<PAGE>
CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
JUNE 30, 1997 0-11579
TBC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0600670
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4770 Hickory Hill Road
Memphis, Tennessee 38141
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (901) 363-8030
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
23,462,450 Shares of Common Stock were outstanding as of June 30, 1997.
INDEX TO EXHIBITS at page 12 of this Report<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
June 30, December 31,
1997 1996
(Unaudited)
CURRENT ASSETS
Accounts and notes receivable, less
allowance for doubtful accounts
of $9,610 on June 30, 1997
and $8,879 on December 31, 1996:
Related parties $ 20,995 $ 18,362
Other 71,007 67,444
Total accounts and notes receivable 92,002 85,806
Inventories 73,188 71,102
Deferred income taxes 6,771 6,716
Other current assets 7,880 8,409
Total current assets 179,841 172,033
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land and improvements 5,701 5,285
Buildings and leasehold improvements 22,201 21,691
Furniture and equipment 28,727 25,929
56,629 52,905
Less accumulated depreciation 20,925 17,818
Total property, plant and equipment 35,704 35,087
TRADEMARKS, NET 17,562 17,787
GOODWILL, NET 14,818 14,900
OTHER ASSETS 12,833 14,075
TOTAL ASSETS $260,758 $253,882
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1997 1996
(Unaudited)
CURRENT LIABILITIES
Outstanding checks, net $ 4,721 $ 559
Notes payable to banks 29,842 21,092
Current portion of long-term debt 628 1,537
Accounts payable, trade 6,156 16,761
Federal and state income taxes payable 805 106
Other current liabilities 14,197 13,998
Total current liabilities 56,349 54,053
LONG-TERM DEBT, LESS CURRENT PORTION 68,348 69,550
NONCURRENT LIABILITIES 2,871 2,753
DEFERRED INCOME TAXES 7,498 7,721
STOCKHOLDERS' EQUITY
Common stock, $.10 par value,
shares issued and outstanding -
23,462 on June 30, 1997 and
23,727 on December 31, 1996 2,346 2,373
Additional paid-in capital 9,684 9,624
Retained earnings 113,662 107,808
Total stockholders' equity 125,692 119,805
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $260,758 $253,882
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
NET SALES* $163,785 $137,561 $308,152 $261,566
COSTS AND EXPENSES:
Cost of sales 139,261 123,854 262,332 233,919
Distribution 7,775 5,314 14,858 9,991
Selling and administrative 8,048 3,973 16,200 7,773
Interest expense 1,553 545 2,974 1,119
Other (income) expense - net (746) (1,330) (1,441) (1,907)
Total costs and expenses 155,891 132,356 294,923 250,895
INCOME BEFORE INCOME TAXES 7,894 5,205 13,229 10,671
PROVISION FOR INCOME TAXES 3,110 1,978 5,214 4,055
NET INCOME $ 4,784 $ 3,227 $ 8,015 $ 6,616
Earnings per share $ .20 $ .14 $ .34 $ .28
Weighted average number of shares
and equivalents outstanding 23,572 23,857 23,642 23,847
* Including sales to related parties of $34,107 and $35,874 in the
three months ended June 30, 1997 and 1996, respectively, and $68,814
and $68,700 in the six months ended June 30, 1997 and 1996,
respectively.
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
Common Stock Additional
Number of Paid-In Retained
Shares Amount Capital Earnings Total
Six Months Ended
June 30, 1996
BALANCE, JANUARY 1, 1996 23,784 $2,378 $ 9,543 $ 92,902 $104,823
Net income for period 6,616 6,616
Issuance of common stock
under stock option and
incentive plans, net 14 2 100 - 102
BALANCE, JUNE 30, 1996 23,798 $2,380 $ 9,643 $ 99,518 $111,541
Six Months Ended
June 30, 1997
BALANCE, JANUARY 1, 1997 23,727 $2,373 $ 9,624 $107,808 $119,805
Net income for period 8,015 8,015
Issuance of common stock
under stock option and
incentive plans 28 3 165 - 168
Repurchase and retirement
of common stock (293) (30) (119) (2,161) (2,310)
Tax benefit from exercise
of stock options - - 14 - 14
BALANCE, JUNE 30, 1997 23,462 $2,346 $ 9,684 $113,662 $125,692
See accompanying notes to consolidated financial statements.
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<PAGE>
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended June 30,
1997 1996
OPERATING ACTIVITIES
Net income $ 8,015 $ 6,616
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,287 2,611
Amortization 492 55
Deferred income taxes (278) (324)
Equity in earnings from joint ventures (241) (162)
Changes in operating assets and liabilities:
Receivables (4,802) (5,459)
Inventories (2,086) (2,997)
Other current assets 529 (770)
Other assets (36) 6
Outstanding checks, net 4,162 (1,711)
Accounts payable, trade (10,605) 26,729
Federal and state income taxes
refundable or payable 713 585
Other current liabilities 199 654
Noncurrent liabilities 118 91
Net cash provided by (used in)
operating activities (533) 25,924
INVESTING ACTIVITIES
Purchase of property, plant and equipment (4,545) (2,539)
Other, net 581 23
Net cash used in investing activities (3,964) (2,516)
FINANCING ACTIVITIES
Net bank borrowings (repayments) under
short-term borrowing arrangements 8,750 (23,413)
Payments on long-term debt (2,111) (97)
Issuance of common stock under stock option and
incentive plans 168 102
Repurchase and retirement of common stock (2,310) -
Net cash provided by (used in)
financing activities 4,497 (23,408)
Increase (decrease) in Cash and Cash Equivalents - -
CASH AND CASH EQUIVALENTS
Balance - Beginning of period - -
Balance - End of period $ - $ -
Supplemental Disclosures of Cash Flow Information:
Cash paid for - Interest $ 2,872 $ 1,357
- Income taxes 4,779 3,794
Supplemental Disclosure of Non-Cash Financing
Activity:
Tax benefit from exercise of stock options $ 14 $ -
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statement Presentation
The consolidated balance sheet as of June 30, 1997, the consolidated
statements of income for the three months and six months ended June 30,
1997 and 1996, and the consolidated statements of stockholders' equity
and cash flows for the six months ended June 30, 1997 and 1996, have been
prepared by the Company, without audit. It is Management's opinion that
these statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows as of June 30, 1997 and
for all periods presented. The results for the periods presented are not
necessarily indicative of the results that may be expected for the full
year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's 1996
Annual Report.
Certain reclassifications have been made in the statements of income
for the periods ended June 30, 1996 to conform to the current
presentation, with no effect on previously reported net income.
2. Earnings Per Share
Earnings per share have been computed by dividing net income by the
weighted average number of common shares and equivalents outstanding.
Common share equivalents included in the computation represent shares
issuable upon assumed exercise of stock options, which would have a
dilutive effect in the respective periods. Fully diluted earnings per
share did not significantly differ from primary earnings per share in the
periods presented.
Statement of Financial Accounting Standards No. 128, "Earnings per
Share", was issued in February 1997 and established new standards for
computing and presenting earnings per share. The Company is required to
adopt this statement beginning with the annual financial statements for
the year ended December 31, 1997; however, the impact is not expected to
be material.
3. Other Assets
Other assets consist of the following (in thousands):
June 30, December 31,
1997 1996
Notes receivable $ 7,844 $ 9,274
Investments in joint ventures 2,735 2,433
Intangible assets, net of amortization 820 831
Other 1,434 1,537
$12,833 $14,075
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TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Other Assets (continued)
The notes receivable totals include a note for $4,897,000 from a
former distributor. The maker of the note was discharged in a proceeding
under Chapter 11 of the Bankruptcy Code in 1991. The Company received
distributions totaling $308,000 from the bankruptcy proceeding. The
Company holds written guarantees of the distributor's account, absolute
and continuing in form, signed by the principal former owners and
officers of the distributor and their wives, upon which the Company filed
suit in 1989. The defendants have pleaded various defenses based on,
among other things, an alleged oral cancellation of the guarantees. The
defendants have also filed a third party complaint against the Company's
former chief executive officer in which they claim the right to recover
against him for any liability they may have to the Company. In October
1994, the Court granted the Company's motion to exclude evidence of any
oral cancellation of the guarantees. That order was reversed by the
Court of Appeals on March 7, 1997, which held, in substance, among other
things, that the defendants should not be barred from offering evidence
to support their defenses of waiver/abandonment and estoppel, subject to
the trial court's rulings on the admissibility of any evidence so
offered. The Company has applied to the Supreme Court of Tennessee for
permission to appeal that reversal. The Company believes that the
defendants' defenses are invalid and that there is no merit to the third
party complaint. The Company knows of no reason to believe that the
defendants will be unable to pay any judgment that may be entered against
them in the action.
4. Goodwill, Trademarks and Other Intangible Assets
Goodwill and trademarks were recorded as a result of the acquisition
of Big O Tires, Inc. on July 10, 1996. Goodwill represents the excess of
cost over the fair value of identifiable net assets acquired. The value
assigned to trademarks was based on an independent third-party valuation
prepared at the time of acquisition. Goodwill, trademarks and other
intangible assets are amortized on a straight-line basis, principally
over 40 years.
The Company periodically reviews the recoverability of intangible
and other long-lived assets. If facts or circum-stances support the
possibility of impairment, the Company will prepare a projection of the
undiscounted future cash flows of the specific intangible assets and
determine if the assigned value is recoverable based on such projection.
If impairment is indicated, an adjustment will be made to the carrying
value of the assets based on the discounted future cash flows. The
Company does not believe that there are any current facts or
circumstances indicating impairment of any of its recorded intangible
assets.
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ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
The Company's financial position and liquidity remain strong. The
Company believes that the combination of its net assets, committed bank
facilities and expected funds from operations will be sufficient to operate
on both a short-term and long-term basis.
Working capital increased from $118.0 million at December 31, 1996 to
$123.5 million at June 30, 1997. Current accounts and notes receivable
increased by $6.2 million and inventories increased by $2.1 million during
the first six months of 1997, due principally to seasonal fluctuations.
Other assets decreased $1.2 million due primarily to collections of notes
receivable. The composite total owed to banks and vendors, in the form of
outstanding checks, notes payable to banks and accounts payable, increased
$2.3 million from December 31, 1996 to June 30, 1997. This increase,
together with cash generated from operations, enabled the Company to fund
the above-noted increases in receivables and inventories, as well as stock
repurchases and normally recurring capital expenditures during the first
six months of 1997.
Results of Operations
As a result of the Company's acquisition of Big O Tires, Inc. on July 10,
1996, there were a number of significant changes in income statement items
between the three months and six months ended June 30, 1997 and the year-
earlier periods.
Net sales increased 19.1% during the second quarter and 17.8% in the
first six months compared to the year-earlier levels, due principally to
the addition of sales by Big O of $36.3 million in the current quarter and
$64.6 million in the first six months of 1997. Sales of tires accounted
for approximately 94% of total sales in the second quarter and 93% in the
first six months of 1997 versus 87% in the second quarter and first half
of 1996. The increased percentage of tire sales was the result of the
Company's decision in December 1996 to discontinue the marketing of
certain non-tire products such as batteries, wheels and ride control
products to TBC's independent distributors. Excluding the contribution by
Big O, TBC's unit tire volume increased 1.5% in the current quarter and
4.4% during the first six months of 1997, compared to the year-earlier
levels. The average tire sales price excluding Big O was relatively
unchanged in the current quarter and was 2.5% lower in the first half of
1997 compared to the year-earlier averages. The principal factor
affecting the average tire sales price was industry-wide price discounting
that has been prevalent throughout much of 1996 and 1997.
Cost of sales as a percentage of net sales decreased from 90.0% in
the second quarter of 1996 to 85.0% in the current quarter. For the year-
to-date period, cost of sales decreased from 89.4% of net sales in 1996 to
85.1% in 1997. The fluctu-ations were due principally to the positive
effects of the Big O acquisition, includ-ing the Company's improved
overall sourcing strength.
Distribution expenses increased $2.5 million in the current quarter
and $4.9 in the first half of 1997 compared to the year-earlier levels.
The increases were primarily due to the inclusion of Big O warehousing and
product delivery expenses of $2.3 million in the current quarter and $4.2
million in the year-to-date period. The remainder of the increases in
1997 were principally due to a greater percentage of shipments through the
Company's distribution facilities rather than direct from manufacturers.
Selling and administrative expenses increased $4.1 million in the
second quarter and $8.4 million in the first six months, compared to the
year-earlier levels. The 1997 totals included expenses for Big O of $4.1
in the current quarter and $7.9 million in the first six months. The
year-to-date increase was also affected by a first quarter 1997 charge of
$810,000 associated with an early retirement program accepted by certain
employees. Excluding these items, selling and administrative expenses
were unchanged in the current quarter and down 3.9% in the year-to-date
period.
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Interest expenses increased $1.0 million in the current quarter and $1.9
million in the first six months of 1997. These net increases were
principally due to long-term borrowings incurred to finance the Big O
acquisition, which resulted in interest expenses of $1.2 million in the
current quarter and $2.3 million in the year-to-date period. These amounts
were partially offset by the impact of lower average short-term bank
borrowings. Interest on short-term borrowings decreased 51.2% in the current
period and 69.2% in the first six months of 1997 compared to the year-earlier
levels.
Net other income decreased in the second quarter and first six months of
1997 compared to the same periods in 1996, since the year-earlier results
included income of $500,000 from the settlement of a trademark infringement
matter.
The Company's effective tax rate increased from 38.0% in the second
quarter and first six months of 1996 to 39.4% in the same periods of 1997,
due primarily to the impact of the Big O acquisition.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on April 23, 1997,
Messrs. Marvin E. Bruce, Robert E. Carroll, Jr. and Robert H. Dunlap were
elected as directors of the Company for a term expiring at the 2000 Annual
Meeting of Stockholders and stockholders approved the appointment of
Coopers & Lybrand as independent public accountants of the Company for the
year ending December 31, 1997.
The number of shares of Common Stock voted for each director elected at
the Annual Meeting and the number of shares with respect to which authority
to vote for each such director was withheld are as follows: 18,856,340
shares were voted for Mr. Bruce and authority to vote 1,097,457 shares for
Mr. Bruce was withheld; 19,622,465 shares were voted for Mr. Carroll and
authority to vote 331,332 shares for Mr. Carroll was withheld; 19,760,754
shares were voted for Mr. Dunlap and authority to vote 193,043 shares for
Mr. Dunlap was withheld. A total of 19,873,842 shares were voted for
approval of the appointment of Coopers & Lybrand, 9,932 shares were voted
against approval, and the holders of 70,023 shares abstained from voting on
such approval.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
None
(b) No reports on Form 8-K were filed during the three months ended
June 30, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TBC CORPORATION
July 29, 1997 By /s/ Ronald E. McCollough
Ronald E. McCollough
Senior Vice President Operations
and Treasurer
(principal accounting and
financial officer)
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INDEX TO EXHIBITS
Located at
Sequentially-
Exhibit No. Description Numbered Page
(10) MATERIAL CONTRACTS
Management Contracts and Compensatory Plans
or Arrangements
10.1 TBC Corporation 1989 Stock Incentive Plan, as
amended and restated April 23, 1997.................. 13
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<PAGE>
EXHIBIT 10.1
TBC CORPORATION
AMENDED AND RESTATED
1989 STOCK INCENTIVE PLAN
________________________________
Effective April 27, 1989
Amended April 26, 1990 and April 23, 1992
Amended and Restated April 23, 1997<PAGE>
Table of Contents
Page
Section 1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Shares Subject to the Plan . . . . . . . . . . . . . . . . 3
Section 4. Administration . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6. Options . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 7. Restricted Share Awards . . . . . . . . . . . . . . . . . . 7
Section 8. Performance Awards . . . . . . . . . . . . . . . . . . . . 9
Section 9. Stock Appreciation Rights . . . . . . . . . . . . . . . . . 10
Section 10. Restricted Shares for Eligible Directors . . . . . . . . . 12
Section 11. Non-Assignability of Incentive Awards . . . . . . . . . . . 15
Section 12. Change of Control . . . . . . . . . . . . . . . . . . . . . 15
Section 13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 14. Compliance with Laws and Exchange
Requirements . . . . . . . . . . . . . . . . . . . . . . . 16
Section 15. Amendment and Termination of Plan . . . . . . . . . . . . 16
Section 16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 17. Benefits of Plan . . . . . . . . . . . . . . . . . . . . . 17
Section 18. Pronouns and Plurals . . . . . . . . . . . . . . . . . . 17
Section 19. Stockholder Approval and Term of Plan . . . . . . . . . . . 17<PAGE>
1989 STOCK INCENTIVE PLAN
Section 1. Purpose.
The purpose of this 1989 Stock Incentive Plan (the "Plan") is to
promote the long-term success of TBC Corporation (the "Company") by
providing financial incentives to officers, key employees and non-employee
directors of the Company and its subsidiaries who are in positions to make
significant contributions toward such success. The Plan is designed to
attract individuals of outstanding ability to employment with the Company
and its subsidiaries and to encourage such individuals to acquire a
proprietary interest in the Company through stock ownership, to continue
employment with the Company and its subsidiaries, and to render superior
performance during such employment. To accomplish the purposes of the
Plan, the Board of Directors of the Company may grant Incentive Awards, as
hereinafter defined, in such amounts and on such conditions as it deems
appropriate, subject to the provisions of the Plan.
Section 2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means and shall be deemed to have occurred
on (i) the date upon which the Company is provided a copy of a Schedule
13D, filed pursuant to Section 13(d) of the Securities Exchange Act of
1934 indicating that a group or person, as defined in Rule 13d-3 under
said Act, has become the beneficial owner of 20% or more of the
outstanding Voting Shares of the Company or the date upon which the
Company first learns that a person or group has become the beneficial
owner of 20% or more of the outstanding Voting Shares of the Company if a
Schedule 13D is not filed; (ii) the date of a change in the composition of
the Board such that individuals who were members of the Board on the date
two years prior to such change (or who were subsequently elected to fill a
vacancy in the Board, or were subsequently nominated for election by the
Company's stockholders, by the affirmative vote of at least two-thirds of
the directors then still in office who were directors at the beginning of
such two year period) no longer constitute a majority of the Board; (iii)
the date the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Shares of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Shares of the
surviving or parent entity) at least 80% of the total voting power
represented by the Voting Shares of the Company or such
-1-<PAGE>
surviving or parent entity outstanding immediately after such merger or
consolidation; or (iv) the date stockholders of the Company approve a plan
of complete Liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee referred to in Section 4.
(e) "Eligible Director" means any director of the Company or any
Subsidiary who is not also an employee of the Company or any Subsidiary.
(f) "Employee" means officers and any other full-time employees of
the Company or any of its Subsidiaries.
(g) "Fair Market Value" means the mean of the closing bid and
asked quotations in the over-the-counter market on the date the value of a
Share is to be determined, as reported by the National Association of
Securities Dealers, through NASDAQ; or in the event the Shares are listed
on any exchange or on the NASDAQ National Market System, the closing price
on such exchange or in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. through NASDAQ, on the
date the value of a Share is to be determined or, if there are no sales on
such date, the mean of the bid and asked price for Shares on such exchange
or in the over-the-counter market, as reported by the National Association
of Securities Deals, Inc. through NASDAQ, at the close of business on such
date. In the event there is no public market for the Shares, then Fair
Market Value of a Share shall be determined by the Committee by such
method as is consistent with the provisions of the Code or the regulations
of the Treasury Department promulgated thereunder.
(h) "Incentive Award" means an Option, Restricted Share Award
(granted under either Section 7 or Section 10 of the Plan), Performance
Award or Stock Appreciation Right granted under the Plan.
(i) "Incentive Stock Option" means an Option that is an Incentive
Stock Option, as defined in Section 422 of the Code.
(j) "Meeting" means the Annual Meeting of the Stockholders of the
Company.
(k) "Nonqualified Stock Option" means an Option that is not an
Incentive Stock Option.
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(l) "Option" means a right to purchase Shares at a Specified
price; "Optionee" means the holder of an Option.
(m) "Participant" means an Employee or Eligible Director selected
to receive an Incentive Award.
(n) "Performance Award" means a right to receive Shares, cash, or
a combination thereof, contingent upon the attainment of performance
objectives determined in the discretion of the Committee as more fully set
forth at Section 8 hereof.
(o) "Restricted Share Award" means a right, granted under either
Section 7 or Section 10 hereof, to receive Shares that is nontransferable
and subject to substantial risk of forfeiture until specific conditions
are met; "Restricted Shares" means Shares which are the subject of a
Restricted Share Award; and "Restricted Period" means, in the case of
Employees, the period established by the Committee pursuant to Section
7(a) and, in the case of Eligible Directors, the period established
pursuant to Section 10(b).
(p) "Shares" means the shares of Common Stock of the Company.
(q) "Stock Appreciation Right" shall have the meaning set forth at
Section 9.
(r) "Subsidiary" means any entity more than 50% of the voting
control of which is held, directly or indirectly, by the Company.
(s) "Tax Date" means the date as of which the amount of the
withholding tax payment with respect to the exercise of a Nonqualified
Stock Option, the termination of the Restricted Period of Restricted
Shares or the payment of a Performance Award is calculated.
(t) "Voting Shares" means any securities of the
Company which vote generally in the election of directors.
(u) "Valuation Date" means the date that the election to exercise
the Stock Appreciation Right is received by the Committee.
Section 3. Shares Subject to the Plan.
(a) Maximum Number. The maximum number of Shares that may be
subject to Incentive Awards granted pursuant to the Plan
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shall be 1,125,000 (1) less the number of Shares subject to options
granted under the Company's 1983 Stock Option Plan through the date of its
termination on April 27, 1989 and further subject to adjustment in
accordance with Section 3(b). The Shares which may be issued pursuant to
Incentive Awards may be authorized and unissued Shares or Shares held in
the Company's treasury. In the event of a lapse, expiration, termination,
or cancellation of any Incentive Award granted under the Plan without the
issuance of Shares or the payment of cash, or if Shares are issued under a
Restricted Share Award and are reacquired by the Company as a result of
rights reserved upon the issuance thereof, or if the exercise of a Stock
Appreciation Right results in the cancellation of an Option granted in
tandem with the Stock Appreciation Right, the Shares subject to or
reserved for such Incentive Award shall no longer be charged against said
maximum number of Shares and may again be used for new Incentive Awards.
(b) Recapitalization Adjustment. In the event of any change
affecting the Shares by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, combination or exchange
of stock or other corporate change, or any distribution to a holder of
Shares other than ordinary cash dividends, the Committee shall make such
adjustment, if any, as it may deem appropriate to avoid dilution in the
number and kind of shares authorized for issuance under the Plan, in the
number and kind of shares covered by Incentive Awards and, in the case of
options, in the option price.
Section 4. Administration.
(a) Committee. The Plan shall be administered by a Committee of
the Board, comprised of three or more directors, who shall from time to
time be appointed by, and serve at the pleasure of, the Board.
(b) Authority. The Committee shall have and exercise all the
power and authority granted to it under the Plan. Subject to the
provisions of the Plan, the Committee shall have authority in its sole
discretion from time to time (i) to designate from Employees the persons
who shall be granted Incentive Awards; (ii) to prescribe such limitations,
restrictions and conditions upon any such awards as the Committee shall
deem appropriate; (iii) to interpret the Plan and to adopt, amend and
rescind rules and regulations relating to the Plan; and (iv) to make all
other determinations and take all other actions necessary or advisable for
the implementation and administration of the Plan.
(1) Not adjusted for stock splits after the adoption of the Plan.
-4-<PAGE>
(c) Committee Actions. A majority of the Committee shall
constitute a quorum, and the acts of a majority of the members present at
a meeting at which a quorum is present, or acts reduced to or approved in
writing by all members of the Committee, shall be acts of the Committee.
All such actions shall be final, conclusive, and binding. No member of
the Committee shall be liable for any action taken or decision made in
good faith relating to the Plan or any Incentive Award thereunder. In the
performance of their duties, the members of this Committee shall be fully
protected in relying in good faith upon information provided by the
Company's officers or auditors.
Section 5. Eligibility and Incentive Awards.
(a) Eligible Employees and Directors. The Committee may grant
Incentive Awards to officers and other key Employees. Incentive Awards
shall be granted to Eligible Directors in accordance with Section 10
hereof.
(b) Incentive Awards. Incentive Awards may be granted in any one
or more combinations of (i) Incentive Stock Options, (ii) Nonqualified
Stock Options, (iii) Restricted Share Awards, and (iv) Performance Awards.
All Incentive Awards shall be subject to such other terms and conditions
as may be established by the Committee. Determinations by the Committee
under the Plan, including, without limitation, designation of Employees,
the form, amount and timing of Incentive Awards, the terms and provisions
of Incentive Awards, and the written agreements evidencing Incentive
Awards, need not be uniform and may be made selectively among Employees
who receive, or are eligible to receive, Incentive Awards hereunder,
whether or not such Employees are similarly situated.
(c) Employment. The Plan and the Incentive Awards granted
hereunder shall not confer upon any Participant the right to continued
employment with the Company or affect in any way the right of the Company
to terminate the employment of a Participant at any time and for any
reason.
Section 6. Options.
The Committee may grant Incentive Stock Options and Nonqualified
Stock Options and such Options shall be subject to the following terms and
conditions and such other terms and conditions as the Committee may
prescribe:
(a) Written Agreement. The terms and conditions of each Option
granted under the Plan shall be set forth in a written agreement, the
form of which shall be approved by the Committee.
-5-<PAGE>
(b) Option Price. The Option price per Share with respect to each
Option shall be determined by the Committee but shall not be less than
the par value of a Share.
(c) Period of Option. The period of each Option shall be fixed by
the Committee subject to the limitations in Section 6(e) with respect
to Incentive Stock Options.
(d) Exercise of Option. An Option may be exercised with respect
to all Shares covered thereby or may be exercised with respect to a
specified number of Shares over a specified period or periods as
determined by the Committee. Any Shares not purchased during a
specified period may be purchased thereafter at any time prior to the
expiration of the Option unless the Committee determines otherwise.
(e) Limits on Incentive Stock Options.
(i) The option price of an Incentive Stock Option shall not be
less than the Fair Market Value of a Share on the date such option
is granted.
(ii) No Incentive Stock Option shall be granted to an Employee
who possesses, directly or indirectly, at the time of grant more
than 10% of the combined voting power of all classes of stock of
the Company unless the option price is at least 110% of the Fair
Market Value of the Shares subject to the Option on the date such
Option is granted and such Incentive Stock Option is not
exercisable after the expiration of five years from the date of
grant.
(iii) No Incentive Stock Option may be granted on or after the
tenth anniversary of the adoption of the Plan by the Board.
(iv) No Incentive Stock Option may be exercised more than ten
years after the date of grant.
(v) The aggregate Fair Market Value (determined as of the time
an Incentive Stock Option is granted) of Shares with respect to
which Incentive Stock Options are exercisable for the first time by
such individual in any calendar year (under the Plan and all other
plans of the Company and any Subsidiary) shall not exceed $100,000,
or such other maximum amount permitted by the Code. In the event
that the ability to exercise an Incentive Stock Option would
otherwise violate this Subsection, then (a) the cumulative amount
of Incentive Stock Options exercisable in a calendar year shall be
limited as provided in this Subsection (with the determination of
exercisable Incentive Stock Options being made in order
-6-<PAGE>
of grant), and (b) the portion of any Incentive Stock Options
thereby rendered nonexercisable shall, subject to the foregoing,
become exercisable during the remaining period of the Option.
(f) Notice of Exercise and Payment. An Option granted under the
Plan may be exercised by the Optionee giving written notice of exercise
to the Committee and paying the option price in full at such time. An
Option shall be deemed exercised on the date the Committee receives
written notice of exercise, together with full payment for the Shares
purchased. The option price shall be paid to the Company either in
cash, by delivery to the Company of Shares already-owned by the
Optionee or any combination of cash and such Shares. In addition,
payment may be made by delivering an exercise notice together with
irrevocable instructions to a broker promptly to deliver to the Company
the amount of sale or loan proceeds to pay the exercise price. The
Committee may, however, at any time and in its discretion, adopt
guidelines limiting or restricting the use of already-owned Shares to
pay all or any portion of the option price. In the event already-owned
Shares are used to pay all or a portion of the option price, the amount
credited to payment of the option price shall be the Fair Market Value
of the already-owned Shares on the date the Option is exercised.
(g) Special Payment Provisions for Nonqualified Options. Upon the
exercise of a Nonqualified Option, the Company,at the discretion of the
Committee, may pay the exercising party a cash lump sum which is
equivalent to the net tax savings to the Company, as determined by the
Committee, arising from the tax deduction available to the Company
through such exercise, where applicable, under the Code.
(h) Fractional Shares. No fractional Shares shall be issued
pursuant to the exercise of an Option, nor shall any cash payment be
made in lieu of fractional Shares.
Section 7. Restricted Share Awards.
The Committee may issue Shares to an Employee subject to the
following terms and conditions and such other terms and conditions as the
Committee may prescribe in connection with the grant of a Restricted Share
Award:
(a) General. With respect to each grant of Restricted Shares, the
Committee, in its sole discretion, shall determine the period during
which the restrictions set forth at Subsection 7(b) shall apply to the
Restricted Shares (the "Restricted Period").
-7-<PAGE>
(b) Restrictions. At the time of grant of Restricted Shares to an
Employee, the number of Shares granted shall be issued in the
Employee's name in uncertificated form. The Employee shall have the
entire beneficial ownership interest in, and all rights and privileges
of a stockholder as to, such Restricted Shares, including the right to
receive dividends and the right to vote such Restricted Shares, subject
to the following restrictions: (i) subject to Section 7(c), the
Employee shall not be entitled to delivery of a Share certificate until
the expiration of the Restricted Period; (ii) none of the Restricted
Shares may be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restricted Period; and (iii) all
of the Restricted Shares shall be forfeited and all rights of the
Employee to such Restricted Shares shall terminate without further
obligation on the part of the Company unless the Employee remains in
the continuous employment of the Company for the entire Restricted
Period in relation to which such Restricted Shares were granted, except
as provided by Section 7(c). Any Shares received with respect to
Restricted Shares as a result of a recapitalization adjustment defined
in Section 3(b) shall be subject to the same restrictions as such
Restricted Shares.
(c) Termination of Employment.
(i) Retirement. If an Employee ceases to be employed by the
Company prior to the end of a Restricted Period by reason of normal
retirement under a retirement plan of the Company or the Employee
otherwise retires with the consent of the Company, the number of
Restricted Shares granted to such Employee for such Restricted Period
shall be reduced in proportion to the Restricted Period (determined on
a quarterly basis) remaining after the Employee ceases to be an
Employee and all restrictions on such reduced number of Shares shall
lapse. A certificate for such Shares shall be delivered to the
Employee in accordance with the provisions of Section 7(d) hereof. The
Committee may, if it deems appropriate, direct that the Employee
receive a greater number of Shares free of all restrictions but not
exceeding the number of Restricted Shares then subject to the
restrictions of Section 7(b).
(ii) Death. If an Employee ceases to be employed by the
Company prior to the end of a Restricted Period by reason of death, the
Restricted Shares granted to such Employee shall immediately vest in
his beneficiary or estate and all restrictions applicable to such
Shares shall lapse. A certificate for such Shares shall be delivered
to the Employee's beneficiary or estate in accordance with the
provisions of Subsection 7(d).
-8-<PAGE>
(iii) All Other Terminations. If an Employee ceases to be an
Employee prior to the end of a Restricted Period for any reason other
than retirement or death, the Employee shall immediately forfeit all
Restricted Shares then subject to the restrictions of Section 7(b) in
accordance with the provisions thereof, except that the Committee may,
if it finds that the circumstances in the particular case so warrant,
allow an Employee whose employment has so terminated to retain any or
all of the Restricted Shares then subject to the restrictions of
Section 7(b) and all restrictions applicable to such retained Shares
shall lapse. A certificate for such retained Shares shall be delivered
to the Employee in accordance with the provisions of Section 7(d).
(d) Delivery of Restricted Shares; Payment for Fractional Shares.
At the end of the Restricted Period or at such earlier time as provided
for in Subsection 7(c), all restrictions applicable to the Restricted
Shares shall lapse and a Share certificate for a number of Shares equal
to the number of Restricted Shares, free of all restrictions, shall be
delivered to the Employee or his beneficiary or estate, as the case may
be. The Company shall not be required to deliver any fractional Share
but will pay, in lieu thereof, the Fair Market Value (measured as of
the date the restrictions lapse) of such fractional Share to the
Employee or his beneficiary or estate, as the case may be.
Section 8. Performance Awards.
The Committee may grant to Employees Performance Awards which shall
be subject to the following terms and conditions and such other terms and
conditions as the Committee may prescribe in connection with the grant of
a Performance Award:
(a) Award Period and Performance Goals. The Committee shall
determine and include in a Performance Award the period of time during
which a Performance Award may be earned ("Award Period"). The
Committee shall also establish performance objectives ("Performance
Goals") to be met by the Company, Subsidiary or division during the
Award Period as a condition to payment of the Performance Award. The
Performance Goals may include earnings per share, return on
stockholders' equity, return on assets, net income, or any other
financial or other measurement established by the Committee. The
Performance Goals may include minimum and optimum objectives or a
single set of objectives.
(b) Payment of Performance Awards. The Committee shall establish
the method of calculating the amount of payment to be made under a
Performance Award if the Performance Goals
-9-<PAGE>
are met, including the fixing of a maximum payment. The Performance
Award shall be expressed in terms of Shares and referred to as
"Performance Shares." After the completion of an Award Period, the
performance of the Company, Subsidiary or division shall be measured
against the Performance Goals, and the Committee shall determine
whether all, none or any portion of a Performance Award shall be paid.
The Committee, in its discretion, may elect to make payment in Shares,
cash or any combination of Shares and cash. Any payment shall be based
on the Fair Market Value of Performance Shares on the last day of the
Award Period.
(c) Revision of Performance Goals. At any time prior to the end
of an Award Period, the Committee may revise the Performance Goals and
the computation of payment if unforeseen events occur which have a
substantial effect on the performance of the Company, Subsidiary or
division and which in the judgment of the Committee make the
application of the Performance Goals inappropriate unless a revision is
made.
(d) Requirement of Employment. A grantee of a Performance Award
must remain in the employment of the Company until the completion of
the Award Period in order to be entitled to payment under the
Performance Award; provided that the Committee may, in its sole
discretion, provide for a full or partial payment where such an
exception is deemed equitable.
(e) Dividends. The Committee may, in its discretion, at the time
of the granting of a Performance Award, or thereafter, provide that any
dividends declared on Shares during the Award Period, and which would
have been paid with respect to Performance Shares had they been owned
by a grantee, be (i) paid to the grantee, or (ii) used to increase the
number of Performance Shares of the grantee subject to the provisions
of the Performance Award.
Section 9. Stock Appreciation Rights.
The Committee may, at any time, in its discretion, grant a right to
receive the appreciation in the Fair Market Value of Shares ("Stock
Appreciation Right") either separately or in tandem with Options. Stock
Appreciation Rights shall be subject to the following terms and conditions
and such other terms and conditions as the Committee may prescribe:
(a) Time and Period of Grant. A Stock Appreciation Right granted
in tandem with an Option may be granted either at the time the Option
is granted or at any time thereafter prior to the expiration of the
Option. If a Stock
-10-<PAGE>
Appreciation Right is granted in tandem with an Option, the Committee
may limit the exercise period for such Stock Appreciation Right,
provided that the Stock Appreciation Right may not be exercised after
the expiration of the Option to which the Stock Appreciation Right is
attached.
(b) Value of Stock Appreciation Right. If a Stock Appreciation
Right is granted in tandem with an Option, the Optionee will be
entitled to surrender the Option which is then exercisable and receive
in exchange therefor an amount in cash equal to the excess of the Fair
Market Value of a Share on the Valuation Date over the Option price
multiplied by the number of Shares covered by the Option or portion
thereof which is surrendered. In the event a Stock Appreciation Right
granted in tandem with an Option is exercised, the right of the
Optionee to exercise the related Option shall be cancelled to the
extent Shares covered by such Option are used to calculate cash paid
upon exercise of the related Stock Appreciation Right. The right of an
Optionee to exercise a Stock Appreciation Right shall be canceled if
and to the extent that the related option is exercised. If a Stock
Appreciation Right is granted separately from an Option, the Optionee
will receive upon exercise of the Stock Appreciation Right an amount in
cash equal to the excess of the Fair Market Value of a Share on the
Valuation Date over the Fair Market Value of a Share on the date of
grant multiplied by the number of Shares as to which the Stock
Appreciation Right is being exercised. Notwithstanding the foregoing,
in no event shall the exercise value of a Stock Appreciation Right
issued in connection with an Incentive Stock Option exceed the maximum
permissible exercise value for such a right under the Code and the
regulations and interpretations issued pursuant thereto.
(c) Exercise of Rights and Payment. A Stock Appreciation Right
which is in tandem with an option may be exercised when the related
Option is exercisable, provided, however, such a Stock Appreciation
Right may only be exercised on a date or dates on which the Fair Market
Value of a Share exceeds the Option price per Share applicable to the
related Option. A Stock Appreciation Right which is granted separate
from an Option may be exercised at such times as specified in the
written instrument evidencing such right. An Employee may exercise a
Stock Appreciation Right by giving written notice of exercise,
specifying the number of Shares as to which the right is exercised, to
the Committee. Provided the exercise is valid and in accordance with
the terms of the Plan, the Company shall promptly, after the receipt of
such a notice, pay to the Employee the cash to which he is entitled.
If a Stock Appreciation Right has not been exercised, cancelled,
terminated or expired on the last day of the term of such Stock
Appreciation Right, the holder
-11-<PAGE>
of such Stock Appreciation Right will automatically receive a cash
payment from the Company in an amount, if any, that would be payable if
the Stock Appreciation Right is exercised on such date.
Section 10. Restricted Shares for Eligible Directors.
(a) Grant of Restricted Shares to Eligible Directors. On the date
of the 1989 Meeting and on the date of each Meeting thereafter while the
Plan is in effect (each such date is hereinafter referred to as a "Grant
Date"), the Company shall grant to each then Eligible Director a number of
Restricted Shares determined by dividing $5,000 by the Fair Market Value
of a Share on the Grant Date (rounded to the nearest whole Share).
(b) Terms and Conditions of Restricted Shares.
(i) Subject to the provisions of paragraph (ii) of this
Section 10(b), Restricted Shares issued to Eligible Directors
pursuant to the Plan shall be subject to the following
restrictions:
(1) the restrictions on the Restricted Shares shall
apply for the period ("Restricted Period") commencing on the
Grant Date (as defined in Section 10(a)) and ending on (i) the
third anniversary of the Grant Date for one-third (1/3) of the
Restricted Shares to the nearest whole Share, (ii) the fourth
anniversary of the Grant Date for one-third (1/3) of the
Restricted Shares to the nearest whole Share, and (iii) the
fifth anniversary of the Grant Date for the balance of such
Restricted Shares.
(2) the Eligible Director shall not be entitled to
receive delivery of a certificate or certificates for such
Restricted Shares until the expiration of the Restricted
Period;
(3) such Restricted Shares shall not be sold,
transferred, assigned, pledged or otherwise encumbered or
disposed of during the Restricted Period; and
(4) all such Restricted Shares shall be forfeited and
all right of the Eligible Director to such Restricted Shares
shall terminate without further obligation on the part of the
Company if the Eligible Director ceases to be a director of
the Company prior to the end of the Restricted Period.
-12-<PAGE>
(ii) Notwithstanding the provisions of subparagraph (b)(i) of
this Section 10, in the event an Eligible Director ceases to be a
director of the Company prior to the end of a Restricted Period as
a result of such Eligible Director's death, disability, normal
retirement in accordance with the Company's policies, or failure to
obtain sufficient votes at a Meeting to be re-elected as a
director, then the restrictions set forth in subparagraph (b)(i) of
this Section 10 shall cease to apply on a date 30 days thereafter,
if the associated Tandem Options are not exercised pursuant to
Section 10(d)(iv)(b).
(iii) Upon the occurrence of a Change in Control, all of the
restrictions set forth in subparagraph (b)(i) of this Section 10
shall cease to apply on a date thirty days thereafter, if the
associated Tandem Options are not exercised pursuant to Section
10(d)(iv)(b), to all Restricted Shares issued pursuant to the Plan,
except to the extent that the lapse of such restrictions would, in
the opinion of counsel selected by the Company's independent
auditors, constitute "parachute payments" in the meaning of Section
28OG(b)(2)(A) of the Code and, when added to any other "parachute
payments" which would be received by the Eligible Director pursuant
to the terms of any other plan, arrangement or agreement with the
Company, any person whose actions result in a change in control of
the Company or any person affiliated with the Company or such
person, would be subject to the tax imposed by Section 4999 of the
Code.
If the lapse of the restrictions arising from a Change in
Control would so subject an Eligible Director to Section 4999 of
the Code, the Restricted Shares of the Eligible Director (to the
extent otherwise subject to Section 4999) shall be forfeited and
returned to the status of authorized and unissued Shares. At the
time of such forfeiture, the Company shall transfer to a trust for
the benefit of the Eligible Director cash in an amount determined
by multiplying the number of Restricted Shares forfeited by the
Market Value of a Share on the date of the Change in Control. If
the Eligible Director remains a director of the Company until the
date that the restrictions on the forfeited Restricted Shares would
have ceased to apply, then, on such date, such cash and all amounts
earned thereon shall be distributed to the Eligible Director. If
the Eligible Director does not remain a director of the Company
until such date, such cash and the earnings thereon shall be paid
over to the Company. The selection of the trustee(s), the
determination of the terms of the trust, and all other matters
relating to the creation and operation of the
-13-<PAGE>
trust shall, subject to the express provisions of this paragraph,
be at the discretion of the Committee.
(iv) At the end of the Restricted Period, or at such earlier
time as is provided for in subparagraphs (b)(ii) or (b)(iii) of
this Section 10, the restrictions applicable to the Restricted
Shares pursuant to this Section 10 shall cease and a Share
certificate for the number of Restricted Shares with respect to
which the restrictions have ceased shall be delivered, free of all
such restrictions and all restrictive legends, to the Eligible
Director or the Eligible Director's beneficiary or estate, as the
case may be.
(c) Additional Restrictions. At the time of grant of Restricted
Shares to an Eligible Director, the number of Shares granted shall be
issued in his name in uncertificated form. The Eligible Director shall
have the entire beneficial ownership interest in, and all rights and
privileges of a stockholder as to, such Restricted Shares, including the
right to receive dividends and the right to vote such Restricted Shares.
Any Shares received with respect to Restricted Shares as a result of a
recapitalization adjustment pursuant to Section 3(b) shall be subject to
the same restrictions as such Restricted Shares.
(d) Grant of Non-Statutory Stock Options to Eligible Directors.
The Company shall grant to the Eligible Director in tandem with each
Restricted Share granted pursuant to Section 10(a) four (4) Nonqualified
Stock Options ("Tandem Options") subject to the following terms and
conditions:
(i) The option price of the Tandem option shall be the Fair
Market Value of a Share on the date of grant.
(ii) The right of the Optionee to exercise a Tandem Option
shall be cancelled if and to the extent that the related Restricted
Share is no longer subject to the restrictions in Section 10. In
the event that Tandem Options are exercised, the right of the
Eligible Director to receive the Restricted Shares granted in
tandem with said Options shall be forfeited.
(iii) The four Tandem Options granted in tandem with each
Restricted Share must be exercised at the same time. No Tandem
Options shall be exercisable within 12 months of the Grant Date of
the Option.
(iv) Tandem Options may only be exercised on a date or dates on
which the aggregate Option Spread (measured as the difference
between the Fair Market Value of a Share on the date of exercise
less the option exercise price) for the four Tandem Options equals
or exceeds 110% of the
-14-<PAGE>
Fair Market Value of the associated Restricted Share on the date of
exercise of the Tandem Options. Notwithstanding the preceding
sentence, Tandem Options may be exercised (a) during the 60 day
period preceding the date on which the Restricted Period applicable
to the associated Restricted Share ends and (b) during the 30-day
period following the termination of restrictions on the Restricted
Shares pursuant to Section 10(b)(ii) or 10(b)(iii).
(v) The exercise of and payment for the Shares issuable upon
exercise of a Tandem Option shall be in accordance with the
provisions of Section 6(f) of the Plan.
Section 11. Non-Assignability of Incentive Awards.
No Incentive Award granted under the Plan shall be assigned,
transferred, pledged, or otherwise encumbered by the Participant,
otherwise than by will, by designation of a beneficiary after death, or
the laws of descent and distribution, or be made subject to execution,
attachment or similar process. Each Incentive Award shall be exercisable
during the Participant's lifetime only by the Participant or, if
permissible under applicable law, by the Participant's guardian or legal
representative.
Section 12. Change of Control.
In order to maintain all of the Participant's rights in the event
of a Change of Control of the Company, the Committee, in its sole
discretion, may, as to any Incentive Award, either at the time that an
Incentive Award is made or any time thereafter, take any one or more of
the following actions:
(a) provide for the acceleration of any time periods relating to
the exercise or realization of any such award, so that such award may
be exercised or realized in full on or before a date fixed by the
Committee,
(b) provide for the purchase of any such award by the Company for
an amount of cash equal to the amount that could have been attained
upon the exercise of such award or realization of such Employee's
rights had such award been currently exercisable or payable,
(c) make such adjustment to any such award then outstanding as the
Committee deems appropriate in light of a Change of Control, or
-15-<PAGE>
(d) cause any such award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving corporation,
if any, in connection with a Change of Control.
Section 13. Taxes.
(a) Withholding for Taxes. The Company shall be entitled, if
necessary or desirable, to withhold from any Incentive Award the amount of
any tax attributable to any amounts payable under any Incentive Award and
the Company may defer making payment of any Incentive Award if any such
tax, charge, or assessment may be pending until indemnified to its
satisfaction.
(b) Use of Shares to Pay Withholding Taxes. With the approval of
the Committee, the holder of a Nonqualified Stock Option, a Restricted
Share Award (under either Section 7 or Section 10 of the Plan) or a
Performance Award may elect to have the Company retain from the Shares to
be issued upon the exercise of such an Option, the termination of the
restrictions on a Restricted Share Award, or the payment of a Performance
Award, as the case may be, Shares having a Fair Market Value on the Tax
Date equal to all or any part of the federal, state and local withholding
tax payments (whether mandatory or permissive) to be made by the holder
with respect to such option (up to a maximum amount determined by the
holder's top marginal tax rate) in lieu of making such payments in cash.
The Committee may establish from time to time rules or limitations with
respect to the right of a holder to elect to have the Company retain
Shares in satisfaction of withholding payments.
Section 14. Compliance With Laws and Exchange Requirements.
No Option or Stock Appreciation Right shall be granted and no
Shares shall be issued in connection with any Incentive Award unless the
grant of the Option or the Stock Appreciation Right and the issuance and
delivery of Shares or cash pursuant to the Incentive Award shall comply
with all relevant provisions of state and federal law, including, without
limitation, the Securities Act of 1933, the Securities Exchange Act of
1934, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be
listed.
Section 15. Amendment and Termination of Plan.
(a) Amendment. The Board may from time to time amend the Plan, or
any provision thereof, in such respects as the Board may deem advisable
except that it may not amend the Plan without stockholder approval so as
to increase the maximum number of
-16-<PAGE>
Shares that may be issued under the Plan except in accordance with Section
3(b).
(b) Termination. The Board may at any time terminate the Plan.
(c) Effect of Amendment or Termination. Any amendment or the
termination of the Plan shall not adversely affect any Incentive Award
previously granted and such Incentive Award shall remain in full force and
effect as if the Plan had not been amended or terminated.
Section 16. Notices.
Each notice relating to the Plan shall be in writing and delivered
in person or by certified or registered mail to the proper address. Each
notice to the Committee shall be addressed as follows: TBC Corporation,
4770 Hickory Hill Drive, Post Office Box 18342, Memphis, Tennessee 38181-
0342, Attention: Compensation Committee. Each notice to a Participant
shall be addressed to the Participant at the address of the Participant
maintained by the Company on its books and records. Anyone to whom a
notice may be given under this Plan may designate a new address by written
notice to the other party to that effect.
Section 17. Benefits of Plan.
This Plan shall inure to the benefit of and be binding upon each
successor of the Company. All rights and obligations imposed upon a
Participant and all rights granted to the Company under this Plan shall be
binding upon the Participant's heirs, legal representatives and
successors.
Section 18. Pronouns and Plurals.
All pronouns shall be deemed to refer to the masculine, feminine,
singular or plural, as the identity of the person or persons may require.
Section 19. Stockholder Approval and Term of Plan.
The Plan shall become effective upon its approval by the
affirmative vote of the holders of a majority of the outstanding Shares
and shall continue in effect until terminated pursuant to Section 15.
* * * * * *
-17-<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> (4,721)<F1>
<SECURITIES> 0
<RECEIVABLES> 101,612
<ALLOWANCES> 9,610
<INVENTORY> 73,188
<CURRENT-ASSETS> 179,841
<PP&E> 56,629
<DEPRECIATION> 20,925
<TOTAL-ASSETS> 260,758
<CURRENT-LIABILITIES> 56,349
<BONDS> 0
0
0
<COMMON> 2,346
<OTHER-SE> 123,346
<TOTAL-LIABILITY-AND-EQUITY> 260,758
<SALES> 308,152
<TOTAL-REVENUES> 308,152
<CGS> 262,332
<TOTAL-COSTS> 262,332
<OTHER-EXPENSES> 29,617
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 2,974
<INCOME-PRETAX> 13,229
<INCOME-TAX> 5,214
<INCOME-CONTINUING> 8,015
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,015
<EPS-PRIMARY> .34
<EPS-DILUTED> 0<F2>
<FN>
<F1>THIS ITEM IS SHOWN UNDER THE CATEGORY "OUTSTANDING CHECKS, NET" ON THE
CONSOLIDATED BALANCE SHEETS.
<F2>THESE ITEMS ARE NOT SEPARATELY REPORTED ON TBC CORPORATION'S FORM 10-Q.
</FN>
</TABLE>
