<PAGE>
CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
JUNE 30, 1994 0-11579
TBC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0600670
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4770 Hickory Hill Road
Memphis, Tennessee 38141
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (901) 363-8030
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by 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
28,010,733 Shares of Common Stock were outstanding as of June 30, 1994.
INDEX TO EXHIBITS at page 12 of this Report<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
<CAPTION>
June 30, December 31,
1994 1993
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Accounts and notes receivable, less
allowance for doubtful accounts
of $8,391 on June 30, 1994
and $7,828 on December 31, 1993:
Related parties $ 20,795 $ 14,207
Other 89,931 83,743
Total accounts and notes receivable 110,726 97,950
Inventories 49,691 43,313
Deferred federal income taxes 3,047 2,166
Other current assets 2,135 1,881
Total current assets 165,599 145,310
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land and improvements 1,545 1,545
Buildings 8,503 8,503
Equipment 17,966 16,370
Furniture and fixtures 1,699 1,606
Leasehold improvements 600 600
30,313 28,624
Less accumulated depreciation 15,059 13,196
Total property, plant and equipment 15,254 15,428
OTHER ASSETS 8,805 6,008
TOTAL ASSETS $189,658 $166,746
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-2-<PAGE>
<TABLE>
<CAPTION>
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, December 31,
1994 1993
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Outstanding checks, net $ 5,063 $ 981
Notes payable to banks 35,210 26,091
Accounts payable, trade 21,902 18,482
Federal and state income taxes payable 255 84
Other current liabilities 6,484 4,558
Total current liabilities 68,914 50,196
NONCURRENT LIABILITIES 312 -
STOCKHOLDERS' EQUITY
Common stock, $.10 par value,
shares issued and outstanding -
28,011 on June 30, 1994 and
28,377 on December 31, 1993 2,801 2,838
Additional paid-in capital 11,088 11,056
Retained earnings 106,543 102,656
Total stockholders' equity 120,432 116,550
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $189,658 $166,746
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-3-<PAGE>
<TABLE>
<CAPTION>
TBC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
NET SALES* $132,925 $154,398 $266,705 $280,063
COSTS AND EXPENSES:
Cost of sales 119,988 140,253 240,951 252,572
Distribution 2,080 2,133 4,059 4,302
Selling and
administrative 5,530 3,413 8,628 6,911
Other (income)
expense - net (485) (212) (948) (501)
Total costs
and expenses
127,113 145,587 252,690 263,284
INCOME BEFORE
INCOME TAXES 5,812 8,811 14,015 16,779
PROVISION FOR
INCOME TAXES 2,209 3,260 5,326 6,208
NET INCOME $ 3,603 $ 5,551 $ 8,689 $ 10,571
Earnings
per share $ .13 $ .19 $ .31 $ .36
Weighted average
number of shares and
equivalents outstanding 28,374 29,157 28,444 29,191
<FN>
* Including sales to related parties of $33,765 and $39,816 in the three
months ended June 30, 1994 and 1993, respectively, and $71,405 and
$74,257 in the six months ended June 30, 1994 and 1993, respectively.
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-4-<PAGE>
<TABLE>
<CAPTION>
TBC CORPORATION
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<CAPTION>
Common Stock Additional
Number of Paid-In Retained
Shares Amount Capital Earnings Total
Six Months Ended
June 30, 1993
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993
29,032 $2,903 $10,593 $ 89,464 $102,960
Net income for period 10,571 10,571
Issuance of common stock
under stock option and
incentive plans
42 4 670 - 674
Repurchase and retirement
of common stock
(507) (50) (196) (6,011) (6,257)
BALANCE, JUNE 30, 1993
28,567 $2,857 $11,067 $ 94,024 $107,948
Six Months Ended
June 30, 1994
BALANCE, JANUARY 1, 1994
28,377 $2,838 $11,056 $102,656 $116,550
Net income for period
8,689 8,689
Issuance of common stock
under stock option and
incentive plans
21 2 144 - 146
Repurchase and retirement
of common stock
(387) (39) (153) (4,802) (4,994)
Tax benefit from exercise
of stock options
- - 41 - 41
BALANCE, JUNE 30, 1994
28,011 $2,801 $11,088 $106,543 $120,432
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months
Ended June 30,
1994 1993
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,689 $ 10,571
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,100 1,955
Amortization 46 32
Deferred federal income taxes (881) 50
Changes in operating assets and liabilities:
Receivables (15,623) (28,182)
Inventories (6,378) (8,794)
Other current assets (254) (24)
Outstanding checks, net 4,082 5,861
Accounts payable, trade 3,420 (1,233)
Federal and state income taxes payable 212 (83)
Other current liabilities 1,926 (104)
Noncurrent liabilities 312 -
Net cash provided by (used in)
operating activities (2,349) (19,951)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,957) (1,508)
Other, net 35 13
Net cash used in investing activities (1,922) (1,495)
FINANCING ACTIVITIES
Net bank borrowings (repayments) under
short-term borrowing arrangements 9,119 25,158
Issuance of common stock under stock option and
incentive plans 146 674
Repurchase and retirement of common stock (4,994) (6,257)
Net cash provided by (used in)
financing activities 4,271 19,575
Decrease in Cash and Cash Equivalents - (1,871)
CASH AND CASH EQUIVALENTS
Balance - Beginning of period - 1,871
Balance - End of period $ - $ -
Supplemental Disclosures of Cash Flow Information:
Cash paid for - Interest $ 462 $ 812
- Income taxes 5,995 6,241
Supplemental Disclosure of Non-Cash Financing
Activity:
Tax benefit from exercise of stock options $ 41 $ -
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-6-<PAGE>
TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statement Presentation
The consolidated balance sheet as of June 30, 1994, the consolidated
statements of income for the three months and six months ended June 30,
1994 and 1993, and the consolidated statements of stockholders' equity
and cash flows for the six months ended June 30, 1994 and 1993, have been
prepared by the Company, without audit. It is Management's opinion that
these statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows as of June 30, 1994 and
for all periods presented. The results for the periods presented are not
necessarily indicative of the results that may be expected for the full
year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's 1993
Annual Report.
2. Earnings Per Share
Earnings per share have been computed by dividing net income by the
weighted average number of common shares and equivalents outstanding.
Common share equivalents included in the computation represent shares
issuable upon assumed exercise of stock options, which would have a
dilutive effect in the respective periods. Fully diluted earnings per
share did not significantly differ from primary earnings per share in the
periods presented.
3. Other Assets
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
Notes receivable $8,305 $5,458
Intangible assets, net of amortization 500 546
Other - 4
$8,805 $6,008
</TABLE>
The notes receivable totals include a note for $4,897,000 from a
former distributor. The maker of the note was discharged in a proceeding
under Chapter 11 of the Bankruptcy Code in 1991. The Company received
distributions totaling $290,000 from the bankruptcy proceeding. The
Company holds written guarantees of the distributor's account, absolute
and continuing in form, signed by the principal former owners and
officers of the distributor and their wives, upon which the Company filed
suit in 1989. The defendants have pleaded various defenses based on,
among other things, in substance, the fact that they sold their interests
in the distributor after they signed the guarantees and the Company
continued to do business with the distributor thereafter. The defendants
have also filed a third party complaint against the Company's former chief
executive officer in which they claim the right to recover against him
for any liability they may have to the Company. The Company believes, on
the basis of applicable Tennessee law, that those defenses are invalid
and that there is no merit to the third party complaint. Trial has been
adjourned until September 12, 1994, by reason of the illness of
defendants' attorney. The Company knows of no reason to believe that the
defendants will be unable to pay any judgment that may be entered against
them in the action.
-7-<PAGE>
TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
4. Supplemental Retirement Benefits
The Company has an unfunded supplemental retirement plan for certain
of its executive officers, to provide benefits in excess of amounts
permitted to be paid by its defined benefit pension plan under current
tax law. In addition, employment agreements with the Company's President
and Chief Executive Officer and its former Chief Executive Officer
include certain supplemental retirement provisions. During the quarter
ended June 30, 1994, the Company determined that the accumulated benefit
obligation under these arrangements, which was previously unaccrued,
should be reflected as a liability in the consolidated balance sheets.
As a result, expenses for the second quarter and first six months of 1994
included a charge of $2,291,000 in conjunction with this accrual. Of that
amount, $1,979,000 was included in other current liabilities and $312,000
was classified as a noncurrent liability at June 30, 1994. At June 30,
1994, the projected benefit obligation was $2,937,000.
-8-<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
The Company's financial position and liquidity remain strong. Working
capital increased from $95.1 million at December 31, 1993, to $96.7 million
at June 30, 1994. Current accounts and notes receivable increased by $12.8
million and inventories increased by $6.4 million due principally to seasonal
fluctuations. Other assets increased $2.8 million due primarily to the
conversion of an amount due from one distributor from an account receivable
to a collateralized note receivable. The composite total owed to banks and
vendors, in the form of outstanding checks, notes payable to banks and
accounts payable, increased by $16.6 million from December 31, 1993 to June
30, 1994. This increase, together with cash generated from operations, was
sufficient to fund the above-noted increases in receivables and inventories,
as well as the repurchase of 387,000 shares of common stock and normally
recurring capital expenditures during the first half of 1994. Other current
liabilites and noncurrent liabilities at June 30, 1994, reflected the accrual
of certain supplemental retirement benefits which were previously unaccrued.
See Note 4 to the consolidated financial statements.
Results of Operations
Net sales decreased 13.9% during the second quarter and 4.8% through the
first six months compared to the year-earlier levels. Sales of tires
accounted for approximately 88% of total sales in both the second quarter and
first six months of 1994, compared to 88% in the second quarter of 1993 and
87% in the first half of 1993. Unit tire volume declined 13.2% in the current
quarter and 1.4% in the first half of 1994, compared with the same periods in
1993. The reduction in unit tire shipments in the current quarter followed an
unusually strong first quarter, as earlier purchases were made by customers in
response to announced industry price increases. The average tire sales price
increased 0.3% in the second quarter but declined 1.6% in the first six
months, compared with the prior year levels. Sales of non-tire products
decreased in the second quarter and first half of 1994, due primarily to
lower unit shipments of batteries.
Cost of sales as a percentage of net sales decreased from 90.8% in the
second quarter of 1993 to 90.3% in the current quarter. Net product costs
from suppliers in the second quarter of 1994 were favorably affected by
greater interest income on early payments to suppliers. This increase
virtually offset a decline in early payment interest which was experienced
during the first quarter of 1994, causing the cost of sales for the first six
months to be relatively unchanged, compared with the same period in 1993.
Distribution expenses decreased 2.5% in the second quarter and 5.6% in
the first half of 1994 compared to the year-earlier levels, due principally
to decreases in labor costs and other operating expenses.
Selling and administrative expenses increased from the levels in the
second quarter and first six months of 1993, due principally to a charge of
$2,291,000 in the second quarter of 1994 for supplemental retirement benefits.
See Note 4 to the consolidated financial statements. Since the accumulated
benefit obligation is now fully accrued, the Company expects future charges
to be substantially less.
Net other income was higher in the second quarter and first six months of
1994 compared to the year-earlier levels, due primarily to decreased interest
expenses associated with lower bank borrowings.
The Company's effective tax rate increased from 37.0% in the second
quarter and first half of 1993 to 38.0% in the same periods in 1994, due to
the higher Federal tax rate associated with the tax legislation enacted after
the second quarter of the prior year.
-9-<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on April 28, 1994,
Messrs. Marvin E. Bruce, Robert E. Carroll, Jr. and Robert H. Dunlap were
elected as directors of the Company for a term expiring at the 1997 Annual
Meeting of Stockholders and stockholders approved the appointment of Coopers
& Lybrand as independent public accountants of the Company for the year
ending December 31, 1994.
The number of shares of Common Stock voted for each director elected at the
Annual Meeting and the number of shares with respect to which authority to
vote for each such director was withheld are as follows: 22,492,632 shares
were voted for Mr. Bruce and authority to vote 140,672 shares for Mr. Bruce
was withheld; 22,493,697 shares were voted for Mr. Carroll and authority to
vote 139,607 shares for Mr. Carroll was withheld; 22,493,847 shares were
voted for Mr. Dunlap and authority to vote 139,457 shares for Mr. Dunlap was
withheld. A total of 22,596,534 shares were voted for approval of the
appointment of Coopers & Lybrand, 15,136 shares were voted against approval,
and the holders of 21,364 shares abstained from voting on such approval.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Index to Exhibits
(b) No reports on Form 8-K were filed during the three months ended
June 30, 1994.
-10-<PAGE>
SIGNATURE
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 thereunto duly authorized.
TBC CORPORATION
July 19, 1994 By /s/ Ronald E. McCollough
Ronald E. McCollough
Senior Vice President Operations
(principal accounting and
financial officer)
-11-<PAGE>
INDEX TO EXHIBITS
Located at
Sequentially-
Exhibit No. Description Numbered Page
(10) MATERIAL CONTRACTS:
Other Material Contracts
10.1 Form of TBC Corporation's standard Distributor
Agreement ....................................... 13
10.2 Agreement, effective January 1, 1994, signed
April 25, 1994, between the Company and Cooper
Tire & Rubber Company ........................... 19
-12-<PAGE>
TBC CORPORATlON
Distributor Agreement
AGREEMENT effective the date last set forth herein between TBC Corporation, a
Delaware corporation (hereinafter called "TBC"), P. O. Box 18342, Memphis,
Tennessee, and the distributor (hereinafter called "Distributor") whose name
and address are set forth at the end of this Agreement.
TBC is engaged in the business of having manufactured, purchasing, and selling
tires, tubes, batteries and other automotive products for all types of
vehicles. TBC sells such products to distributors for resale. Distributor is
engaged in business in, among other things, the purchase and resale of such
products. TBC and Distributor desire that Distributor purchase Products (as
defined in this Agreement) from TBC for resale, upon the terms and conditions
set forth in this Agreement.
TBC and Distributor agree as follows:
1. As used in this Agreement, the following terms have the following
respective meanings:
(a) "Products" means tires, tubes, batteries, and other automotive products
which TBC may from time to time in its sole discretion offer for sale
to Distributor.
(b) "Assigned Products" means Products bearing the TBC trademarks or brand
names set forth in Schedule A, but does not mean or include any other
Products; in particular, it does not mean or include similar or other-
wise identical Products that do not bear any of the TBC trademarks or
brand names that are set forth in said Schedule.
(c) "Territory" means the area described in Schedule B on the last page of
this Agreement.
(d) "Supplier" means any manufacturer for, or supplier to, TBC of tires,
tubes, batteries, or other automotive products.
(e) "Financial Institution" means any bank or other financial institution
with which TBC has entered into or is considering entering into a credit
or financial arrangement.
(f) "TBC's Manual" means the manual compiled and published by TBC under the
title "TBC Corporation Customer Procedure Manual," a copy of which has
been furnished by TBC to Distributor, including any amendments thereto,
or any like manual hereafter furnished by TBC to Distributor.
(g) "Distributor's sales quota" means the minimum number of units of
Products, as determined by TBC and communicated to Distributor, which
Distributor shall be required to buy from TBC for any period stated by
TBC in that connection.
(h) "Annual Fee" means $2500 per year or such other amount as may be
determined by TBC's Board of Directors.
(i) "Calendar Quarter" means each three month period commencing on
January 1, April 1, July 1, and September 1, in each year.
2. TBC hereby appoints Distributor and Distributor hereby accepts appointment
as a distributor of Products in the Territory. It is understood that each of
the parties is responsible for the operation and success of its own business.
3. Distributor shall:
(a) Actively promote the sale of Products throughout the Territory, and take
delivery of, purchase and pay for all Products ordered from TBC at the
applicable prices and under the applicable terms of payment.
(b) Provide a place or places of business and all necessary facilities in
the Territory to perform and discharge Distributor's functions and
obligations under this Agreement and keep the same in good, clean and
satisfactory condition for the conduct of Distributor's business.
<PAGE>
(c) Purchase from TBC and at all times maintain in stock an inventory
of Products in such variety and amount as, in TBC's opinion, is
needed to meet Product sales requirements in the Territory.
(d) Meet or exceed Distributor's sales quota.
(e) Comply with TBC's Manual.
(f) Supply all users of Products purchased from Distributor with a copy of
TBC's applicable warranty with respect thereto.
(g) Furnish TBC (and, at TBC's request, any Financial Institution) complete
and accurate current financial reports, operating statements, and other
reports relating to Distributor's business, at such intervals, in such
forms, and containing such information as TBC may reasonably request.
(h) Pay TBC the Annual Fee each year, in equal quarterly installments (pro
rata in the case of a period less than a Calendar Quarter) on the
effective date of this Agreement and the first day of each Calendar
Quarter thereafter.
(i) Not establish or acquire any places of business for the sale of Products
outside the Territory.
(j) Refrain from using the name "TBC Corporation" or any name, trademark,
trade name, brand name, logo, slogan, label or insignia now or hereafter
owned, adopted or used by TBC (whether registered or unregistered) on or
in connection with any place of business or other facility which is
located outside the Territory, or so as to suggest or indicate that
Distributor has any place of business or other facility located outside
the Territory that is used for the sale of Products, or in or as part of
the trade, corporate, or firm name or style of Distributor or of any
division, subsidiary or affiliate of Distributor or so as to identify
Distributor as the source or origin of Products or as affiliated in any
way, other than as a distributor, with TBC.
(k) Handle all legitimate adjustments of Products in accordance with any
applicable warranty, regardless of where the Products were purchased.
(I) Properly complete and promptly return to TBC all required Product
registration forms.
(m) Execute and deliver to TBC such security agreement(s) and forms required
to be filed under the Uniform Commercial Code (as the same shall be in
effect in the Territory) or like statute as TBC may request in order to
perfect and protect TBC's security interest in Products owned by
Distributor or in its possession, custody, or control.
(n) Not without the prior knowledge and consent of TBC grant to or permit
any third party to have any security interest in its inventory of
Products or file or permit to be filed any Form UCC-1 or like form in
that connection.
4. TBC shall:
(a) Not appoint any other distributor for Assigned Products in the
Territory, except to the extent otherwise set forth in Schedule A or
unless in TBC's opinion Distributor is not giving or is unable to give
adequate coverage for Assigned Products in the Territory or adequate
penetration of the market for tires, tubes, batteries and other
automotive products therein. TBC does not undertake to prevent others
from selling Assigned Products in the Territory. TBC may sell Products
that are similar or identical to Assigned Products which do not bear
any of the TBC trademarks or brand names set forth in Schedule A to
third parties for resale in the Territory.
(b) Publish current price lists for Products.
(c) Notify Distributor of changes in or additions to TBC's Manual.
(d) Comply with TBC's Manual.
(e) Supply Distributor (at TBC's regular charges therefore) copies of
TBC's warranty and registration forms applicable to Products.
<PAGE>
5. TBC reserves the right to change at any time the lines, grades,
specifications, or other characteristics of Products, or add to or
discontinue the same, or to change Suppliers, without prior notice to
Distributor.
6. TBC reserves the right to change at any time previously announced prices
or payment terms for Products without prior notice to Distributor. Prices
and terms on all sales to Distributor shall be those in effect at the time
of shipment.
7. If Distributor shall fail to pay any indebtedness to TBC promptly when due
or if Distributor's financial condition shall at any time seem to TBC
inadequate to warrant a particular or further extension of credit, TBC
may, if it so elects, with or without demand for any payments past due and
without prejudice to any other rights or remedies available to it,
withhold further shipments until all Distributor's indebtedness to TBC
shall have been fully paid.
8. All orders placed by Distributor shall be subject to and governed by TBC's
Manual.
9. In the event of termination of this Agreement, TBC will continue to honor
valid warranty claims presented by Distributor, pursuant to TBC's Manual,
until a date ninety days after the date of termination. Thereafter
Distributor will direct customers with warranty claims to other
distributors of TBC.
10. The relationship of Distributor with and to TBC under or in connection
with this Agreement is that of an independent contractor. Distributor is
in no respect the agent or legal representative of TBC hereunder, or
otherwise, and is without right or authority to create or assume in any
manner any obligation of any kind on behalf of TBC. Distributor assumes
responsibility for and will hold TBC harmless from and against all
liabilities, claims, demands, actions or causes of action of any kind
(including, but not limited to, those resulting from the negligent or
willful acts or omissions of Distributor or its agents, employees or
subcontractors) asserted against either TBC or Distributor which are, or
are alleged to be, occasioned by any act or failure to act by Distributor
or which arise in connection with the performance or nonperformance of any
obligation on Distributor's part contained in this Agreement or TBC's
Manual or required by law.
11. TBC's obligation to fill any order accepted by it shall be subject to
failure or delay caused by fire, accidents, acts of God or elements, war
or acts of war, strikes, lockouts, slowdown, picketing or other labor
controversies, sabotage, riots, civil commotion, default or failure of
carriers, shortages of labor, inability to obtain materials or parts from
regular sources, action or request of any government or governmental
authority, or any other happening or contingency beyond the control or
without the fault of TBC whether similar or dissimilar to the foregoing.
12. Unless previously extended or sooner terminated as hereinafter provided,
the term of this Agreement shall end, without notice or other action by
either party, on a date three years after the date last set forth below.
13. This Agreement may be terminated as follows:
(a) By Distributor at any time, with or without cause, by giving written
notice of such termination to TBC specifying the effective date
thereof, which date shall be not less than 90 days after the giving
of such notice.
(b) By TBC by giving written notice of such termination to Distributor,
effective immediately upon the giving of such notice to Distributor or
at such later date as TBC may specify in such notice, in the event of
the occurrence of any of the following which TBC shall deem
detrimental to its interest:
(1) the death or incapacity of Distributor if a natural person, or if
a partnership the death, incapacity or withdrawal of any partner.
(2) any substantial change in the ownership, control or management of
Distributor; or the transfer of a substantial part of the assets
or property of Distributor.
<PAGE>
(3) any dispute, disagreement or controversy between or among
principals, partners, officers, or stockholders of Distributor
which, in the unrestricted judgment of TBC, may adversely affect
the operation, management, or business of Distributor.
(4) failure of Distributor to pay any indebtedness to TBC when due
accompanied by failure, within 14 days after written demand there-
fore, fully to pay the same or provide assurance of payment
satisfactory to TBC; or such evidence of financial difficulty on
Distributor's part as to give rise to a reasonable apprehension on
the part of TBC that Distributor may be unable to pay any
obligations to TBC when due.
(5) failure by Distributor to pay any indebtedness to TBC when due or
to comply within 14 days with any request by TBC referred to in
Paragraph 3(g), (1), and (m); or failure by Distributor to cure
any other default on its part under this Agreement within 28 days
after being notified thereof by TBC.
(6) repetition by Distributor of a failure the same or substantially
the same as one previously corrected by Distributor after having
been notified thereof as provided in subparagraphs (4) or (5)
above.
(7) the material inaccuracy of any information set forth in any
financial statement, claim, report or other document heretofore or
hereafter furnished by Distributor to TBC or to any Financial
Institution.
(8) the levy of an attachment or other distraint against Distributor
or any property of the Distributor which is not released within 10
days.
(9) the affiliation by Distributor as a distributor for, or member or
stockholder of, any corporation, firm, organization or group other
than TBC engaged in whole or inpart in the distribution of private
brand tires, tubes, batteries, and/or other automotive products
involving the purchase and resale thereof by Distributor.
14. This Agreement shall terminate forthwith, without the giving of notice or
any other action on the part of TBC, if Distributor ceases to function as
a going concern, or makes an assignment for the benefit of creditors, or
any proceeding under any federal or state bankruptcy, receivership or
insolvency laws is instituted by or against Distributor, or the
liquidation, dissolution, merger, or consolidation of Distributor occurs,
or a receiver or trustee for Distributor or any of the assets or property
of Distributor is appointed or applied for.
15. The following provisions shall govern the rights, duties and obligations of
the parties upon termination of this Agreement however occurring:
(a) Termination shall not release or affect, and this Agreement shall
remain fully operative as to, any obligations or liabilities incurred
by Distributor prior to the effective date of such termination;
provided that all indebtedness of Distributor to TBC of any kind shall
become immediately due and payable on the effective date of
termination, and TBC may deduct from any sums it owes to Distributor
any sums owed by Distributor to TBC.
(b) After the effective date of termination Distributor shall discontinue
the use in any manner of any name, trademark, trade name, slogan,
label, title or insignia, or anything else which so nearly resembles
any of the same owned, adopted or used by TBC as to be likely to lead
to confusion or uncertainty and/or make it appear that Distributor is
a distributor of TBC or of Products.
16. Neither TBC nor Distributor shall, by reason of the termination of this
Agreement, be liable to the other for any damage of any kind whether
direct or indirect or consequential.
<PAGE>
17. Any notice or demand required or permitted under the terms of this
Agreement shall be sufficiently given to either party if sent by certified
or registered United States mail to such party at its address appearing in
this Agreement, or at such other address as such party may have designated
for such purpose by notice previously so given to the other party. Any
such notice or demand given by any other means (including other delivery
systems and facsimile transmission) shall be sufficiently given upon
receipt.
18. The failure of either party to insist in any one or more instances upon
performance of any of the provisions of this Agreement or to take
advantage of any of its rights hereunder shall not be construed as a
waiver of any such provisions or the relinquishment of any such rights,
and the same shall continue and remain in full force and effect. No single
or partial exercise by either party of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or
remedy.
19. None of Distributor's rights hereunder may be transferred or assigned by
Distributor and none of the obligations or duties imposed on Distributor
hereunder may be delegated to another or others without the consent in
writing of TBC signed by an officer of TBC.
20. This Agreement contains the entire agreement between the parties relating
to the distribution by Distributor of Products, and cannotbe amended,
varied or abridged in any manner except by amendment in writing duly
signed by the parties (and, in the case of TBC, by an officer of TBC).
This Agreement supersedes any existing arrangements between the parties
relating to the subject matter hereof.
21. This Agreement shall be construed according to and the legal relations
between the parties governed by the laws of the state of Tennessee,
excluding those relating to conflict of laws. Any action or proceeding
by either of the parties against the other arising out of or relating to
this Agreement; the making, performance, nonperformance, or termination
thereof; or any transaction between the parties or obligation of either
party or both parties in that connection, may (and, in the case of any
such action or proceeding against TBC, may only)be brought in any court
located in the City of Memphis, Shelby County, Tennessee, and service
therein may be made upon any nonresident party at its address set forth
in this Agreement in accordance with the procedures provided for service
upon nonresidents under the laws of Tennessee.
<PAGE>
SCHEDULE A: Assigned Products and Brands
SCHEDULE B: Territory
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate as
of _____________, 19__. TBC CORPORATION
Witness:
By
President
Name and Address of Distributor*:
Witness:
By
Name and Title
*State if corporation, partnership, or proprietorship:
if corporation, where it is incorporated:
<PAGE>
TBC
CORPORATION
Distributor Agreement
TBC CORPORATION
4770 HICKORY HILL ROAD
P.O. BOX 18342 MEMPHIS, TENNESSEE 38181-0342
<PAGE>
AGREEMENT
THIS AGREEMENT made at Findlay, Ohio and effective as of January 1, 1994,
by and between TBC CORPORATION, a Delaware corporation, with its principal
offices located at 4770 Hickory Hill, Memphis, Tennessee 38141 (hereinafter
called "TBC") and COOPER TIRE & RUBBER COMPANY, a Delaware corporation, with
its principal offices located at Lima & Western Avenues, Findlay, Ohio 45840
(hereinafter called "COOPER").
WITNESSETH:
In consideration of the mutual promises and covenants hereinafter set
forth, the parties agree as follows:
1. QUANTITY
COOPER agrees to manufacture and sell, upon the terms and subject to the
conditions hereof, and to make shipments as provided hereinafter, and TBC
agrees to purchase passenger, light truck and medium truck tires bearing brand
names owned and/or controlled by TBC and generic brands as offered by COOPER
(individually "Passenger Tire(s)", "Light Truck Tire(s)" or "Medium Truck
Tire(s)", as the case may be, and collectively "Tire(s)") and inner tubes
("Tubes"), in such sizes, types and quantities as agreed to by the parties.
2. MOLDS
TBC will furnish all molds, plates and rings required for the production
of Tires, unless otherwise agreed to in writing. Cooper will furnish all
mold equipment required to produce Tubes.
TBC shall be responsible for all costs involved in mold preparation or
modification, in those molds owned by TBC, necessary to comply with government
laws, rules, standards and regulations.
COOPER shall keep all molds, rings and plates in good operating condition,
normal wear and tear excepted. COOPER shall be responsible only for its
negligence in the use and handling of said molds, rings and plates. COOPER
shall insure all molds, rings and plates against loss by fire, lightning and
perils covered by extended coverage insurance and endorsements.
3. FORECASTS, PRODUCTION ORDERS, PRODUCTION AND SHIPMENT REPORTS
Any required Tire forecasts, production orders, production and shipment
reports shall be in accordance with the provisions of an operating procedure
as agreed upon between the parties from time to time.
The following operating procedures will be followed unless otherwise
agreed to in writing:
TBC and COOPER shall agree no later than the 1st day of September of each
year during the life of this Agreement what TBC's estimated production
requirements forecast will be, by size and type, for the subsequent year.
In addition to the above annual estimated production requirements
forecast, TBC will provide COOPER with a ninety (90) day production
requirements forecast by size and type, acceptable to COOPER, updated
monthly, by the 12th day of each month.
It is agreed TBC will purchase all winter Passenger Tires for which TBC
requests production and further all said Tires will be purchased prior to
December 15 of each calendar year. Should any of said Tires remain in COOPER's
inventory for which there are no instructions for shipment prior to
December 31, TBC agrees to accept transfer of title and related invoices
during December and to pay such invoices when due.
4. PRICE
COOPER's billing prices to TBC for Tires and Tubes sold and purchased
hereunder will be established by COOPER prior to the beginning of each
calendar quarter during the life of this Agreement and will be firm for that
quarter. COOPER will notify TBC of any changes in billing prices thirty (30)
days prior to the start of such quarter. Exhibit A is a listing of billing
prices in effect on January 1, 1994.
<PAGE>
From time to time, it may be in the best interests of both parties to
forgo a price revision at the start of a calendar quarter. In such an event,
COOPER reserves the right to revise prices once, at any time during said
quarter, upon thirty (30) days prior written notice to TBC.
Notwithstanding the above, COOPER's billing prices to TBC for winter
Passenger Tires sold and purchased hereunder will be established by COOPER and
will be firm for the period of May 15 - December 15 of each calendar year
during the life of this Agreement; provided, however, during any other period
of the Agreement, COOPER may change the billing prices to TBC.
5. PAYMENT TERMS
TBC agrees to pay COOPER the net billing price for all Tires and Tubes
purchased hereunder within sixty (60) days of the date of invoice. Anti-
cipation discounts will be allowed on advanced payments computed using (i) a
variable daily rate based on the prime interest rate as quoted in The Wall
Street Journal plus one and one-half percent (1.5%), (ii) the amount prepaid,
and (iii) the number of days paid in advance as determined by date of receipt
of funds by COOPER.
6. FREIGHT
All shipments are F.O.B. COOPER's factory warehouses, freight collect.
All shipments will be in full truckloads and full pallet quantities.
7. SPECIFICATIONS
All specifications used by COOPER in Tires and Tubes shall be the same or
equivalent to the specifications used by COOPER in the manufacture of the same
sizes and types of tires and inner tubes bearing COOPER-owned or controlled
trademarks, unless otherwise agreed in writing between the parties hereto.
COOPER agrees it will notify TBC in writing of the following:
(a) Any change in any specification for Tires and/or Tubes furnished
hereunder which will be, in the sole opinion of COOPER, a
significant specification change; and,
(b) Any change in any specification for Tires and/or Tubes furnished
hereunder which will, in the sole opinion of COOPER, significantly
affect the cost or performance of any of the Tires and/or Tubes
being furnished hereunder.
8. BLEMISHED TIRES
TBC will purchase from COOPER those Blemished Tires which are raised
letter Blemished Tires, and TBC shall have the right and option to purchase
any other Blemished Tires resulting from the manufacture of Tires for TBC
pursuant to this Agreement. Such Blemished Tires shall meet COOPER's
established blemished specifications approved by TBC which approval shall not
be unreasonably withheld. The price for such Blemished Tires shall be
discounted twenty-five percent (25%).
TBC shall not be obligated to purchase (i) nonuniform Tires, (ii)
tubeless Tires when downgraded from tubeless to tube-type, or (iii) Blemished
Tires for which the blemished specifications are not approved by TBC, as
provided above. TBC-owned or controlled brand names or identification,
excepting the Department of Transportation Identification Number, shall be
removed from such downgraded Tires prior to being sold or disposed of by
COOPER.
Notwithstanding the above, in the event TBC should refuse to purchase any
raised letter Blemished Tires for which TBC has approved the Blemished
specifications, COOPER shall have the right to sell such Blemished Tires
without removing the raised letters, provided all other TBC trademarks or
other identification, except the Department of Transportation Identification
Number, are removed from such raised letter Blemished Tires.
<PAGE>
9. ADJUSTMENTS
EXCEPT AS SET FORTH HEREIN, COOPER MAKES NO OTHER WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL COOPER BE LIABLE TO TBC
ON A CLAIM OF ANY KIND FOR SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES,
INCLUDING WITHOUT LIMITATIONS, LOSS OF ANTICIPATED PROFITS, OR DAMAGE TO
BUSINESS REPUTATION.
(a) Definitions
(i) Adjustable Tires
Adjustable Tires shall mean those Tires which have been placed
in service and are adjustable in accordance with COOPER's
standard practice for adjusting tires.
(ii) New Adjustable Tires
New Adjustable Tires shall mean any COOPER-manufactured and/or
sold Tire (excepting all steel Light Truck and Medium Radial
Truck Tires) with two-thirty-seconds inch (2/32nds") or less
tread wear and is adjustable in accordance with COOPER's
standard practice for adjusting tires. With respect to all
steel Light Truck and Medium Radial Truck Tires, a New
Adjustable Tire shall mean any COOPER-manufactured and/or sold
all steel Light Truck and Medium Radial Truck Tire with one-
thirty seconds (1/32nds") or less tread wear and is adjustable
in accordance with COOPER's standard practice for adjusting
tires.
(iii) Adjustable Tubes
Adjustable Tubes shall mean those Tubes which are adjustable in
accordance with COOPER's standard practice for adjusting inner
tubes.
(b) Adjustment Practice
TBC will adjust, initially at its expense, all Tires and Tubes sold
hereunder.
(c) Adjustment Verification
TBC's customers shall return all Adjustable Tires and Tubes to
locations specified by COOPER to be examined by COOPER's adjustor.
Any shipment of Adjustable Tires by a TBC customer to COOPER in
quantities weighing less than one thousand (1,000) pounds shall be
freight prepaid. TBC will advise its customers to make all such
shipments freight prepaid. The freight expense for any shipment of less
than one thousand (1,000) pounds, if sent freight collect will be charged
to TBC. All shipments of Adjustable Tires in quantities weighing one
thousand (1,000) pounds or more may be shipped freight collect, and the
freight expense for such shipments will be borne and paid for by COOPER.
Freight on shipments of Adjustable Tubes will be determined as
follows: If the Adjustable Tubes are included in a shipment of
Adjustable Tires, the provisions of the prior paragraph will apply. If
the shipment consists entirely of Adjustable Tubes, it will be accepted
freight collect but the customer will be charged back for freight costs
as follows:
Weight of Adjustable Tube Shipment Freight Chargeback
1,000 pounds or more None
500 to 1,000 pounds 50%
200 to 499 pounds 75%
under 200 pounds 100%
<PAGE>
After verification by COOPER of the adjustable condition, TBC shall
be reimbursed in accordance with Subsection (d) below.
Adjustable Tires and/or Adjustable Tubes shall become COOPER's
property, after verification of the adjustable condition, for
reclassification and disposition.
Such Adjustable Tires shall be reclassified by COOPER as either
being scrap tires or used tires. Upon such reclassification COOPER
shall:
(i) Render those Adjustable Tires or Tubes reclassified to scrap
tires or tubes unusable prior to disposition; and
(ii) Brand those Adjustable Tires reclassified to "used tire
nonadjustable" prior to resale.
(iii) Allow to TBC a salable value, determined by COOPER, for those
tires reclassified to "used tire nonadjustable".
New Adjustable Tires shall be returned by TBC's customers to COOPER
freight collect to a location specified by COOPER.
New Adjustable Tires shall become COOPER's property after verification of
the adjustable condition. If such New Adjustable Tires are resold by COOPER
to someone other than TBC, COOPER shall remove all TBC identification from
such New Adjustable Tires except any brand name owner designation in the
Department of Transportation's identification number.
(d) Reimbursement
(i) Adjustable Tires
For each annual production period (calendar year), COOPER
agrees to reimburse TBC for Adjustable Tires manufactured and
sold by COOPER to TBC and which are submitted to COOPER for
verification of the adjustable condition within twenty-four
(24) months from the end of the calendar year of manufacture
as follows:
Large Bias and Radial Truck Tires (20" and larger) - any
adjusted over and above a four percent (4%) cumulative
unit adjustment level for all such Large Truck Tires.
All Passenger Car and Light Truck Tires (Highway and
Snow) - any adjusted over and above a two percent (2%)
cumulative unit adjustment level for all such Passenger
Car and Light Truck Tires.
COOPER's reimbursement to TBC for a Tire adjusted over and
above the cumulative unit adjustment level will be based upon
the annual average price (excluding any applicable Federal
Excise Tax) to TBC for such Tire during the production year in
which the Tire was produced times the percentage of treadwear
(nonskid) remaining.
Tires are considered one hundred percent (100%) worn when the
tread depth remaining is two-thirty-seconds inch (2/32") or
less and no reimbursement shall be made for such Tires.
COOPER shall provide TBC on a quarterly basis the results of
COOPER's adjustment verification in a form mutually agreeable
to both parties.
(ii) New Adjustable Tires
COOPER agrees to reimburse TBC, after verification by COOPER of
the adjustable condition, in full for all New Adjustable Tires
returned to locations designated by COOPER, freight collect;
provided, however, any applicable Federal Excise Tax will be
refunded only on New Adjustable Tires which have vent marks on
the face of the tread.
<PAGE>
(iii) Adjustable Tubes
Cooper agrees to reimburse TBC, after verification by Cooper of
the adjustable condition, in full for all Adjustable Tubes
returned to locations designated by Cooper.
(e) Road Hazards
It is expressly understood COOPER at no time shall have any
obligation for Road Hazard adjustments, or for any of those conditions or
circumstances which have historically been considered as a basis for Road
Hazard adjustments.
(f) Adjustments After Termination
In the event this Agreement is terminated for any reason, then
COOPER shall thenceforth continue its above described and limited
responsibility for adjustments of Adjustable Tires, New Adjustable Tires
and Adjustable Tubes, but only for a period of thirty (30) months from
and after the effective date of termination of this Agreement.
Notwithstanding any other term or condition contained herein, after said
thirty (30) month period, COOPER shall have no further liability or
responsibility for any adjustment expenses or costs of any kind or nature
whatsoever other than product liability as set forth in Paragraph 12.
"Product Liability."
(g) No Admission
It is expressly understood and agreed any reimbursement by COOPER,
pursuant to the foregoing, shall not in any way be determined or
construed as an admission or indication on the part of COOPER, or any
other party, that said Tire or Tube is, in fact, either defective in
workmanship and/or material, of poor or unmerchantable quality, or in
any way unfit for the use for which it was intended.
10. UNIFORM TIRE QUALITY GRADING, CONSUMER TIRE REGISTRATION AND DEFECT
AND NONCOMPLIANCE REPORTS
COOPER will perform Uniform Tire Quality Grading tests for Passenger
Tires and provide TBC the results thereof in order to mutually determine and
assign Uniform Tire Quality Grades for each size and type of Passenger Tire.
TBC recognizes and agrees to perform its responsibilities under 49 CFR 575.6
including, but not limited to, submission of grading information to the
National Highway Traffic Safety Administration and the distribution of grading
information to consumers.
Consumer tire registration procedures will be handled by TBC and, in the
event of a recall pursuant to Section 11., COOPER agrees to assume and perform
any and all responsibilities of TBC under 49 CFR 573 ("Defect and Non-
compliance Reports"), provided TBC shall:
(a) maintain lists of purchasers;
(b) jointly report with COOPER defects per agreement, pursuant to
Subsection 11.1(b), to the National Highway Traffic Safety
Administration;
(c) jointly report with COOPER nonconformities per agreement, pursuant
to Subsection 11.1(b), to motor vehicle safety standards to the
National Highway Traffic Safety Administration;
(d) provide COOPER with quarterly reports on defect and noncompliance
notification campaigns for filing with the National Highway Traffic
Safety Administration; and
(e) provide COOPER with copies of communications with distributors,
dealers and purchasers regarding defects and noncompliance for
filing with the National Highway Traffic Safety Administration.
<PAGE>
TBC agrees to assume and perform any and all responsibilities of TBC and
COOPER under 49 CFR 577 ("Defect and Noncompliance Notification"), including,
but not limited to, notifying purchasers and owners of defective and
noncomplying Tires provided, however, COOPER shall provide to TBC a proposed
form of the notice to be given and the parties shall agree as to the final
form of such notice.
11. RECALL
11.1 Without affecting any other provision herein, COOPER agrees, in
accordance with Subsection 11.2, to replace for TBC, or reimburse TBC, for all
new and used Tires, including Blemished Tires, which COOPER has manufactured
and supplied to TBC under this Agreement which are:
(a) recalled, either in accordance with:
(i) an order of the Department of Transportation or the National
Highway Traffic Safety Administration validly issued under the
provisions of the National Traffic and Motor Vehicle Safety Act
of 1966, as amended; or
(ii) any state law; or
(b) recalled per agreement between the parties hereto which are defective
in a way relating to motor vehicle safety or which fail to conform
with the National Traffic and Motor Vehicle Safety Act of 1966, as
amended, which agreement shall not be unreasonably withheld by either
party.
11.2 In the event of a recall, as set forth above, for those recalled
Tires returned to COOPER by TBC, COOPER, at its option, shall either:
(a) replace the recalled Tires freight prepaid with identical or
reasonably equivalent tires; or
(b) pay TBC the total replacement price including freight for the Tires,
plus any transportation expense necessary to return the recalled
Tires from TBC locations to COOPER-designated locations.
11.3 In the event of a recall referred to in Subsection 11.1, COOPER
shall, in the case of Tires which have been placed in service by consumers
and returned as a result of the recall, pay six dollars ($6.00) per Tire
replaced to cover mounting and balancing expense.
11.4 This Section 11. of this Agreement shall continue in effect
following the termination of this Agreement so long as Tires made under this
Agreement are subject to the recall provisions of any applicable state or
Federal law.
12. PRODUCT LIABILITY
COOPER agrees to hold harmless and indemnify TBC and undertake TBC's
defense from and against all claims, demands, losses, expenses, damages,
recoveries and settlements approved by COOPER or judgments (including
attorneys' fees) for death, personal injury or property damage arising or
alleged to have arisen from or attributable to any defect in workmanship
and/or material or COOPER design of any Tires or Tubes supplied by COOPER
to TBC.
TBC agrees to hold harmless and indemnify COOPER and undertake COOPER's
defense from and against all claims, demands, losses, expenses, damages,
recoveries and settlements approved by TBC, or judgments (including attorneys'
fees) for death, personal injury or property damage arising, or alleged to
have arisen from, or attributable to:
(a) the negligence of TBC or any of its agents, servants or employees in
connection with any Tires or Tubes supplied by COOPER to TBC;
(b) any failure to provide appropriate and adequate user instructions,
installation instructions, labeling (excluding any labeling required
to be placed on Tires by statute and/or regulation of the United
States or any state therein) or warning copy;
<PAGE>
(c) any advertising, promotional materials or other items or matters
related to the distribution and marketing of any Tires or Tubes
supplied by COOPER to TBC; and
(d) any unique design or specification by, or provided by, TBC.
If either TBC or COOPER proposes to claim indemnity or reimbursement,
under the terms of this Agreement, from the other, it shall:
(a) give the other party reasonably prompt notice of the pendency of any
such claim or case after it learns of such claim or case;
(b) make known to the other party any material fact concerning such
claim or action; and
(c) give its complete cooperation to the other party, including the
cooperation of its officers, agents and employees.
The party from whom indemnification is claimed under the terms of this
Agreement shall have the right to control the defense of such claim or case,
and it shall have the further right to settle or compromise such claim or case
as it deems advisable.
This Section 12. shall survive the termination of this Agreement.
13. CONTINGENCIES
Neither party to this Agreement shall be held liable or deemed to be in
default if prevented from performing the obligations of this Agreement by
reason of fire, flood, acts of God, war, riots, labor disturbances, strikes,
slowdowns, lockouts, sabotage, embargoes, failure of transportation, inability
to obtain raw material or supplies or equipment, government laws or
requirements or regulations, or any cause or circumstances beyond its
reasonable control. In the event of limited production due to any of the
causes listed above, COOPER agrees to furnish Tires or Tubes to TBC on a pro
rata basis of remaining available capacity for similar sizes and types of
Tires or Tubes as the case may be.
14. PATENTS AND TRADEMARKS
COOPER shall indemnify TBC from all expense resulting from any actual or
alleged infringement of any U.S. Letters Patent by reason of COOPER's use of
methods, processes of manufacturing materials, machinery or equipment in
connection with the Tires and Tubes furnished to TBC under this Agreement;
provided TBC shall promptly notify COOPER in writing of any claim or lawsuit
against TBC, transmit to COOPER all documents and information TBC has on the
claim or lawsuit, cooperate fully in COOPER's defense of such claim or
lawsuit, and allow COOPER full authority to settle or otherwise dispose of
same.
TBC shall indemnify COOPER from all expense resulting from actual or
alleged infringement of any U.S. copyright or trademark right of TBC or of a
third party because of COOPER's use of any such trade name, trademark or
information furnished by TBC for the Tires and Tubes, provided COOPER shall
promptly notify TBC in writing of any claim or lawsuit, transmit to TBC all
documents and information COOPER has on the claim or lawsuit, cooperate fully
in TBC's defense of such claim or lawsuit, and allow TBC full authority to
settle or otherwise dispose of same.
15. CONFIDENTIALITY
In connection with COOPER's manufacturing and supplying Tires and Tubes
to TBC hereunder, COOPER has and, from time to time, will be furnishing TBC,
verbally and in writing, certain confidential and proprietary information for
a multiple range of sizes, constructions, designs and applications of Tires
and Tubes and other nonpublic, confidential and/or proprietary COOPER
information ("COOPER Confidential Information"). In consideration of
furnishing COOPER Confidential Information, TBC agrees:
(a) COOPER Confidential Information will be kept confidential and shall
not, without COOPER's prior written consent, be disclosed by TBC,
its agents or employees, in any manner whatsoever, in whole or in
part, and shall not be used by TBC, its agents or employees, other
than in connection with the purchase of Tires and Tubes hereunder.
<PAGE>
Moreover, TBC agrees to transmit the COOPER Confidential Information
only to TBC agents and employees who need to know such COOPER
Confidential Information for the purpose of purchasing Tires and
Tubes hereunder and who are informed by TBC of the confidential
nature of the COOPER Confidential Information; provided, if COOPER
Confidential Information is provided to any agent, such agent shall
agree in writing to be bound by the terms and conditions of this
Agreement. In any event, TBC shall be responsible for any breach of
this Agreement by TBC's agents or employees.
(b) TBC will know the location of any written COOPER Confidential
Information. Any written COOPER Confidential Information will be
returned to COOPER immediately upon request. Any written COOPER
Confidential Information will be held and kept confidential and
subject to the terms of this Agreement, or destroyed.
(c) In the event TBC, or any agent or employee, becomes legally
compelled to disclose any of the COOPER Confidential Information,
TBC will provide COOPER with prompt notice so COOPER may seek a
protective order or other appropriate remedy and/or waive compliance
with the provisions of this Agreement. In the event such protective
order or other remedy is not obtained, or COOPER waives compliance
with the provisions of this Agreement, TBC and/or any agent or
employee will furnish only that portion of the COOPER Confidential
Information which is legally required and will exercise best efforts
to obtain a protective order or other reliable assurance that
confidential treatment will be accorded the COOPER Confidential
Information.
(d) Notwithstanding anything to the contrary herein, COOPER Confidential
Information may be used by TBC and its employees in the ordinary
course of its business.
(e) The above confidentiality obligations shall apply equally to any
nonpublic, confidential and/or proprietary TBC information,
including any pricing information ("TBC Confidential Information")
provided to COOPER. TBC Confidential Information may be used by
COOPER and its employees in the ordinary course of its business.
Both parties to this Agreement acknowledge that maintaining a reputation
for quality products and services is an important aspect of doing business in
the tire and inner tube industries. Accordingly, both parties agree not to
make any public or private disclosures concerning the nonperformance of either
party under the terms of this Agreement without the expressed written consent
of the other party.
16. NOTIFICATION OF SIGNIFICANT EVENTS
Each party shall notify the other of the occurrence of, or the reasonable
anticipation of the occurrence of, any of the following events; provided the
notifying party is not barred from doing so by either applicable law or the
necessity of obtaining the consent of a third party (including any parent or
subsidiary corporation) and in the event a third party's consent is required,
the notifying party shall make a good faith effort to obtain the consent of
such third party to so notify of:
(a) a change in ownership;
(b) a transfer of business which would materially affect this Agreement;
(c) a merger, acquisition or consolidation; or
(d) any other significant alterations in the organization or operation
of the notifying party's business.
17. TERM AND TERMINATION
17.1 Term
This Agreement shall be effective commencing January 1, 1994, and shall
continue thereafter until such time as either party gives the other party
written notice of its intent to terminate this Agreement; provided, however,
<PAGE>
neither party shall be permitted to give such notice of termination prior to
June 30, 2003. During the period from receipt of the notice of termination
until the effective date of termination, TBC will continue to purchase under
the terms of this Agreement and COOPER will continue to supply TBC's require-
ments for Tires under the terms of this Agreement.
17.2 Termination for Breach
In the event COOPER shall default in the performance of any obligation to
be performed by it under this Agreement and said default shall not have been
remedied within one hundred twenty (120) days after written notice thereof,
TBC may (a) terminate this Agreement by written notice to COOPER, which
termination shall be effective upon receipt by COOPER of said notice;
(b) cancel any or all outstanding orders and/or shipping instructions; and/or
(c) elect to cease purchasing any or all Tires and Tubes. In the event TBC
shall default in the performance of any obligation to be performed by it
under this Agreement and said default shall not have been remedied within
(a) thirty (30) days, in the case of payment obligations which are not the
subject of a dispute, or (b) one hundred twenty (120) days, in the case of
other obligations after written notice thereof, COOPER may terminate this
Agreement by written notice to TBC, which termination shall be effective upon
receipt by TBC of said notice. The rights and remedies contained in this
Section 17.2 are in addition to and not in lieu of any other rights and
remedies which may be available to either party in the event of breach by the
other.
17.3 Termination for Insolvency, or Bankruptcy
If (a) a voluntary petition in bankruptcy shall be filed by either party,
or (b) an involuntary petition in bankruptcy or petition alleging insolvency
or inability to pay debts when due in the ordinary course of business shall be
filed against either party and not be dismissed within thirty (30) days, or
(c) a receiver shall be appointed for the assets of either party and not be
dismissed within thirty (30) days, or (d) either party shall make an
assignment for the benefit of creditors, shall become insolvent, or shall be
unable to pay its debts when due in the ordinary course of business, the other
party shall, to the extent permitted by law, have the right to terminate this
Agreement upon notice to the party so affected.
17.4 Termination for Adverse Events
Notwithstanding any other term or condition contained in this Agreement,
either party may, at its sole option, terminate this Agreement upon written
notice of termination to the other party upon the occurrence of any event
which would adversely and materially affect the other party's security or
materially increase such other party's financial risk; provided, however,
should COOPER give notice to TBC pursuant hereto, termination will not occur
and this Agreement will continue if TBC within ten (10) days of such notice,
(i) pays COOPER all monies owing COOPER, whether due or not, and (ii) agrees
to pay COOPER for future orders hereunder on a cash with order basis.
17.5 Termination Inventory
Should this Agreement be terminated (i) due to TBC's failure to make its
payment obligations, or (ii) as provided pursuant to Section 17.3, COOPER may
dispose of all Tires in process or in inventory at its discretion.
In the event of any termination by either party for any other reason,
pursuant to this Section 17., TBC will immediately purchase, accept delivery
of, and pay for all Tires produced by COOPER prior to the date of such
termination against TBC's firm order at the prices then in effect.
It is specifically agreed TBC may purchase, on a C.O.D. basis, any or all
Tires produced by COOPER in excess of the number it is required to purchase
under the above provisions of this Section 17. at the prices then in effect,
and any remaining Tires may be sold or disposed of by COOPER.
18. SURVIVAL OF OBLIGATIONS
All obligations of either party pertaining to payment, reimbursement,
warranty, adjustment, recall and indemnity, and all obligations hereunder
which, by the terms of this Agreement, arise at or after termination, shall
survive any termination of this Agreement as provided in the applicable
section(s) hereof or for the duration of the applicable statute of
limitations, whichever is shorter.
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19. WAIVER
Waiver by TBC or COOPER of any breach of any of the terms and conditions
contained herein shall not be construed as a waiver of any other term or
condition hereof or of any other breach hereunder or any continuing breach
hereunder.
20. MODIFICATION, ASSIGNMENT and CONTINUATION
Any modification or change in this Agreement can be made only in writing
signed by the parties hereto. Neither party shall have the right to assign
this Agreement without the prior written consent of the other party.
Notwithstanding the above, COOPER shall review in good faith any TBC proposed
assignment, or partial assignment, of this Agreement.
Specific elements of consideration for a good faith review shall include,
but not be limited to:
(a) continuation of the tire wholesaling business;
(b) impairment of overall credit-worthiness;
(c) merchandising strategy and customer service; and
(d) restructuring within the current ownership framework.
Both parties to this Agreement acknowledge a general evaluation of
business practices, reputation, integrity and credit-worthiness was an
integral part of the decision to enter into this Agreement. In the event all
or a majority of the stock of TBC is acquired by a third party without
COOPER's prior written consent, COOPER shall have the option of terminating
this Agreement upon giving such third party not less than one hundred eighty
(180) days written notice of COOPER's intent to terminate this Agreement,
provided such notice shall be given within ninety (90) days of the date TBC
provides COOPER written notice of the completion of such sale. Upon the
receipt of such notice from TBC, COOPER shall have the right to review and
modify, in COOPER's sole discretion, the credit terms in effect for TBC prior
to the consummation of the sale.
21. NOTICES
Notices and other communications, required or permitted hereunder, shall
be sufficiently given, if in writing and when sent, by registered or certified
United States mail, postage prepaid, addressed as follows:
If to COOPER: President, The Cooper Tire Company
COOPER TIRE & RUBBER COMPANY
Lima & Western Avenues
Findlay, Ohio 45840
If to TBC: Mr. B. M. Hubbard
Senior Vice President
Purchasing & Engineering
TBC CORPORATION
4770 Hickory Hill
P.O. Box 18342
Memphis, Tennessee 38141
or to such other address as either party hereto shall furnish to the other in
writing.
22. PROHIBITED CLAUSE
In the event any clause, or portion of a clause, of this Agreement is
finally determined by a court of competent jurisdiction, from which an appeal
either cannot be taken or is not taken, to be in violation of any applicable
Federal, state or local law, all other clauses or portions of a clause of this
Agreement shall nevertheless remain in full force and effect to the extent not
clearly prohibited by applicable Federal, state or local law.
<PAGE>
23. CAPTION AND SECTION AND SUBSECTION HEADINGS
The caption and section and subsection headings used herein are for
convenience only and shall not be deemed part of this Agreement and shall not
in any way restrict or modify the context and substance of any section or
subsection hereof.
24. ENTIRE AGREEMENT
This instrument and Exhibit A contain the entire agreement between the
parties hereto regarding the matters contained herein.
25. GOVERNING LAW
This Agreement shall be construed under the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
ATTEST: TBC CORPORATION
By: /s/ Jo Miller By: /s/ L. S. DiPasqua
Title: President / C. O. O.
Title: Assistant Secretary Date: April 25, 1994
ATTEST: COOPER TIRE RUBBER COMPANY
By: /s/ P. G. Weaver By: /s/ P. W. Rooney
Title: President
Title: Tire Div. Controller Date: April 25, 1994
By: /s/ W. C. Hattendorf
Title: Treasurer
RDT/rlg Date: April 25, 1994
<PAGE>
