Conformed Copy
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 30, 1996
TBC Corporation
(Exact name of registrant as specified in its charter)
Delaware 0-11579 31-0600670
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
4770 Hickory Hill Road, Memphis, Tennessee 38141
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (901) 363-8030
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events.
On May 2, 1996, TBC Corporation ("TBC") issued the following press
release:
May 2, 1996
Ronald E. McCollough
Senior Vice President
TBC Corporation
(901) 363-8030
John E. Siipola
Chairman
Big O Tires, Inc.
(303) 790-2800
TBC SIGNS DEFINITIVE MERGER AGREEMENT TO ACQUIRE BIG O TIRES
MEMPHIS, Tennessee (May 2, 1996) - TBC Corporation (Nasdaq/NM:TBCC) and
Big O Tires, Inc. (Nasdaq/NM:BIGO) jointly announced today that they have
signed a definitive merger agreement relating to TBC's proposed
acquisition of all of the outstanding shares of Big O. Under the terms of
the merger agreement, Big O stockholders will receive a cash price of
$16.50 a share, subject to a possible reduction based on a final
tabulation of transaction costs and other expenses, which is not expected
to result in a material adjustment. The transaction, which has been
approved by the Board of Directors of each company, remains subject to
certain regulatory approvals and the approval of the stockholders of Big
O. Closing of the merger is expected to occur within approximately 60
days.
TBC Corporation is a marketer and distributor of products for the
automotive replacement market.
Big O Tires, Inc. is a franchisor of independent retail tire and auto
service stores.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
See Exhibit Index.
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 hereunto duly authorized.
TBC CORPORATION
(Registrant)
May 17, 1996 By:/s/Ronald E. McCollough
(Date) Ronald E. McCollough,
Senior Vice President, Operations
and Treasurer
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EXHIBIT INDEX
Exhibit No. and Description:
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession.
2.1 Agreement and Plan of Merger, dated as of April 30, 1996, by
and among TBC Corporation, TBCO Acquisition, Inc., and Big O
Tires, Inc.
As permitted by Item 601(b)(2) of Regulation S-K, the
Disclosure Certificate delivered by Big O Tires, Inc. to
TBC Corporation and TBCO Acquisition, Inc.
contemporaneously with the execution of the above Agreement
and Plan of Merger is not being filed. A description of
the contents of the Disclosure Certificate is set forth on
page (v) of the Agreement and Plan of Merger. TBC
Corporation agrees to furnish a copy of the Disclosure
Certificate to the Commission upon request.
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AGREEMENT AND PLAN OF MERGER
by and among
TBC CORPORATION,
TBCO ACQUISITION, INC.,
and
BIG O TIRES, INC.
Dated as of April 30, 1996<PAGE>
TABLE OF CONTENTS
ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effects of the Merger. . . . . . . . . . . . . . . . . . 2
1.3 Consummation of the Merger . . . . . . . . . . . . . . . 2
1.4 Articles; Bylaws; Directors and Officers; Name . . . . . 2
1.5 Conversion of Shares . . . . . . . . . . . . . . . . . . 3
1.6 Stock Options. . . . . . . . . . . . . . . . . . . . . . 4
1.7 Adjustment of the Merger Consideration . . . . . . . . . 4
1.8 Exchange of Certificates . . . . . . . . . . . . . . . . 5
1.9 Taking of Necessary Action; Further Action . . . . . . . 6
1.10 Certain Definitions. . . . . . . . . . . . . . . . . . . 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF PARENT AND
THE PURCHASER . . . . . . . . . . . . . . . . . . 8
2.1 Organization and Qualification . . . . . . . . . . . . . 8
2.2 Capitalization . . . . . . . . . . . . . . . . . . . . . 9
2.3 Authorization; Binding Agreement . . . . . . . . . . . . 9
2.4 Compliance . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Brokers and Finders. . . . . . . . . . . . . . . . . . . 10
2.6 Proxy Statement. . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . 11
3.1 Subsidiaries, Joint Ventures, Organization and
Qualification. . . . . . . . . . . . . . . . . . . . . . 11
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . 12
3.3 Authorization; Binding Agreement . . . . . . . . . . . . 13
3.4 Compliance . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Commission Filings . . . . . . . . . . . . . . . . . . . 15
3.6 Changes. . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Approval by Board of Directors
and Investment Committee . . . . . . . . . . . . . . . . 17
3.8 Prior Transaction Costs. . . . . . . . . . . . . . . . . 17
3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Material Contracts . . . . . . . . . . . . . . . . . . . 17
3.11 Proprietary Rights . . . . . . . . . . . . . . . . . . . 19
3.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . 22
3.14 Proxy Statement. . . . . . . . . . . . . . . . . . . . . 24
3.15 Compliance with Laws and Orders. . . . . . . . . . . . . 25
3.16 Labor Matters. . . . . . . . . . . . . . . . . . . . . . 26
3.17 Undisclosed Liabilities. . . . . . . . . . . . . . . . . 26
3.18 Title to Properties; Absence of Liens, Etc. . . . . . . 26
3.19 Receivables; Inventory . . . . . . . . . . . . . . . . . 27
3.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 27
3.21 Environmental Matters. . . . . . . . . . . . . . . . . . 28
3.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV - CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . 29
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ARTICLE V - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . 31
5.1 Proxy Statement. . . . . . . . . . . . . . . . . . . . . 31
5.2 Meeting of Stockholders of the Company . . . . . . . . . 32
5.3 Cancellation of Stock Options and Stock
Appreciation Rights; Certain Employee Terminations . . . 33
5.4 Fees and Expenses. . . . . . . . . . . . . . . . . . . . 33
5.5 Further Assurances . . . . . . . . . . . . . . . . . . . 35
5.6 No Solicitation. . . . . . . . . . . . . . . . . . . . . 36
5.7 Notification of Certain Matters. . . . . . . . . . . . . 36
5.8 Access to Information. . . . . . . . . . . . . . . . . . 37
5.9 Directors' Indemnification . . . . . . . . . . . . . . . 37
ARTICLE VI - CONDITIONS . . . . . . . . . . . . . . . . . . . . 38
6.1 Conditions to Obligation of Each Party to
Effect the Merger. . . . . . . . . . . . . . . . . . . . 38
6.2 Additional Conditions to the Obligation of
the Parent and Purchaser to Effect the Merger. . . . . . 39
6.3 Additional Condition to the Obligation of
the Company to Effect the Merger . . . . . . . . . . . . 42
ARTICLE VII - CLOSING . . . . . . . . . . . . . . . . . . . . . 42
7.1 Time and Place . . . . . . . . . . . . . . . . . . . . . 42
7.2 Deliveries at the Closing. . . . . . . . . . . . . . . . 42
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER. . . . . . . . 43
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . 43
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . 44
8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . 45
8.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX - GENERAL PROVISIONS . . . . . . . . . . . . . . . . 45
9.1 Public Statements. . . . . . . . . . . . . . . . . . . . 45
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 45
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . 47
9.4 Representations and Warranties . . . . . . . . . . . . . 47
9.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . 47
9.6 Successors and Assigns . . . . . . . . . . . . . . . . . 47
9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . 47
9.8 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 47
EXHIBIT A - Form of Indemnification Agreement
EXHIBIT B - Form of Opinion of Lionel Sawyer & Collins/Hopper and Kanouff
-ii-<PAGE>
INDEX TO DEFINED TERMS
Defined Term Defined in Section
Acquisition Proposal 5.6(a)
Agreement Introduction
Another Person 5.4(b)
Articles of Merger 1.3
BOTI 1.10(a)
Certificates 1.8(a)
Closing 1.3
Closing Date 7.1
Code 3.12(e)
Commission 1.10(a)
Company Introduction
Constituent Entities 1.1
Corporation Law Recitals
Current Financial Statements 3.5
Current Transactions 1.10(b)
Current Transaction Costs 1.10(f)
Disclosure Certificate 1.10(h)
Dissenting Shares 1.5(d)
Effective Time 1.3
Employee Benefit Plans 3.13(a)
Environmental Law 3.21(a)
ERISA 3.13(a)
ERISA Affiliate 3.13(j)
Exchange Act 2.4
Exchange Agent 1.8(a)
Fairness Opinion 6.1(e)
Franchise Laws 3.15(b)
Hart-Scott-Rodino Act 1.10(f)
Hazardous Substance 3.21(b)
Interested Parties 1.10(c)
IRS 3.13(e)
Investment Committee Recitals
Joint Venture 3.1(a)
Letter of Intent 5.4(d)
-iii-<PAGE>
Mailing Date 1.7(a)
Material Adverse Effect 3.1(b)
Material Contracts 3.10(b)
Merger Recitals
Merger Consideration 1.5(a)
Merger Law Recitals
Multiemployer Plan 3.13(b)
Options 1.6
Option Plans 1.6
Option Settlement Amount 1.6
Parent Introduction
Payments 1.10(d)
Pension Pan 3.13(a)
Post-September 30 Transaction Expenses 1.10(g)
Prior Merger Agreement 1.10(a)
Prior Transactions 1.10(a)
Prior Transaction Costs 1.10(e)
Proprietary Rights 3.11
Proxy Statement 5.1(a)
Purchaser Introduction
Real Property 3.18(a)
Representatives 5.8
Rights 3.2(e)
Rights of Purchase 3.2(e)
SAR Agreements 3.2(c)
SEC Filings 3.5
Shares 1.5(a)
Special Meeting 5.2
Stock Appreciation Rights 3.2(c)
Subsidiary 3.1(a)
Surviving Corporation 1.1
Taxes 3.12(h)
Welfare Plan 3.13(a)
-iv-<PAGE>
DISCLOSURE CERTIFICATE
CONTENTS
Description Section Reference
Subsidiaries, Organization,
and Qualification 3.1
Capitalization 3.2
Compliance 3.4
Changes 3.6
Approval 3.7
Prior Transaction Costs 3.8
Litigation 3.9
Material Contracts 3.10
Proprietary Rights 3.11
Taxes 3.12
Employee Benefit Plans 3.13
Compliance with Laws and Orders 3.15
Labor Matters 3.16
Properties 3.18
Insurance 3.20
Environmental Matters 3.21
-v-<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
April 30, 1996, is among TBC Corporation, a Delaware corporation with
principal executive offices at 4770 Hickory Hill Road, Memphis, Tennessee
38141 ("Parent"), TBCO Acquisition, Inc., a Nevada corporation and a wholly
owned subsidiary of Parent, with principal executive offices at 4770
Hickory Hill Road, Memphis, Tennessee 38141 (the "Purchaser"), and BIG O
Tires, Inc., a Nevada corporation with principal executive offices at
11755 East Peakview Avenue, Englewood, Colorado 80111 (the "Company").
RECITALS
A. The respective Boards of Directors of the Purchaser, Parent and
the Company have approved Parent's acquisition of the Company pursuant to
the terms of this Agreement.
B. A special committee appointed by the Board of Directors of the
Company and consisting of four directors who are not employed by the
Company (the "Investment Committee") has recommended that the Board of
Directors of the Company approve the merger of the Purchaser into the
Company, in accordance with the General Corporation Law of the State of
Nevada (the "Corporation Law") and the Merger and Exchanges of Interest
Law of the State of Nevada (the "Merger Law"), upon the terms and subject
to the conditions set forth herein (the "Merger"), and has determined that
the Merger is in the best interests of and fair to the stockholders of the
Company.
C. The respective Boards of Directors of the Purchaser, Parent and
the Company have duly approved the Merger, and the Board of Directors of
the Company has resolved to recommend the Merger to the Company's
stockholders.
AGREEMENT
This Agreement constitutes the Plan of Merger referred to in
Section 92A.100 of the Merger Law.
In consideration of the premises and the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Parent, the Purchaser and the
Company hereby agree as follows:<PAGE>
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.3 hereof), in accordance with this Agreement, the Corporation Law, and
the Merger Law, the Purchaser shall be merged with and into the Company,
the separate existence of the Purchaser (except as may be continued by
operation of law) shall cease, and the Company shall continue as the
surviving corporation (the "Surviving Corporation"). The Surviving
Corporation is a corporation organized under the laws of the State of
Nevada whose address is 11755 East Peakview Avenue, Englewood, Colorado
80111. The Company and the Purchaser are sometimes referred to herein as
the "Constituent Entities."
1.2 Effects of the Merger. The Merger shall have the effects
set forth in the Merger Law. As of the Effective Time, the Company shall
be a wholly owned subsidiary of Parent.
1.3 Consummation of the Merger. As soon as is practicable
after the satisfaction or waiver of the conditions set forth in Article VI
hereof, the parties hereto will cause the Merger to be consummated by
filing with the Secretary of State of the State of Nevada articles of
merger in such form as required by, and executed in accordance with, the
relevant provisions of the Corporation Law and the Merger Law (the
"Articles of Merger") and take all such further actions as may be required
by law to make the Merger effective. The Merger shall occur immediately
upon the filing of the Articles of Merger with the Secretary of State of
the State of Nevada (the date and time of such filing being referred to
herein as the "Effective Time"). As contemplated by Section 92A.200 of
the Merger Law, the Articles of Merger shall refer to this Agreement for
the procedure set forth in Section 1.8 below regarding the exchange of
certificates representing the Company's Common Stock. The closing of the
Merger and the transactions contemplated by this Agreement (the "Closing")
shall take place as specified in Article VII.
1.4 Articles; Bylaws; Directors and Officers; Name. At the
Effective Time, (a) the Articles of Incorporation of the Purchaser, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation, until thereafter amended as
provided by law, the Articles of Incorporation of the Surviving
Corporation shall be amended and restated accordingly, and a statement to
this effect shall be included in the Articles of Merger; (b) the Bylaws of
the Purchaser, as in effect immediately prior to the Effective Time, shall
be the Bylaws of the Surviving Corporation, until
-2-<PAGE>
thereafter amended as provided by law; (c) the directors of the Purchaser
immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, until their successors are elected; (d) the
officers of the Purchaser shall be the initial officers of the Surviving
Corporation, in each case, until their successors are elected and qualified;
and (e) the corporate name of the Company immediately prior to the Effective
Time shall be the name of the Surviving Corporation.
1.5 Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the Purchaser, the
Company, the Surviving Corporation or the holders of any of the following
securities:
(a) Each share of the Company's Common Stock, par value
$0.10 per share (the "Shares"), which is issued and outstanding
immediately prior to the Effective Time (other than (i) Dissenting Shares
(as defined below in Section 1.5(d)), if any, and (ii) Shares held by, or
which are under contract to be acquired by Parent or the Purchaser) shall
be cancelled and extinguished and be converted into and become a right to
receive from Parent a cash payment of $16.50 per Share, without interest
(which payment shall include $0.01 per share for the redemption of the
Rights, as defined in Section 3.2(e) hereof). Such per share cash
payment, which is hereinafter referred to as the "Merger Consideration,"
shall be subject to reduction as provided in Section 1.7 hereof.
(b) Each Share which is issued and owned by the Company or
by any Subsidiary (as defined in Section 3.1(a) hereof) immediately prior
to the Effective Time shall be cancelled, and no payment shall be made
with respect thereto.
(c) Each share of Common Stock, par value $0.01 per share,
of the Purchaser issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued, fully paid and
nonassessable share of Common Stock, par value $0.10 per share, of the
Surviving Corporation.
(d) Notwithstanding anything to the contrary in this
Agreement, if appraisal rights are available to holders of the Shares
pursuant to Sections 92A.300-92A.500 of the Merger Law, each outstanding
Share, the holder of which has demanded and perfected his rights for
appraisal of such Shares in accordance with all of the requirements of the
Merger Law and has not effectively withdrawn or lost his right to such
appraisal (the "Dissenting Shares"), shall not be converted into the
Merger Consideration, but shall be deposited with the Surviving
-3-<PAGE>
Corporation (which is the "subject corporation" under Section 92A.440 of
the Merger Law) and the holders of any Dissenting Shares shall be entitled
only to such rights as are granted by the Merger Law.
1.6 Stock Options. The Company shall have entered into binding
agreements with the holders of all options to purchase Shares
(collectively, the "Options") which have been granted and are then
outstanding under any stock option plan or other option arrangement of the
Company (collectively, the "Option Plans"), pursuant to which agreements
the holders of such Options agree that the Options shall be cancelled
immediately prior to the Effective Time and settled by cash payment to the
holders to be mailed within three business days after the Effective Time.
The cash payment to the holder of each cancelled Option shall be an amount
equal to the excess, if any, of the Merger Consideration (which shall be
subject to reduction as provided in Section 1.7) over the per Share
exercise price of such Option, multiplied by the number of Shares for
which such Option was granted, regardless of whether such Option is then
exercisable (the "Option Settlement Amount"), less all deductions required
by the respective Option Plan and any income tax withholding required in
connection therewith; provided, however, that if the terms of any Option
Plan or any Option allow such Option to be cancelled for an amount less
than the Option Settlement Amount, then the Company shall cancel such
Option for a cash payment of such lesser amount.
1.7 Adjustment of the Merger Consideration. (a) In the event
that the Company's Post-September 30 Transaction Expenses (as defined in
1.10(g) below) exceed $1,900,000, the Merger Consideration shall be
reduced by an amount equal to the amount of such excess divided by the sum
of the number of issued and outstanding Shares on the date of this
Agreement and the number of Shares subject to Options outstanding on the
date of this Agreement. Any reduction of the Merger Consideration
pursuant to this Section 1.7 shall be calculated not later than three
business days prior to the date the Company's definitive Proxy Statement
(as defined in Section 5.1(a) hereof) is first mailed to its stockholders
(the "Mailing Date"), and no further reductions pursuant to this Section
1.7 shall thereafter be made.
(b) To enable the parties to determine whether any
reduction of the Merger Consideration is to be made pursuant to this
Section 1.7, the Company shall, no later than four business days prior to
the Mailing Date, furnish to Parent and Purchaser a true and complete list
of all Post-September 30 Transaction Expenses known to the Company as of
such date, together with (i) all information then available to the Company
with respect to any other Post-September 30 Transaction Expenses
-4-<PAGE>
which the company may incur or for which any Interested Party (as defined
in Section 1.10(c) hereof) has indicated an intention to present a claim,
and (ii) letters or other correspondence from each Interested Party to whom
any known Post-September 30 Transaction Expenses were paid or are payable,
which letters or other correspondence shall confirm the amount thereof and
that the Company has no other liability or obligation to such Interested
Party except as the Parent and Purchaser shall have consented to in
writing.
1.8 Exchange of Certificates. (a) From and after the
Effective Time, a bank or trust company to be designated by the Purchaser
and approved by the Investment Committee (the "Exchange Agent") shall act
as exchange agent in effecting the exchange of the Merger Consideration
for certificates representing Shares entitled to payment pursuant to
Section 1.5 (the "Certificates"). As part of the closing of the Merger,
the Purchaser shall deposit with the Exchange Agent an amount necessary to
enable the Exchange Agent to exchange the Merger Consideration for all
Shares to be converted into Merger Consideration.
(b) Promptly after the Effective Time, the Exchange Agent
shall mail to each record holder of Shares as of the Effective Time a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass only
upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in surrendering Certificates and receiving the Merger
Consideration therefor. Upon the surrender of each Certificate, together
with such letter of transmittal duly executed and completed in accordance
with the instructions thereto, the holder of such Certificate shall be
entitled to receive in exchange therefor an amount equal to the Merger
Consideration multiplied by the number of Shares represented by such
Certificate, and such Certificate shall be cancelled. Until so
surrendered and exchanged, each Certificate shall represent solely the
right to receive an amount equal to the Merger Consideration multiplied by
the number of Shares represented by such Certificate. No interest shall
be paid or accrued on the Merger Consideration upon the surrender of the
Certificates. If any Merger Consideration is to be paid to a person other
than the person in whose name the Certificate surrendered in exchange
therefor is registered, it shall be a condition to such exchange that the
person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the payment of such Merger
Consideration to a person other than that of the registered holder of the
Certificate surrendered, or such person shall establish to the
satisfaction of the Exchange Agent that such tax
-5-<PAGE>
has been paid or is not applicable. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to a
holder of Shares for any Merger Consideration delivered to a public
official pursuant to applicable abandoned property, escheat and similar
laws.
(c) Promptly following the date which is 180 days after
the Effective Time, the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate may surrender the Certificate to
the Surviving Corporation and (subject to applicable abandoned property,
escheat and similar laws) receive in exchange therefor an amount equal to
the Merger Consideration multiplied by the number of Shares represented by
such Certificate, without any interest thereon, but shall have no greater
rights against the Surviving Corporation than may be accorded to general
unsecured creditors of the Surviving Corporation.
(d) After the Effective Time, there shall be no transfers
of any Shares on the stock transfer books of the Surviving Corporation.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent, they shall be cancelled and exchanged
for the applicable Merger Consideration, as provided in this Article I.
1.9 Taking of Necessary Action; Further Action. The Purchaser
and the Company shall each take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger as
promptly as possible. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to and of all assets, property, rights, privileges, powers, and
franchises of either of the Constituent Entities, the officers and
directors of such corporations are fully authorized in the name of their
respective corporation or otherwise to take, and shall take, all such
lawful and necessary action.
1.10 Certain Definitions. As used in this Agreement:
(a) "Prior Transactions" shall mean and include any
proposals made by any stockholder of the Company since 1992; the
transactions contemplated by the Agreement and Plan of Merger, dated July
24, 1995, as amended (the "Prior Merger Agreement"), among the Company and
BOTI Acquisition Corp. and BOTI Holdings, Inc. (collectively, "BOTI"); the
financing commitments sought or obtained by any person or entity in
connection with the transactions contemplated by the Prior Merger
Agreement; and any other matters or events described under the heading
"Background and Reasons for the Merger" in the Company's
-6-<PAGE>
preliminary proxy statement filed with the Securities and Exchange
Commission (the "Commission") on Febuary 21, 1996, in connection with the
transactions contemplated by the Prior Merger Agreement.
(b) "Current Transactions" shall mean and include the
discussions between the Company and Parent occurring after December 11,
1995; the negotiation and execution of the letter of intent between Parent
and the Company, dated March 13, 1996; the negotiation and execution of
this Agreement; and the consummation of the transactions contemplated
hereby.
(c) "Interested Parties" shall mean and include each and
every broker, finder, investment banking firm, accounting firm, valuation
company, law firm, other consultant or adviser, bank or financial
institution, printer or other person or entity involved in, or providing
services to the Company or any other person or entity in connection with,
any Prior Transaction or Current Transaction. Interested Parties shall
include, without limitation, BOTI, Big O Tire Dealers of America, and each
and every director, officer, stockholder, or partner of any of them.
(d) "Payments" shall mean and include all amounts paid or
payable for or in connection with services rendered to the Company or any
Interested Party and shall include, without limitation, fees, commissions,
costs, expenses, and "topping," "breakup," or "bust-up" fees or similar
payments or compensation.
(e) "Prior Transaction Costs" shall mean and include all
Payments which the Company has made or is obligated to make to any
Interested Party in connection with or arising out of any Prior
Transaction or for which the Company has reimbursed or agreed to reimburse
any Interested Party in connection with or arising out of any Prior
Transaction.
(f) "Current Transaction Costs" shall mean and include all
Payments which the Company has made or is obligated to make to any
Interested Party in connection with or arising out of any Current
Transaction or for which the Company has reimbursed or agreed to reimburse
any Interested Party in connection with or arising out of any Current
Transaction, other than filing fees (if any) of the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations thereunder (the "Hart-Scott-Rodino Act") and the costs of the
accountant's letter described in Section 6.2(n) of this Agreement.
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(g) "Post-September 30 Transaction Expenses" shall mean
the sum of (i) all Prior Transaction Costs which were not reflected in the
Company's financial statements appearing in its Report on Form 10-Q for
the quarter ended September 30, 1995 or had not been reflected in the
Company's financial statements for periods ended prior to September 30,
1995; (ii) all Current Transaction Costs; and (iii) all amounts paid or
payable by the Company or any Subsidiary to Messrs. Siipola or Mehlfeldt
with respect to the cancellation and settlement of their SAR Agreements
(as defined in Section 3.2(c) hereof) and with respect to any severance or
other obligation owing to them as a result of their employment by the
Company or any Subsidiary or the termination of that employment as
contemplated by Section 5.3(d), other than amounts paid in cancellation
and settlement of outstanding Options.
(h) "Disclosure Certificate" shall mean the certificate of
the Company of even date herewith which is being delivered simultaneously
with the execution and delivery of this Agreement. The Disclosure
Certificate sets forth data relevant to the Merger, in each case
identified by the Section of this Agreement to which the same pertains.
The Disclosure Certificate is signed on behalf of the Company, and
individually, by John E. Siipola, Horst K. Mehlfeldt and Steven P.
Cloward, who are all of the members of the Office of Chief Executive
Officer of the Company, and by John B. Adams, Chief Financial Officer of
the Company, provided that each such officer shall have no liability to
Parent and Purchaser after the Closing except as provided in Section
6.2(m) hereof. The Disclosure Certificate constitutes a part of this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Each of Parent and the Purchaser represents and warrants to the
Company as follows (i) as of the date of this Agreement and (ii) as of
the time of the Closing (as defined in Section 7.1) with the same force
and effect as if such representations and warranties were made at and as
of the time of the Closing:
2.1 Organization and Qualification. Each of Parent and the
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has the
requisite corporate power and authority to carry on its business as now
being conducted. Each of Parent and the Purchaser is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where
-8-<PAGE>
the character of its properties, owned or leased, or the nature of its
activities makes such qualification necessary, except for failures to be so
qualified or in good standing which would not, in the aggregate, have a
material adverse effect on Parent or the Purchaser. Each of Parent and the
Purchaser has delivered to the Company complete and correct copies of their
respective Certificate or Articles of Incorporation and Bylaws, as in effect
on the date hereof.
2.2 Capitalization. The authorized capital stock of the
Purchaser consists of 250,000 shares of Common Stock, par value $0.10 per
share, 100 shares of which are issued and outstanding. All issued and
outstanding shares of Purchaser's Common Stock are validly issued, fully
paid, nonassessable and free of preemptive rights, and are owned by
Parent.
2.3 Authorization; Binding Agreement. Each of Parent and the
Purchaser has the requisite corporate power and authority to enter into
this Agreement and to perform its respective obligations hereunder and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and the Purchaser and the
consummation by Parent and the Purchaser of the transactions contemplated
hereby have been duly and validly authorized by all necessary action of
their respective Boards of Directors and stockholders, and no other
corporate proceeding on the part of Parent or the Purchaser is necessary
to authorize the execution, delivery and performance of this Agreement and
the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Parent and the Purchaser and constitutes
a legal, valid and binding obligation of Parent and the Purchaser,
enforceable against each of them in accordance with its terms.
2.4 Compliance. Neither the execution and delivery of this
Agreement by Parent or the Purchaser nor the consummation of the
transactions contemplated hereby nor compliance by Parent or the Purchaser
with any of the provisions hereof will (i) violate, conflict with, or
result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
Parent or the Purchaser under, any of the terms, conditions or provisions
of (x) the Certificate or Articles of Incorporation or Bylaws of Parent or
the Purchaser, or (y) any material note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to
which Parent or the Purchaser is a party or to which it, or any of its
properties or assets,
-9-<PAGE>
may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in the last sentence of this paragraph, violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or the Purchaser or any of their respective
properties or assets, except in the case of each of clauses (i) and (ii)
above, for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests, charges or
encumbrances, which, in the aggregate, would not have a material adverse
effect on the financial condition, business or operations of Parent and the
Purchaser and their subsidiaries taken as a whole, or which are cured,
waived or terminated prior to the Effective Time. Other than in connection
with or in compliance with the provisions of the Corporation Law, the Merger
Law, the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act"), the "takeover" or "blue sky"
laws of various states, and the Hart-Scott-Rodino Act, no notice to, filing
with, or authorization, consent or approval of, any domestic or foreign
public body or authority is necessary for the consummation by Parent or the
Purchaser of the transactions contemplated by this Agreement.
2.5 Brokers and Finders. Neither Parent nor the Purchaser has
engaged any broker, finder or other intermediary which engagement would
require the payment of any brokerage, finder's or other similar fees or
commissions by Parent or the Purchaser in connection with this Agreement
or the transactions contemplated hereby.
2.6 Proxy Statement. None of the information supplied or to be
supplied in writing by Parent or Purchaser for inclusion or included or
incorporated by reference in (a) the Proxy Statement (as defined in
Section 5.1(a) hereof), including any amendment or supplement thereto, or
(b) any other documents to be filed with the Commission or any other
governmental agency in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and at the
time of the Special Meeting (as defined in Section 5.2) or at the time of
mailing of the Proxy Statement to the Company's stockholders, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
false or misleading or necessary to correct any statement in any earlier
communication which has become false or misleading.
-10-<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as
follows (i) as of the date of this Agreement and (ii) as of the time of
the Closing with the same force and effect as if such representations and
warranties were made at and as of the time of the Closing:
3.1 Subsidiaries, Joint Ventures, Organization, and
Qualification. (a) Set forth in the Disclosure Certificate is the name,
jurisdiction of organization, and percentage of ownership by the Company,
of (i) each corporation (a "Subsidiary") of which the Company owns,
directly or indirectly, 50% or more of the capital stock or other equity
interests therein, the holders of which are generally entitled to vote for
the election of directors or other governing body thereof; and (ii) each
joint venture or other partnership in which the Company or any Subsidiary
holds, directly or indirectly, an equity interest (a "Joint Venture").
Except as set forth in the Disclosure Certificate, the Company does not,
directly or indirectly, have any investment in or own any securities of
any corporation, business, enterprise, joint venture, partnership, entity,
or organization other than (i) its interests in the Subsidiaries and the
Joint Ventures listed in the Disclosure Certificate, or (ii) certificates
of deposit, commercial paper, or similar instruments.
(b) Each of the Company, the Subsidiaries, and the Joint
Ventures is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the requisite
power and authority to own, lease and operate its properties and assets
and to carry on its business as it is now being conducted. Each of the
Company, the Subsidiaries, and the Joint Ventures is duly qualified as a
foreign corporation or partnership to do business, and is in good
standing, in the respective jurisdictions listed for each in the
Disclosure Certificate, which jurisdiction are the only jurisdictions
where the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except for failures to be
so qualified or in good standing which would not, in the aggregate, have a
material adverse effect on the condition (financial or otherwise),
business, operation or prospects of the Company, the Subsidiaries, and the
interests of the Company and the Subsidiaries in the Joint Ventures, all
taken as a whole ("Material Adverse Effect").
-11-<PAGE>
(c) The Company has heretofore made available, and will
upon request deliver, to Parent true and complete copies of the
Certificate or Articles of Incorporation and Bylaws of the Company and of
each Subsidiary, all as currently in effect. The respective minute books
of the Company and each of the Subsidiaries have been made available to
Parent by the Company. Such minute books contain accurate and complete
records of all meetings and other corporate actions of the respective
stockholders and directors (and committees thereof). The respective stock
books maintained by the Company and each of the Subsidiaries are complete
and accurately disclose all issuances and transfers of stock of the
Company and each of the Subsidiaries.
3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, par value $0.10
per share. As of the date of this Agreement, (i) 3,317,916 Shares were
issued and outstanding; (ii) 31,261 Shares were held in the treasuries of
the Company and the Subsidiaries; and (iii) 216,232 Shares are issuable
upon the exercise of outstanding Options heretofore granted under the
Option Plans. All of the issued and outstanding Shares were validly
issued and are fully paid, nonassessable, and free of preemptive rights.
Since June 30, 1995, the Company has not issued (i) any shares of Common
Stock, except pursuant to the exercise of Options, or (ii) any Options.
(b) Set forth on the Disclosure Certificate is a complete
list of all holders of Options, the number of Options held by each holder,
the Option Plan under which such Options were granted, the number of
Shares subject thereto, per share exercise prices, and the dates of grant
and expiration. True and complete copies of all Option Plans and any
other agreements or instruments defining the rights of holders of Options
have been made available, and will upon request be delivered, to Parent.
(c) Set forth on the Disclosure Certificate is a complete
list of all outstanding agreements or commitments of the Company or any
Subsidiary ("SAR Agreements") which entitle the holders thereof to receive
payments based upon the amount of appreciation occurring in the value of
the Shares or any other Subsidiary (collectively, "Stock Appreciation
Rights"), together with the names of the holders thereof, the number of
Stock Appreciation Rights held by each holder, the SAR Agreement under
which such Stock Appreciation Rights were granted, the number of Shares
subject thereto, the base value per share established under each SAR
Agreement, and the dates of grant and expiration. True and complete
copies of all SAR Agreements and any other agreements or instruments
defining the rights of holders of any Stock Appreciation Rights have been
made available, and will upon
-12-<PAGE>
request be delivered, to Parent. All of the SAR Agreements provide that
any appreciation in value payable to the holders thereof will be paid in
cash, not in Shares or other equity securities of the Company, and neither
the Company nor any Subsidiary is a party to any agreement which entitles
any party to receive amounts payable thereunder in Shares or other equity
securities of the Company or any Subsidiary.
(d) Except as set forth in the Disclosure Certificate, all
issued and outstanding shares of capital stock of each of the Subsidiaries
and the interests of the Company and the Subsidiaries in the Joint
Ventures are owned by the Company or another wholly owned Subsidiary free
and clear of all liens, charges, encumbrances, claims and options of any
nature.
(e) Except for rights outstanding pursuant to the Rights
Agreement dated as of August 26, 1994, between the Company and Interwest
Transfer Co., Inc. as Rights Agent (the "Rights"), and except as set forth
in the Disclosure Certificate, there are no, and at the Effective Time
there will be no, (i) Shares or other equity securities of the Company
outstanding other than the Shares referred to in Section 3.2(a) and any
Shares issued pursuant to the Options described in Section 3.2(b), and no
outstanding options, warrants, rights to subscribe (including any
preemptive rights), calls or commitments of any character whatsoever to
which the Company, any of its Subsidiaries, or any of the Joint Ventures
is a party or may be bound requiring the issuance or sale of Shares, other
equity securities of the Company or any of the Subsidiaries, ownership
interests in any of the Joint Ventures, or securities or rights
convertible into or exchangeable for such shares, other equity securities,
or ownership interests (collectively, "Rights of Purchase"); and (ii)
contracts, commitments, understandings or arrangements by which the
Company, any of the Subsidiaries, or any of the Joint Ventures is or may
become bound (x) to issue, sell or transfer any Right of Purchase or (y)
which restrict the transfer of or otherwise encumber any Shares, other
than restrictions pursuant to securities laws and restrictions in regard
to 37,698 restricted Shares issued pursuant to the Company's Long Term
Incentive Plan.
3.3 Authorization; Binding Agreement. The Company has the
requisite corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and, subject to stockholder approval, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company, and except for the
approval of the Merger by the Company's stockholders in accordance with
the
-13-<PAGE>
Corporation Law and the Merger Law, no other corporate proceeding on
the part of the Company is necessary to authorize the execution, delivery
and performance of this Agreement and the transactions contemplated
hereby. The Board of Directors of the Company has taken all action
necessary to cause the provisions of Sections 78.411 to 78.444 of the
Corporation Law to be inapplicable to the Parent's acquisition of the
Shares pursuant to the Merger or any of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered
by the Company and constitutes a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
3.4 Compliance. Except as set forth in the Disclosure
Certificate, neither the execution and delivery of this Agreement by the
Company, nor the consummation of the transactions contemplated hereby, nor
compliance by the Company with any of the provisions hereof will (i)
violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of the Subsidiaries or Joint Ventures under,
any of the terms, conditions or provisions of (x) the Certificate or
Articles of Incorporation or Bylaws of the Company or any Subsidiary, or
(y) any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company, any
Subsidiary, or any Joint Venture is a party or to which they or any of
their respective properties or assets may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in the last
sentence of this paragraph, violate any judgment, ruling, order, writ,
injunction, decree, statute or law, rule or regulation applicable to the
Company, the Subsidiaries, or the Joint Ventures, or any of their
respective properties or assets, except in the case of each of clauses (i)
and (ii) above, for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests,
charges or encumbrances which, in the aggregate, would not have a Material
Adverse Effect. Other than in connection with or in compliance with the
provisions of the Corporation Law, the Merger Law, the Exchange Act, the
"takeover" or "blue sky" laws of the various states, and the Hart-Scott-
Rodino Act, no notice to, filing with, or authorization, consent or
approval of, any domestic or foreign public body or authority is necessary
for the consummation by the Company of the transactions contemplated by
this Agreement.
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3.5 Commission Filings. Since January 1, 1993, the Company has
filed all reports, registrations and statements, including amendments
thereto, that the Company was required to file with the Commission. The
Company has made available to the Parent and Purchaser the Company's (i)
Annual Reports on Form 10-K for the years ended December 31, 1993,
December 31, 1994, and December 31, 1995, as filed with the Commission,
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31, June
30, and September 30, 1995, (iii) proxy statements relating to all of the
Company's meetings of stockholders (whether annual or special) since
January 1, 1994, (iv) all other reports or registration statements filed
by the Company with the Commission since January 1, 1995, and (v) all
amendments and supplements to the foregoing (collectively, the "SEC
Filings"). As of their respective dates, the SEC Filings (including all
exhibits and schedules thereto and documents incorporated by reference
therein) complied in all material respects with all rules and regulations
promulgated by the Commission and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated interim
financial statements of the Company and the Subsidiaries included or
incorporated by reference in the SEC Filings, have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated
in the notes thereto), and fairly present the consolidated assets,
liabilities and financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended.
The audited consolidated financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 are hereinafter
referred to as the "Current Financial Statements."
3.6 Changes. Except as expressly contemplated by this
Agreement or as disclosed in the Disclosure Certificate, since December
31, 1995 the Company, the Subsidiaries, and the Joint Ventures have
carried on their respective businesses in the ordinary and usual course
consistent with their prior practices, and none of the following has
occurred:
(a) anything which has had, or would be reasonably likely
to have, a Material Adverse Effect;
(b) a change in accounting methods, principles or
practices by the Company materially affecting its assets, liabilities, or
business or the valuation thereof;
-15-<PAGE>
(c) any damage, destruction or loss of any assets used in
the business of the Company or any of the Subsidiaries or Joint Ventures,
which damage, destruction or loss has had or would be reasonably likely to
have a Material Adverse Effect;
(d) any declaration, setting aside for payment or payment
of dividends or distributions, redemption, purchase or other acquisition
by the Company or any Subsidiary of any capital stock of the Company or
any Subsidiary;
(e) any issuance or sale by the Company or any Subsidiary
of any capital stock of the Company or any Subsidiary;
(f) any issuance or grant of any Option, Stock
Appreciation Right, or other Right of Purchase with respect to the capital
stock of the Company or any Subsidiary or the equity of any Joint Venture
which is not listed in the Disclosure Certificate; or any agreement giving
any holder the right to exercise any Option or Stock Appreciation Right
prior to the dates specified in the original instrument creating the same;
(g) any sale, assignment, transfer, or other disposition
by the Company, any Subsidiary, or any Joint Venture of any of its
properties or assets having a book value of $25,000 or more, other than
sales of inventory in the ordinary course of business;
(h) any purchase or other acquisition by the Company, any
Subsidiary, or any Joint Venture of assets constituting any other line of
business or any properties or assets having a book value of $25,000 or
more, other than the purchase of inventory in the ordinary course of
business;
(i) any increase in the rate of compensation of, or
payment of any bonus to, any director or officer or, except in the
ordinary course of business and in compliance with existing practice and
procedure, any other employee, of the Company or any Subsidiary not
required under existing Employee Benefit Plans (as defined in Section
3.13); any collateralization or funding of any Employee Benefit Plan not
previously collateralized or funded; or any termination or material
modification of any Employee Benefit Plan;
(j) any execution, termination, or material amendment or
modification of any Material Contract (as defined in Section 3.10) outside
the ordinary course of business;
-16-<PAGE>
(k) any existing, pending, or threatened termination or
cancellation of or change in the business relationship of the Company, any
Subsidiary, or Joint Venture with any supplier or customer which would be
reasonably likely to have a Material Adverse Effect;
(l) any agreement by the Company, any Subsidiary, or any
Joint Venture to do any of the things described in the preceding clauses
(a) through (k) other than as expressly provided for herein.
3.7 Approval by Board of Directors and Investment Committee.
The Board of Directors of the Company and the Investment Committee each
has duly and unanimously, except as otherwise indicated in the Disclosure
Certificate, (i) approved and adopted this Agreement, the Merger and the
other transactions contemplated hereby on the material terms and
conditions set forth herein (or, in the case of the Investment Committee,
has recommended that the Board of Directors of the Company do so), (ii)
determined that the Merger Consideration is in the best interests of and
fair to the Company's stockholders and (iii) recommended that the
Company's stockholders approve and adopt this Agreement and the
transactions contemplated hereby.
3.8 Prior Transaction Costs. Set forth in the Disclosure
Certificate is a complete description of all Prior Transaction Costs known
to the Company on the date hereof, together with the name of the
Interested Party to whom the Payment thereof has been made or is owing,
and the amount of the same.
3.9 Litigation. Except as set forth in the Company's Form 10-K
for the year ended December 31, 1995 or in the Disclosure Certificate,
there are no actions, suits or proceedings pending or, to the best
knowledge of the Company, threatened against the Company or any of the
Subsidiaries or Joint Ventures, nor is the Company or any of the
Subsidiaries or Joint Ventures subject to any order, judgment or decree,
except for individual matters in which the only relief sought is damages
from the Company, the Subsidiary, or the Joint Venture which, in the
aggregate, would not have a Material Adverse Effect.
3.10 Material Contracts. (a) Set forth in the Disclosure
Certificate is a complete list of all Material Contracts (as defined in
Section 3.10(b)) of the Company and its Subsidiaries and Joint Ventures in
force and effect on the date of this Agreement. The Company has made
available, and will upon request deliver, to Parent true and complete
copies of all such Material Contracts and will make available and upon
request deliver to Parent true and complete copies of all Material
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Contracts executed after the date of this Agreement. To the best
knowledge of the Company, except as set forth in the Disclosure
Certificate, all of the Material Contracts are valid, binding, and in full
force and effect. Neither the Company, any Subsidiary, nor any Joint
Venture nor, to the best knowledge of the Company, any other party thereto
is in default under any Material Contract, which default is reasonably
likely to have, in the aggregate, a Material Adverse Effect, and there has
not occurred any event that with the lapse of time or the giving of notice
or both would constitute such a default. Except as set forth in the
Disclosure Certificate, the Company's execution and delivery of this
Agreement and the consummation of the Merger will not violate or breach
any Material Contract, will not place the Surviving Corporation in breach
of or default under any Material Contract, and do not require the consent
of any party to any Material Contract in order to avoid any such violation
or breach.
(b) As used in this Agreement, "Material Contracts" shall
mean and include all of the following which the Company or any Subsidiary
or Joint Venture is a party to, is bound or affected by, receives any
benefits under, or by which any property or assets of any of them may be
bound: (i) all real property leases; (ii) all leases of equipment having
an original acquisition cost in excess of $25,000; (iii) all franchise,
dealer, or other distribution agreements pursuant to which the Company or
any Subsidiary or Joint Venture sells or otherwise distributes its
products or services or pursuant to which any person sells or otherwise
distributes products or services of the Company or any Subsidiary or Joint
Venture; (iv) all supply contracts or other such agreements or
understandings pursuant to which the Company or any Subsidiary or Joint
Venture purchased in its last fiscal year, or expects to purchase in this
fiscal year, in excess of $50,000 worth of products; (v) any agreement,
arrangement, or commitment which materially restricts the conduct of any
line of business, including without limitation, all standstill or
noncompete agreements; (vi) any contract, agreement or other arrangement
(other than pursuant to the Employee Benefit Plans, as defined in Section
3.13(a) hereof) providing for the furnishing of services to or by,
providing for the rental of real or personal property to or from, or
otherwise requiring payments to or from, any director, officer, or one
percent (1%) stockholder of the Company or any Subsidiary, any family
member of any such director, officer or stockholder, or any entity in
which any of the foregoing holds, directly or indirectly, a substantial
interest; (vii) any agreement, indenture or other instrument relating to
the borrowing of money by the Company or any Subsidiary or Joint Venture
(other than trade payables and instruments relating to transactions
entered into in the ordinary course of business); (viii) any agreement
pursuant to which the
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Company or any Subsidiary or Joint Venture is obligated to lend money or
make advances, or has lent money or made advances which are still
outstanding, to any person (other than routine travel advances to any
employee not to exceed $5,000 or deposits or advances in respect of
products purchased in the ordinary course of business); (ix) any agreement,
arrangement, or commitment to indemnify or exonerate from liability any
Interested Party in connection with any Prior Transaction or Current
Transaction; (x) any other agreement, arrangement or commitment to
guarantee the obligations of or to indemnify or exonerate from liability
any person, including any Subsidiary or Joint Venture, or the directors or
officers of the Company or any Subsidiary (other than pursuant to the
Certificate or Articles of Incorporation or Bylaws of the Company or the
Subsidiary, or applicable law), or any partner or co-joint venturer; (xi)
any power of attorney presently in effect giving any person or entity the
right to act on behalf of the Company or any Subsidiary or Joint Venture;
(xii) any partnership or joint venture agreement to which the Company or
any Subsidiary or Joint Venture is a party; (xiii) any confidentiality or
secrecy agreement to which the Company or any Subsidiary or Joint Venture
is a party; (xiv) any consulting agreement to which the Company or any
Subsidiary or Joint Venture is a party; (xv) any other contract, commitment,
agreement, or understanding, whether written or oral, which involves more
than $25,000 and is not terminable without penalty upon not more than 90
days' notice; and (xvi) any other contract or agreement that would be
required to be filed as an exhibit to a Form 10-K filed by the Company with
the Commission.
3.11 Proprietary Rights. Set forth in the Disclosure
Certificate is a complete list of all patents, trademarks, trade names,
and copyrights, and all pending applications for any of the same, used in
or necessary for the conduct of the businesses of the Company or the
Subsidiaries or Joint Ventures (collectively, "Proprietary Rights"),
together with a summary description of and full information concerning the
filing, registration, issuance, or licensing thereof. Except as set forth
in the Disclosure Certificate, the Company owns all such Proprietary
Rights, the use of the Proprietary Rights by the Company and the
Subsidiaries and Joint Ventures does not infringe upon the rights of any
other party, and no claim of such infringement is pending or, to the best
knowledge of the Company, threatened. No licenses, sublicenses, or
agreements with respect to the Proprietary Rights have been granted or
entered into by the Company or the Subsidiaries or Joint Ventures except
as described in the Disclosure Certificate. Except as set forth in the
Disclosure Certificate, to the best knowledge of the Company, no third
party is infringing upon any of the Proprietary Rights.
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3.12 Taxes. (a) Except as set forth in the Disclosure
Certificate, the Company and each of the Subsidiaries and Joint Ventures
have, since December 31, 1990 (i) timely filed all returns, schedules and
declarations (including withholding and information returns) relating to
Taxes (as defined in Section 3.12(h) hereof), required to be filed by any
jurisdictions to which they are or have been subject, all of which Tax
returns, schedules and declarations are complete, accurate and correct,
(ii) paid in full all Taxes required to be paid in respect of the periods
covered by such returns and made any deposits of Tax required by such
taxing authorities, (iii) fully accrued on the Company's financial
statements or, in the case of the Joint Ventures, on the Joint Venture's
financial statements, all Taxes for any prior period that are not yet due,
the information set forth on such financial statements being accurate and
correct, and (iv) made timely payments of the Taxes required to be
deducted and withheld from the wages paid to their respective employees or
contractors. The Company has made available, and will upon request
deliver, to the Parent and Purchaser true and complete copies of all Tax
returns of the Company and each Subsidiary and Joint Venture filed with
any federal or state taxing authority since December 31, 1990.
(b) Except as set forth in the Disclosure Certificate,
since December 31, 1990, neither the Company nor any Subsidiary or Joint
Venture has been delinquent in the payment of any Tax or has requested any
extension of time within which to file any Tax returns that have not been
filed, and no deficiencies for any Tax have been claimed, proposed or
assessed. Except as disclosed in the Disclosure Certificate, neither the
Company nor any Subsidiary or Joint Venture has agreed to any currently
effective extension of time for the assessment or payment of, or has
waived any applicable statute of limitations with respect to, any Taxes
payable by it.
(c) Except as set forth in the Disclosure Certificate,
there are no pending or, to the best of the Company's knowledge,
threatened Tax audits, investigations or claims for or relating to any
liability in respect of Taxes, and there are no matters under discussion
with any governmental authorities with respect to Taxes that, in the
reasonable judgment of the Company, are likely to result in a further Tax
liability.
(d) The Disclosure Certificate sets forth, since December
31, 1990 (i) those Tax years for which the Tax returns of the Company and
the Subsidiaries and Joint Ventures have been reviewed or audited by
applicable federal, state, local and foreign taxing authorities, (ii)
those Tax years for which such Tax returns have received clearances or
other indications of
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approval from applicable federal, state, local and foreign taxing
authorities; (iii) those Tax years which remain subject to review or audit
by applicable federal, state, local or foreign taxing authorities. Except
as set forth in the Disclosure Certificate, since December 31, 1990, to the
best knowledge of the Company, no issue or issues have been raised in
connection with any prior or pending review or audit of any Tax return that
have not been resolved or which the Company reasonably believes may be
expected to be raised in the future by such taxing authorities in connection
with the audit or review of the Tax returns of the Company or any Subsidiary
or Joint Venture.
(e) The Disclosure Certificate lists (i) all elections
with respect to Taxes that have been made by the Company or any
Subsidiary, including without limitation, any election under Section
341(f) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder (the "Code"); (ii) the amount of any net operating
loss, net capital loss, unused investment, minimum, or other credit, or
excess charitable contribution deduction of the Company or any Subsidiary;
(iii) all expenses that have been paid or accrued through December 31,
1995 but have not yet been deducted for Tax purposes; and (iv) the
aggregate amount of net Section 1231 losses incurred since January 1, 1991
under the Code that has been deducted or is expected to be deducted by the
Company or any Subsidiary.
(f) Except as otherwise set forth on the Disclosure
Certificate: (i) the Company and each Subsidiary has not made any
payments, is not obligated to make any payments and is not a party to any
agreement that could obligate it to make any payments, that will not be
deductible under Sections 280G or 162(m) of the Code or such other
compensation that must be capitalized under Section 263 of the Code; (ii)
the Company and the Subsidiaries have not taken any position on their
federal income Tax returns (and are not considering taking a position on a
federal income Tax return required to be filed before or after the Closing
Date) that would subject them to an underpayment of federal income Tax
within the meaning of Section 6662 of the Code or any corresponding
provision of state, local, or foreign tax law; (iii) the Company and the
Subsidiaries are not parties to any Tax allocation or Tax sharing
agreement; (iv) the Company and the Subsidiaries have not agreed to make,
nor are they required to make, any adjustment under Section 481 of the
Code by reason of a change in accounting method, accounting period, or
otherwise; (v) the Company and the Subsidiaries have not engaged in a
transfer of assets with a Subsidiary that would have resulted in gain
pursuant to Section 311 of the Code, but which
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gain was treated as a deferred intercompany gain pursuant to the Code; and
(vi) the Company and the Subsidiaries have not deferred any gain from the
sale of assets pursuant to Section 453 of the Code.
(g) After the date of this Agreement, neither the Company
nor any Subsidiary or Joint Venture shall make any election with respect
to Taxes without the prior written consent of the Parent.
(h) As used in this Agreement, "Taxes" shall mean all
federal, state, local, or foreign income, franchise, sales, use, excise,
real and personal property, transfer, employment, social security,
unemployment, withholding, and other taxes, assessments, charges, fees, or
levies, and any interest or penalties on any of the foregoing.
3.13 Employee Benefit Plans. (a) The Disclosure Certificate
lists each (i) employee pension benefit plan within the meaning of Section
3(2) of the Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder ("ERISA"), covered by Part 2 of Title I of
ERISA ("Pension Plan") in which employees of the Company or any of the
Subsidiaries or Joint Ventures participate, (ii) employee welfare benefit
plan within the meaning of Section 3(1) of ERISA ("Welfare Plan") in which
employees of the Company or any of the Subsidiaries or Joint Ventures
participate and (iii) each other employee stock ownership, stock purchase,
savings, severance, profit sharing, group insurance, bonus, deferred
compensation, stock option, severance pay, insurance, pension or
retirement plan or written agreement relating to employment or fringe
benefits for or of employees, officers or directors of the Company or any
Subsidiary or Joint Venture (together with the Pension Plans and Welfare
Plans, the "Employee Benefit Plans"). The Company has provided Purchaser
with access to true and complete copies of all Employee Benefit Plans,
including amendments thereto. Except as disclosed in the Disclosure
Certificate, no individual will accrue or receive additional benefits
(other than additional accruals under the normal formula in effect prior
to and without regard to the transactions contemplated hereby) as a direct
result of the transactions contemplated by this Agreement.
(b) There are no qualified defined benefit plans (as
defined in Section 4(j) of the Code), voluntary employees beneficiary
associations, as described in Section 501(c)(9) of the Code, or
multiemployer plans within the meaning of Section 3(37) of ERISA
("Multiemployer Plans") in which employees of the
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Company, any Subsidiary, any Joint Venture, or any ERISA Affiliate (as
defined in Section 3.13(j) below) have participated or to which the
Company or any ERISA Affiliate currently has an obligation to contribute.
(c) Each Employee Benefit Plan has been maintained,
operated and administered in substantial compliance with its terms. None
of the Employee Benefit Plans has participated in, engaged in or been a
party to any prohibited transaction, as defined in Section 406 of ERISA or
Section 4975 of the Code, and, to the best knowledge of the Company, no
officer, director or employee of the Company or any Subsidiary or Joint
Venture or fiduciary of any such Plan has committed a material breach of
any of the responsibilities or obligations imposed upon fiduciaries by
Title I of ERISA.
(d) Except as set forth in the Disclosure Certificate,
there are no claims, pending or overtly threatened, involving any Employee
Benefit Plan by a current or former employee (or beneficiary thereof) of
the Company or any Subsidiary or Joint Venture or a current or former
ERISA Affiliate, nor is there any reasonable basis to anticipate any
claims involving any such Plans which would likely be successfully
maintained against the Company, the Subsidiaries, or the Joint Ventures.
(e) Each Employee Benefit Plan currently complies, and has
at all relevant times complied, in all material respects with ERISA and
the Code. There are no violations of any material reporting and
disclosure requirements with respect to any Employee Benefit Plans and no
such Plans have violated applicable law, including but not limited to
ERISA and the Code.
(f) The Company has delivered or made available to the
Purchaser a copy of the most recently filed IRS Form 5500, if applicable,
and accountant's opinion, if applicable, of the three most recent plan
years for each Employee Benefit Plan disclosed in the Disclosure
Certificate. All information provided by the Company or any Subsidiary or
Joint Venture to any actuary in connection with the preparation of such
actuarial valuation report was true, correct and complete in all material
respects.
(g) The Company has delivered or made available to the
Purchaser a copy of (i) in the case of each Pension Plan described in the
Disclosure Certificate intended to qualify under Section 401(a) of the
Code, the most recent IRS letter as to the qualification of such Plan
under Section 401(a) of the Code; (ii) in the case of each Welfare Plan
described in the Disclosure Certificate, the most recent IRS letter as to
the tax exempt
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status of such Plan under Section 501(c)(9) of the Code, if applicable; and
(iii) the current summary plan description, if applicable, for each Employee
Benefit Plan disclosed in the Disclosure Certificate and evidence that the
same has been filed with the U.S. Department of Labor.
(h) Except as set forth in the Disclosure Certificate, no
current or former Employee Benefit Plan provides benefits, including
without limitation, death or medical benefits (whether or not insured),
with respect to current or former employees of the Company or any
Subsidiary or Joint Venture beyond their retirement or other termination
of service, other than (i) temporary coverage mandated by applicable law,
(ii) death benefits or retirement benefits under any Pension Plan, (iii)
deferred compensation benefits accrued as liabilities on the books of the
Company or the Subsidiary or Joint Venture, or (iv) benefits the full cost
of which are borne by the current or former employee (or his or her
beneficiary).
(i) With respect to each Employee Benefit Plan, all
required contributions have been made, except for current contributions
not yet due and payable, all of which have been accrued and are reflected
on the Company's financial statements, and all other employee benefit
liabilities are reflected on the Company's financial statements in a
manner satisfying the requirements of Financial Accounting Standards No.
87 and 88.
(j) For purposes of this Section 3.13, "ERISA Affiliate"
shall mean any company which, as of the relevant measuring date under
ERISA, is a member of a controlled group of corporations or trades or
businesses (as defined in Sections 4(b) and (c) of the Code) of which the
Company or any Subsidiary or Joint Venture is a member.
(k) With respect to each Employee Benefit Plan, (i) no
event has occurred and no condition exists that would subject the Company
or the Subsidiaries or Joint Ventures to any Tax under Section 4971
through 4980B of the Code or to a fine or liability under Section 502 of
ERISA; (ii) no provision of such Plan prevents the Company or the
Subsidiaries or Joint Ventures from terminating or amending it; and (iii)
all forms, documents and other materials have been filed with the
Commission or otherwise distributed as required by the Securities Act of
1933 or any regulation promulgated thereunder or the Exchange Act.
3.14 Proxy Statement. With the exception of the information
supplied or to be supplied in writing by Parent or Purchaser (as to which
the Company makes no representation or warranty), the Proxy Statement and
any other documents to be filed with the Commission or any other
governmental agency in
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connection with the transactions contemplated hereby will not, at the
respective time such documents are filed, and at the time of the Special
Meeting or at the time of mailing of the Proxy Statement to the Company's
stockholders, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they are made, not false or misleading or necessary to correct any statement
in any earlier communication which has become false or misleading.
3.15 Compliance with Laws and Orders. (a) Except as disclosed
in the Disclosure Certificate, the businesses of the Company and the
Subsidiaries and Joint Ventures are not being conducted, and to the best
knowledge of the Company, have not been conducted since December 31, 1990,
in violation of any law, ordinance, regulation, judgment, order, decree,
license or permit of any governmental entity (including without
limitation, federal and state franchise, business opportunity, dealer
protection, and similar laws and regulations (collectively, "Franchise
Laws"), zoning ordinances, building codes, Environmental Laws (as defined
in Section 3.21(b) below), wages and hours law, and occupational health
and safety laws and regulations), except for possible violations which in
the aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have a Material Adverse Effect. Except as set forth in
the Disclosure Certificate, no investigation or review by any governmental
entity with respect to the Company or any Subsidiary or Joint Venture is
pending, or to the best knowledge of the Company, threatened, nor has the
Company received notice that any governmental entity intends to conduct
the same.
(b) Set forth in the Disclosure Certificate is a true and
complete list of all registrations, exemptions, and other filings under
the Franchise Laws of any and all states in which the Company or any of
its Subsidiaries or Joint Ventures has sold or solicited the sales of
franchises, business opportunities, or similar arrangements since January
1, 1995, together with the status, effective date, and expiration date of
such filings. The Company has made available, and will upon request
deliver, to Parent true and complete copies of all offering circulars,
disclosure documents, earnings claims, and any other disclosure materials
currently in use in connection with any and all applicable Franchise Laws.
To the best knowledge of the Company, neither the Company nor any
Subsidiary or Joint Venture violated any Franchise Law in soliciting or
entering into any Material Contract.
-25-<PAGE>
(c) None of the Company, a Subsidiary, a Joint Venture or
any stockholder, director, officer, agent, employee or other person or
entity associated with or acting on behalf of any of the foregoing has
used any corporate funds for unlawful contributions, payments, gifts,
entertainment or other unlawful expenses relating to political activity or
made any direct or indirect unlawful payments to governmental officials or
others.
3.16 Labor Matters. Except as shown on the Disclosure
Certificate, there are no controversies pending between the Company or any
Subsidiary or Joint Venture and any of their respective employees, other
than routine individual grievances which will not have a Material Adverse
Effect. No employee of the Company or any Subsidiary or Joint Venture is
represented by any labor union and, to the best knowledge of the Company,
no labor union is attempting any such representation.
3.17 Undisclosed Liabilities. (a) Except as and to the extent
disclosed, reflected or reserved against in the Current Financial
Statements, the Company and the Subsidiaries did not have, as of the
respective dates thereof, any material liabilities or obligations (whether
known or unknown, accrued, absolute, contingent or otherwise) of the type
required to be reflected on a balance sheet prepared in accordance with
generally accepted accounting principles or disclosed in the notes
thereto, and there was no material loss contingency, as defined in
paragraph 1 of Statement of Financial Accounting Standards No. 5, of the
Company or any Subsidiary which was not so reflected or disclosed as
required by paragraphs 8 to 12, inclusive, of such Statement. Since
December 31, 1995, neither the Company nor any Subsidiary has incurred any
such material liability or obligation, and no such material loss
contingency has arisen.
(b) To the best knowledge of the Company, the warranty reserve
set forth on the most recent balance sheet included in the SEC Filings is
adequate to satisfy in full all present and future warranty claims with
respect to products or services sold by the Company and the Subsidiaries
prior to the date of such balance sheet.
3.18 Title to Properties; Absence of Liens, Etc. (a) Set
forth in the Disclosure Certificate is a complete list of all real
property owned by the Company or any Subsidiary or Joint Venture
(collectively, the "Real Property").
(b) Except as disclosed in the Disclosure Certificate, the
Company and the Subsidiaries and Joint Ventures have good and marketable
title to all the Real Property and all of their other properties and
assets, including without limitation, those assets
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and properties reflected in the Current Financial Statements, free and clear
of all liens, except (i) the lien of current taxes not yet due and payable;
(ii) properties and assets disposed of since the dates of such Current
Financial Statements in the ordinary course of business; (iii) the lien of
such secured indebtedness as is disclosed in the SEC Filings or the
Current Financial Statements; and (v) liens and imperfections of title
which are not substantial in character, amount or extent. The Company and
the Subsidiaries and Joint Ventures own, or have valid and enforceable
rights as lessees to possess and use, all properties and assets used in
the conduct of their respective businesses since January 1, 1995, other
than any properties or assets disposed of since such date in the ordinary
course of business.
(c) Except as disclosed in the Disclosure Certificate, all
buildings and other improvements located on any Real Property or any real
property leased by the Company or any Subsidiary or Joint Venture conform
in all material respects to all applicable building codes, zoning
ordinances, other statutes and regulations, restrictive covenants, and
deed restrictions applicable thereto.
3.19 Receivables; Inventory. (a) All of the accounts, notes
and other receivables which are reflected in the most recent balance sheet
included in the SEC Filings were acquired in the ordinary and regular
course of business and, except to the extent reserved against on such
balance sheet, have been collected in full, or, to the best knowledge of
the Company, will be collected in full, in the ordinary and regular course
of business.
(b) All of the inventory reflected on the most recent
balance sheet included in the SEC Filings consisted or, to the best
knowledge of the Company, will consist, except as indicated thereon, of
items of a quantity and quality useable or saleable without discount in
the ordinary and regular course of business.
3.20 Insurance. Set forth in the Disclosure Certificate is a
list (including applicable deductible amounts and limitations) of all
insurance maintained by the Company or any Subsidiary or under which any
of them is entitled to coverage or benefits. True and complete copies of
such insurance policies have previously been made available, and will upon
request be delivered, to Parent and Purchaser. Except as set forth in the
Disclosure Certificate, to the best knowledge of the Company, the Company
has in place adequate insurance coverage with respect to all litigation
pending against the Company or any Subsidiary.
-27-<PAGE>
3.21 Environmental Matters. (a) For purposes of this
Agreement, "Environmental Law" means any applicable federal, state or
local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction or
agreement with any governmental entity related to (i) the protection,
preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, ground water, drinking water
supply, surface soil, subsurface soil, plant and animal life or any other
natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release or disposal of Hazardous Substances (as defined in Section 3.21(b)
below). The term Environmental Law includes, without limitation: the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Subsection 9601, et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S. C. Subsection 6901, et seq.; the Clean Air
Act, as amended, 42 U.S.C. Subsection 7401, et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S. C. Subsection 1251, et seq.; the
Toxic Substances Control Act, as amended, 15 U.S.C. Subsection 2601,
et seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C.
Subsection 11001, et seq.; the Safe Drinking Water Act, 42 U.S.C. Subsection
300f, et seq.; all comparable state and local laws; and any common law (
including without limitation, common law that may impose strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Substance.
(b) As used in this Agreement, "Hazardous Substance" means
any substance presently listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated, under
any Environmental Law, whether by type or by quantity, including any
material containing any such substance as a component. Hazardous
Substances include, without limitation, petroleum or any derivative or by-
product thereof, asbestos, radioactive material, polychlorinated
biphenyls, and battery acids.
(c) Except as set forth in the Disclosure Certificate, (i)
neither the Company nor any Subsidiary or Joint Venture nor any real
property previously or currently owned by any of them, has been or is in
violation of, or liable for remediation costs or any other damages or
penalties under, any Environmental Law, except for any such violations or
liabilities which would not reasonably be expected, in the aggregate, to
have a Material Adverse Effect; and (ii) to the best knowledge of the
Company, there are no actions, suits, demands, notices, claims,
investigations or proceedings under any Environmental Law pending or
threatened against the Company or any Subsidiary or Joint Venture or
relating to any real property previously or currently
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owned or occupied by the Company or any Subsidiary or Joint Venture or at
which Hazardous substances alleged to have been generated by the Company
or any Subsidiary or Joint Venture were treated, stored, or disposed,
including without limitation, any notices, demand letters or requests for
information from any governmental entity making inquiries relating to any
Environmental Law.
(d) Set forth in the Disclosure Certificate is a complete
list of all reports, assessments, evaluations, surveys, or other such
documents relating to the Company's compliance with any Environmental Law,
any Subsidiary's compliance with any Environmental Law, any Joint
Venture's compliance with any Environmental Law, or Environmental Law
matters affecting or involving any real property previously or currently
owned or occupied by the Company or any Subsidiary or Joint Venture which,
to the best knowledge of the Company, have been prepared since December
31, 1990. The Company has made available, and will upon request deliver,
to Parent true and complete copies of all such reports, assessments,
evaluations, surveys, or other such documents in the Company's possession.
3.22 Disclosure. All information and documents provided prior
to the date of this Agreement, and all information and documents
subsequently provided, to Parent or Purchaser or their Representatives (as
defined in section 5.8) by or on behalf of the Company or the Subsidiaries
or Joint Ventures, to the best knowledge of the Company, are or contain,
or will be or will contain as to subsequently provided information or
documents, true, accurate and complete information with respect to the
subject matter thereof and are, or will be as to subsequently provided
information or documents, fully responsive to any specific request made by
or on behalf of Parent or Purchaser or their Representatives. In
furtherance and not in limitation of the foregoing, the representations
and warranties of the Company contained in this Agreement and the
information set forth in the Disclosure Certificate do not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements contained herein or therein not
misleading.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
The Company covenants and agrees that, prior to the Effective
Time, unless Parent and Purchaser shall otherwise agree
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in writing, or except as disclosed in the Disclosure Certificate as of the
date hereof or as otherwise expressly contemplated by this Agreement:
(a) Neither the Company nor any of the Subsidiaries or
Joint Ventures shall take any action except in the ordinary course of
business and consistent with past practices, and the Company shall use its
best efforts to maintain and preserve its business organization,
franchisee network, assets, prospects, employees and advantageous business
relationships.
(b) Neither the Company nor any of the Subsidiaries or
Joint Ventures shall, directly or indirectly, do any of the following:
(i) incur any expenses in contemplation of a reorganization or
restructuring of the Company; (ii) amend its Certificate or Articles of
Incorporation or Bylaws or similar organizational documents; (iii) split,
combine or reclassify any shares of its capital stock or declare, set
aside or pay any dividend or make any distribution, payable in cash,
stock, property or otherwise with respect to its capital stock; (iv)
transfer any stock or any assets or liabilities of any Subsidiary or Joint
Venture except in the ordinary course of business and consistent with past
practice; (v) adopt a plan of liquidation or resolutions providing for the
liquidation, dissolution, merger, consolidation or other reorganization of
the Company except the Merger; or (vi) authorize or propose any of the
foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(c) Neither the Company nor any of the Subsidiaries or
Joint Ventures shall, directly or indirectly: (i) issue, sell, pledge,
encumber or dispose of, or authorize, propose or agree to the issuance,
sale, pledge, encumbrance or disposition of, any shares of its capital
stock or any other equity securities or any Rights of Purchase with
respect thereto, except for Shares issuable upon exercise of Options
outstanding on the date hereof and which by their terms are or become
exercisable at or prior to the Effective Time; (ii) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or make any
material investment either by purchase of stock or securities,
contributions to capital, property transfer or purchase of any material
amount of property or assets, in any other individual or entity; (iii)
other than as set forth in the Disclosure Certificate or other than
indebtedness incurred from borrowings made pursuant to existing lending
arrangements set forth in the Disclosure Certificate, incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee, endorse (other than to a Company
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account) or otherwise as an accommodation become responsible for, the
obligations of any other individual or entity, or make any loans or
advances, including without limitation, advances to dealers or franchisees
and guarantees of leases, regardless of whether made in the ordinary course
of business or consistent with past practice; (iv) release or relinquish any
Material Contract right; (v) settle or compromise any pending or threatened
suit, action or claim by or against the Company involving a payment by the
Company exceeding $25,000; (vi) take any action involving possible
expenditures, contingent liabilities or the acquisition or disposition of
assets other than the purchase or sale of inventory in the ordinary course
of business, in each case in excess of $25,000; or (vii) authorize or
propose any of the foregoing, or enter into or modify any contract,
agreement, commitment or arrangement to do any of the foregoing.
(d) Each of the Company and the Subsidiaries and Joint
Ventures shall use its best efforts to keep in place its current insurance
policies, including but not limited to director and officer liability
insurance, which are material (either individually or in the aggregate);
and notwithstanding such efforts, if any such policy is cancelled, the
Company shall use its best efforts to replace such policy or policies.
(e) Except in accordance with the provisions of this
Article IV, neither the Company nor any of the Subsidiaries or Joint
Ventures shall enter into any agreement or otherwise agree to do anything,
which to the Company's best knowledge at the time of such action, would
make any representation or warranty of the Company in this Agreement
untrue or incorrect in any material respect as of the date hereof and as
of the Closing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement. (a) As promptly as practicable after
execution of this Agreement, the Company shall prepare a proxy statement
for use in connection with the Special Meeting (the "Proxy Statement") and
file a preliminary copy of the same with the Commission. The Company will
notify the Parent and Purchaser promptly of the receipt of any comments
from the Commission or its staff and of any request by the Commission or
its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply the Parent and Purchaser with
copies of all correspondence between the Company or any of its
representatives, on the one hand, and the
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Commission or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the Effective Time there
shall occur any event that should be set forth in an amendment of, or
supplement to, the Proxy Statement, the Company will promptly prepare and
mail to its stockholders such an amendment or supplement. The Company will
not distribute or file the Proxy Statement, or any amendment thereof or
supplement thereto, to which the Parent and Purchaser reasonably objects;
provided that the Company shall have the right to distribute or file any
amendments or supplements required in the written opinion of counsel to the
Company to be made by applicable law. The Company shall take all reasonable
action required so that the Proxy Statement and all amendments and
supplements thereto will comply as to form in all material respects with the
provisions of the Exchange Act.
(b) The Company shall cause the definitive Proxy Statement
to be mailed to the Company's stockholders at the earliest practicable
time.
5.2 Meeting of Stockholders of the Company. The Company shall
promptly take all action necessary, in accordance with the Corporation
Law, the Merger Law, and its Articles of Incorporation and Bylaws, to
convene a special meeting of the stockholders of the Company as promptly
as practicable to consider and vote upon the Merger pursuant to the terms
of this Agreement (the "Special Meeting"). Neither the Company nor the
Board of Directors shall take any action which would make any approval of
the Merger necessary, other than the approval of the holders of Shares
representing a majority of the outstanding Shares. The Proxy Statement
shall contain at all times up to and including the date of the Special
Meeting, the recommendation of the Board of Directors of the Company and
of the Investment Committee that the stockholders of the Company vote to
adopt and approve the Merger, subject to the right of the Investment
Committee and the Board of Directors to withdraw such recommendations if,
by a majority vote, either the Investment Committee or the Board of
Directors in the exercise of its fiduciary duties makes a good faith
judgment, based as to the legal issues involved on the written advice of
legal counsel, that failure to withdraw such recommendation would
constitute a breach of its fiduciary duties. Subject to such right of the
Investment Committee and the Board of Directors to withdraw its
recommendation of the Merger in accordance with the exercise of its
fiduciary duties, the Company and the Board of Directors shall use their
best efforts to obtain the necessary approvals of the stockholders of the
Company and shall take all other action necessary or, in the reasonable
judgment of the Parent and Purchaser, helpful to secure the vote or
consent of stockholders of the Company.
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5.3 Cancellation of Stock Options and Stock Appreciation
Rights; Certain Employee Terminations. (a) The Company shall cancel all
outstanding Options issued pursuant to the Option Plans or otherwise to
the extent required by Section 1.6 hereof, and shall comply with all
requirements regarding income tax withholding in connection therewith.
(b) The Company shall cancel and settle all SAR Agreements
effective as of the Effective Date and shall comply with all requirements
regarding income tax withholding in connection therewith.
(c) The Company shall cause the Option Plans to be
terminated effective as of the Effective Time and shall establish to the
reasonable satisfaction of the Parent and Purchaser that no person or
entity (whether or not a participant in any Option Plan or SAR Agreement)
has or will have any right to acquire any interest in the Company, the
Surviving Corporation or the Purchaser as a result of the exercise of
Options, Stock Appreciation Rights or other Rights of Purchase on or after
the Effective Time.
(d) Effective as of the Effective Time, the Company shall
terminate the employment of (i) John E. Siipola, as Chairman and a Member
of the Office of Chief Executive Officer of the Company, and (ii) Horst K.
Mehlfeldt, as Vice Chairman and Member of the Office of Chief Executive
Officer of the Company.
5.4 Fees and Expenses. (a) Except as provided in Section
5.4(c), all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
(b) (i) If this Agreement is terminated (A) by Purchaser
and the Parent pursuant to Section 8.1(b)(ii) or 8.1(d)(iii), but limited
only to a termination based solely on a failure of the condition set forth
in Section 6.2(b) or the failure by the Company to fulfill any of its
obligations hereunder, or (B) by the Company pursuant to Section
8.1(c)(iii), or (C) by Purchaser and the Parent pursuant to Section
8.1(d)(i), 8.1(d)(ii), or 8.1(d)(iv), and (ii) within one year from the
date of this Agreement (A) any corporation, partnership, person, entity or
"group" (as that term is used in Section 13(d)(3) of the Exchange Act),
including the Company or any of the Subsidiaries but excluding Parent, the
Purchaser or any of their affiliates and excluding any group of which
Parent, the Purchaser or any of their affiliates is a member ("Another
Person"), shall have acquired or agreed to acquire all or a substantial
portion of the assets of the Company or consummated or agreed to
consummate a merger or consolidation with, or other acquisition
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of, the Company, (B) Another Person shall have acquired or agreed to acquire
beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of
35% or more of the Shares then outstanding, or (C) a "change in control,"
within the meaning of Item 1 of Form 8-K under the Exchange Act, of the
Company involving Another Person shall have occurred, the Company shall,
within five business days after consummation of the transaction referred
to in clause (ii) above, pay to Parent and Purchaser (by transfer of same-
day funds to an account designated by Parent for such purpose) an amount
equal to $1,000,000, less any funds paid by the Company to the Parent or
Purchaser pursuant to Section 5.4(c); provided such amount shall be
payable by the Company with respect to any such transaction only if (y)
the transaction provides for the Company or the holders of any Shares
being purchased in such transaction to receive consideration per Share
having an indicated value per Share which is equal to or greater than the
Merger Consideration (as the same may have been reduced as provided in
Section 1.7), or (z) the amount of consideration received or to be
received in such transaction is not readily determinable on a per Share
basis and the Investment Committee or another committee of disinterested
members of the Board of Directors of the Company fails to make a good
faith determination that, to the stockholders of the Company from a
financial point of view, the transaction is not comparable to the Merger
or more favorable than the Merger.
(c) If this Agreement is terminated (i) by Purchaser and
the Parent pursuant to Section 8.1(b)(ii) or 8.1(d)(iii), but limited only
to a termination based solely on (A) a failure of the condition set forth
in Section 6.2(b) otherwise than by an act of God occurring subsequent to
the date of this Agreement, or (B) the failure by the Company to fulfill
any of its obligations hereunder, or (ii) by the Company pursuant to
Section 8.1(c)(iii), or (iii) by Purchaser and the Parent pursuant to
Section 8.1(d)(i), 8.1(d)(ii), or 8.1(d)(iv), the Company will, within
five business days after notice by the Parent and the Purchaser to the
Company, reimburse the Parent and the Purchaser for all reasonable out-of-
pocket costs and expenses (including, without limitation, reasonable
commitment fees, reasonable termination fees, reasonable attorney fees and
expenses incurred by potential lenders which the Parent or Purchaser is
obligated to reimburse, and other fees and expenses incurred in connection
with arranging financing for the Merger, legal fees and expenses,
appraisal fees, fees and expenses of financial advisors and fees and
expenses of accountants) incurred by the Purchaser or Parent or on their
behalf in connection with the preparation or negotiation of this Agreement
or of the transactions contemplated hereby or otherwise incurred in
contemplation of this Agreement, the Merger or the other transactions
contemplated by this Agreement; provided that (y)
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the Company shall not be obligated to pay any additional amounts under this
Section 5.4(c) if Parent and Purchaser have been paid the amount provided
in Section 5.4(b) above, and (z) the Company shall have the right to review
all expense receipts (other than receipts which contain privileged or
confidential information).
(d) Notwithstanding anything to the contrary set forth in
Section 5.4(c), the Company shall not be obligated to pay any amounts
under Section 5.4(c) if this Agreement is terminated by the Purchaser and
the Parent pursuant to Section 8.1(d)(iii) as a result of the failure by
Parent and Purchaser to (i) approve the terms and conditions of either (y)
any employment agreement described in Section 6.2(g) pursuant to which the
employee would receive a salary and incentive bonus opportunities which
are substantially similar to those presently afforded to him as an
employee of the Company, or (z) any indemnification and release
contemplated by Section 6.2(o) that contains provisions which are not
inconsistent with those set forth in paragraph 5 of the letter of intent
between Parent and the Company, dated March 13, 1996 and thereafter
amended (the "Letter of Intent"); or (ii) fulfill the condition set forth
in Section 6.2(c).
5.5 Further Assurances. Subject to the terms and conditions
herein provided, including those contained in Section 5.6, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
and to cooperate with each other in connection with the foregoing,
including, but not limited to, using reasonable efforts (a) to obtain all
necessary waivers, consents and approvals from other parties to Material
Contracts, (b) to obtain all necessary consents, approvals and
authorizations as are required to be obtained under any federal, state or
foreign law or regulations, (c) to defend all lawsuits or other legal
proceedings challenging this Agreement or the transactions contemplated
hereby, (d) to lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate
the transactions contemplated hereby, (e) to effect all necessary filings,
including, but not limited to, filings with the Commission, under the
Hart-Scott-Rodino Act and under the rules or regulations of any other
governmental authorities, (f) to fulfill all conditions to this Agreement
and to any agreements related to the financing contemplated by Section
6.2(c), and (g) to keep the other parties reasonably apprised of the
status of all such efforts.
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5.6 No Solicitation. (a) The Company, each Subsidiary, and
their respective directors, officers, and authorized agents shall not, and
shall not authorize or direct any other person to, directly or indirectly,
(i) participate in discussions or negotiations with or provide any
confidential information regarding the Company to any person for the
purpose of soliciting, encouraging, or enabling Another Person to propose
an acquisition of any of the capital stock of the Company (other than
pursuant to the presently outstanding Options) or all or any substantial
portion of the assets or business of the Company (collectively, an
"Acquisition Proposal"), or (ii) solicit from, encourage, negotiate with,
or accept from Another Person an Acquisition Proposal.
(b) Notwithstanding the foregoing, if the Board of
Directors of the Company, in the exercise of its fiduciary duties, makes a
good faith determination that the Board of Directors' failure to permit
the Company to take any action described in Section 5.6(a) would
constitute a breach of its fiduciary duties (based as to the legal issues
involved on the written opinion of legal counsel), the Company shall so
advise Parent and Purchaser and, thereafter, the taking of any such action
shall not be a violation of Section 5.6(a). In the event that the Company
receives an Acquisition Proposal or any communication with respect thereto
from Another Person or in the event that the Company takes any action
described in Section 5.6(a), the Company shall immediately give to Parent
and Purchaser written notice of the substance of such Acquisition Proposal
or communication, or the nature and substance of the information furnished
or the action taken, as the case may be, and thereafter keep Parent and
Purchaser fully informed with respect thereto.
5.7 Notification of Certain Matters. The Company shall give
prompt notice to the Parent and Purchaser, and the Parent and Purchaser
shall give prompt notice to the Company, of (a) the occurrence, or failure
to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date
hereof to the Effective Time, (b) any material failure of the Company or
the Parent or Purchaser or any of their respective affiliates, as the case
may be, or of any of their respective officers, directors, employees or
agents, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, (c) any material
claims, actions, proceedings or investigations commenced or, to the best
of its or their knowledge, threatened, involving or affecting the Company
or any of the Subsidiaries or Joint Ventures or any of their properties or
assets, or, to the best of its or their
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knowledge, against any employee, consultant, director, officer or
stockholder of the Company or any of the Subsidiaries or Joint Ventures,
in his, her or its capacity as such and (d) any material adverse change
in the condition (financial or otherwise), business or prospects of the
Company and the Subsidiaries and Joint Ventures, taken as a whole, or the
occurrence of an event known to the Company which, so far as reasonably can
be foreseen at the time of its occurrence, would result in any such change;
provided, however, that no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
5.8 Access to Information. From the date hereof to the
Effective Time, the Company shall, and shall cause the Subsidiaries and
Joint Ventures and the officers, directors, employees and agents of the
Company and each Subsidiary and Joint Venture to, afford the officers,
employees, advisors and agents of the Parent or Purchaser and the banks or
other financial institutions arranging or providing the financing
contemplated by Section 6.2(c) (collectively, the "Representatives")
complete access at all reasonable times to its officers, employees,
agents, properties, books, records and contracts, and shall furnish the
Parent, Purchaser, and the Representatives with such operating and other
data and information as they may reasonably request. Subject to the
requirements of law, the Parent and Purchaser shall, and shall use
reasonable efforts to cause the Representatives to, hold in confidence and
not use all such nonpublic information until such time as such information
is otherwise publicly available other than through a breach of this
Section 5.8, and, if this Agreement is terminated, the Parent and
Purchaser will, and will use reasonable efforts to cause the
Representatives to, deliver to the Company all documents, work papers and
other material (including copies, extracts and summaries thereof) obtained
by or on behalf of any of them directly or indirectly from the Company as
a result of this Agreement or in connection herewith, whether so obtained
before or after the execution hereof. No investigation pursuant to this
Section 5.8 shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties hereto.
5.9 Directors' Indemnification. The Parent and the Surviving
Corporation will enter into Indemnification Agreements, substantially in
the form set forth in Exhibit A hereto (with such changes therein as the
Company and the Purchaser may agree) with each present director of the
Company as of the Effective Time. The Company shall, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, provide like indemnification for each present and
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former director and officer of the Company or any of the Subsidiaries,
including, without limitation, each member of the Investment Committee;
provided, however, that such indemnification shall not be available to
those officers of the Company specified in Section 6.2(m) for liability
incurred as a result of such officer's knowledge that his Certificate
under Section 6.2(m) was false in any material respect when executed.
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger
shall be subject to the fulfillment or waiver at or prior to the Closing
of the following conditions:
(a) Stockholder Approval. The Merger pursuant to the
terms of this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of the Company.
(b) Hart-Scott-Rodino Act. Any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the
Hart-Scott-Rodino Act shall have expired or been terminated.
(c) No Injunction or Proceedings. No preliminary or
permanent injunction or other order, decree or filing issued by a court of
competent jurisdiction or by a governmental agency or commission, nor any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, shall be in effect which materially adversely
affects the Merger, and no suit, action, or proceeding shall be pending by
or with any court or other governmental agency which seeks to have
declared illegal or would make illegal or otherwise prevent the
consummation of the Merger or seeks damages with respect thereto.
(d) Consents. The Company, Parent, and the Purchaser
shall have obtained such licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to Material Contracts as are necessary for consummation of the
Merger, excluding licenses, permits, consents, approvals, authorizations,
qualifications or orders which the failure to obtain will not, in the
aggregate, have a Material Adverse Effect.
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(e) Fairness Opinion(s). If requested by the Company
prior to the Mailing Date, the Company shall have received from
PaineWebber Incorporated a written opinion addressed to the Company for
inclusion in the Proxy Statement that the Merger Consideration is fair,
from a financial point of view, to the stockholders of the Company (the
"Fairness Opinion"). Such Fairness Opinion, if any, and the fairness
opinion delivered to the Company by PaineWebber Incorporated on November ,
1995 shall not have been withdrawn.
6.2 Additional Conditions to the Obligation of the Parent and
Purchaser to Effect the Merger. The obligation of the Parent and
Purchaser to effect the Merger is also subject to the satisfaction at or
prior to the Closing of the following additional conditions, unless waived
by the Parent and Purchaser:
(a) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations and
agreements required to be performed by it under this Agreement prior to
the Effective Time.
(b) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement which are
qualified as to materiality shall be true and correct, and any such
representations and warranties not so qualified shall be true and correct
in all material respects, at and as of the time of the Closing as if made
at and as of such time, except as expressly contemplated by this
Agreement.
(c) Financing. The Parent and Purchaser shall have
obtained financing or other sources of funds necessary to pay the
aggregate Merger Consideration and to replace certain of the existing
indebtedness of the Company on terms acceptable to Parent in its sole
discretion.
(d) Cancellation of Stock Options and SARs. The Company
shall have cancelled and settled all Options and Stock Appreciation Rights
as required by Sections 1.6 and 5.3(a) and (b).
(e) Redemption of Rights. The Company shall have taken
all necessary actions to cause the Rights to be extinguished or redeemed
effective at the Effective Time.
(f) Compliance with the Nevada Business Combination
Statute. The Purchaser shall be satisfied in its sole discretion that the
Board of Directors of the Company shall
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have taken all actions required under the Corporation Law to render the
restrictions on combinations with interested stockholders of Section
78.438 of such Law inapplicable to the Merger.
(g) Employment Agreements. Employment agreements between
the Company and each of Messrs. Steven P. Cloward, John B. Adams, and
Thomas L. Staker, upon terms and conditions acceptable to Parent and
Purchaser, shall be in full force and effect. Such terms and conditions
shall include, in the case of Mr. Cloward, his agreement to the
cancellation and settlement of his Stock Appreciation Rights in
consideration for the execution of the employment agreement.
(h) Post-September 30 Transaction Expenses. The Company
shall have furnished to Parent and Purchaser a true and complete list of
the Company's Post-September 30 Transaction Expenses, together with
letters or other correspondence from each Interested Party to whom such
Expenses were paid or are payable, which letters or other correspondence
shall confirm the amount thereof and that the Company has no other
liability or obligation to such Interested Party except as the Parent and
Purchaser shall have consented to in writing.
(i) Legal Opinion(s). Parent and Purchaser shall have
received an opinion of Lionel Sawyer & Collins or Hopper and Kanouff,
counsel to the Company, dated the Closing Date and addressed to Parent and
Purchaser, substantially in the form of Exhibit B to this Agreement.
(j) Resignations and Releases. Parent and Purchaser shall
have received letters of resignation, effective as of the Closing,
executed and tendered by (i) each of the then incumbent directors of the
Company and the Subsidiaries, (ii) any non-employee officers of the
Company and the Subsidiaries, and (iii) Messrs. Siipola and Mehlfeldt, as
required by Section 5.3(d) hereof. Each such resignation shall contain an
acknowledgment that the director or officer has been paid all amounts
owing to him by the Company or any Subsidiary in connection with his
services as a director or officer and, in the cases of Messrs. Siipola and
Mehlfeldt, as an employee of the Company or any Subsidiary (including
without limitation, severance obligations), and shall release the Company
and the Subsidiaries from any further liability of any nature whatsoever
to the director, officer, and/or employee, except as otherwise provided in
Section 5.9 of this Agreement.
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(k) Dissenter's Rights. The number of Shares as to which
dissenters' rights shall have been properly asserted and not withdrawn or
forfeited under applicable law shall not exceed 5% of the then outstanding
Shares.
(l) Transfer Agent Certificate. Parent shall have
received a certificate of the Company's transfer agent, dated the Closing
Date, setting forth the number of issued and outstanding Shares.
(m) Officers' Certificates. The Company shall have
furnished to Parent and Purchaser Certificates, signed on behalf of the
Company by Messrs. Siipola, Mehlfeldt and Cloward, as members of its
Office of Chief Executive Officer, and by Mr. Adams, its Chief Financial
Officer, and by each of them individually, that each such person has made
reasonable inquiry and based thereon certifies that, to the best of his
knowledge and belief, the conditions set forth in Sections 6.2(a) and (b)
have been satisfied as of the Closing Date and that he understands that
Parent and Purchaser are relying thereon in consummating the Merger. Each
such officer shall have no liability to Parent or Purchaser after the
Closing except to the extent, if any, that he knew that a matter, as
represented, was false in any material respect when his Certificate was
delivered.
(n) Accountant's Update Letter. At the Closing, Parent
and Purchaser shall have received a letter from Deloitte & Touche, dated
the Closing Date and addressed to Parent and Purchaser, which sets forth
the results of the procedures conducted by Deloitte & Touche on the
financial statements of the Company in accordance with S.A.S. No. 72 and
76 with respect to the period from the last day of the then most recently
completed fiscal quarter for which the Company has filed a Quarterly
Report on Form 10-Q with the Commission, to a specified date not more than
five business days prior to the Effective Time.
(o) BOTI Release. The Company and BOTI shall have
executed a full and final settlement and release with respect to all
matters between them. In connection therewith, the Company may agree to
indemnify BOTI and their directors, officers, stockholders, and agents
(collectively, the "Indemnified Parties") in connection with any legal
proceedings relating to or arising out of the Prior Merger Agreement, its
termination, or the proposed acquisition of the Company by Parent which
are brought against the Company by any stockholder of the Company who is
not an Indemnified Party and in which such Indemnified Party is joined as
a party, provided that the Indemnified Party has not engaged in any
wrongful act or omission in that connection, that the Company is given
prompt notice of the involvement of such Indemnified Party, and the
Company has
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been given control of the representation of such Indemnified Party therein
and the full cooperation of such Indemnified Party. Such indemnification
may not extend to amounts or claims which would be Prior Transaction Costs
or which arise under any contract or agreement to which the Company is not
a party. The form of the indemnification shall have been approved by
Parent prior to its execution by the Company, and BOTI shall have agreed
that all prior indemnification obligations of the Company to BOTI and/or
the Indemnified Parties will be superseded by the indemnification
contemplated by this Section. The Company shall also obtain BOTI's
agreement that Parent shall have no liability of any nature whatsoever
to BOTI in any event, including without limitation, in the event that
the Merger is not consummated.
(p) Other Documents. Parent and Purchaser shall have
received such other certificates and documents (customary in similar
transactions) relating to the satisfaction of the conditions to the
obligations of Parent and Purchaser as either of them or their counsel
shall have reasonably requested.
(q) Approval of Documents. All certificates, agreements,
instruments, and other documents required by this Agreement to be
delivered by the Company or any Subsidiary to Parent and Purchaser at the
Closing shall have been approved by counsel for Parent and Purchaser,
which approval shall not be unreasonably withheld.
6.3 Additional Condition to the Obligation of the Company to
Effect the Merger. The obligation of the Company to effect the Merger
shall be subject to the condition that the Parent and Purchaser shall have
made the deposit described in Section 1.8(a).
ARTICLE VII
CLOSING
7.1 Time and Place. The Closing shall take place at the
offices of Holme Roberts & Owen LLC, 1700 Lincoln, Denver, Colorado, at
2:00 p.m., local time, as soon as practicable after satisfaction or waiver
of all of the conditions contained in Article VI or at such other place or
at such other time as Parent and the Company may mutually agree (the date
of the Closing being referred to herein as the "Closing Date").
7.2 Deliveries at the Closing. At the Closing, Parent,
Purchaser and the Company shall cause the Articles of Merger to be filed
in accordance with the applicable provisions
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of the Merger Law and shall take any and all other lawful actions and do
all other lawful things called for by this Agreement or necessary to cause
the Merger to become effective and to consummate the transactions
contemplated by this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether prior to or after approval of the
Merger by the stockholders of the Company:
(a) By mutual written consent of the Boards of Directors
of the Parent, the Purchaser, and the Company (which, in the case of the
Company, shall include the approval of the Investment Committee); or
(b) By the Company or the Parent and Purchaser if (i) the
Effective Time shall not have occurred on or before July 31, 1996, or (ii)
any of the conditions set forth in Section 6.1 hereof shall not be met at
the Effective Time; provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date.
(c) By the Company:
(i) If the Parent or Purchaser fails to perform in
any material respect any of its obligations under this
Agreement;
(ii) If the representations and warranties of the
Parent and Purchaser set forth in this Agreement are not true
and correct in any material respect at any time prior to the
Effective Time;
(iii) If the Company's Board of Directors, in the
exercise of its fiduciary duty under the circumstances described
in Section 5.2, shall withdraw its recommendation to the
stockholders of the Company to adopt and approve the Merger or
change such recommendation in any manner adverse to Parent and
Purchaser;
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(iv) If, at least three business days prior to the
Mailing Date, the Parent and Purchaser shall have failed to
deliver to the Company copies of executed commitment letters
relating to the financing described in Section 6.2(c); or
(v) If the condition set forth in Section 6.3 hereof
shall not be satisfied at the Effective Time.
(d) By the Parent and Purchaser:
(i) If the Company takes any action described in
Section 5.6(a), regardless of whether Section 5.6(b) permits the
taking of such action in the exercise of the fiduciary duties of
the Company's Board of Directors;
(ii) If there occurs, or the Company enters into or
publicly announces its intention to enter into an agreement with
Another Person to cause to occur, a transaction of the type
described in clauses (i), (ii) or (iii) of Section 5.4(b)
hereof, or Another Person shall have commenced or publicly
announced an intention to commence a tender or exchange offer
for the Company's Shares;
(iii) If any of the conditions set forth in Section
6.2 hereof shall not be satisfied at the Effective Time; or
(iv) If the Company's Post-September 30 Transaction
Expenses, less the total amount by which the aggregate Merger
Consideration payable for all Shares was previously reduced
pursuant to Section 1.7, exceed $1,900,000.
8.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 8.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
the Company or Parent and Purchaser or their affiliates except (i) as set
forth in Sections 5.4 and 5.8, and (ii) that a party shall be liable for
willful defaults of its obligations hereunder. Notwithstanding the
foregoing, if this Agreement is terminated by the Company pursuant to
Section 8.1(c)(iv) or (c)(v), neither Parent nor Purchaser nor their
affiliates shall be liable to the Company as a result thereof if Parent
and Purchaser were unable to obtain financing or other sources of funds
necessary to pay the
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aggregate Merger Consideration and to replace certain of the existing
indebtedness of the Company on terms acceptable to Parent in its sole
discretion or, in the case of any termination pursuant to Section 8.1(c)
(iv), commitments for the same.
8.3 Amendment. This Agreement may not be amended except by
action of the Boards of Directors of each of the parties hereto (which, in
the case of the Company, shall include the approval of the Investment
Committee) set forth in an instrument in writing signed on behalf of each
of the parties hereto; provided, however, that after approval of the
Merger by the stockholders of the Company, no amendment may be made
without the further approval of the stockholders of the Company which
would alter or change any of the terms or conditions of this Agreement if
any of the alterations or changes, alone or in the aggregate, would
materially adversely affect the stockholders of the Company.
8.4 Waiver. At any time prior to the Effective Time, whether
before or after approval of the Merger by stockholders of the Company, any
party hereto, by action taken by its Board of Directors (which, in the
case of the Company, shall include the approval of the Investment
Committee), may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto or (ii) subject to the
provision contained in Section 8.3, waive compliance with any of the
agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party by a duly authorized officer.
ARTICLE IX
GENERAL PROVISIONS
9.1 Public Statements. The parties agree to consult with each
other and their respective counsel prior to issuing any press release or
public announcement with respect to this Agreement, the Merger, or the
transactions contemplated hereby. Each shall use all reasonable efforts
to give to the other parties sufficient opportunity to review any such
press release or other public announcement in advance of release.
9.2 Notices. All notices and other communications hereunder
shall be in writing, shall be delivered personally or sent by U.S. mail,
telecopy, or overnight delivery service, to
-45-<PAGE>
the parties at the following addresses or at such other addresses as shall
be specified by the parties by like notice, and shall be deemed given when
received by the party for whom intended:
(a) If to Parent or the Purchaser:
TBC Corporation
4770 Hickory Hill Drive
P.O. Box 18342
Memphis, Tennessee 38181-0342
Attn: Louis S. DiPasqua
Fax #: (901) 541-3639
with a copy to:
Thompson Hine & Flory P.L.L.
2000 Courthouse Plaza N.E.
P.O. Box 8801
Dayton, Ohio 45401-8801
Attn: Stanley A. Freedman, Esq.
Fax #: (513) 443-6635
(b) If to the Company:
Big O Tires, Inc.
11755 East Peakview Avenue
Englewood, Colorado 80111
Attn: John E. Siipola
Fax #: (303) 790-0225
with a copy to:
Holme Roberts & Owen
1700 Lincoln
Suite 4100
Denver, Colorado 80203
Attn: W. Dean Salter, Esq.
Fax #: (303) 866-0200
and
Hopper and Kanouff, P.C.
1610 Wynkoop Street, Suite 200
Denver, Colorado 80202
Attn: Thomas S. Smith, Esq.
Fax #: (303) 892-0457
The sending party shall have the burden of proving receipt.
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9.3 Interpretation. As used in this Agreement, (i) the
masculine, feminine and neuter genders and the plural and singular numbers
shall be deemed to include the others in all cases where they would so
apply; and (ii) the phrase "to the best knowledge" of any party shall mean
to the knowledge of such party after due and appropriate inquiry.
9.4 Representations and Warranties. The respective
representations and warranties of the Company and the Parent and Purchaser
contained herein shall expire with, and be terminated and extinguished
upon, consummation of the Merger, and thereafter neither the Company nor
the Parent or the Purchaser nor any officer, director, or employee thereof
shall be under any liability whatsoever with respect to any such
representation or warranty, except the persons named in Section 6.2(m) to
the extent, if any, that the Certificate of any such person described
therein was known by such person to be false when it was made or delivered
to Parent or Purchaser.
9.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto.
9.7 Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
9.8 Miscellaneous. This Agreement (including the Exhibits, the
Disclosure Certificate and instruments referred to herein): (i)
constitutes the entire agreement and supersedes all other prior agreements
and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof, including without
limitation, the Letter of Intent; (ii) except for Section 5.9 hereof, is
not intended to confer upon any person other than a party hereto any
rights or remedies hereunder; (iii) shall not be assigned, except by the
Purchaser or Parent to a directly or indirectly wholly owned subsidiary of
the Purchaser or Parent which, in a written instrument shall agree to
assume all of such party's obligations hereunder and be bound by all of
the terms and conditions of this Agreement; and (iv) shall be governed in
all respects, including validity, interpretation and effect, by the
internal laws of the State of Nevada, without giving effect to the
principles of conflict of laws thereof.
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IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by
their duly authorized respective officers.
PARENT: TBC CORPORATION
By:/s/ Louis S. DiPasqua
Louis S. DiPasqua,
President and Chief
Executive Officer
PURCHASER: TBCO ACQUISITION, INC.
By:/s/ Louis S. DiPasqua
Louis S. DiPasqua,
President
COMPANY: BIG O TIRES, INC.
By:/s/ John E. Siipola
John E. Siipola,
Chairman and Member of the
Office of Chief Executive
Officer
And:/s/ Horst K. Mehlfeldt
Horst K. Mehlfeldt,
Vice Chairman and Member
of the Office of Chief
Executive Officer
And:/s/ Steven P. Cloward
Steven P. Cloward,
President and Member
of the Office of Chief
Executive Officer
291.MJW
5/20/96
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EXHIBIT A
INDEMNIFICATION AGREEMENT
This Agreement is made as of the ____ day of _________, 1996 by and
between Big O Tires, Inc., a Nevada corporation (the "Company"), TBC
Corporation, a Delaware corporation (the "Parent"), and the undersigned
(the "Indemnitee"), with reference to the following facts:
WHEREAS, the Company, Parent, and TBCO Acquisition, Inc., a wholly
owned subsidiary of the Parent ("Purchaser"), have entered into an
Agreement and Plan of Merger pursuant to which Purchaser will merge with
and into the Company, with the Company being the surviving corporation;
WHEREAS, pursuant to the Agreement and Plan of Merger, the Company,
as the surviving corporation, and the Parent have agreed to enter into
indemnification agreements with each of the directors of the Company;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Company and the Parent hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) the term "Proceeding" shall include any threatened, pending
or completed claim, action, suit, proceeding or appeal, whether brought by
or in the right of the Company or otherwise, and whether of a civil,
criminal, administrative or investigative nature, in which Indemnitee was,
is or may be involved as a party or otherwise by reason (i) the fact that
Indemnitee is or was a director of the Company, (ii) any actual or alleged
error or misstatement or misleading statement or omission made or suffered
to exist by Indemnitee while acting as a director of the Company, (iii)
any action taken by him or any omission or neglect or breach of duty on
his part while acting as a director of the Company, or (iv) the fact that
he was serving at the request of the Company as a director, trustee,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise;
(b) the term "other enterprise" shall include, without
limitation, employee benefit plans and administrative committees thereof;
(c) the term "fines" shall include, without limitation, any
excise tax assessed with respect to any employee benefit plan; and
<PAGE>
(d) the term "Expenses" shall include, without limitation, all
reasonable attorney's fees, retainers, court costs, costs of attachment or
similar bonds, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, or being or
preparing to be a witness in a Proceeding; and any of the expenses listed
above in this paragraph (d) as may be incurred in establishing a right to
indemnification under this Agreement.
2. Indemnity in Third Party Proceedings. To the fullest extent
permitted under applicable law, the Company shall indemnify Indemnitee,
his executors, heirs or administrators in accordance with the provisions
of this Paragraph 2, against all Expenses, judgments, fines, penalties and
settlements, actually and reasonably incurred by Indemnitee in connection
with the defense or settlement of a Proceeding (other than a Proceeding by
or in the right of the Company to procure a judgment in its favor), unless
it is determined pursuant to Paragraph 5 of this Agreement that Indemnitee
did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Company or, in the case
of a criminal proceeding, had reasonable cause to believe that his conduct
was unlawful. The termination of any such Proceeding by judgment, order
of court, settlement, conviction, or upon a plea of nolo contendere, or
its equivalent, shall not, of itself, create a presumption that Indemnitee
did not act in good faith and in a manner which he reasonably believed to
be in the best interests of the Company, and with respect to any criminal
proceeding, that such person had reasonable cause to believe that his
conduct was unlawful.
3. Indemnity in Proceedings By or In the Right of the Company. To
the fullest extent permitted under applicable law, the Company shall
indemnify Indemnitee in accordance with the provisions of this Paragraph 3
against all Expenses actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of a Proceeding by or in the
right of the Company, unless it is determined pursuant to Paragraph 5 of
this Agreement that he did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification for Expenses shall be made under
this Paragraph 3 in respect of any claim, issue or matter as to which
Indemnitee shall have been adjudged by a court of competent jurisdiction
to be liable to the Company, unless and only to the extent that any court
in which such Proceeding is brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances
of the case, Indemnitee is fairly and reasonably entitled to indemnity for
such Expenses as such court shall deem proper.
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4. Notice of Claim. The Indemnitee, as a condition precedent to his
right to be indemnified under this Agreement, shall give to the Company
notice in writing as soon as practicable of any claim made against him for
which indemnity will or could be sought under this Agreement. Notice to
the Company shall be given at its principal office and shall be directed
to the Corporate Secretary (or such other address as the Company shall
designate in writing to the Indemnitee). Notice shall be deemed received
if sent by registered mail, return receipt requested, properly addressed,
the date of such notice being the date postmarked. In addition, the
Indemnitee shall give the Company such information and cooperation as it
may reasonably request and as shall be within the Indemnitee's power.
Upon receipt of the aforesaid notice, the Company shall have the right, at
its own expense, to retain counsel reasonably satisfactory to the
Indemnitee to defend any such claim and the right to settle the same in
cooperation with any other person who may have such right. The Company
shall determine whether it will defend such claim and shall notify the
Indemnitee of its decision in writing within 10 days of receipt of the
Indemnitee's notice of such claim. If the Company elects to defend such
claim, the Indemnitee shall be permitted to participate in such defense
only at his own expense; provided, however, that if the Company is also a
party or is threatened to be made a party to the Proceeding and the
Indemnitee reasonably concludes that there are defenses available to him
which are different than those available to the Company, the Indemnitee
may retain his own counsel at the expense of the Company if the Indemnitee
is otherwise entitled to indemnification hereunder. In the event that the
Company shall elect not to defend such claim or shall not notify the
Indemnitee in writing of its decision within such 10-day period, then the
Indemnitee may retain counsel and conduct the defense of such Proceeding
as he may in his discretion deem proper, at the expense of the Company if
the Indemnitee is otherwise entitled to indemnification hereunder.
5. Right of Indemnitee Upon Application; Procedure Upon Application.
Any indemnification or advance under Paragraphs 2, 3 or 10 hereof shall be
made no later than 30 days after receipt of the written request of
Indemnitee, unless a determination is made within said 30 day period by
(a) the Board of Directors of the Company by a majority vote of a quorum
thereof consisting of directors who are not parties to such Proceedings,
(b) independent legal counsel in a written opinion (which counsel shall be
appointed if such a quorum is not obtainable), or (c) the court before
which the relevant Proceeding was brought, that the Indemnitee has not met
the relevant standards for indemnification set forth in Paragraphs 2 and
3.
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6. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all papers
required and shall do everything that may be necessary to secure such
rights, including the execution of such documents as are necessary to
enable the Company effectively to bring suit to enforce such rights.
7. Indemnification Hereunder Not Exclusive. The indemnification and
advancement of expenses provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under
applicable law, insurance policies, any agreement, or otherwise, both as
to action in his official capacity and as to action in another capacity
while holding such office. However, Indemnitee shall reimburse the
Company for amounts paid to him pursuant to such other rights to the
extent such payments duplicate any payments received pursuant to this
Agreement. Nothing herein shall be deemed to diminish or otherwise
restrict the Indemnitee's right to indemnification under any provision of
the Articles of Incorporation or Bylaws of the Company.
8. Indemnification of Expenses of Successful Party. Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee has
been successful on the merits or otherwise in defense of any Proceeding or
in defense of any claim, issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against any and all
Expenses incurred in connection therewith.
9. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for a
portion of Expenses, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
Expenses to which Indemnitee is entitled.
10. Advances of Expenses. Expenses incurred by the Indemnitee in
connection with any Proceeding, except the amount of any settlement, shall
be paid by the Company in advance upon request of the Indemnitee that the
Company pay such Expenses. Indemnitee hereby undertakes to repay to the
Company the amount of any Expenses theretofore paid, reimbursed or
advanced by the Company, plus interest on such amount equal to the rate
announced from time to time by Colorado National Bank as its "prime" rate,
to the extent that it is ultimately determined that such Expenses were not
reasonable in nature or amount or that Indemnitee was not otherwise
entitled to indemnification.
11. Settlement of Claims. The Company shall not be liable to
indemnify the Indemnitee under this Agreement for any amounts paid in
settlement of any Proceeding effected without the
-4-<PAGE>
Company's written consent. The Company shall not settle any Proceeding in
any manner which would impose any penalty or limitation on the Indemnitee
without the Indemnitee's written consent. Neither the Company nor the
Indemnitee will unreasonably withhold their consent to any proposed
settlement. The Company shall pay promptly the amount of any settlement
consented to by the Company and the Indemnitee.
12. Guarantee of the Parent. By its execution of this Agreement,
the Parent guarantees the full and prompt payment when due of any amounts
owed under this Agreement at any time by the Company to the Indemnitee and
the performance by the Company of all of its other obligations to
Indemnitee under this Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one instrument.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Nevada, as applicable
to agreements executed and wholly performed therein.
15. Saving Clause. Wherever there is a conflict between any
provision of this Agreement and any applicable present or future statute,
law or regulation, or any judgment, decree or order of any court or other
governmental or regulatory body to which the Company or Parent is subject
and contrary to which the Company, the Parent and the Indemnitee have no
legal right to contract, the latter shall prevail. In such event,
however, the affected provisions of this Agreement shall be curtailed and
restricted only to the extent necessary to bring them within applicable
legal requirements and the Company shall indemnify Indemnitee to the
fullest extent permitted by the remaining valid and enforceable provisions
of this Agreement or by applicable law.
16. Coverage and Successors. The provisions of this Agreement shall
apply with respect to Indemnitee's service as a director of the Company
prior to the date of this Agreement and with respect to all periods of
such service after the date of this Agreement, even though Indemnitee may
have ceased to be a director of the Company when he exercises his rights
hereunder. All of Indemnitee's rights to indemnification under this
Agreement shall apply with equal force to and be enforceable by
Indemnitee's executors, heirs and administrators. This Agreement shall be
binding upon the Company, the Parent, and their respective successors and
assigns, including any transferee of all or substantially all of their
assets and any successor by merger or operation of law. In the event that
the Company shall cease operations or the legal existence of the Company
shall be terminated and, in either such event, there shall be no successor
or assign of the Company, the Parent shall assume and discharge the
Company's obligations to the Indemnitee hereunder.
-5-<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and signed as of the day and year first above written.
BIG O TIRES, INC.
By:___________________________
Title: _______________________
TBC CORPORATION
By:___________________________
Title:________________________
______________________________
Director
280.MJW
5/20/96
-6-<PAGE>
EXHIBIT B
OPINION OF COMPANY COUNSEL
1. Each of the Company and the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power
and authority to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted. Except as otherwise
set forth in Section 3.1 of the Disclosure Certificate, each of the
Company and the Subsidiaries is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction in which its
ownership or leasing of property or the nature of the business conducted
by it, as the same is known to such counsel, makes such qualification
necessary, except for such jurisdictions in which the failure to be so
qualified or in good standing would not, in the aggregate, have a Material
Adverse Effect.
2. The authorized capital stock of the Company is as set forth in
Section 3.2(a) of the Agreement. To such counsel's knowledge, none of the
outstanding capital stock of the Company or the Subsidiaries was issued in
violation of any preemptive rights of any stockholder, and, to such
counsel's knowledge, all such outstanding capital stock is duly
authorized, validly issued, fully paid and nonassessable. Except as set
forth in Section 3.2 of the Disclosure Certificate, to such counsel's
knowledge, there are no outstanding Options, Stock Appreciation Rights, or
other Rights of Purchase with respect to any capital stock of the Company
or any Subsidiary.
3. The Company has the requisite corporate power and authority to
execute and deliver the Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Agreement and the
consummation of the transactions contemplated thereby have been duly
authorized and approved by all necessary corporate action on the part of
the Company. The Board of Directors of the Company has taken all action
necessary to cause the provisions of Sections 78.411 to 78.444 of the
Corporation Law to be inapplicable to the Parent's acquisition of the
Shares pursuant to the Merger or any of the transactions contemplated by
the Agreement. The Company has taken all necessary actions to cause the
Rights to be extinguished or redeemed effective at the Effective Time.
4. The Agreement has been duly and validly executed and delivered
by the Company and constitutes a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (i) insolvency,
reorganization,
<PAGE>
arrangement, fraudulent conveyance, moratorium or other laws relating to
or affecting creditors' rights generally, and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
5. The Agreement complies with the requirements of the Corporation
Law and the Merger Law with respect to the Merger and, upon filing the
Articles of Merger with the Secretary of State of the State of Nevada, the
Merger will become effective in accordance with the Corporation Law and
the Merger Law.
6. Except as set forth in Section 3.4 of the Disclosure
Certificate, neither the execution and delivery of the Agreement by the
Company nor the consummation by the Company of the transactions
contemplated thereby will:
(a) conflict with or result in any breach of any provision of
the Company's Articles of Incorporation or Bylaws;
(b) to such counsel's knowledge, violate, conflict with,
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, result in the termination
of, accelerate the performance required by, result in a right of
termination or acceleration of, or result in the creation of any lien
upon any of the properties or assets of the Company or any Subsidiary
under, any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the
Company or any Subsidiary is a party or to which they or any of their
respective properties or assets may be subject, except for any of the
same which, in the aggregate, would not have a Material Adverse
Effect;
(c) to such counsel's knowledge, violate any judgment, ruling,
order, writ, injunction, decree, statute, law, rule or regulation
applicable to the Company, any Subsidiary, or any of their respective
properties or assets, except for any of the same which, in the
aggregate, would not have a Material Adverse Effect; or
(d) give rise to dissenters' rights on behalf of stockholders
of the Company.
7. All requisite corporate action has been taken by the directors
and stockholders of the Company under the laws of the State of Nevada to
enable the Company to legally consummate the Merger.
-2-<PAGE>
8. All consents, approvals, and authorizations of any governmental
authority required under the laws of the State of Nevada in order for the
Company to consummate the Merger and the transactions contemplated by the
Agreement have been obtained. To such counsel's knowledge, all other
consents, approvals, and authorizations by any governmental authority
required in order for the Company to consummate the Merger and the
transactions contemplated by the Agreement have also been obtained.
9. Except as disclosed in Section 3.9 of the Disclosure
Certificate, to such counsel's knowledge, there are no actions, suits or
proceedings pending or threatened against the Company or any Subsidiary,
nor is the Company or any of the Subsidiaries subject to any order,
judgment or decree, except for individual matters in which the only relief
sought is damages which, in the aggregate, would not have a Material
Adverse Effect.
10. The Proxy Statement, as of the Mailing Date or other delivery to
the stockholders of the Company, appeared on its face to comply as to form
in all material respects with the requirements of the Exchange Act. Such
counsel has participated in the preparation of the Proxy Statement and
nothing has come to the attention of such counsel to cause them to believe
that the Proxy Statement, on the Mailing Date, or other delivery or at the
Effective Time, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (it being understood that such
counsel is not requested to and has not and will not make any comment in
this paragraph with respect to the financial statements, supporting
schedules, and other financial and statistical information contained in
the Proxy Statement or the information covering Parent or Purchaser
contained in the Proxy Statement).
289.MJW
5/20/96
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