr. Johnston retired.

Robert K. Lallatin June 95 47 Member of the Dealer Planning Board representing
(11) franchisees of the Company in Idaho, Montana, Western
Wyoming and northern Nevada since March 1990; Chairman
of the Personnel Training Committee of the Dealer
Planning Board since July 1993; part owner of B & G
Tire, Inc., an Idaho corporation, that currently owns
a franchised Big O Tires retail store in Idaho since
November 1981 and acquired a second franchised Big O
Tires retail store in Idaho in August 1989; B & G
Tire, Inc. also owned two Big O Tires retail stores in
Montana, one of which was sold in March 1990 and the
other was closed in December 1993; also a part owner
of B & G Jackson Partnership, an Idaho general
partnership, that has owned a franchised Big O Tires
retail store in Wyoming since February 1992 as a
partner with one of the Company's subsidiaries. This
store was purchased by B & G Jackson Partnership
effective December 31, 1994.

Horst K. Mehlfeldt Dec. 89 56 Vice Chairman and Member of the Office of the Chief
(1)(8) Executive of the Company since February 1995;
Consultant to the Company providing investment
advisory services from September 1994 to February
1995; Senior Vice President and Chief Financial
Officer of General Tire, Inc., a tire manufacturer and
marketer, from January 1992 to February 1994; Vice
President and Treasurer of General Tire, Inc. from
January 1989 until December 1991.

John E. Siipola Mar. 88 52 Member of the Office of the Chief Executive of the
(1)(10) Company since February 1995; Chairman of the Board of
the Company since December 1991; President and owner
of Barrett Publishing, Inc. since January 1993;
Consultant and investor since May 1991; President of
the Barrett Group, a personnel consulting firm, from
November 1988 until May 1991.

</TABLE>

3
<PAGE>

<TABLE>
<S> <C> <C> <C>
Ralph J. Weiger June 92 71 Chairman and owner of the Moneco Group, an advisor to
(4)(7)(9) franchise business clients, international marketing
companies and investment and commercial banking
clients, since 1982; Chairman of the Board of
America's Carpet Gallery since October 1991.
Chairman, President and Chief Executive Officer of
Midas International Corp. from 1971 until 1978 and
Vice Chairman and President of Jiffy Lube
International, Inc. from 1983 until 1985. A director
of the International Franchise Association from 1976
until 1979 and President in 1979.

C. Thomas Wernholm Dec. 86 65 President and Chief Executive Officer for D.
(3)(4)(5)(9) Wernholm & Sons, Industrial Contractors, an
industrial painting contractor; Chairman of the
Board of Loomis Industries, a company owned
primarily by the Wernholm family that
manufactures paraline instruments.

</TABLE>

(1) Member of the Executive Committee. The Executive Committee is
responsible for meeting on issues that arise between the regular meetings of
the Board of Directors to: monitor business operations of the Company; plan
and budget future operations of the Company; provide authorization for major
expenditures and contract commitments in accordance with approved business
plans and budgets; and consider other actions on behalf of the Board of
Directors when expedience dictates and a matter falls within the scope of
plans, principles or authorities approved by the Board of Directors. All
decisions of the Executive Committee must be unanimous to be implemented.
Mr. Adams is a non-voting member of this Committee.

(2) In November 1993, the Company entered into a Stipulation for Entry of
Final Judgment and a Permanent Injunction against the Company and two (2)
franchised Big O Tires retail stores owned by C.S.B. and two (2) franchised
Big O Tires retail stores owned by a joint venture consisting of C.S.B. and a
wholly-owned subsidiary of the Company. Although the Stipulation in the
action does not constitute an admission or adjudication of any of the
allegations made against the defendants, it does permanently enjoin all
defendants from directly or indirectly advertising the purchase or lease of a
product or service, or any combination thereof, that requires as a condition
of the sale, the purchase or lease of a different product or service, or any
combination thereof, without conspicuously disclosing in the advertisement
the price of all such products and services. The defendants are also
required to inform any prospective purchaser of one of the Big O Tires retail
stores which was the subject of the investigation of the injunction. As part
of the Stipulation, the defendants agreed to pay certain costs and penalties
totaling $35,000, the Company's portion of which was $25,000.

(3) Member of the Human Resources Committee. The Human Resources Committee
reviews management's organizational structure; compensation plans for
officers and directors; retirement programs and personnel policies;
interviews prospective officers; monitors the administration of the employee
benefit programs; monitors the effectiveness of the Company's Human Resources
Officer; serves as nominating committee for candidates for Director
positions; prepares compensation disclosure required by the Securities and
Exchange Commission; and counsels the Members of the Office of Chief
Executive in all areas related to human resources.

(4) Member of the Investment Committee. At the Annual Meeting of
Shareholders held in June 1994, the shareholders adopted a resolution calling
for the Company to engage an investment banker to explore all alternatives
for enhancing the value of the Company. In implementing this resolution, the
Company's Board of Directors established the Investment Committee of the
Board which retained PaineWebber Incorporated to fulfill this shareholder
proposal. The Investment Committee is presently comprised of the four (4)
independent members of the Board of Directors. In September 1994, the
proponent of the June 1994 shareholder proposal, upon invitation by the
Board, began advising the Investment Committee in this process. (See also
Item 13. Certain Relationships and Related Transactions section.)

<PAGE>

(5) Member of the Director and Employee Stock Option Plan and Long Term
Incentive Plan Administrative Committees. The Director and Employee Stock
Option Plan was terminated in December 1995.

(6) In October 1992, Western SizzliN, Inc. filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court, Northern District of Texas, Dallas Division, and its plan
of reorganization was confirmed by the Bankruptcy Court in December 1993.
Mr. Frank L. Carney was the Chairman of the Board of Western SizzliN, Inc.
from November 1988 to December 1993 and also served as its President and
Chief Executive Officer from November 1990 until December 1993.

(7) Member of the Audit Committee. The Audit Committee is responsible for
evaluating and recommending the appointment of the independent auditors;
reviewing and approving the audit plans of the independent and internal
auditors; reviewing the results of audits and management's response;
reviewing annual and interim reports to the Company's shareholders and the
Securities and Exchange Commission; reviewing the Company's accounting
principles as well as the impact of changes in accounting rules; reviewing
activities, organization structure and qualification of the internal audit
function; reviewing the Company's system of internal controls; monitoring the
Company's compliance with laws, regulations and internal policies prohibiting
fraud and illegal acts as well as its code of ethics; conducting special
investigations and directing independent and/or internal auditors to perform
special internal reviews; reviewing the results of examinations conducted by
regulatory agencies; and reviewing long range financial plans of the Company.

(8) Class I Director serving until the Company's 1997 Annual Meeting of
Shareholders.

(9) Class II Director serving until the Company's 1998 Annual Meeting of
Shareholders.

(10) Class III Director serving until the Company's 1996 Annual Meeting of
Shareholders.

(11) Class IV Director elected annually and serving until the Company's
Annual Meeting of Shareholders.

(12) BOTI Holdings, Inc. and BOTI Acquisition Corp. (collectively "BOTI") are
companies whose shareholders consisted of several senior managers and
officers, two of which are also Directors of the Company and Big O Tire
Dealers of America ("BOTDA"), a group, consisting of the Company's franchised
dealers. BOTI was formed by these shareholders to accomplish a merger with
the Company. The Company terminated its merger agreement with BOTI on March
13, 1996.

(b) EXECUTIVE OFFICERS

The Executive Officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after the Annual Meeting of
Shareholders or at such time as the Board of Directors establishes a new
position. Each Executive Officer holds office until his/her successor is
duly elected and qualified or until his/her resignation or until he/she is
removed in the manner provided in the Company's Bylaws. The current
Executive Officers of the Company are John B. Adams, Steven P. Cloward,
Donald O. Flanders, Dennis J. Fryer, Allen E. Jones, Ronald H. Lautzenheiser,
Horst K. Mehlfeldt, Kelley A. O'Reilly, Gregory L. Roquet, John E. Siipola,
Thomas L. Staker, Philip J. Teigen, and Bruce H. Ware. Messrs. Flanders,
Fryer, Jones and Roquet and Ms. O'Reilly were appointed by the President
pursuant to authority delegated to him by the Board of Directors. Messrs.
Flanders and Ware were appointed by the Company's Executive Committee and
such appointment was ratified by the Company's Board of Directors.
Information pertaining to Messrs. Adams, Cloward, Mehlfeldt and Siipola is
set forth earlier in this Item 10.

<PAGE>

The following table provides information relating to the other Officers of
the Company:

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DIRECTOR DURING THE LAST FIVE YEARS AND
NAME OF NOMINEE SINCE AGE OTHER POSITION, IF ANY, IN THE COMPANY
- --------------- ----- --- --------------------------------------
<S> <C> <C> <C>
Donald O. Flanders Jan. 96 46 Regional Vice President - Southwest Region since
January 1996; Western Region Commercial Accounts
Representative of The Kelly-Springfield Tire Company
from June 1995 through December 1995; Western Region
Manager for The Kelly-Springfield Company from June
1993 through July 1995; Account Executive with The
Kelly-Springfield Company from November 1990 until
June 1993.

Dennis J. Fryer Jan. 93 43 Regional Vice President - Central Region of the Company
since October 1992; New Store Opening Specialist of the
Company from January 1990 to October 1992; Area Manager of
the Company from March 1986 to January 1990.

Allen E. Jones Dec. 90 45 Regional Vice President - Southeast Region of the Company
since December 1990; Regional Director for the Company from
1988 to 1990.

Ronald H. Mar. 90 54 Vice President - Business Development of the Company
Lautzenheiser since November 1993; Vice President - Marketing of the
Company from March 1990 to November 1993, and employee
of the Company since December 1989.

Kelley A. O'Reilly Nov. 93 34 Vice President - Marketing of the Company since
November 1993; Director, President and Treasurer of
Impact Advertising, Inc. since August 1994; Marketing
Director of the Company from July 1991 to October
1993; Advertising Director for Big O Dealers-Seattle
from March 1990 to June 1991; Market Analyst for the
Small Business Development Center in Bellingham,
Washington from June 1988 to March 1990.

Gregory L. Roquet Dec. 90 39 Regional Vice President - West Central Region since May 1993
and Regional Vice President - Southwest Region of the
Company from July 1991 through January 1996; Regional
Director of Operations - Southwest Region from December 1990
to July 1991; Warehouse Manager of the Company's Western RSC
from April 1990 to December 1990; prior thereto, owner and
operator of two franchised Big O Tires retail stores in
Richmond, California.

Thomas L. Staker Dec. 91 47 Senior Vice President - Operations of the Company since
January 1993; Vice President - Operations of the Company
from December 1991 to December 1992; President and Director
of Staker Management, Inc., a provider of consulting
services to the Company's franchisees, from March 1991 to
December 1991; President and Director of Willow Investments,
Inc., a wholesaler and manufacturer of

</TABLE>

<PAGE>

<TABLE>
<S> <C> <C> <C>
clothing, from October 1988 to November 1991; 25% stockholder,
Secretary and Director of Tad Tire, Inc., a franchisee of the
Company, from August 1982 to the present.

Philip J. Teigen Dec. 90 56 Secretary of the Company since December 1990; General
Counsel of the Company since August 1990; engaged in the
private practice of law from May 1987 to August 1990.

Bruce H. Ware Dec. 90 38 Vice President - Purchasing of the Company since March 1996;
Corporate Purchasing Manager from January 1996 to March
1996; Regional Vice President - Northwest Region of the
Company from December 1990 to January 1996; Director of
Operations - Northwest Region of the Company from January
1990 to November 1990; Employee of the Company since January
1989.
</TABLE>

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Officers and Directors, and persons who own more than ten percent (10%) of
the Company's Common Stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. During the Company's
fiscal year ended December 31, 1995, Messrs. Cloward, Mehlfeldt and Siipola
filed a late Form 4 to report receipt of certain stock appreciation rights.

ITEM 11. EXECUTIVE COMPENSATION

(a) REPORT OF THE HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION

The executive compensation program, administered by the Human Resources
Committee of the Board of Directors ("Committee"), has been designed and is
administered to support the Company's mission which is to become the largest
network of successful franchised tire and automotive related retail outlets
in North America providing top quality Big O brand tires and products at
competitive prices while operating within the Company's corporate creed. The
Committee members consist entirely of non-employee directors. In furtherance
of the Company's mission, the Committee is responsible for administering
total compensation programs which will enable the Company to:

- Attract, develop and retain high-quality executives;

- Emphasize the relationship between pay and performance by placing
a significant portion of compensation at risk and subject to the
achievement of financial goals and objectives;

- Maximize real growth-driven financial performance, balancing short
and long term goals of the Company; and

- Maximize shareholder value by aligning the interests of its
executive officers with those of its shareholders through the use
of stock, stock derivatives and stock appreciation rights to link
a significant portion of compensation to increases in shareholder
value.

COMPONENTS OF COMPENSATION

Executive officers compensation is based on a wide range of quantitative and
qualitative measures which permit comparisons with competitors' performances
and internal targets set before the beginning of each fiscal year. The
Committee believes that executive officers should be accountable for their
areas of responsibility (their individual

<PAGE>

performance) as well as overall corporate performance, and that the executive
officers compensation program should reflect both Company progress and
achievement within an executive officer's business unit. Examples of
quantitative measures for 1995 were net franchise growth, earnings per share,
reduction in non-current accounts receivable and reduction in selling and
general administrative expenses. Examples of 1995 qualitative assessments
were reduction in warranty adjustment expense, the measured progress in
marketing (Cost-U-LessTM program), and improvement in product quality.

Executive officer compensation is comprised of three elements: base salary,
annual incentive bonus and long term incentives.

BASE SALARIES

Executive officers receive base salaries that are modest by industry
standards. The Committee commissioned a compensation study by Hay Management
Consultants/The Hay Group in 1990 and has targeted base salaries at the 40th
percentile of comparable positions as defined by that study.

ANNUAL INCENTIVE BONUS

The Committee believes that executive officer reward should appropriately be
based more on achievement of quantifiable business goals which are negotiated
each year in concert with the Company's short and long term business plans.
The annual incentive bonus is an annual cash bonus that is distributed based
upon the Company's achievement of certain objective financial goals and
achievement of each executive officer's individual goals defined by minimal
acceptable thresholds, business targets, and maximum levels.

LONG-TERM INCENTIVES

The third component of the executive officer compensation program are the
long term incentives which use stock options and/or restricted stock grants
under the Company's Long Term Incentive Plan (the "LTI Plan") and for
selected key employees stock appreciation rights under the Company's
Supplemental Executive Retirement Plan. And, as of February 1995, stock
appreciation rights SARs for members of the Office of the Chief Executive
were granted under the Company's Stock Appreciation Rights Agreements. The
Committee uses a model developed for the Company by The Hay Group. By
awarding stock, stock derivatives and stock appreciation rights, a
significant portion of the total executive officer compensation program is
tied to the Company's future stock price performance. The Committee's
objective is to align the interests of the executive officers with the
long-term interests of the Company's shareholders. Using The Hay Group model
as a baseline as it is applied to the Company's LTI Plan, the Committee
increases or decreases such option or restricted stock grants by factors
based upon the Company's overall performance and each individual executive
officer's performance. A determination of unsatisfactory performance could
equate to no award. During 1995, the Committee did not recommend options be
granted to the Company's Executive Officers, because it appeared that the
Company would be acquired by certain franchised dealers of the Company and
certain members of the Executive Officers ("Dealer Management Group").

Section 162(m) of the Internal Revenue Code ("Code") limits federal income
tax deductions for compensation paid after 1993 to the Company's Chief
Executive Officer and each of its four other most highly compensated officers
to $1 million per year, but includes an exception for performance-based
compensation that satisfies certain conditions. The Company is below this $1
million deduction limit. Options granted under the shareholder approved
performance based LTI Plan are exempt from Section 162(m) of the Code because
the awards under the plan are determined by a committee consisting only of
those committee members whose only remuneration from the Company is paid in
their capacity as directors, and because the option price is the market price
at the time of grant. Therefore, the Committee believes that compensation
arising from the exercise of outstanding stock options as well as options to
be granted under the LTI Plan will be deductible for federal income tax
purposes. It is the current policy of the Committee to only make restricted
stock grants which allow the Company to have federal income tax deductions
under Section 162(m).

<PAGE>

In 1994, the Company adopted a Supplemental Executive Retirement Plan
("SERP") in order to provide certain key employees ("Participants") a
deferred compensation benefit in the form of stock appreciation rights based
upon compensation which each such Participant receives in excess of the
limitation on compensation that can be counted for the Company's ESOP for the
purpose of qualified retirement plans. It is the Company's intention that
the SERP qualify as a plan which is unfunded and maintained primarily for the
purpose of providing deferred compensation. The Company maintains for each
Participant an account reflecting the number of units of deferred
compensation awarded to the Participant. Each year the Company's Board of
Directors determines the contribution that is made to the ESOP (see Summary
Compensation Table footnote 2, page 12). The contribution is expressed as a
percentage of the compensation of all of the employees in the ESOP (the "ESOP
Percentage Contribution Rate"). The SERP provides that each SERP Participant
shall receive deferred compensation units for each year as follows: (i) the
Participant's taxable compensation for such year in excess of $150,000 (or
such higher amount as is permitted to be counted for the purposes of the
ESOP) shall be multiplied by the ESOP Percentage Contribution Rate; (ii) the
resulting amount is divided by the value of a share of the Company's Common
Stock as of December 31 of such year; and (iii) the resulting number is the
number of units awarded to the Participant. A unit is equal to the value of
one share of the Company's Common Stock. To date the Committee and the Board
of Directors have only approved 1994 contributions to the SERP on behalf of
two of the Company's executive officers.

Under the SERP, upon termination of the employment of the Participant with
the Company for any reason other than death, the Participant will be entitled
to receive all amounts credited to the Participant's account as of the date
of termination of employment. Such distribution will be in installments over
a designated period of months. If termination of a Participant's employment
occurs by reason of a Participant's death, the participant's designated
beneficiary will be entitled to receive all amounts credited to the account
of the Participant as of the date of his death.

Following a change of control of the Company (as defined in the SERP), the
Participant will be entitled to receive all amounts credited to the
Participant's account. Upon a change of control, distribution of the amounts
credited to a Participant's account will begin in thirty (30) days following
such change of control and shall be paid in one hundred twenty (120) equal
monthly installments unless the Participant elects within a specified time
period to receive the distribution in a lump sum or in sixty (60) equal
monthly payments.

COMPENSATION OF THE MEMBERS OF THE OFFICE OF CHIEF EXECUTIVE

Steven P. Cloward continued his office as President and Chief Executive
Officer until February 15, 1995, when the Company's Board of Directors
established the Office of Chief Executive ("OCE") and elected John E.
Siipola, as Chairman of the Board, Horst K. Mehlfeldt, as Vice Chairman of
the Board, and Steven P. Cloward, as President, as members of the OCE. This
required Messrs. Siipola and Mehlfeldt to become full time employees of the
Company for the purpose of managing the Company and exploring all
alternatives to enhance the value of the Company, as directed by the
shareholders of the Company at their June 1994 meeting. This permitted
Mr. Cloward to continue his efforts with the Dealer Management Group to
acquire the Company.

9
<PAGE>

Since it was anticipated that this reorganization would exist for a short
period of time until the acquisition of the Company by the Dealer Management
Group could be consummated, the compensation of each member of the OCE
consisted of a base salary and SARs, without annual incentive bonuses or long
term incentives. Subject to vesting, each Unit as defined in the SAR
agreements entitles the recipient to receive, in cash only, the difference
between the Base Value (or $13.875 per share) of a share of Common Stock and
the Market Value of a share of Common Stock on the Exercise Date. The right
to exercise any Units granted did not vest until August 16, 1995.
Thereafter, the recipient's rights to exercise any Units granted vest at a
rate of 16,662 Units on August 16, 1995 and at a rate of 2,777 Units on the
16th day of each month thereafter until January 16, 1998, at which time 2,805
unvested Units will vest. Such vesting shall occur only if the employee is
in the full-time employ of the Company or any subsidiary of the Company on
each vesting date. Each member of the OCE was also provided special severance
plans which, in the case of Messrs. Siipola and Mehlfeldt, would be off-set
by gains experienced under the SARs. At the February 12, 1996, meeting of
the Company's Board of Directors, the special severance plans with Messrs.
Mehlfeldt and Siipola were terminated and the Company's Executive Management
Severance Policy was amended to include all members of the OCE. The Board
also amended the monthly SAR vesting provisions so that in the event of a
participant's termination of employment, the vesting would be accelerated to
include the entire plan year in which such employment terminated.

FRANK L. CARNEY C. THOMAS WERNHOLM

<PAGE>

(b) EXECUTIVE COMPENSATION

The following table sets forth certain information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1995, 1994 and 1993, of those persons who
were, at December 31, 1995 (i) members of the Office of the Chief Executive
and (ii) the other four (4) most highly compensated executive officers of the
Company whose annual salary and bonus from the Company exceeded $100,000 (See
the following pages for footnotes).

I. SUMMARY COMPENSATION TABLE

Annual Compensation Long Term Compensation
------------------------------- ---------------------------------
Other Restricted
Annual Stock All Other
Name and Principal Salary Bonus Compensation Award(s) Options/ Compensation
Position Year ($) ($) ($) ($) SARs(#)(1) ($)(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Siipola, 1995 $166,615 ---- $ 4,482(6) ---- D&EP 411 ----
Member of the Office SAR 100,000
of the Chief Executive 1994 ---- ---- $49,400(6) ---- D&EP 452 ----
and Chairman of the
Board of Directors 1993 ---- ---- $41,800(6) ---- D&EP 700 ----

Horst K. Mehlfeldt, 1995 $149,077 ---- $ 9,741(4)(6) ---- D&EP 1,368 ----
Member of the Office SAR 100,000
of the Chief Executive 1994 ---- ---- $67,818(7) ---- D&EP 1,507 ----
and Vice-Chairman of the
Board of Directors 1993 ---- ---- $22,600(6) ---- D&EP 1,647 ----

Steven P. Cloward, 1995 $185,458 ---- ---- ---- SAP 100,000 $ 7,500
Member of the Office SERP 118
of the Chief Executive 1994 $215,000 $88,209 ---- $103,277 LTIP 25,049 $15,156
and President D&EP 1,184
SERP 502

1993 $195,000 $17,218 $8,700(5) ---- LTIP 17,700 $21,298

</TABLE>

<PAGE>

Annual Compensation Long Term Compensation
------------------------------- ---------------------------------
Other Restricted
Annual Stock All Other
Name and Principal Salary Bonus Compensation Award(s) Options/ Compensation
Position Year ($) ($) ($) ($) SARs(#)(1) ($)(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John B. Adams, Executive 1995 $150,500 $31,711 $2,145(5) ---- SERP 88 $ 7,500
Vice President, Chief
Financial Officer, 1994 $145,000 $66,922 $8,580(5) $69,654 LTIP 16,893 $10,596
Treasurer and Assistant D&EP 377
Secretary SERP 203

1993 $129,000 $39,946 $7,800(5) ---- LTIP 12,197 $16,944

Thomas L. Staker, 1995 $129,500 $27,163 $ 200 ---- $ 7,500
Senior Vice President -
Operations 1994 $125,000 $32,855 $45,988 N/A ---- $ 7,500

1993 $110,000 $10,792 --- $24,195(3) LTIP 1,354 $12,121

Ronald H. Lautzenheiser, 1995 $115,000 $17,475 $2,180(5) ---- N/A ---- $ 7,010
Vice President - Business
Development 1994 $110,000 $27,187 $7,920(5) $53,954 N/A ---- $ 6,874

1993 $104,000 $15,936 $7,200(5) ---- LTIP 5,245 $12,044

Gregory L. Roquet, 1995 $ 83,000 $22,596 $21,398(4) ---- N/A ---- $ 5,289
Regional Vice President
1994 $ 80,000 $27,009 $13,504(4) $29,439(3) N/A ---- $ 5,356

1993 $ 72,734 $ 3,571 $6,059(4) ---- LTIP 3,546 $ 7,684

- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1) "D&EP" reflects options granted under the Big O Tires, Inc. Director and
Employee Stock Option Plan (also referred to as "D&E Option Plan" and "D&E
Options"). "LTIP" reflects options granted under the Big O Tires, Inc. Long
Term Incentive Plan.

(2) Includes contributions under the Company's Employee Stock Ownership Plan
("ESOP"), that is a stock bonus type of retirement benefit plan meeting the
requirements of Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and is designed as a defined contribution plan. The
ESOP invests primarily in "employer securities" (i.e., the Company's Common
Stock) for the exclusive benefit of its participating employees
("Participants"). The ESOP prohibits Participants from making any
contributions to the Plan. Employees of the Company and its wholly-owned
subsidiaries ("Employees") who complete more than 1,000 hours of service
within 12 consecutive months, who are 18 years of age or older during the
calendar year, and who are not covered by a collective bargaining agreement
(of which there is none) are eligible to participate in the ESOP. Neither
the Directors

<PAGE>

of the Company (nor its subsidiaries) who are not otherwise employees of the
Company (or its subsidiaries) nor the employees of the Company-owned Big O
Tires retail stores are eligible to participate in the ESOP.

Includes the value of units granted under the Company's Supplemental
Executive Retirement Plan ("SERP"). The SERP is a deferred compensation
benefit based upon compensation which each participant receives in excess of
the limitation on compensation that can be counted for the Company's ESOP.
It is the Company's intention that the SERP qualify as a plan which is
unfunded and maintained primarily for the purpose of providing deferred
compensation. The value of units granted on behalf of Messrs. Cloward and
Adams totaled a vested share value of $7,656 and $3,096, respectively at
December 31, 1994. (See the "Report of the Human Resources Committee on
Executive Compensation" for a more complete description of the SERP.)

(3) At December 31, 1995, Messrs. Cloward, Adams, Lautzenheiser, Staker and
Roquet held 11,370, 7,552, 3,495, 4,479 and 1,907 shares, respectively, of
Common Stock that had been granted to them pursuant to the LTIP. Based on
the closing sale price of the Company's Common Stock on December 31, 1995,
Mr. Cloward's unvested shares had a value of $80,940, Mr. Adams' unvested
shares had a value of $54,240, Mr. Lautzenheiser's unvested shares had a
value of $34,950, Mr. Staker's unvested shares had a value of $43,290 and Mr.
Roquet's unvested shares had a value of $19,065. Twenty percent of the
shares of Common Stock that have been granted prior to 1994 to Messrs.
Cloward, Adams and Staker vest each year after the grant date. Shares of
Common Stock granted in 1994 vest over a three year period.

(4) Includes payment of relocation expenses of $6,615 and $21,198 for
Messrs. Mehlfeldt and Roquet, respectively, for the fiscal year ending
December 31, 1995. Includes $13,404 in relocation expenses for Mr. Roquet in
the year ended December 31, 1994. Includes $5,759 in relocation expenses for
Mr. Roquet for the year ended December 31, 1993.

(5) Includes payment of an automobile allowance.

(6) Includes 1995 Board of Director compensation of $3,126 and $4,482 for
Messrs. Mehlfeldt and Siipola, respectively. The amounts listed in years
1993 for Messrs Mehlfeldt and Siipola, and in 1994 for Mr. Siipola are also
for Board of Director compensation.

(7) Includes remuneration for consulting services in the amount of $36,167
and Board of Director compensation in the amount of $31,651.

<PAGE>

II. OPTION GRANTS TABLE

<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
-------------------------------------

Potential Realizable Value
Value at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(1)
-------------------------------------------------------------------- -----------------------------

% of Total
Options/ Options/SARs Exercise or
SARs Granted to Base
Granted Employees in Price Expiration 5% 10%
Name(3) Plan(2) (#) Fiscal Year ($/SH) Date ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John E. Siipola, D&EP 411 19.24% $1.625 12/31/04 $9,542 $15,589
Member of the Office of SAR 100,000 33.33% $13.875 NA $131,250 $137,500
the Chief Executive

Horst K. Mehlfeldt, D&EP 1,368 64.04% $1.625 12/31/04 $31,759 $51,888
Member of the Office of SAR 100,000 33.33% $13.875 NA $131,250 $137,500
the Chief Executive

Steven P. Cloward, Member SAR 100,000 33.33% $13.875 NA $131,250 $137,500
of the Office of the Chief
Executive and President

John B. Adams, Executive
Vice President, Chief
Financial Officer,
Treasurer and
Assistant Secretary

Thomas L. Staker, Senior
Vice President -
Operations

Ronald H. Lautzenheiser,
Vice President -
Marketing

Gregory L. Roquet,
Regional Vice President -
Southwest Region

</TABLE>

(1) Based on Common Stock price of $15.125 on April 19, 1996, and a total of
3,317,916 shares of Common Stock outstanding. The total potential stock
appreciation from 1995 to 2005 for all shareholders at an assumed stock price
appreciation of 5% and 10% is $52,692,654 and $55,201,828, respectively.

(2) In February 1995, the Board of Directors approved a grant of stock
appreciation rights ("SARs") on behalf of Messrs. Cloward, Mehlfeldt and
Siipola. Subject to vesting requirements stipulated in the SAR agreement,
each member of the Office of the Chief Executive received a grant of 100,000
share equivalent units (the "Units") each of

14
<PAGE>

which shall represent an equal, undivided interest in the future appreciation
in the value of a share of the Company's Common Stock. Subject to vesting,
each Unit entitles the recipient to receive, in cash only, the difference
between the Base Value (or $13.875 per share, which was the price of the
Company's Common Stock on the date of grant) of a share of Common Stock and
the Market Value of a share of Common Stock on the Exercise Date. The right
to exercise any Units granted will not vest until August 16, 1995.
Thereafter, the recipient's rights to exercise any Units granted shall vest
at a rate of 16,662 Units on August 16, 1995 and at a rate of 2,777 Units on
the 16th day of each month thereafter until January 16, 1998, at which time
2,805 unvested Units will vest. Such vesting shall occur only if the
employee is in the full-time employ of the Company or any subsidiary of the
Company on each vesting date. (See also Item 13. Certain Relationships and
Related Transactions, Paragraphs 7 and 8).

(3) No gain to the optionees is possible without an increase in stock price,
which will benefit all shareholders.

<PAGE>

III. VALUE OF OPTIONS AT DECEMBER 31, 1995

<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in last Fiscal Year and FY-End Option/SAR Values

Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs at Options/SARs at
FY-END (#) FY-END ($)
---------- ----------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized ($)(1) Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John E. Siipola, 0 0 D&EP 3,782/ $53,157/
Member of the Office of 411 $5,497
the Chief Executive SAR(2) 27,770/ $31,241/81,259
72,230
Horst K. Mehlfeldt, 0 0 D&EP 3,154/ $42,864/
Member of the Office of 1,368 $18,297
the Chief Executive SAR(2) 27,770/ $31,241/81,259
72,230
Steven P. Cloward, 0 0 D&EP 12,284/ $177,239/
President and Chief 0 0
Executive Officer
LTIP 16,955/ $167,882/
42,479 $48,675

SERP 620/ $9,455/
0 0

SAR(2) 27,770/ $31,241/81,259
72,230
John B. Adams, Executive 0 0 D&EP 4,922/ $70,916/
Vice President, Chief 0 0
Financial Officer,
Treasurer and Assistant LTIP 11,054/ $109,447/
Secretary 29,090 $33,542

SERP 291/ $4,438/
NA NA

Thomas L. Staker, Senior 0 0 LTIP 3,681/ $36,235/
Vice President - Operations 1,354 $3,724

Ronald H. Lautzenheiser, 0 0 LTIP 3,804/ $37,446/
Vice President - 5,245 $14,424
Business Development

Gregory L. Roquet, 0 0 LTIP 4,684/ $46,533/
Regional Vice President - 3,546 $9,752
Southwest Region

</TABLE>

(1) The Value Realized is based on the sale price.
(2) The Value of Exercisable In-the-Money SARs at FY-End was determined by
the difference in the Company's Common Stock at December 31,1995 and the
$13.875 Base Value of each SAR Unit.

16
<PAGE>

IV. FIVE YEAR SHAREHOLDER RETURN COMPARISON

The regulations of the United States Securities and Exchange Commission
require that the Company include herein a line-graph presentation comparing
cumulative, five-year shareholder returns on an indexed basis with the NASDAQ
Market Index and either a nationally recognized industry standard or an index
of peer companies selected by the Company. The Board of Directors has
approved a group of five (5) other franchisors and/or tire and other auto
aftermarket wholesale distributors which have been used for purposes of this
performance comparison which appears below. These companies were selected
based on similar business segments and/or market capitalization to that of
the Company. A list of these companies follows the graph below:

[GRAPH APPEARS HERE]

Measurement Period
(Fiscal Year Covered)

Measurement Pt- Big O Tires, Inc. Peer Group Broad Market
<S> <C> <C> <C>
12/31/90 $100 $100 $100
FYE 12/31/91 $125 $213 $128
FYE 12/31/92 $350 $252 $130
FYE 12/31/93 $380 $312 $156
FYE 12/31/94 $407 $261 $163
FYE 12/31/95 $400 $322 $212

</TABLE>

- -------------------------------------------------------------------------------
Assumes $100.00 invested on January 1, 1990
Assumes Dividend reinvested.
Fiscal Year ended December 31, 1995

SELECTED PEER GROUP:

BANDAG, INC.
GOODYEAR TIRE & RUBBER CO.
GREASE MONKEY HOLDING CO.
REPUBLIC AUTOMOTIVE PARTS
TRAK AUTO CO.
- -------------------------------------------------------------------------------

<PAGE>

Directors of the Company who are not otherwise employees receive annual
compensation of $12,000 plus $1,000 for each meeting that they attend, $400
for the first two hours of each telephone conference call in which they
participate and an additional $200 each hour or part thereof exceeding two
hours. Until December 1995 when the D&E Option Plan was terminated, each
such Director was to elect to purchase $6,000 in options under the D&E Option
Plan or such compensation was to be forfeited. Such $6,000 amount was offset
against the $12,000 annual compensation. Upon termination of the D&E Option
Plan, the $12,000 annual compensation, noted above, reverted to an all cash
bases effective January 1, 1996. In addition, the Chairman of the Board of
Directors receives a $5,000 annual retainer, which in the case of Mr. Siipola
will be paid pro rata as to the portion of 1995 he was not an employee of the
Company. Each non-employee Director who is a member of the Executive
Committee of the Board (currently all Executive Committee members are
employees) receives an additional $6,000 as annual compensation for serving
on this Committee plus $1,000 for each meeting attended which is not
scheduled in conjunction with regularly scheduled meetings of the Board of
Directors. Each Investment Committee member receives $3,000 per year; such
compensation is paid on a quarterly basis. Each non-employee Director who
serves on any other Committee of the Board receives $2,000 as an annual
retainer for service on each such Committee, plus $1,000 for each meeting
that is specially approved by the entire Board when such Committee meeting is
not held in conjunction with regularly scheduled Board meetings. In addition
to the Executive Committee, the Board has three standing committees, as
follows - Audit Committee, Human Resources Committee, Investment Committee.

All reasonable, ordinary, and necessary travel, lodging, meals, and other
out-of-pocket expenses incurred by members of the Board of Directors in
fulfilling their responsibilities are paid for or are reimbursed by the
Company.

(b) COMPENSATORY ARRANGEMENTS WITH CERTAIN EXECUTIVE OFFICERS

In February 1995, management of the Company was restructured, creating the
Office of the Chief Executive. Members of the Office of the Chief Executive
consist of the Company's Chairman, John E. Siipola; Vice-Chairman, Horst K.
Mehlfeldt; and President, Steven P. Cloward. Concurrent with the creation of
the Office of the Chief Executive, the Committee and the Company's Board of
Directors approved a grant of Stock Appreciation Rights ("SAR") to the
members of the Office of the Chief Executive ("Members"), which was
subsequently granted effective this same date. The SAR agreement provides
that each Member received a grant of 100,000 share equivalent units (the
"Units"), each of which represents an equal, undivided interest in the future
appreciation in the value of a share of the Company's Common Stock. The SAR
agreement provides, subject to a certain vesting schedule stipulated in the
agreement, that each Unit shall entitle each Member to receive, in cash only,
the difference between the base value (defined in the agreement as $13.875
per share, which was the price of the Company's Common Stock on the date of
grant) of a share of Common Stock and the market value of a share of Common
Stock on the exercise date. At its February 12, 1996 meeting, the Company's
Board of Directors amended the monthly vesting provisions so that in the
event of a participant's termination of employment, the vesting would be
accelerated to include the entire plan year in which such employment
terminated. (See also Item 13. the Certain Relationships and Related
Transactions.)

In March 1995, the Board of Directors agreed to an arrangement regarding
severance payments that will be made to Messrs. Mehlfeldt and Siipola in the
event that a change of control of the Company takes place between February
15, 1995 and August 16, 1995, inclusive. The severance package will consist
solely of a lump sum payment of $150,000 in the event that such change of
control occurs and their respective positions within the Company terminates
as a result of such change of control. In July 1995, the Company revised
this severance package by offsetting the lump sum payment with any amounts
Messrs. Mehlfeldt and Siipola would realize from the exercise of rights
granted under the Stock Appreciation Rights Agreement, described above. At
the February 12, 1996, meeting of the Company's Board of Directors, the
severance package with Messrs. Mehlfeldt and Siipola were terminated and the
Company's Executive Management Severance Policy was amended to include all
members of the OCE. In April 1996, the Company's Board of Directors agreed
that if the Merger of the Company with a subsidiary of TBC Corporation
("TBC") or with TBC, Messrs. Siipola and Mehlfeldt will resign their positions
with the Company and each receive a lump sum payment of $208,613 and $186,654
respectively, rather than the payments of base salary as provided for under
the Company's Executive Management Severance Policies. In addition, the
Board of Directors agreed that the Company would continue to provide fifteen
(15) months medical and dental insurance benefits, or until such time as
other employment has been secured, and it would repurchase the 66,648 units
under each of the SAR Agreements of Messrs. Siipola and Mehlfeldt for a total
amount of $174,951 each. Although the parties are in agreement as of
April 26, 1996, the Separation Agreements have not yet been finalized.

<PAGE>

(e) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS DURING 1995

During the Company's fiscal year ended December 31, 1995, Frank L. Carney and
C. Thomas Wernholm served as members of the Human Resources Committee (the
"Compensation Committee") of the Company's Board of Directors. Messrs.
Carney and Wernholm are not now, and never have been an officer or employee
of the Company or its subsidiaries. No member of the Compensation Committee
has served as a member of the compensation committee of any other entity or
as a director of another entity, the executive officers of which have served
on the Human Resources Committee of the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following persons are the only persons known to the Company who, on April
19, 1996, owned beneficially more than 5% of the outstanding shares of the
Company's Common Stock:

NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------- -------------------- --------
<S> <C> <C>
Big O Tires, Inc. 496,243(1) 14.96%
Employee Stock Ownership Plan ("ESOP")
11755 East Peakview Avenue
Englewood, Colorado 80111

Balboa Investment Group, L.P., 320,500(2) 9.66%
a California limited partnership and
Mr. Kenneth W. Pavia, Sr., the sole general
partner of this partnership
1101 East Balboa Boulevard
Newport Beach, California 92661-1313

Maurice D. Sabbah, et al. 190,265(3) 5.73%
262 East Moorehead Street
P.O. Box 700
Burlington, North Carolina 27216

</TABLE>

(1) Of the 496,243 shares of Common Stock in the ESOP, all shares of Common
Stock will be allocated to Participants' accounts as of December 31, 1995.
Each Participant has voting power over the shares of Common Stock allocated
to his or her account. The ESOP Administrator shall direct the Trustee
concerning the exercise of any voting rights of the Company Common Stock
which are not passed through to Participants or are not exercised by
Participants, including shares of the Company's Common Stock which are held
in an unallocated ESOP suspense account.

(2) In a Schedule 13D, as amended, the Company was notified that these
persons held these shares of Common Stock. (See also the "Certain
Relationships and Related Transactions".)

(3) In a Schedule 13D dated December 6, 1993, the Company was notified that
these persons held these shares of Common Stock.

<PAGE>

(b) SECURITY OWNERSHIP OF MANAGEMENT

The following table shows, as of April 19, 1996, the shares of the Company's
outstanding Common Stock beneficially owned by each Director of the Company
and the shares of the Company's outstanding Common Stock beneficially owned
by all Executive Officers and Directors of the Company as a group:

NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(9) OF CLASS(9)
- ------------------- -------------------------- -----------
<S> <C> <C>
John B. Adams 55,109(2)(8)(9) 1.65%
Ronald D. Asher 16,520(3)(8) *
Frank L. Carney 1,780(8) *
Steven P. Cloward 122,578(4)(8)(9) 3.64%
Everett H. Johnston 1,452(8) *
Robert K. Lallatin 369(5)
Horst K. Mehlfeldt 4,522(8) *
John E. Siipola 5,193(8) *
Ralph J. Weiger 3,414(8) *
C. Thomas Wernholm 19,589(6) *

All Current Directors and Executive (2)(3)(4)
Officers as a Group (17 persons) 355,320(5)(6)(7)(8)(9) 10.19%

</TABLE>

* Percent of shares of Common Stock beneficially owned by this Director does
not exceed 1% of the Company's outstanding Common Stock.

(1) Unless otherwise indicated, the shares are held directly in the names of
the beneficial owners and each person has sole voting and sole investment
power with respect to the shares.

(2) Includes 1,311 shares of Common Stock owned jointly by Mr. Adams and his
wife, over which shares Mr. Adams may be deemed to have shared voting and
investment power, and includes 18,073 shares of Common Stock that have been
allocated or are expected to be allocated to Mr. Adams in the ESOP, over
which shares Mr. Adams has and will have sole voting power.

(3) Includes beneficial ownership by R & A Asher, Inc., a California
corporation ("R & A"), of 156 shares of Common Stock. Mr. Asher and his wife
each own 50% of the issued and outstanding capital stock of R & A, and Mr.
Asher may be deemed to have shared voting and investment power over the 156
shares. Includes approximately 470 shares owned by a retirement trust in
which Mr. Asher and his wife are co-trustees.

(4) Includes 25,110 shares owned directly by Mr. Cloward's wife, over which
shares Mr. Cloward may be deemed to have shared voting and investment power,
and includes 39,159 shares that have been allocated or are expected to be
allocated to Mr. Cloward in the ESOP, over which shares Mr. Cloward has and
will have sole voting power.

(5) Includes 410 shares owned by B & G Tire, Inc. of which Mr. Lallatin is
the President and 51% owner.

(6) Includes 2,952 shares of Common Stock owned jointly by Mr. Wernholm and
his wife and over which shares Mr. Wernholm may be deemed to have shared
voting and investment power over such shares.

(7) Includes the following shares of Common Stock that have been allocated
or are to be allocated to the following Executive Officers not named above
who participate in the ESOP, over which shares these Executive Officers will
have sole voting power:

<PAGE>

NAME NO. OF SHARES
---- -------------

Dennis J. Fryer 7,628
Allen E. Jones 7,214
Ronald H. Lautzenheiser 11,218
Kelley A. O'Reilly 4,118
Gregory L. Roquet 6,241
Thomas L. Staker 7,085
Philip J. Teigen 6,017
Bruce H. Ware 8,321

(8) Included in the above share figures are shares of Common Stock
underlying presently exercisable options granted under the Big O Tires, Inc.
Director and Employee Stock Option Plan owned by the following Directors and
Executive Officers:

NO. OF SHARES
UNDERLYING PRESENTLY
NAME EXERCISABLE OPTIONS
---- --------------------

John B. Adams 4,922
Ronald D. Asher 15,894
Frank L. Carney 1,780
Steven P. Cloward 12,284
Everett H. Johnston 1,452
Allen E. Jones 906
Horst K. Mehlfeldt 4,522
John E. Siipola 4,193
Philip J. Teigen 833
Bruce H. Ware 302
Ralph J. Weiger 1,767
C. Thomas Wernholm 16,637

(9) Included in the above share figures are shares of restricted Common
Stock granted under the Big O Tires, Inc. Long Term Incentive Plan, over
which shares the following Executive Officers have sole voting power and
includes shares of Common Stock underlying presently exercisable options
granted under the LTI Plan:

NAME NO. OF SHARES NO. OF OPTIONS
---- ------------- --------------

John B. Adams 7,552 23,251
Steven P. Cloward 11,370 34,655
Dennis J. Fryer 1,716 2,496
Allen E. Jones 1,716 7,180
Ronald H. Lautzenheiser 3,495 9,049
Kelley A. O'Reilly 2,065 0
Gregory L. Roquet 1,907 8,230
Thomas L. Staker 4,479 5,035
Philip J. Teigen 1,634 4,961
Bruce H. Ware 1,764 7,899

(10) The beneficial ownership and percentages for each person and the group
have been reported and calculated as if the presently exercisable options
owned by each person or the group referred to in the preceding footnotes had
been exercised.

<PAGE>

With the exception of the potential acquisition of the Company by TBC
Corporation as is discussed on page 3 of Item 1, of this Annual Report on
Form 10-K, the Company does not know of any arrangement, the operation of
which may at a subsequent date, result in a change of control of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

1. Ronald D. Asher, through various corporations, owns various
interests in thirty (30) franchised Big O Tires retail stores.
During the fiscal year ended December 31, 1995, these stores purchased
approximately $5,872,000 in tires and other products from the Company on
the same basis as other franchisees of the Company and paid subrents of
approximately $180,000 to the Company pursuant to certain real estate
subleases for such stores.

In 1991 and 1992, the Company, through a wholly-owned subsidiary,
entered into joint ventures with the C.S.B. Partnership ("C.S.B.") and
the S.A.N.D.S. Partnership ("S.A.N.D.S."), both California partnerships,
for the purpose of opening new and purchasing existing Company
franchised Big O Tires retail stores (the "Retail JVs"). A corporation
owned by a retirement trust in which Mr. Asher and his wife are
co-trustees is a partner in both C.S.B. and S.A.N.D.S.. The Retail JVs
opened one (1) Company franchised Big O Tires retail store in 1991 and
five (5) Company franchised Big O Tires retail stores in 1992 and, also
in 1992, purchased three (3) Company franchised Big O Tires retail
stores from persons not affiliated with the Company; all such stores are
located in Southern California and Arizona. Under the Retail JV
agreements with C.S.B. and S.A.N.D.S., the Company contributed $55,000
of inventories and also provided joint and several agreements for debt
financing and/or leasing for each new Retail JV store. C.S.B. and
S.A.N.D.S. provided working capital of $30,000 and received a $25,000
"equity credit" for opening each new Retail JV store and also provided
joint and several agreements for debt financing and/or leasing for each
new Retail JV store. The Company also agreed to advance on a short-term
basis up to $250,000 in loans to the Retail JV with C.S.B.. Interest on
such advances is the Company's cost of borrowing plus two percent (2%).
In 1993, C.S.B., the Big O/C.S.B. Joint Venture and the Big
O/S.A.N.D.S. Joint Venture each entered into a loan agreement and
promissory note pertaining to receivables due and payable pursuant to
inventory purchases.

In October and November 1994, the Company sold to an investor certain
note receivables from C.S.B. and the Big O/C.S.B. Joint Venture and the
Big O/ S.A.N.D.S. Joint Venture. In connection with the sale of these
and other notes, the Company entered into an Ultimate Net Loss Agreement
with the investor which limits the Company's guarantee for payment of
these Notes to fifty percent (50%) of the aggregate unpaid balance of
the purchased Notes at the end of each year. C.S.B. is negotiating with
this investor or others to restructure the terms of these notes and the
Company has agreed to continue its fifty percent (50%) guarantee under
the restructured terms.

The Company, through its wholly-owned subsidiary, sold to C.S.B. its
interest in the Big O/C.S.B. Joint Venture effective October 1, 1994.
C.S.B. assumed the Company's portion of any liabilities in the joint
venture as represented by the Company's 50% interest in the joint
venture, and as additional consideration, C.S.B. has agreed to pay the
sum of Five Hundred Fifty Thousand Dollars ($550,000) by execution and
delivery of a promissory note to be amortized over a ten (10) year term
with an interest rate charged by the Company's primary commercial lender
(currently The First National Bank of Chicago), plus 2%. Under the
agreement covering this joint venture interest sale, C.S.B. is obligated
to wind-up and dissolve the Big O/C.S.B. Joint Venture.

In 1995, the Big O/S.A.N.D.S. Joint Venture, sold all three of its Big
O Tires retail stores in Arizona. Two of these sales have been
consummated and the third sale will be consummated in the near future.
The partners will then wind-up and dissolve the Big O/S.A.N.D.S. Joint
Venture.

In January 1996, the Company sold to C.S.B. $250,000 in inventory and
received from C.S.B. a $250,000 promissory note to be amortized over a
ten (10) year term with an interest rate charged by the Company's
primary commercial lender (currently The First National Bank of
Chicago), plus 2%. The obligations under this note are

22
<PAGE>

secured by the pledge of 1,880 shares of Big O Tires, Inc. $.10 par value
common stock, the pledge of a $47,000 promissory not and the pledge of a
partnership interest that owns a leasehold interest and the Big O Tires
retail store facilities in Oceanside, California.

In 1996, the Company has obtained the agreement of C.S.B. that C.S.B.
will sell certain of its 16 Big O Tires retail stores. The Company has
agreed to assist C.S.B. in this sales effort.

2. At the Annual Meeting of Shareholders held in June 1994, the
shareholders adopted a resolution calling for the Company to engage an
investment banker to explore all alternatives for enhancing the value of
the Company. In implementing this resolution, the Company's Board of
Directors established the Investment Committee of the Board which
retained PaineWebber Incorporated to fulfill this shareholder proposal.
In September 1994, the proponent of the June 1994 shareholder proposal,
Mr. Kenneth W. Pavia, Sr., the sole general partner of Balboa Investment
Group, L.P., a California limited partnership (the "Balboa Group"), upon
invitation by the Board, entered into a confidentiality agreement with
the Company and began assisting the Investment Committee in this
process, such assistance was continued from time during the year ended
December 31, 1995.

3. On September 22, 1994, Mr. Mehlfeldt entered into a Consulting
Agreement with the Company. Mr. Mehlfeldt was retained by the Company to
serve as a full time representative to assist the Company in fulfilling
the directives of the June 1994 shareholder proposal. Pursuant to the
terms of the Consulting Agreement, as amended, Mr. Mehlfeldt received
$3,750 in 1995 remuneration for his consulting services. On February
15, 1995, the Consulting Agreement was terminated.

4. On December 2, 1994, a group of senior Company managers and
franchised dealers ("Dealer-Management Group") submitted an offer to the
Company to acquire all of the outstanding shares of common stock of the
Company not owned by them for $18.50 per share in a cash merger (the
"Acquisition Proposal") reflecting a total purchase price of
approximately $83 million. The Acquisition Proposal was subject to a
number of conditions, including the Dealer Management Group's ability to
obtain the necessary financing and the Company's agreement to deal
exclusively with the Dealer Management Group for a period of 120 days.
On December 23, 1994, the Company announced that the Investment
Committee had agreed to enter into a period of exclusive negotiations
with, and agreed to pay certain expenses of, the Dealer Management Group
and on January 20, 1995, the Company agreed to extend until February 8,
1995, the period of exclusive negotiations. The Acquisition Proposal,
which would have taken the Company private, was led by the Company's
President, Steven P. Cloward and other officers of the Company and
franchisees acting on behalf of certain of the Company's franchisees.
On February 7, 1995, the Company was notified that the Dealer Management
Group and elected not to continue negotiations to acquire the Company
due to the difficulties in obtaining commitments for the elements of
financing necessary to consummate the acquisition and the resulting
inability of the representatives of the dealers and management to reach
mutual understandings on certain fundamental issues relating to the
acquisition. At that time, the Dealer Management Group expenses the
Investment Committee agreed to pay totaled $203,152. At the time the
Dealer Management Group withdrew the offer to acquire the Company, the
Company was also informed by representatives of management and similarly
by the dealers that they continue to be interested in completing a
purchase of the Company on mutually agreeable terms. The Company
advised the management representatives and similarly the dealers that it
would consider credible proposals but the Board of Directors would
continue to review all alternatives to enhance the value of the Company.
In February 1995, management of the Company was restructured, creating
the Office of the Chief Executive. Members of the Office of the Chief
Executive consist of the Company's Chairman, Vice-Chairman and
President. The Board of Directors permitted the Company's President to
devote a portion of his time to efforts to acquire the Company until
such time as the Board of Directors advised otherwise.

On April 6, 1996, the Company announced that a group substantially
similar to the Dealer-Management Group (the "Acquisition Group") made a
proposal to acquire the outstanding shares of the Company for a cash
price of $16.00 per share (the "Second Acquisition Proposal"). The
Second Acquisition Proposal was subject to a number of conditions,
including the ability to obtain the necessary financing, participation
in the Acquisition Group of not less than 80% of the shares held by the
Company's Employee Stock Ownership Plan ("ESOP"), the ability of the
ESOP to obtain an acceptable fairness opinion, approval by and
participation in the Acquisition Group of not less than 85% of

<PAGE>

the Company franchisees and the negotiation of a definitive merger
agreement. In consideration of the efforts to consummate the Second
Acquisition Proposal, the Acquisition Group requested the Company agree
to advance or reimburse certain expenses incurred by the Acquisition
Group. This Second Acquisition Proposal expired by its terms on April
13, 1995, but the Company announced that it had requested further
negotiations with the Acquisition Group. On April 13, 1995, the
Investment Committee also declined to reimburse the Acquisition Group
for certain expenses incurred by the Acquisition Group in pursuing the
proposal. The following officers of the Company are included in the
Acquisition Group: Steven P. Cloward, John B. Adams, Ronald H.
Lautzenheiser, Dennis Fryer, Allen E. Jones, Kelley A. O'Reilly, Gregory
L. Roquet, Thomas L. Staker, Philip J. Teigen, Bruce H. Ware and Bradley
R. Findlay.

In June 1995, the Company's Board of Directors approved in principle a
proposal to recommend to the Company's shareholders that the
shareholders sell at a price of $16.50 per share to a group consisting
of the same group of the Company's franchised dealers and senior
managers (the "Acquisition Group"). In July 1995, the Company entered
into an Agreement and Plan of Merger ("Merger Agreement") with BOTI
Holdings, Inc. and BOTI Acquisition Corp., (collectively "BOTI"),
companies formed by the Acquisition Group to accomplish the merger. The
Merger Agreement was subject to approval of the Company's stockholders.
Among other conditions, the consummation of the merger was also subject
to the receipt of fairness opinions, the Acquisition Group obtaining
acceptable financing, participation in the acquisition by not less than
80% of the shares held by the Company's ESOP and participation in the
acquisition by not less than 85% of the franchised Big O Tire stores as
of the date of the Merger Agreement, which later was reduced to 82%. In
March 1996, the Acquisition Group provided the Company a review as to
the status of all of these conditions and requested an additional 180
day exclusive period in order to complete the transaction contemplated
by the Merger Agreement. On March 13, 1996, the Company terminated the
Merger Agreement. As of March 31, 1996, the Company reimbursed
approximately $969,000 of the Acquisition Group's expense relating to
the now terminated Merger Agreement. The parties are presently
negotiating reimbursement of additional expenses incurred by the
Acquisition Group as well as the receipt of certain mutual releases and
indemnities of certain members of the Dealer Management Group.

5. In October 1994, a member of the Office of the Chief Executive and
President, Steven P. Cloward, together with a Senior Vice President -
Operations of the Company, Thomas L. Staker, became part owners in a
corporation that owns a franchised Big O Tires retail store. Effective
February 1996, Messrs. Cloward and Staker sold their interest in this
store to a third party. During the fiscal year ended December 31, 1995,
this store purchased approximately $152,000 in tires and other products
from the Company on the same basis as other franchisees of the Company.
Mr. Staker is also a 25% stockholder, Secretary, and Director in a
corporation that has owned a franchised Big O Tires retail store since
August 1982. During the fiscal year ended December 31, 1995, this store
purchased approximately $481,000 in tires and other products from the
Company on the same basis as other franchisees of the Company. In
November 1993, the Company's Executive Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary, John B. Adams, became a
part-owner of a limited liability company that owns a franchised Big O
Tires retail store. During the fiscal year ended December 31, 1995,
this store purchased approximately $443,000 in tires and other products
from the Company on the same basis as other franchisees of the Company.

6. Robert K. Lallatin, who is a director of the Company, is a
part-owner of B & G Tire, Inc., an Idaho corporation, that has owned a
franchised Big O Tires retail store in Idaho since November 1981. B & G
Tire, Inc. acquired its second Idaho franchised Big O Tire retail store
in August 1989. During the fiscal year ended December 31, 1995, these
stores purchased approximately $1,116,000 in tires and other products
from the Company on the same basis as other franchisees of the Company.
Mr. Lallatin is also a part-owner of B & G Jackson Partnership, an Idaho
general partnership that owns a franchised Big O Tires retail store in
Wyoming since February 1992. During the fiscal year ended December 31,
1995, this store purchased approximately $397,000 in tires and other
products from the Company on the same basis as other franchisees of the
Company.

7. In February 1995, management of the Company was restructured,
creating the Office of the Chief Executive. Members of the Office of
the Chief Executive consist of the Company's Chairman, Mr. John E.
Siipola, Vice-Chairman, Mr. Horst K. Mehlfeldt, and President, Mr.
Steven P. Cloward. The Board of Directors permitted the Company's
President to devote a portion of his time to efforts to acquire the
Company until such time as the Board of

<PAGE>

Directors advised otherwise. (See also Paragraph 4 of this section.)
Concurrent with the restructuring of the Company's management, the
Board of Directors approved a grant of stock appreciation rights
("SARs") on behalf of Messrs. Cloward, Mehlfeldt and Siipola. The
Board of Directors believe that SARs provide strong incentives for
its top executive officers for superior longer-term future performance.
The SAR awards will increase or decrease in value based upon the
future price of the Company's Common Stock. Subject to vesting
requirements stipulated in the SAR agreement, each member of
the Office of the Chief Executive received a grant of 100,000
share equivalent units (the "Units") each of which shall represent
an equal, undivided interest in the future appreciation in the
value of a share of the Company's Common Stock. Subject to vesting,
each Unit entitles the recipient to receive, in cash only, the
difference between the Base Value (or $13.875 per share) of a share of
Common Stock and the Market Value of a share of Common Stock on the
Exercise Date. The right to exercise any Units granted will not vest
until August 16, 1995. Thereafter, the recipient's rights to exercise
any Units granted shall vest at a rate of 16,662 Units on August 16,
1995 and at a rate of 2,777 Units on the 16th day of each month
thereafter until January 16, 1998, at which time 2,805 unvested Units
will vest. Such vesting shall occur only if the employee is in the
full-time employ of the Company or any subsidiary of the Company on each
vesting date. At its February 12, 1996 meeting, the Company's Board of
Directors amended the monthly vesting provisions so that in the event of
a participant's termination of employment, the vesting would be
accelerated to include the entire plan year in which such employment
terminated.

8. In April 1996, the Company's Board of Directors agreed that if the
merger of the Company with a subsidiary of TBC Corporation ("TBC") or
with TBC, Messrs. Siipola and Mehlfeldt will resign their positions with
the Company and will each receive a lump sum payment of $208,613 and
$186,654, respectively, rather than the payments of base salary as
provided for under the Company's Executive Management Severance
Policies. In addition, the Board of Directors agreed that the Company
would continue to provide fifteen (15) months medical and dental
insurance benefits, or until such time as other employment has been
secured, and it would repurchase the 66,648 units under each of the SAR
Agreements of Messrs. Siipola and Mehlfeldt for a total amount of
$174,951 each. Although the parties are in agreement, as of April 26,
1996, the Separation Agreements have not yet been finalized.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

Dated: April 29, 1996

BIG O TIRES, INC., a Nevada corporation

By: /S/ JOHN E. SIIPOLA
------------------------------------
John E. Siipola
Member of the Office of the
Chief Executive and Chairman

By: /S/ HORST K. MEHLFELDT
------------------------------------
Horst K. Mehlfeldt
Member of the Office of the
Chief Executive and Vice-Chairman

By: /S/ STEVEN P. CLOWARD
------------------------------------
Steven P. Cloward
Member of the Office of the
Chief Executive and President

By: /S/ JOHN B. ADAMS
------------------------------------
John B. Adams
Principal Accounting Officer

<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

DATE NAME AND TITLE SIGNATURE
- ---- -------------- ---------
April 29, 1996 John E. Siipola JOHN E. SIIPOLA
Director, Member of the Office of the
Chief Executive and Chairman of
the Board

Horst K. Mehlfeldt HORST K. MEHLFELDT
Director, Member of the Office of the
Chief Executive and Vice-Chairman of
the Board

Steven P. Cloward STEVEN P. CLOWARD
Director, Member of the Office of the
Chief Executive and President

John B. Adams JOHN B. ADAMS
Director and Principal
Financial Officer

Ronald D. Asher RONALD D. ASHER
Director

Frank L. Carney FRANK L. CARNEY
Director

Everett H. Johnston EVERETT H. JOHNSTON
Director

Robert K. Lallatin ROBERT K. LALLATIN
Director

Ralph J. Weiger RALPH J. WEIGER
Director

C. Thomas Wernholm C. THOMAS WERNHOLM
Director

April 29, 1996
By: /s/ JOHN B. ADAMS
---------------------------
John B. Adams
Attorney-in-Fact