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
MARCH 31, 1998 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
23,066,347 Shares of Common Stock were outstanding as of March 31, 1998.
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
March 31, December 31,
1998 1997
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ - $ 917
Accounts and notes receivable, less
allowance for doubtful accounts
of $7,175 on March 31, 1998
and $7,344 on December 31, 1997:
Related parties 20,313 15,072
Other 63,156 62,267
Total accounts and notes receivable 83,469 77,339
Inventories 96,895 84,806
Refundable federal and state income taxes 638 2,489
Deferred income taxes 4,865 4,863
Other current assets 11,066 12,784
Total current assets 196,933 183,198
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land and improvements 7,242 5,604
Buildings and leasehold improvements 24,566 23,167
Furniture and equipment 30,122 29,455
61,930 58,226
Less accumulated depreciation 23,521 21,967
Total property, plant and equipment 38,409 36,259
TRADEMARKS, NET 17,225 17,337
GOODWILL, NET 14,533 14,628
OTHER ASSETS 14,805 13,526
TOTAL ASSETS $281,905 $264,948
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1998 1997
(Unaudited)
CURRENT LIABILITIES
Outstanding checks, net $ 1,052 $ 3,237
Notes payable to banks 18,852 22,496
Current portion of long-term debt 1,024 690
Accounts payable, trade 33,425 10,879
Other current liabilities 13,592 15,482
Total current liabilities 67,945 52,784
LONG-TERM DEBT, LESS CURRENT PORTION 67,173 67,647
NONCURRENT LIABILITIES 2,962 2,876
DEFERRED INCOME TAXES 7,433 7,454
STOCKHOLDERS' EQUITY
Common stock, $.10 par value,
shares issued and outstanding -
23,066 on March 31, 1998 and
23,163 on December 31, 1997 2,307 2,316
Additional paid-in capital 10,230 9,788
Retained earnings 123,855 122,083
Total stockholders' equity 136,392 134,187
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $281,905 $264,948
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
Ended March 31,
1998 1997
NET SALES* $140,735 $144,367
COSTS AND EXPENSES
Cost of sales 118,401 123,071
Distribution 7,745 7,083
Selling and administrative 8,614 8,152
Interest expense 1,440 1,421
Other (income) expense - net (582) (695)
Total costs and expenses 135,618 139,032
INCOME BEFORE INCOME TAXES 5,117 5,335
PROVISION FOR INCOME TAXES 1,967 2,104
NET INCOME $ 3,150 $ 3,231
EARNINGS PER SHARE -
Basic and assuming dilution $ .14 $ .14
* Including sales to related parties of $34,016 and $34,707 in the
three months ended March 31, 1998 and 1997, respectively.
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
Number of Paid-In Retained
Shares Amount Capital Earnings Total
Three Months Ended
March 31, 1997
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 23,727 $2,373 $ 9,624 $107,808 $119,805
Net income for period 3,231 3,231
Issuance of common stock
under stock option and
incentive plan 6 - 35 - 35
Repurchase and retirement
of common stock (189) (19) (76) (1,468) (1,563)
Tax benefit from exercise
of stock options - - 5 - 5
BALANCE, MARCH 31, 1997 23,544 $2,354 $ 9,588 $109,571 $121,513
Three Months Ended
March 31, 1998
BALANCE, JANUARY 1, 1998 23,163 $2,316 $ 9,788 $122,083 $134,187
Net income for period 3,150 3,150
Issuance of common stock
under stock option and
incentive plan 67 7 454 - 461
Repurchase and retirement
of common stock (164) (16) (69) (1,378) (1,463)
Tax benefit from exercise
of stock options - - 57 - 57
BALANCE, MARCH 31, 1998 23,066 $2,307 $10,230 $123,855 $136,392
</TABLE>
See accompanying notes to consolidated financial statements.
-5-<PAGE>
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months
Ended March 31,
1998 1997
OPERATING ACTIVITIES
Net income $ 3,150 $ 3,231
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,599 1,590
Amortization 243 242
Deferred income taxes (23) (54)
Equity in earnings from joint ventures (58) (144)
Changes in operating assets and liabilities:
Receivables (7,176) (2,912)
Inventories (12,089) (12,097)
Other current assets 1,866 540
Other assets 179 (298)
Accounts payable, trade 22,546 (1,339)
Federal and state income taxes
refundable or payable 1,908 1,274
Other current liabilities (1,890) (608)
Noncurrent liabilities 86 52
Net cash provided by (used in)
operating activities 10,341 (10,523)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (3,899) (1,267)
Investment in joint ventures (390) -
Other, net 150 475
Net cash used in investing activities (4,139) (792)
FINANCING ACTIVITIES
Net bank borrowings (repayments) under
short-term borrowing arrangements (3,644) 11,027
Increase (decrease) in outstanding checks, net (2,185) 2,269
Payments on long-term debt (140) (453)
Issuance of common stock under stock option
and incentive plan 313 35
Repurchase and retirement of common stock (1,463) (1,563)
Net cash provided by (used in)
financing activities (7,119) 11,315
Increase (decrease) in Cash and Cash Equivalents (917) -
CASH AND CASH EQUIVALENTS
Balance - Beginning of period 917 -
Balance - End of period $ - $ -
Supplemental Disclosures of Cash Flow Information:
Cash paid for - Interest $ 1,545 $ 1,399
- Income taxes 82 884
Supplemental Disclosure of Non-Cash Financing
Activities:
Tax benefit from exercise of stock options $ 57 $ 5
Issuance of restricted stock under stock
incentive plan 148 -
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statement Presentation
The December 31, 1997 balance sheet was derived from audited
financial statements. The consolidated balance sheet as of March 31,
1998, and the consolidated statements of income, stockholders' equity and
cash flows for the three months ended March 31, 1998 and 1997, 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 March 31, 1998 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 1997
Annual Report.
2. Earnings Per Share
Basic earnings per share have been computed by dividing net income by
the weighted average number of shares of common stock outstanding.
Diluted earnings per share have been computed by dividing net income by
the weighted average number of common shares and equivalents outstanding.
The weighted average number of common shares outstanding totaled
23,107,000 and 23,625,000 during the three months ended March 31, 1998
and 1997, respectively. Common share equivalents, representing shares
issuable upon assumed exercise of stock options, totaled 111,000 in the
current period and 91,000 in the prior year first quarter. The weighted
average number of common shares and equivalents outstanding totaled
23,218,000 and 23,716,000 during the three months ended March 31, 1998
and 1997, respectively.
3. Other Assets
Other assets consist of the following (in thousands):
March 31, December 31,
1998 1997
Notes receivable $ 9,491 $ 8,445
Investments in joint ventures 3,095 2,811
Other intangible assets, net 735 741
Other 1,484 1,529
$14,805 $13,526
-7-<PAGE>
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. The lawsuit
is scheduled to be tried in June 1998. 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.
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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.
Working capital totaled $129.0 million at March 31, 1998 compared to
$130.4 million at December 31, 1997. Current accounts and notes
receivable increased by $6.1 million and inventories increased by $12.1
million during the current quarter, due largely to seasonal fluctuations.
The net total owed to banks and vendors, consisting of the combined
balances of cash and cash equivalents, outstanding checks, notes payable
to banks and accounts payable, increased $17.6 million from December 31,
1997 to March 31, 1998. 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 three months of 1998.
Results of Operations
Net sales decreased 2.5% during the first quarter compared to the
year-earlier level. Sales of tires accounted for approximately 95% of
total sales in the first quarter of 1998 versus 93% in the first three
months of 1997, reflecting the discontinuation of the marketing of certain
non-tire products such as batteries, wheels and ride control products to
TBC's independent distributors. Unit tire shipments declined 1.9%
compared to the strong unit volume in the prior year first quarter. The
average tire sales price increased 1.5% in the current quarter compared
with the year-earlier level, due primarily to changes in the mix of tires
shipped.
Cost of sales as a percentage of net sales decreased from 85.2% in
the first quarter of 1997 to 84.1% in the current quarter. The decline
was due principally to an increased percentage of shipments to franchised
retail dealers compared to other customers.
Distribution expenses increased $662,000 in the current quarter
compared to the year-earlier level. The overall increase included higher
warehousing and product delivery expenses, related in part to an increase
in the percentage of shipments through the Company's distribution
facilities rather than direct from manufacturers.
Selling and administrative expenses increased $462,000 from the level
in the first quarter of 1997. Included in the total for the prior year
first quarter was a $810,000 charge associated with an early retirement
program accepted by certain employees. Excluding that charge, selling and
administrative expenses were $1.3 million higher than in the year-earlier
period, due largely to the Company's efforts to accelerate the growth in
its number of franchised retail dealers. The Company has added personnel
and systems and incurred various other operating expenses in conjunction
with these expansion efforts.
Interest expenses and net other income did not change significantly in
the first three months of 1998 compared to the year-earlier level.
The Company's effective tax rate decreased from 39.4% in the first
quarter of 1997 to 38.4% in the current quarter, due primarily to a
reduction in state taxes.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Index to Exhibits
(b) No reports on Form 8-K were filed during the three months ended
March 31, 1998.
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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
April 21, 1998 By /s/ Ronald E. McCollough
Ronald E. McCollough
Executive Vice President, Chief
Financial Officer
and Treasurer
(principal accounting and
financial officer)
-11-<PAGE>
INDEX TO EXHIBITS
Located at
Sequentially
Exhibit No. Description Numbered Page
(10) MATERIAL CONTRACTS:
Management Contracts and Compensatory Plans
or Arrangements
10.1 Agreement, dated January 7, 1998, to Extend
Executive Employment Agreement between
the Company and Louis S. DiPasqua . . . . . . . 13
10.2 Letter Agreement, dated February 6, 1998,
between the Company and Bob M. Hubbard. . . . . 14
10.3 Form of Trust Agreement (01/01/98 version). . . 19
10.4 Executive Employment Agreement, dated as of
February 20, 1998, between the Company and
Lawrence C. Day (without Exhibit A thereto,
which is substantially identical to the Form
of Trust Agreement filed with the Commission
as Exhibit 10.3 hereto) . . . . . . . . . . . . 41
-12-
Exhibit 10.1
AGREEMENT TO EXTEND
EXECUTIVE EMPLOYMENT AGREEMENT
THE UNDERSIGNED HEREBY AGREE to extend the Executive Employment
Agreement, dated February 18, 1991, between them (as later restated and
amended, the "Agreement"), until the later of April 30, 2000 or one year
after the occurrence of a Change in Control of the Company (as defined in
the Agreement), in the event a Change in Control of the Company shall have
occurred on or prior to April 30, 2000.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 7th day of January, 1998.
TBC CORPORATION
By /s/MARVIN E. BRUCE
Marvin E. Bruce,
Chairman of the Board
/s/LOUIS S. DiPASQUA
LOUIS S. DiPASQUA (the Executive)
-13-
Exhibit 10.2
February 6, 1998
Mr. Bob M. Hubbard
3227 Whisper Wind Cove
Memphis, TN 38125
Dear Bob:
The purpose of this letter is to confirm our mutual understanding
regarding your early retirement from TBC.
With respect to your retirement, we have agreed as follows:
1. You will retire and resign from all positions you hold with TBC or
any of its subsidiaries or affiliates, effective March 31, 1998.
Since you will be 64 years old when you retire, you will be retiring
eleven months before TBC's normal retirement age of 65 (which you
would reach on March 1, 1999). TBC's consent to your retirement
prior to the normal retirement age is hereby granted.
2. As a participant in TBC s Management Incentive Compensation Plan, you
will be entitled to a pro rata portion of any incentive payment you
would have earned in 1998 under that Plan. The portion will be 25%
(since you will have been an employee of TBC for three months during
1998). Any incentive payment owing to you will be paid early in
1999, at the same time as incentive payments are made to other
participants in this Plan.
3. TBC will pay you, as a consulting fee, an amount equal to your
current annual base salary of $210,366.96 plus an additional $75,000,
through March 31, 1999, one-twelfth of such amount being payable to
you monthly, beginning on May 1, 1998 and continuing on the first day
of each of the next eleven months. In the event of your death, we
will make any payments then remaining under this Item 3 to your wife,
or if she predeceases you, to your estate.
4. I will recommend to the TBC Compensation Committee that it agree to
waive the provision in TBC's Supplemental Executive Retirement Plan
(the "SERP") that
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specifies that the lump sum election you made on March 31, 1997 would
not be effective for a period of two years. As a result, you will
be entitled to a lump sum payment of your supplemental retirement
benefits under SERP.
5 Because of the difference in the aggregate retirement benefits you
would have received under TBC's defined benefit retirement plan and
the SERP if you had retired at age 65 and the aggregate retirement
benefits you will receive under such plans when you retire at age 64,
TBC will make a lump sum payment of $75,000 to you. This payment
will be made on January 1, 1999.
6. On the date of this letter agreement, you hold the following
outstanding stock options under the 1989 Stock Incentive Plan:
Date of Grant No. of Shares
9/1/89 13,680
7/25/91 11,805
7/22/93 7,038
7/20/95 9,665
1/15/97 27,816
1/7/98 23,851
Portions or all of the options granted to you in 1995, 1997, and 1998
are not presently exercisable and will not be exercisable before
March 31, 1998. In addition, under the terms of their grants, each of
these options, other than the 1998 grant, expire if they are not
excercised within three months following your termination of employment.
I will recommend to the TBC Compensation Committee that it take action,
effective March 15, 1998, to make all options then held by you
immediately exercisable and to provide that the term of all unexercised
options then held by you shall be extended until the earlier of
(I) March 31, 2003, or (ii) the date upon which each respective option
would have expired had you remained in the employ of TBC for the entire
original term of that option; provided, however, that if you die within
the one year period prior to expiration of any option in accordance with
the preceding provision, the option will remain outstanding until the
earlier of (a) the date upon which it would have expired had you
remained in the employ of TBC for the entire original term of the
option, or (b) one year after your date of death. You understand that
any options which you do not exercise prior to March 15, 1998 will,
upon amendment by the Compensation Committee as described above, lose
their incentive stock option treatment, and will be treated as
nonqualified options, for income tax purposes.
-15-<PAGE>
7. TBC will pay for your 1998 annual physical examination, in accordance
with TBC s policy with respect to such examinations for its executive
officers, regardless of whether that examination occurs before or
after your retirement.
8. All COBRA costs associated with continuing your current health
insurance for your wife and yourself through March 31, 1999 will be
paid by TBC.
9. To replace the basic insurance you currently have under TBC's group
life insurance policy, TBC will, at its expense up to a maximum of
$1,300, obtain and maintain in effect $211,000 in term life insurance
for you during the period from April 1, 1998 through March 31, 1999.
You may add, at your own expense, $250,000 in supplemental coverage
under this policy (thereby matching the supplemental coverage you
currently have through TBC's group life insurance policy). TBC's
obligation under this paragraph will be contingent upon the insurance
carrier s standard determination of insurability.
10. Effective April 1, 1998, TBC will transfer your Racquet Club
membership (which is currently through TBC) directly into your name.
You will be responsible for all dues or payments thereafter,
to the extent that they relate to periods on or after April 1, 1998.
11. I will recommend to the TBC Compensation Committee that it agree to
amend the terms of your deferred compensation arrangement with TBC to
provide that the balance in your deferred compensation account as of
March 31, 1998 will be paid to you in three equal annual
installments, payable on January 1, 1999, January 1, 2000, and
January 1, 2001, together with interest on the then unpaid balance,
which will accrue at the rate at which interest is then accruing
under TBC s standard deferred compensation arrangements with
executive officers. TBC understands and acknowledges that TBC s
agreement to amend your deferred compensation arrangement in the
manner set forth above is a condition precedent to your willingness
to enter into this letter agreement.
12. You agree that, at all times hereafter, you will hold in strictest
confidence and trust all pricing information or other confidential or
proprietary information in your possession relating to TBC or its
subsidiaries or affiliates and will not make any disclosure or use of
any such information without the prior written consent of TBC. Your
confidentiality obligations will not apply to any information which
is now not generally known within TBC or in the public domain or
which hereafter becomes generally known within TBC or part of the
public domain through no fault of yours. In the event of any breach
of the foregoing confidentiality obligations, in addition to its
rights to damages, TBC will have the right to seek equitable relief,
without the necessity of proof of actual damage. In addition, TBC
will have the right to cease the payments described in item 3 above.
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13. The payments described in item 3 above will cease in the event that,
without the prior written consent of TBC, you engage in any
Competitive Activity prior to April 1, 1999. By "Competitive
Activity", we mean that you, directly or indirectly, are employed by,
perform consulting or other services for, participate in the
management of, or acquire an equity interest in, Summit Tire,
Hercules Tire, or Treadways Tire.
14. Your Executive Employment Agreement with TBC, dated November 1, 1988,
as amended and later extended through October 31, 1997, has expired,
and you no longer have any rights or obligations thereunder other
than rights or obligations which are intended to survive any such
expiration.
15. In consideration of the payments and benefits provided to you under
this letter agreement, you, on behalf of yourself and your heirs,
administrators, assigns, and agents, fully settle, release, and
forever discharge TBC and it subsidiaries and affiliates, and the
present and former officers, directors, stockholders, agents, and
employees of TBC and its subsidiaries or affiliates, from any and all
claims, demands, costs, attorneys' fees, liabilities, damages,
actions, and causes of action arising out of or in any way related to
your employment with TBC, the termination of your employment with
TBC, or the performance of services by you for the benefit of TBC or
its subsidiaries or affiliates, including without limitation, any
claims which may be brought for age, sex, or other discrimination
under the Age Discrimination in Employment Act or any other federal,
state, or local law and claims for breach of express or implied
contract, wrongful discharge, promissory estoppel, emotional
distress, tort, or personal injury, excepting only claims with
respect to the breach of this letter agreement by TBC. It is
expressly acknowledged and agreed that the foregoing release is not
intended to limit or affect in any manner any indemnification or
other similar rights which you have as an officer of TBC or would
otherwise have as a former officer of TBC.
ACKNOWLEDGMENT. In connection with your execution of the above release
and this Agreement, you acknowledge the following:
(a) That you are waiving all rights and claims that you have or may have
under the Age Discrimination in Employment Act, as well as any rights
or claims that you have or may have under other federal, state, or
local laws with regard to age, sex, and other employment
discrimination.
-17-<PAGE>
(b) That you have a 21 day period to consider whether to sign the above
release and this Agreement.
(c) That for a period of seven days following your signing of this
Agreement, you may revoke your release and this Agreement, and that
your release and this Agreement shall not become effective and
enforceable until that seven day revocation period has expired.
(d) That TBC has advised you to consult with an attorney prior to
executing the above release and this Agreement.
Your signature below constitutes an acknowledgment that you have read this
letter agreement, that you understand your rights, and that you have
agreed to your release of claims and the other terms of this letter
agreement.
Sincerely,
TBC CORPORATION
By /s/ Louis S. DiPasqua
Louis S. DiPasqua
President and Chief Executive Officer
ACKNOWLEDGED AND AGREED:
Date: 2/11 , 1998
/s/ Bob M. Hubbard
BOB M. HUBBARD
-18-
Exhibit 10.3
TBC CORPORATION
TRUST AGREEMENT FOR
______________(date)
-19-<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Name of Trust............................... 1
1.1 Name.................................. 1
1.2 Purpose............................... 1
ARTICLE II Definitions................................. 2
ARTICLE III Company Obligations......................... 3
ARTICLE IV Payment Schedules........................... 3
4.1 Payment Schedule...................... 3
4.2 Modified Payment Schedule............. 4
4.3 Withholdings.......................... 4
4.4 Further Assurances.................... 4
4.5 Distributions in the Event
of Taxability......................... 5
ARTICLE V The Trust Fund and Funding.................. 5
5.1 Receipt and Holding of
the Trust Funds....................... 5
5.2 Initial Funding of Trust.............. 5
5.3 Additional Funding; Excess Assets..... 6
5.4 Release of Trust Funds Unless
a Change of Control Occurs............ 6
5.5 Transfer to Another Trustee........... 6
5.6 Company's Right to Substitute Assets.. 7
ARTICLE VI Status of Trust............................. 7
6.1 Grantor Trust......................... 7
6.2 Subject to Claims Creditors
of the Company........................ 7
6.3 Notification of Bankruptcy
or Insolvency......................... 8
ARTICLE VII The Trustee's Accounting.................... 9
7.1 Books and Records..................... 9
7.2 Trustee's Report...................... 9
7.3 Additional Reports.................... 9
ARTICLE VIII Administration of the Trust Fund............ 10
8.1 Ownership and Investment
of the Trust Fund..................... 10
8.2 Powers of the Trustee................. 10
8.3 Situs of Assets....................... 13
8.4 Entire Agreement...................... 13
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ARTICLE IX Relating to the Trustee..................... 13
9.1 Liability of the Trustee.............. 13
9.2 Obligations under Law................. 14
9.3 Bond.................................. 14
9.4 Compensation.......................... 14
9.5 Indemnification....................... 14
ARTICLE X Missing Persons, Incapacitated Executives,
Death, Directions and Notices............... 15
10.1 Missing Persons....................... 15
10.2 Incapacity; Death..................... 15
10.3 Form.................................. 15
10.4 Proof of any Matter................... 15
10.5 Absence of Directions................. 15
ARTICLE XI Resignation or Removal of Trustee........... 15
11.1 Successor Trustee..................... 15
11.2 Final Account......................... 16
11.3 Transfer and Discharge................ 16
11.4 Effective Date of Appointment
of Successor Trustee.................. 16
11.5 Merger or Consolidation............... 16
ARTICLE XII Protection for Third Persons................ 16
ARTICLE XIII Termination; Amendment; and Waiver.......... 17
13.1 Termination........................... 17
13.2 Amendment and Waiver.................. 17
ARTICLE XIV General Provisions.......................... 17
14.1 Tennessee Trust....................... 17
14.2 Severability.......................... 17
14.3 Arbitration........................... 18
14.4 Notices............................... 18
14.5 Trust Beneficiaries................... 18
14.6 Headings.............................. 19
14.7 Counterparts.......................... 19
14.8 Nonalienation of Benefits............. 19
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TBC CORPORATION
TRUST AGREEMENT FOR __________
THIS AGREEMENT is established effective as of the ___ of ______,
____, by TBC CORPORATION (the "Company"), a Delaware corporation, as
grantor, and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, as trustee, under
the following circumstances:
(A) The Company has executed an Executive Employment
Agreement, dated ___________, ____, with________________("the
Executive"), which Agreement provides for the Company's employment
of the Executive, beginning _______, ____. The Executive
Employment Agreement contains provisions to pay the Executive
compensation and benefits if the Executive's employment with the
Company is terminated for certain reasons including, but not
limited to, a Change of Control as defined therein.
(B) Those compensation and benefit payments are not funded
or otherwise secured, and the Company desires by this Trust to
provide further assurance to the Executive that the provisions of
the Employment Agreement concerning termination of the Executive's
employment with the Company following a Change of Control of the
Company (as defined in Article II) will be satisfied and payments
will be timely made when due, by depositing assets for use in
making such payments, in trust, upon the occurrence of a Change of
Control or Potential Change of Control of the Company (as therein
defined), subject only to the claims of the Company's existing or
future general creditors in the event of the Company's insolvency
or bankruptcy as defined in Section 6.3.
NOW, THEREFORE, in consideration of the agreements contained
herein and for other good and valuable considerations, the parties hereto
agree as follows:
ARTICLE I
NAME OF TRUST
1.1 Name. The Trust created by this Agreement may be referred
to as the "TBC CORPORATION TRUST FOR _____________ ".
1.2 Purpose. The Trust is established for the purposes set
forth in Preamble B to this Agreement.
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ARTICLE II
DEFINITIONS
The following terms used in this Trust have the following
meanings:
"Board" means the Board of Directors of the Company.
"Change of Control" means any change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") as the same is construed by the Securities
and Exchange Commission on the date of execution of this Agreement or in
accordance with any change made with respect to said Item or construction
thereof deemed more favorable by the Executive; provided that, without
limitation, such a change in control shall be deemed to have occurred if
(i) any "person" (as such term is defined in Sections 13(d) and 14(d)(2)
of the Exchange Act), other than the Executive and/or an entity then
controlled by the Executive or the Company, is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company's then outstanding
securities; (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board cease for any
reason to constitute at least a majority thereof unless the election, or
the nomination for election by the Company's stockholders, of each new
Director was approved by a vote of at least two-thirds of the Directors
then still in office who were Directors at the beginning of the period;
(iii) the Company merges or consolidates with another corporation and the
Company or an entity controlled by the Company or the Executive
immediately prior to the merger or consolidation is not the surviving
entity; or (iv) a sale, lease, exchange, or other disposition of all or
substantially all of the assets of the Company takes place.
"Code" means the Internal Revenue Code of 1986 and the
regulations issued thereunder, as amended from time to time hereafter.
"Company" means TBC CORPORATION, a Delaware corporation, and any
successor to such entity.
"Employment Agreement" means the Executive Employment Agreement,
dated ___________, ____, between the Company and the Executive, as the
same may be hereafter modified, amended, or extended by mutual agreement
of the Company and the Executive, and shall include any Employment
Agreement subsequently executed by the Company and the Executive which
supersedes or replaces such Executive Employment Agreement.
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"Executive" means _______________.
"Fiscal Year" means the fiscal year of the Company.
"Payment Schedule" has the meaning ascribed to it in Section 4.1.
"Potential Change of Control" means and shall be deemed to have
occurred if (i) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change of Control of the
Company, (ii) any person, other than the Company, the Executive or an
entity controlled by the Company or the Executive, publicly announces an
intention to take or to consider taking actions which, if consummated,
would constitute a Change of Control of the Company, (iii) any person,
other than the Executive and/or any entity controlled by the Executive or
the Company, increases his beneficial ownership of the combined voting
power of the Company's then outstanding securities by 5% or more over the
percentage so owned by such person on the date hereof and, after such
increase, is the beneficial owner, directly or indirectly, of securities
of the Company representing 20% or more of such securities; or (iv) the
Board adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change of Control of the Company has occurred.
"Trust" means the trust created by this Agreement.
"Trust Fund(s)" has the meaning ascribed to it in Section 5.1.
"Trustee" means any trustee from time to time serving as the
trustee of the Trust.
ARTICLE III
COMPANY OBLIGATIONS
The Company shall continue to be liable to make all payments to
the Executive required under the terms of the Employment Agreement to the
extent such payments have not been made pursuant to this Trust. Payments
made from Trust Funds to the Executive pursuant to Article IV shall, to
the extent of such payments, satisfy the Company's obligation to pay
benefits to the Executive under the Employment Agreement.
ARTICLE IV
PAYMENT SCHEDULES
4.1 Payment Schedule. Upon the occurrence of the termination of
Executive's employment with Company following any Change of Control or
Potential Change of Control, the Company
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shall deliver to the Trustee a payment schedule (the "Payment Schedule")
showing as to the Executive the dates payments are to be made to the
Executive and the amount of each such payment or setting forth a formula
or instructions acceptable to the Trustee for determining the amounts so
payable and the payment dates. The Payment Schedule shall also be
delivered by the Company to the Executive.
4.2 Modified Payment Schedules. A Modified Payment Schedule
shall be delivered by the Company to the Trustee and to the Executive each
time that additional amounts are required to be paid by the Company to the
Trustee under Section 5.3, upon the occurrence of any event requiring a
new Payment Schedule under Section 4.1., or upon the death of the
Executive. The Trustee shall make payments from the Trust Funds to the
Executive in accordance with the provisions of the applicable Payment
Schedule. In the event that the Executive reasonably believes that the
Payment Schedule, as modified, does not properly reflect the amount
payable to the Executive and/or dates of Payment under the Employment
Agreement, the Executive shall be entitled to deliver to the Trustee
written notice ("the Executive's Notice") setting forth payment
instructions for the amount the Executive believes is payable under the
relevant terms of the Agreement. The Executive shall also deliver a copy
of the Executive's Notice to the Company within three (3) business days of
delivery to the Trustee. Unless the Trustee receives written objection
from the Company within thirty (30) business days after receipt by the
Trustee of such notice, the Trustee shall make the payment in accordance
with the payment instructions set forth in the Executive's Notice.
4.3 Withholdings. The Trustee shall be permitted to withhold
from any payment due to the Executive hereunder the amount required by law
to be so withheld under Federal, state and local wage withholdings
requirements or otherwise, and shall pay over to the appropriate
government authority the amounts so withheld. The Trustee may rely on
instructions from the Company (consistent with the Executive's
instructions to the Company) as to any required withholding and shall be
fully protected under Section 9.5 in relying on such instructions.
4.4 Further Assurances. The Trustee shall, at any time and from
time to time, administer this Trust as may be necessary or proper to
effectuate the purposes of this Trust. If the Trust receives an
unqualified opinion of tax counsel selected by the Trustee, which opinion
states that the Executive is subject to Federal income tax on amounts held
in Trust prior to the distribution to the Executive of such amounts, the
Trustee shall, to the extent practicable, take such action and administer
the Trust Fund in such a manner so as to prevent the Trust Fund from
becoming immediately taxable income to the Executive before making any
distributions pursuant to Section 4.5, provided that
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the Trustee shall not return any portion of the Trust Fund to the Company.
4.5 Distributions in the Event of Taxability. In the event of
any final determination by the Internal Revenue Service or a court of
competent jurisdiction, which determination is not appealable or the time
for appeal or protest of which has expired, or the receipt by the Trustee
of a substantially unqualified opinion of tax counsel selected by the
Trustee, which determination determines, or which opinion opines, that the
Executive is subject to Federal income taxation on amounts held in the
Trust prior to the distribution to the Executive of such amounts and no
curative action is available under Section 4.4, the Trustee shall, on
receipt by the Trustee of such opinion or notice of such determination,
pay to the Executive the portion of the Trust assets includable in the
Executive's Federal gross income; provided that, as a condition of
receiving such payment, the Executive has delivered to the Trustee a
written agreement stating that the payment being made is in satisfaction
of the obligations of the Company due to him in respect of which the
payment is made, after taking into consideration that such payment is
being made prior to the required distribution date, and the Company has
concurred in such agreement, which concurrence shall not be unreasonably
withheld.
ARTICLE V
THE TRUST FUND AND FUNDING
5.1 Receipt and Holding of the Trust Funds. The Trustee will
accept and hold all contributions, insurance contracts, insurance policies
and other property transferred and delivered to the Trustee by the Company
or at the Company's direction. All contributions and property received by
the Trustee, plus income and appreciation, constitute the trust fund (the
"Trust Fund(s)").
5.2 Initial Funding of Trust. Concurrently with the execution
of this Agreement, the Company is delivering to the Trustee the sum of One
Hundred Dollars to be held in trust hereunder. Upon the earlier of the
occurrence of any Change of Control or Potential Change of Control, the
Company shall contribute to the Trust, in cash or other property, the
amount determined under accepted actuarial principles to be necessary to
fund the amounts payable to the Executive under the Employment Agreement
in accordance with a Payment Schedule to be delivered to the Trustee
pursuant to Section 4.1, assuming that, for purposes of such Payment
Schedule, the Executive's employment with the Company had been terminated
on the day following the occurrence of the Change of Control or Potential
Change of Control.
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5.3 Additional Funding; Excess Assets. Unless the Trust Funds
have been released to the Company pursuant to Section 5.4, the Company
shall, as soon as practicable after the end of each Fiscal Year,
recalculate the amount determined under accepted actuarial principles to
be necessary to fund any amounts payable to the Executive under the
Employment Agreement, in accordance with any Payment Schedule delivered to
the Trustee pursuant to Sections 4.1 and 4.2 during the most recently
completed Fiscal Year (herein referred to as the "Aggregate Payment
Obligation"). If the Aggregate Payment Obligation exceeds the fair market
value of the Trust Funds at the end of the most recently completed Fiscal
Year, then there exists a funding deficiency to the extent of such excess;
and the Company shall contribute to the Trustee no later than 90 days
after the end of such Fiscal Year additional cash or property having a
fair market value equal to the amount of the funding deficiency. If the
fair market value of the Trust Funds at the end of the most recently
completed Fiscal Year is more than 125% of the Aggregate Payment
Obligation, then there is an overfunding to the extent of such excess; and
the Trustee shall as soon as practicable after the determination that an
overfunding exists distribute to the Company cash or other property having
a fair market value equal to the amount of the overfunding in excess of
such 125%.
5.4 Release of Trust Funds Unless Change of Control Occurs. Any
funds delivered to the Trustee pursuant to Section 5.2 because of the
occurrence of a Potential Change of Control, together with any assets in
the Trust Fund in excess of $100, shall be returned to the Company six
months after the date of such delivery, unless a Change of Control shall
have occurred or the Potential Change of Control has not been abandoned or
terminated. Each such initial six-month period shall be renewed for an
additional six-month period, if any Potential Change of Control occurs
during such initial six-month period. The Company shall notify the
Trustee of the occurrence of a Change of Control or Potential Change of
Control, and the Trustee may rely on such notice or on any other actual
notice satisfactory to the Trustee of such Change or Potential Change
which the Trustee may receive. Notwithstanding the foregoing, the Trustee
shall have no duty or obligation to make any independent determination
that such Change or Potential Change has occurred. In the event Trust
Funds are released to the Company pursuant to this Section 5.4, all
Payment Schedules delivered to the Trustee prior thereto pursuant to
Section 4.1 shall be returned to the Company and be of no further force or
effect.
5.5 Transfer to Another Trustee. Upon the Executive's prior
written consent, the Company may direct the Trustee to transfer the Trust
Fund to a successor trustee as set forth in Section 11.1. The Trustee
immediately will comply with that
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direction. When that transfer is completed, the Trustee will be relieved
from all further obligations in connection with the Trust Fund.
5.6 Company's Right to Substitute Assets. The Company shall
have the right at any time, and from time to time in its sole discretion,
to substitute assets of equal fair market value for any asset held by the
Trust. This right is exercisable by Company in a nonfiduciary capacity
without the approval or consent of any person in a fiduciary capacity,
including without limitation, the Trustee.
ARTICLE VI
STATUS OF TRUST
6.1 Grantor Trust. The Trust is part of the Company's program
established for the purpose of providing certain compensation and
retirement benefits to the Executive, and is intended to be exempt from
the participation, vesting, funding and fiduciary requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Company
intends the Trust to be treated as a grantor trust within the meaning of
Section 671 of the Code and all income attributable to the Trust Fund
shall be reported by the Company. The Trust Fund shall at all times be
subject to the claims of the creditors of the Company as set forth in
Section 6.2.
6.2 Subject to Claims of Creditors of the Company. It is the
intent of the parties hereto that the Trust Fund is and shall remain at
all times subject to the claims of the creditors of the Company in the
event of the Company's insolvency or bankruptcy as set forth in this
Article VI, including, without limitation, its general creditors
(including the Executive). Accordingly, the Company shall not create a
security interest in the Trust Fund in favor of the Executive or any
creditor. If the Trustee receives the notice provided for in Section 6.3,
or otherwise receives actual notice that the Company is insolvent or
bankrupt as defined in Section 6.3, the Trustee will make no further
distributions of the Trust Fund to the Executive but shall deliver the
Trust Funds only as a court of competent jurisdiction, or duly appointed
receiver or other person authorized to act by such a court, may direct, in
order to make the Trust Fund available to satisfy the claims of the
Company's creditors, including, without limitation, its general creditors.
The Trustee shall resume distribution of the Trust Fund to the Executive
under the terms hereof after receipt of notification from the Company,
through its Board of Directors and Chief Executive Officer, that the
Company was not, or is no longer, bankrupt or insolvent, or upon receipt
of a decision to that effect by a court of competent jurisdiction or a
duly appointed receiver or other person authorized by a court to so act.
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Unless the Trustee has actual notice of the Company's bankruptcy or
insolvency, the Trustee shall have no duty to inquire whether the Company
is bankrupt or insolvent.
6.3 Notification of Bankruptcy or Insolvency. The Company,
through its Board of Directors and Chief Executive Officer, shall advise
the Trustee promptly in writing of the Company's bankruptcy or insolvency.
The Company shall be deemed to be bankrupt or insolvent upon the
occurrence of any of the following:
(i) The Company shall make an assignment for the
benefit of creditors, file a petition in bankruptcy,
petition or apply to any tribunal for the appointment of a
custodian, receiver, liquidator, sequestrator, or any
trustee for it or a substantial part of its assets, or shall
commence any case under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction (federal or
state), whether now or hereafter in effect; or if there
shall have been filed any such petition or application, or
any such case shall have been commenced against it, in which
an order for relief is entered or which remains undismissed;
or the Company by any act or omission shall indicate its
consent to, approval of or acquiescence in any such
petition, application or case or order for relief or to the
appointment of a custodian, receiver or any trustee for it
or any substantial part of its property, or shall suffer any
such custodianship, receivership, or trusteeship to continue
undischarged; or
(ii) The Company shall generally not pay its debts as
such debts become due or shall cease to pay its debts in the
ordinary course of business; or
(iii) The sum of the Company's debts is greater than all
its property at a fair valuation; or
(iv) The present salable value of the Company's assets
is less than the amount that would be required to pay the
probable liability on its existing debts as they become
absolute, matured, due and payable.
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ARTICLE VII
THE TRUSTEE'S ACCOUNTING
7.1 Books and Records. The Trustee will keep accurate and
detailed accounts of all investments, receipts, disbursements and other
transactions in respect of the Trust Fund. Those accounts and related
records may be inspected by any person designated by the Company. The
Trustee will retain those records and supporting data for the period
required by law. All Trust assets may be commingled for purposes of
investment. For recordkeeping purposes only, an account will be
maintained for the Executive. The account will be credited with all
contributions relating to the Executive and will be debited with all
payments to the Executive.
7.2 Trustee's Report. Within 60 days after the end of each
Fiscal Year, the Trustee shall file a written report with the Company
containing:
(a) A description of investments, receipts, disbursements
and other transactions effected by the Trustee during the most
recently completed Fiscal Year;
(b) An exact description of any asset transferred to the
Trustee or transferred by the Trustee to any other person during
such Fiscal Year;
(c) An exact description of assets sold or purchased by the
Trustee during such Fiscal Year, the cost of each item purchased
and the net proceeds of each item sold;
(d) An exact description of all assets held by the Trustee
as of the close of business on the last day of such Fiscal Year,
and the cost and fair market value of each item (other than
insurance contracts) determined as of the same date; and
(e) Any other information required by law to be filed on
behalf of the Trust.
The information described in subsections (a), (b) and (c), above,
may be given in the form of monthly or quarterly reports, if those
reports, taken together, contain the required information.
7.3 Additional Reports. In addition to the report required
under Section 7.2 above, the Trustee shall make any interim reports
reasonably requested by the Company.
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ARTICLE VIII
ADMINISTRATION OF THE TRUST FUND
8.1 Ownership and Investment of the Trust Fund. The Trustee is
the legal owner of all Trust Fund assets and, subject to this Article,
shall invest and reinvest the Trust Fund. Any amounts reasonably
necessary to meet contemplated payments or to be transferred from the
Trust Fund may be deposited temporarily in the commercial department of
any bank or trust company. The Trustee will not be liable for any
interest on those deposits except for interest actually paid by the bank
or trust company or, if the deposit is with the Trustee's own commercial
department, interest at the legally permitted rate agreed to by the
Trustee and the Company. Alternatively, the Trustee may make temporary
deposits in governmental obligations, certificates of deposit, commercial
paper, commercial paper master notes, cash management funds, or a common
trust fund or a cash management fund maintained by the Trustee for
temporary cash investments.
8.2 Powers of the Trustee. Subject to this Article, Article V
and Sections 9.1 and 9.2 and in addition to the powers generally given to
trustees by law, the Trustee may:
(a) Invest and reinvest the Trust Fund in securities or other
property, real or personal, wherever located, and whether or not
productive of income, which the Trustee believes advisable, including
capital, common and preferred shares of stock (including, if directed
by the Company, investment of up to 10% of the Trust Funds in shares
of stock and other securities issued by the Company, the Trustee or
any entity related through common ownership to the Trustee), personal,
corporation and governmental obligations, whether or not secured;
mortgages, leaseholds, fees and other interests in realty; oil, gas or
mineral properties, rights, royalties, payments or other interests in
that property; contracts, conditional sale agreements, choses in
action; trust and participation certificates, or other evidences of
ownership, part ownership, interest or part interest. Except as
provided in Section 8.2, the Trustee will not be limited or restricted
by any statute or rule of law, now or hereafter in effect, governing
trust investments, and may invest and reinvest through the medium of
any combined, common, collective or commingled trust fund or funds
maintained by the Trustee or any entity related through common
ownership with the Trustee, the terms of which are incorporated into
this Trust, or commingle and invest the Trust Fund with other trust
funds created by the Company under other trusts. An investment will
not be improper or imprudent merely because the Trustee participated
in the issuance,
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underwriting or original sale of the acquired property or because the
proceeds were to be used to satisfy obligations of the issuer or
seller to the Trustee.
(b) Form or acquire an interest in a corporation or make use of
a corporation for the purpose of investing in and holding title to any
property.
(c) Except as limited by Section 8.2, hold property in the form
received (including shares of stock and other securities issued by the
Company, the Trustee or any entity related through common ownership to
the Trustee) for as long as the Trustee believes advisable, regardless
of the character of that property, and regardless of whether its
acquisition by a trustee is authorized by law.
(d) Sell or contract to sell, exchange or otherwise dispose of
or grant options on any asset of the Trust Funds, at public auction,
by private contract, pursuant to option, or otherwise, upon terms and
conditions which at the time the Trustee believes appropriate, and
make, execute and deliver instruments necessary or proper to complete
the transaction.
(e) Hold in its own or in nominee name any asset of the Trust
Funds.
(f) Exercise or sell, for adequate consideration, conversion or
subscription rights under any Trust Fund asset, and use that portion
of the Trust Funds necessary to exercise those rights.
(g) Vote or refrain from voting all shares of stock or
securities (including, at the direction of the investment committee
established under the Company's Retirement Plan, shares of stock and
other securities issued by the Company, the Trustee or any entity
related through common ownership to the Trustee) in person or by proxy
(including special, limited or general proxies, with or without power
of substitution) and, as stock or security holder, execute and deliver
proxies to one or more nominees. The Trustee may dissent from or
consent to, approve, authorize, and become a party to any
reorganization, consolidation, merger, sale or lease of corporate
property or other corporate readjustment, including dissolution or
liquidation, and execute appropriate instruments. In participating in
any corporate action, the Trustee may act as if it is the absolute
owner of the shares of stock or securities and may deposit those
certificates of ownership with any committee or depository designated
in the plan or
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agreement governing that corporate action, and pay from the Trust Fund
any charges or assessments imposed by that plan or agreement and may
accept and continue to hold any property received by reason of
participation in that corporate action.
(h) Borrow money for Trust purposes in amounts, from any person
(except itself) and on the terms and conditions which the Trustee
deems advisable. The Trustee will issue its promissory note as
Trustee and secure repayment by mortgaging, pledging or otherwise
hypothecating all or any part of the Trust Funds (including, if
directed by the Company, shares of stock and other securities issued
by the Company or any entity related through common ownership to the
Trustee).
(i) Establish whether any trust asset is to be treated as
principal or income and charge or apportion expenses, taxes and losses
to principal or income, as the Trustee believes appropriate. However,
gains or profits arising from the sale or other disposition of assets
will become a part of principal, and the Trustee will not be required
to set aside any part of income to absorb or make good any losses
arising from the disposition of any asset. Moreover, all liquidating
payments or liquidating dividends will become part of principal and
stock dividends will be allocated to principal or income depending on
the type of distribution represented by the dividend; regular or
ordinary cash dividends always will be treated as income. Also, the
Trustee need not amortize any premium paid to acquire property or to
set aside any part of the income to absorb a premium; if the Trustee
acquires any investment at a discount or at a price less than par
value, it need not treat or accrue that discount as income.
(j) Modify the terms of any obligation forming part of the Trust
Funds, and release any security for or guaranty of any obligation;
foreclose any mortgage securing any obligation, and purchase the
mortgaged property at the foreclosure sale, or acquire the property by
deed, conveyance or assignment from the mortgagor without foreclosure,
and retain property bought in under foreclosure or acquired without
foreclosure and dispose of it on the terms and conditions which the
Trustee believes appropriate.
(k) Abandon, adjust, arbitrate, compromise, or otherwise settle
any obligation or liability due to or from it as Trustee, including
any tax claim, and/or enforce or contest any claim in legal or
administrative
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proceedings. The Trustee will not be required to contest any claim
unless it has been indemnified against the costs and expenses of that
action or unless available Trust Fund assets are sufficient to pay
those expenses.
(l) Hire and compensate, from the Trust Funds, agents,
accountants, brokers and counsel (who may be counsel for the Company)
and other assistants and advisors which it believes are necessary or
desirable for the proper administration of the Trust Fund.
(m) Temporarily deposit uninvested funds in a commingled
temporary deposit medium which is composed of certificates of deposit
or other obligations issued by the Trustee, or a cash management fund
maintained by the Trustee.
(n) Do all other acts, not specifically mentioned above which
are necessary to administer the Trust Fund and to carry out the
purposes of the Trust.
8.3 Situs of Assets. Except as permitted by law, the Trustee
may not maintain in the Trust Fund any assets located outside the
jurisdiction of the district courts of the United States.
8.4 Entire Agreement. The Trustee will have only those powers,
duties, or responsibilities set forth in this Agreement.
ARTICLE IX
RELATING TO THE TRUSTEE
9.1 Liability of the Trustee. The Trustee will exercise its
powers and perform its duties with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with those matters would use in the
conduct of an enterprise of a like character and with like aim. The
Trustee also will diversify Trust Fund investments to minimize the risk of
large loss unless under the circumstances the Trustee believes it clearly
would be prudent not to diversify. Wherever this Trust Agreement provides
that the Trustee must follow directions of the Company or that the Trustee
has no duty or power concerning a matter, the Trustee will not be liable
for any harm caused by a direction or lack of a direction or by any
exercise or non-exercise of power by another unless:
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(a) the Trustee knowingly participates in or knowingly
undertakes to conceal an act or omission of another fiduciary with
respect to the Trust; or
(b) by the Trustee's failure to act in accordance with this
Section, the Trustee has enabled another fiduciary to breach a
fiduciary duty; or
(c) the Trustee has knowledge of a breach of fiduciary duty
which resulted in harm or injury and does not make reasonable efforts
under the circumstances to remedy the breach.
9.2 Obligations under Law. Regardless of any general or
specific power or authority granted to it, the Trustee may not engage in
any transaction, exercise any power or perform any duty under this Trust
in violation of the Code, the Employee Retirement Income Security Act, as
amended, or any regulations or rulings issued under those laws.
9.3 Bond. Unless required by law, the Trustee is not required
to furnish bond for the faithful performance of its duties.
9.4 Compensation. The Trustee will be compensated reasonably as
agreed to by the Company and the Trustee. Such compensation and all
reasonable expenses of administration will be paid by the Company either
directly or by otherwise providing the needed funds to the Trustee.
Failing such payment, the Trustee's compensation and all reasonable
expenses of administration will be paid by the Trustee out of the Trust
Funds.
9.5 Indemnification. The Company agrees to indemnify and hold
harmless the Trustee from and against any and all damages, losses, claims
or expenses as incurred, including expenses of investigation and fees and
disbursements of counsel to the Trustee and any taxes imposed on the Trust
Fund or income of the Trust (the "Indemnified Amounts"), arising out of or
in connection with the performance by the Trustee of its duties hereunder
provided the Indemnified Amounts do not arise out of, or are connected
with, any of the foregoing as to which the Trustee may be liable under
subparagraphs (a), (b) or (c) of Section 9.1. Any amount payable to the
Trustee under this Section 9.5 and not previously paid by the Company
shall be paid by the Company promptly upon demand therefor by the Trustee
or, if the Trustee so chooses in its sole discretion, from the Trust Fund.
In the event that payment is made hereunder to the Trustee from the Trust
Fund, the Trustee shall promptly notify the Company in writing of the
amount of such payment. The Company agrees that, upon receipt of such
notice, it will deliver to the Trustee to be held in the Trust an amount
in cash or other
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property equal to any payments made from the Trust Fund to the Trustee
pursuant to this Section 9.5. The failure of the Company to transfer any
such amount shall not in any way impair the Trustee's right to
indemnification pursuant to this Section 9.5.
ARTICLE X
MISSING PERSONS, INCAPACITATED EXECUTIVES,
DEATH, DIRECTIONS, AND NOTICES
10.1 Missing Persons. If any payment to be made by the Trustee
to the Executive is not claimed or accepted by the Executive, the Trustee
shall notify the Company. The Trustee shall not have any obligation to
search for or ascertain the whereabouts of the Executive.
10.2 Incapacity; Death. While the Executive is under a legal
disability or, in the Trustee's opinion, in any way is incapacitated so as
to be unable to manage his financial affairs, the Trustee may make any
required distribution to the Executive by making it (i) directly to the
Executive, (ii) to a legal guardian of the Executive, or (iii) in such
other manner as the Trustee deems in the best interest of the Executive.
Upon the death of the Executive, the Trustee shall make any required
distribution to the person or entity entitled to receive such amounts
pursuant to the terms of the Employment Agreement.
10.3 Form. All directions, notices, certifications and
amendments to the Trust to be given by the Company will be in writing
signed on behalf of the Company.
10.4 Proof of any Matter. If required by the Trustee, any
matter may be proved conclusively by certification by the Company. The
Trustee also may accept or require any other or further evidence it
believes to be sufficient or necessary.
10.5 Absence of Directions. If the Trustee believes that it
must take action under this Trust, it may act in its sole discretion
unless direction is provided in this Trust.
ARTICLE XI
RESIGNATION OR REMOVAL OF TRUSTEE
11.1 Successor Trustee. The Trustee may resign and be
discharged from its duties hereunder at any time by giving notice in
writing of such resignation to the Company and the Executive specifying a
date (not less than thirty (30) days after the giving of such notice) when
such resignation shall take effect. Promptly after such notice, the
Company shall appoint a successor trustee to which the Executive has no
reasonable objection, such trustee to become Trustee hereunder upon the
resignation date
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specified in such notice. The Trustee shall continue to serve until its
successor accepts the trust and receives delivery of the Trust Fund. The
Company may at any time substitute a new trustee by giving thirty (30)
days notice thereof to the Trustee then acting. The Trustee and any
successor thereto appointed hereunder shall be a commercial bank which is
not an affiliate of the Company, but which is a national banking
association or established under the laws of one of the states of the
United States, and which has equity in excess of $50,000,000.
11.2 Final Account. If the Trustee resigns or is removed, and
unless the Company accepts without exception the Trustee's final account,
the Trustee (or its representative) may settle its account either (a) by
beginning an action to procure a judicial settlement or (b) by agreeing on
a settlement with the Company.
11.3 Transfer and Discharge. If a successor trustee is
appointed, the Trustee will transfer the Trust Fund to the successor along
with true copies of all relevant records reasonably requested by the
successor. The Trustee also will
execute all documents necessary to the transfer of the Trust Fund. When
it has completed those actions, the Trustee will not be further
accountable for any matters covered in its accounting.
11.4 Effective Date of Appointment of Successor Trustee.
Appointment of a successor trustee will be effective when it delivers to
the Company and to the former trustee written acceptance of the
appointment. When delivered, this Trust will be interpreted as if the
successor trustee had been originally named Trustee. However, the
successor trustee will not be liable or responsible for anything done or
omitted in the administration of the Trust before its appointment.
11.5 Merger or Consolidation. If the Trustee engages in a
corporate reorganization, the resulting corporation automatically will be
the Trustee's successor.
ARTICLE XII
PROTECTION FOR THIRD PERSONS
Protection for Third Persons. In dealing with the Trustee, no
one other than the Company is required to inquire into the Trustee's
authority to take any action authorized by this Trust. All persons may
assume that the Trustee is authorized to take any action which it
undertakes and will not be liable for any act done under written direction
of the Trustee. Also, all persons may assume that the Trustee is
authorized to receive any money or property paid to the Trustee, or paid
under the Trustee's written direction. Written certification by the
Company of the Trustee's name will be conclusive evidence that
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the Trustee is qualified to act as Trustee at the date of that
certification.
ARTICLE XIII
TERMINATION; AMENDMENT; AND WAIVER
13.1 Termination. This Trust shall be terminated upon the
earlier of (i) the exhaustion of the Trust Fund; or (ii) the final payment
of all amounts payable to the Executive pursuant to
Sections 8 and 9 of the Agreement; (iii) the date the Executive ceases to
be employed by the Company for any reason, provided that no Trust Funds
unrelated to the $100 initial deposit made by the Company are then held by
the Trust and that no event has occurred prior to such date or is then
occurring which would, pursuant to Section 5.2 hereof, require the Company
to fund the Trust beyond the Company's $100 initial deposit; or (iv) upon
the mutual consent of the Company and the Executive. Promptly upon
termination of this Trust, any remaining portion of the Trust Funds shall
be paid to the Company.
13.2 Amendment and Waiver. This Trust is irrevocable and may
not be amended except by an instrument in writing signed on behalf of the
parties hereto together with the written consent of the Executive. The
parties hereto, together with the consent of the Executive, may at any
time waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto and the Executive to
any such waiver shall be valid if set forth in an instrument in writing
signed by or on behalf of such party and the Executive. Notwithstanding
the foregoing, any such amendment or waiver may be made by written
agreement of the parties hereto without obtaining the consent of the
Executive if such amendment or waiver does not adversely affect the rights
of the Executive hereunder. No amendment or waiver relating to this Trust
may be made which affects the Executive unless the Executive has agreed in
writing to such amendment or waiver.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Tennessee Trust. The Trust will be construed and enforced
according to the laws of the State of Tennessee and the United States.
14.2 Severability. In the event that any provision of this
Agreement or the application thereof to any person or circumstances shall
be determined by a court of proper jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Agreement, or the
application of such provision to persons or circumstances other than those
as to which it is
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held invalid or unenforceable, shall not be affected thereby, and each
provision of this Agreement shall be valid and enforced to the fullest
extent permitted by law.
14.3 Arbitration. Any dispute between the Executive and the
Company or the Trustee as to the interpretation or application of the
provisions of this Trust and amounts payable hereunder shall be determined
exclusively by binding arbitration in Memphis, Tennessee, in accordance
with the rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitration award in any court of competent
jurisdiction.
14.4 Notices. Any notice, report, demand or waiver required or
permitted hereunder shall be in writing and shall be given personally or
by prepaid registered or certified mail, return receipt requested (except
that reports may be sent by ordinary mail), addressed as follows:
If to the Company: TBC Corporation
4770 Hickory Hill Drive
P. O. Box 18342
Memphis, Tennessee 38181-0342
Attn: Secretary
If to the Trustee: First Tennessee Bank National
Association
Personal Trust Division
P. O. Box 84
Memphis, Tennessee 38101
If to the Executive: ___________________
At his then current home address as set
forth in the books and records of the party
giving such notice.
A notice shall be deemed received upon the date of delivery if
given personally or, if given by mail, upon the receipt thereof.
14.5 Trust Beneficiaries. The Executive is the intended
beneficiary under this Trust, and shall be entitled to enforce all terms
and provisions hereof with the same force and effect as if such person had
been a party hereto. Following the death of the Executive, his rights as
the intended beneficiary under this Trust may be exercised by the person
or entity which, pursuant to the terms of the Employment Agreement, would
be entitled to receive the amounts that would otherwise have been
distributed to the Executive hereunder.
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14.6 Headings. The headings and subheadings in this Agreement
are inserted for convenience of reference only and are not to be
considered in the construction of its provisions.
14.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which is an original; all counterparts constitute
the same instrument, sufficiently evidenced by any one counterpart.
14.8 Nonalienation of Benefits. The Executive's interest under
the Trust or right to receive any payment or distribution under the Trust
is not subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment or other alienation or encumbrance of any kind,
nor may such interest or right to receive a payment or distribution be
taken, voluntarily or involuntarily, for the satisfaction of the
obligations or debts of, or other claims against, the Executive or his
beneficiary, including claims for alimony, support, separate maintenance
and claims in bankruptcy proceedings.
IN WITNESS WHEREOF, the Company and the Trustee have caused this
instrument to be executed as of the 1st day of _____, ____.
FIRST TENNESSEE BANK
NATIONAL ASSOCIATION TBC CORPORATION
By___________________________ By_____________________________
Title: President and Chief Executive
Officer
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Exhibit 10.4
TBC CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
This AGREEMENT is entered into as of February 20, 1998, between TBC
CORPORATION, a Delaware corporation (the "Company"), and LAWRENCE C. DAY,
who resides at 11 Crownwood Circle, Pittsford, New York 14534 (the
"Executive").
Section 1. Term of Employment. The Company hereby agrees to employ
the Executive, and the Executive hereby agrees to continue in the employ
of the Company, for a period of three years commencing April 1, 1998 and
terminating on the later of March 31, 2001, or one (1) year after the
occurrence of a Change in Control of the Company in the event a Change in
Control of the Company shall have occurred on or prior to March 31, 2001.
Section 2. Position and Duties. A. During the term of employment,
the Company shall employ the Executive as, and the Executive shall serve
as, Executive Vice President and Chief Operating Officer or in such other
executive capacity as the Company shall reasonably request. Unless
otherwise agreed by the Executive and the Company, the Executive shall be
based at the Company's offices in Memphis, Tennessee.
B. The Executive shall devote his full-time efforts to the business
and affairs of the Company and shall perform his duties as an executive
officer, or in such other executive capacity as the Company shall
reasonably request, faithfully, diligently and to the best of his ability
and in conformity with the policies of the Company and under and subject
to such reasonable directions and instructions as the Board of Directors
and the President and Chief Executive Officer may issue from time to time.
Section 3. Salary. The Company shall pay the Executive a salary of
$265,000 per year in approximately equal installments in accordance with
the normal pay schedule for officers of the Company. In the event the
Board of Directors of the Company shall at any time or times after the
date hereof increase the Executive's salary, then the Executive's salary
under this Agreement for any period after any such increase shall be not
less than the last amount to which the Board increased the salary of the
Executive.
Section 4. Deferred Compensation. A. The Executive may elect to
defer payment of all or a specified part of the salary and other
compensation payable for the Executive's services by executing an Election
(the "Election") in a form prescribed by or acceptable to the Company and
delivering the same to the Secretary of the Company. For amounts earned
during 1998, the Election shall be made prior to the date the Executive's
employment with the Company commences (the "Employment Start Date"). Any
other Election shall be effective as of the first day of the next
succeeding calendar year and shall apply only to compensation payable for
services rendered on or after the effective date of the Election. The
Election shall remain in effect until terminated or changed as provided in
this Agreement.
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B. The Executive may terminate any Election relating to future
services by giving written notice of termination to the Secretary of the
Company. The Executive may change any Election relating to future
services by executing a revised Election and delivering such Election to
the Secretary of the Company. Any such termination or change in the
amount or part to be deferred shall be effective only with respect to
compensation payable for services on or after the first day of the next
succeeding calendar year.
C. The Company shall establish and maintain a deferred compensation
account on its books in the name of the Executive in which shall be
recorded the amount of the Executive's deferred compensation. The Company
shall credit to the deferred compensation account, on a daily basis,
interest on the amount then credited to such account (including all
previous credits to such account by operation of this Paragraph C)
computed at an annual rate which is equal to the average yield for BBB
Industrial Bonds, as published in the Standard & Poor's Corporate and
Government Bond Yield Index (or such similar index as the Compensation
Committee of the Board of Directors of the Company shall select) for the
month last preceding the beginning of the then current calendar quarter.
D. All amounts and assets credited to or held in the deferred
compensation account referred to in Section 4.C. of this Agreement
("Credited Amounts") shall be paid as follows:
1. If the Executive's employment with the Company is terminated
for any reason, including his death or disability, the Company shall pay
the Credited Amounts or the fair market value thereof, as of the date of
such termination, wholly or partly in cash or in kind, to the Executive,
or, in the event of his death, to his designated beneficiary or
beneficiaries or his estate, as the case may be, on or before a day
fourteen (14) days after the date of such termination; provided, however,
that if such termination occurs on or after August 31 in any year and the
Executive is then living, then and in that event, the Company shall make
such payment on the earlier of (i) the first business day of the following
calendar year or (ii) in the event of his earlier death, on or before a
day fourteen (14) days after the date of his death.
2. The beneficiary or beneficiaries referred to in this
paragraph may be designated or changed by the Executive (without the
consent of any prior beneficiary) by a writing delivered to the Company
before his death. If there shall be no designated beneficiary who shall
survive the Executive, as to all or any part of the Credited Amounts, the
same (or its fair market value) shall be paid to the Executive's estate.
E. The deferred compensation account shall be solely a memorandum
account, and title to and beneficial ownership of any amounts credited
thereto shall at all times remain in the Company. The effect of this
Section 4 is simply to create an unfunded and unsecured promise to pay
deferred compensation to the Executive, his estate or his beneficiaries,
in accordance with the terms of this Agreement. Nothing contained therein
and no deferral of compensation pursuant thereto shall by itself create or
be construed to create a trust of any kind, or a fiduciary relationship of
any kind regarding the deferred compensation between the Company and the
Executive, his estate or any beneficiary of the Executive or any other
person. No right or benefit under this Agreement shall be subject to
anticipation, alienation, sale, assignment, pledge,
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encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber or charge the same shall be void.
Section 5. Other Benefits. In addition to the salary and deferred
compensation payable pursuant to Sections 3 and 4, the Executive shall,
during the term of his employment, participate in the TBC Corporation
Management Incentive Compensation Plan, 1989 Stock Incentive Plan, and in
any other stock option or compensation plan or arrangement adopted by the
Company in addition to, or in lieu of, said plans. The Company shall
also, during the term of the Executive's employment, extend to Executive
the fringe benefits (including, but not limited to, medical, disability
and life insurance, vacation, personal leave, automobile and other similar
personal benefits) which it establishes from time to time for its most
highly compensated executives. In furtherance and not in limitation of
the foregoing, the Executive shall receive an automobile allowance of not
less than $1,267 per month and membership in a Memphis, Tennessee country
club (with initiation fees and monthly dues paid by the Company). The
Executive shall also be eligible for three weeks of paid vacation
beginning in 1998 and shall be reimbursed for his expenses in relocating
from Pittsford, New York to Memphis, Tennessee, in accordance with TBC's
relocation policy.
Section 6. Restricted Stock. The Company hereby grants to the
Executive, effective on the Employment Start Date (the "Date of Grant"),
under and pursuant to the Company's 1989 Stock Incentive Plan (the
"Plan"), 12,500 Restricted Shares of Common Stock of the Company as
defined in Section 2(o) of the Plan.
The Restricted Shares granted hereby shall be subject to all of the
terms and conditions of the Plan including, but not limited to, the
following:
(i) the Restricted Shares shall not be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of
during the Restricted Period;
(ii) the Restricted Period shall commence on the Date of Grant
and end on (i) the first anniversary of the Date of Grant
for one-third (1/3) of the Restricted Shares to the
nearest whole Share, (ii) the second anniversary of the
Date of Grant for one-third (1/3) of the Restricted
Shares to the nearest whole Share, and (iii) the third
anniversary of the Date of Grant for the balance of the
Restricted Shares;
(iii) the Executive shall not be entitled to receive delivery
of a certificate or certificates for the Restricted
Shares until the expiration of the Restricted Period;
(iv) except as otherwise provided in the Plan, all of the
Restricted Shares shall be forfeited and all right of the
Executive to such Restricted Shares shall terminate
without further obligation on the part of the Company if
the Executive ceases to be employed by the Company prior
to the end of the Restricted Period; and
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(v) the Executive shall have the entire beneficial ownership
interest in, and all rights and privileges of a
stockholder as to, the Restricted Shares, including the
right to receive dividends and the right to vote the
Restricted Shares.
Section 7. Stock Option. The Company will grant to the
Executive by separate instrument, dated the Date of Grant, a Nonqualified
Stock Option (as that term is used in the Plan subject to all of the terms
and conditions of the Plan) to purchase 95,000 shares of Common Stock of
the Company, at the fair market value of TBC's Common Stock on the Date of
Grant, exercisable as to one-third on the first anniversary and one-third
on each of the next two anniversaries of the Date of Grant, during a
period of ten years from the Date of Grant.
Section 8. Termination of Employment. A. The Executive's
Employment shall terminate upon the death of the Executive, but the
Company shall continue to pay each month for six (6) months after the
death of the Executive an amount per month equal to the salary per month
(inclusive of the amount of deferred compensation) that was being paid to
the Executive at the time of his death to the person or entity that the
Executive shall have last designated in writing to the Company, or if the
Executive shall fail to designate a person or entity or if the person or
entity so designated shall not be in existence at the time of any payment
pursuant to this Section 8.A., then to the Executive's estate. Nothing in
this Section 8.A. shall in any way limit or restrict any rights or
benefits to which the heirs, legatees or successors in interest of the
Executive are entitled under any plans, insurance or other arrangements
referred to in Section 5 hereof in the event of the Executive's death.
B. The Company shall have the right to terminate the Executive's
employment hereunder at any time upon not less than sixty (60) days'
advance written notice to the Executive in the event (i) of such prolonged
physical or mental disability or other condition of the Executive as, in
the reasonable judgment of the Board of Directors, shall render him
incapable of performing the services required of him hereunder; provided,
however, that no disability or condition shall be considered
incapacitating unless it has prevented the Executive from carrying on his
duties for a consecutive period of at least three (3) months; (ii) that
the Executive engages in an act or acts of dishonesty constituting a
felony and resulting or intended to result directly or indirectly in
personal gain or enrichment at the expense of the Company; or (iii) that
the Executive shall deliberately and intentionally refuse in a material
way to observe or comply with any of the material terms or provisions
hereof (except by reason of total or partial incapacity due to physical or
mental disability or otherwise); provided further, however, that the
Executive's employment shall not terminate if such disability or refusal
is cured or corrected within the 60-day notice period provided herein. In
addition to any retirement benefits payable to the Executive under
Section 9, in the event Executive's employment is terminated as the result
of disability pursuant to this Section 8.B.(i), the Company shall continue
to pay to the Executive each month for six (6) months after such
termination an amount equal to his salary per month (inclusive of the
amount of deferred compensation) at the time of such termination.
C. If a Change in Control of the Company shall occur on or prior to
March 31, 2001, and the employment of the Executive shall terminate during
the period of one (1) year following the Change in Control of the Company,
regardless of whether the Executive resigns or is
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discharged or otherwise (except for termination pursuant to the provisions
of Section 8.A. or clause (i) or (ii) of Section 8.B. above), the
following shall be applicable:
1. During the remainder of the period specified in Section 1
hereof or for a period of one (1) year after such termination of
employment, whichever is longer, the Company shall continue to pay to the
Executive an amount equal to the salary determined in accordance with the
provisions of Section 3 and shall credit him with an amount equal to the
deferred compensation determined in accordance with the provisions of
Section 4.
2. Beginning on the first day of the month following such
termination of the Executive's employment and on the first day of every
month thereafter during the period of time specified in Section 8.C.1
above, the Company shall pay to Executive one-twelfth (1/12) of the sum of
any benefits which the Executive may have been awarded under any incentive
compensation plans of the Company during the last two fiscal years of the
Company preceding the year in which the termination of the Executive's
employment occurred, divided by two.
3. During the time period specified in Section 8.C.1. above,
the Company shall, at its expense, provide to or for the benefit of the
Executive fringe benefits comparable to those provided prior to the Change
in Control of the Company.
4. Any options or stock appreciation rights which the Executive
holds under the 1989 Stock Incentive Plan of the Company (or under any
other option plan of the Company) on the date of the termination of his
employment may be exercised by the Executive with respect to all shares
subject to any such options or rights at any time within ninety (90) days
of the Executive's termination of employment, regardless of whether such
options or rights were exercisable on the date of termination; or at any
time within ninety (90) days after the termination of the Executive's
employment, the Executive may, in lieu of exercising all or any portion of
any such option or right, elect to be paid by the Company in cash the
excess of the fair market value of a Company share (as defined in the 1989
Stock Incentive Plan of the Company) on the date the election is made (or,
if higher, the highest price per Company share actually paid in connection
with the Change in Control of the Company) over the option price per share
times the number of shares then subject to unexercised options held by the
Executive as to which this election is made, whether or not such options
were exercisable on the date of the termination of the Executive's
employment. Any payment required to be made to the Executive pursuant to
the preceding sentence shall be made within two (2) days of the
Executive's election to be paid in cash.
5. Within forty-five (45) days after the end of the fiscal year
in which termination of the Executive's employment occurs, the Company
shall make pro rata awards to the Executive under any incentive
compensation plans of the Company in which he participated which shall be
calculated by multiplying (i) the fraction of which the numerator is the
number of full months worked during such year and the denominator is
twelve (12) and (ii) by the awards which would have been earned (as
determined by the Compensation Committee) if termination had not occurred
during such year.
6. If the Executive dies during the period that he is receiving
compensation or fringe benefits pursuant to the provisions of
Section 8.C.1., 2. or 3., the Company shall continue
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to make such payments to the person or entity entitled thereto pursuant to
Section 8.A. for the period of time provided in Section 8.C.1. but in no
event for a period of more than six (6) months after the Executive's
death. If the Executive dies prior to receiving the payments specified in
Section 8.C.5. or prior to exercising his rights under Section 8.C.4.,
such payments shall be made at the time they are required to be made
hereunder to the person or entity entitled thereto pursuant to Section
8.A., and such rights may be exercised during the time the Executive could
have exercised them but for his death by the person or entity entitled
thereto pursuant to Section 8.A.
7. A "Change in Control" of the Company shall, for purposes of
this Agreement, mean any change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the same is construed by the Securities
and Exchange Commission on the date of execution of this Agreement or in
accordance with any change made with respect to said Item or construction
thereof deemed more favorable by the Executive; provided that, without
limitation, such a Change in Control shall be deemed to have occurred if
(i) any "person" (as such term is defined in Sections 13(d) and 14(d)(2)
of the Exchange Act), other than the Executive and/or any entity then
controlled by the Company or the Executive is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company's then outstanding
securities; (ii) during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the Board cease
for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's stockholders, of
each new director was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who were directors at the beginning of
the period; (iii) the Company merges or consolidates with another
corporation and the Company or an entity controlled by the Company or the
Executive immediately prior to the merger or consolidation is not the
surviving entity; or (iv) a sale, lease, exchange or other disposition of
all or substantially all of the assets of the Company takes place.
8. So long as the Executive shall be receiving payments under
Section 8.C.1. above, the Executive shall not engage in any Competitive
Activity. For purpose of this Agreement, "Competitive Activity" shall
mean the Executive's participation, without the written consent of the
Company, in the management of any business operation of any enterprise if
such operation (a "Competitive Operation") engages in substantial and
direct competition with any business operation actively conducted by the
Company or its subsidiaries. "Competitive Activity" shall not include (i)
the mere ownership of securities in any enterprise or (ii) participation
in the management of any enterprise or any business operation thereof,
other than in connection with a Competitive Operation of such enterprise.
Section 9. Retirement Benefit. A. The Executive shall be entitled
to participate in the Company's 401(k) Savings Plan and in any other
retirement plan hereafter adopted by the Company for the benefit of its
employees, subject in each case to the terms of any such plan governing
participation therein. In addition, the Executive shall be entitled to
supplemental retirement benefits in accordance with the terms of the
Company's Executive Retirement Plan and shall be credited with two Years
of Service thereunder on his Employment Start Date.
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B. The Company shall establish and maintain a trust fund to fund
the payment of all benefits to be paid to the Executive pursuant to
Sections 8 and 9 under the circumstances described in, and in accordance
with the terms of, a trust agreement substantially in the form attached
hereto as Exhibit A. The Company may add to said trust fund the amounts
of Deferred Compensation referred to in Section 4 in order to fund the
payments thereof as provided in said Section.
Section 10. Compensation from Other Employment. Any compensation
payable to the Executive pursuant to the provisions of Section 8 shall be
reduced by any amounts of compensation earned or received by the Executive
from any other employer for services rendered during the period for which
such payments by the Company are to be made thereunder.
Section 11. Limitation on Payments. A. Sections 280G and 4999 of
the Internal Revenue Code (the "Code") impose a 20% excise tax on
excessive compensation received by, and deny a deduction to the Company
for the amount of excess compensation paid to, employees who are officers,
shareholders or highly compensated individuals as a result of a change in
the ownership or effective control of the Company or in the ownership of a
substantial portion of the Company's assets. In general, payments to an
individual that are contingent on a Change in Control will not be treated
as excessive if such payments are less than three (3) times the average
annual compensation received by such individual over the five (5) years
preceding the Change in Control. The provisions that follow are designed
to maximize the amounts payable to the Executive under this Agreement in
the event of a Change in Control, taking into consideration the possible
application of the foregoing Code provisions.
B. Notwithstanding anything in this Agreement to the contrary, in
the event that it is determined that any payment by the Company to the
Executive or for the Executive's benefit, whether paid or payable pursuant
to the terms of this Agreement or otherwise, would be taxable because of
Section 4999 of the Code, then the aggregate present value of amounts
payable to the Executive or for the Executive's benefit pursuant to this
Agreement shall be reduced to the Reduced Amount unless C. below applies.
For purposes of this subparagraph, the "Reduced Amount" shall be defined
as an amount expressed in present value which maximizes the amounts
payable pursuant to this Agreement without causing any such payments to be
taxable to the Executive because of Section 4999 of the Code.
C. If the Net After Tax Benefit of all amounts payable to the
Executive pursuant to this Agreement exceeds the Net After Tax Benefit of
the Reduced Amount, then this Section 11 shall not apply to limit any
amount payable to the Executive. "Net After Tax Benefit" means the amount
payable to the Executive or for the Executive's benefit pursuant to this
Agreement (whether the Reduced Amount or the full amounts payable to the
Executive under this Agreement), less the sum of (i) the amount of federal
income taxes payable with respect to such amounts and (ii) the amount of
excise taxes payable on such amounts pursuant to Section 4999 of the Code,
if any. For purposes of this clause C., federal income taxes payable in
respect of future payments shall be those prescribed by the Code at the
time the calculation is made for the periods in which the same shall be
payable.
D. An initial determination as to whether any reduction in payments
and benefits is necessary in order to comply with B. above and, if so, the
calculation of the Reduced Amount
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shall be made by the Company and furnished to the Executive in writing
within seven (7) days following the date of the Change of Control of the
Company. From time to time thereafter as necessary and, in any event,
upon termination of the Executive's employment, the Company shall re-
examine its determination and recalculate the Reduced Amount and promptly
furnish information with respect to the same to the Executive in writing.
The Company's determination and its calculation of the Reduced Amount
following the termination of the Executive's employment will be final and
binding upon the Executive unless the Executive notifies the Company
within eight (8) days after the Executive receives the Company's
determination and calculation that the Executive disputes the same.
Within ten (10) days after the Executive so notifies the Company, the
Executive shall deliver to the Company a statement of the basis for the
Executive's opinion as to whether any reduction in payments and benefits
is necessary, pursuant to B. above and, if so, the Executive's calculation
of the Reduced Amount. If, within ten (10) days after the Company
receives such statement, the Company and the Executive are unable to agree
as to whether any reduction is necessary or as to the calculation of any
amounts under this Section 11, then the Company and the Executive shall,
within three (3) days thereafter, choose a nationally recognized
accounting firm to resolve any such dispute. Such accounting firm's
determination shall be made promptly and delivered to the Company and the
Executive within twenty (20) days of its appointment and shall be final
and binding on the parties. All costs incurred in connection with the
accounting firm's determination shall be borne by the Company.
E. Within ten (10) days after the date a determination and
calculation of the Reduced Amount becomes final and binding in accordance
with D. above, the Executive may elect which portion of the payments due
him under this Agreement shall be eliminated or reduced to meet such
Reduced Amount (including meeting the Reduced Amount by reducing the
present value of any payment and benefits through deferral of the payment
date). If the Executive does not notify the Company of his election
within such ten (10) day period, the Company shall have the right to
decide how the Reduced Amount will be met.
F. Pending a final and binding determination and calculation of the
Reduced Amount in accordance with this Section 11, the Executive shall
have the right to require the Company to pay to the Executive all or any
undisputed portion of the Reduced Amount, as determined and calculated by
the Company, that would be then due and payable to the Executive pursuant
to this Agreement. Such payment shall be made by the Company within two
(2) days after the date of receipt of notice from the Executive requesting
such payment.
G. The Company shall pay to the Executive or for the Executive's
benefit that portion of the Reduced Amount which is then due and payable
(less any amount previously paid by the Company pursuant to F. above)
within ten (10) days after receipt of the election by the Executive
described in E. above or, in the absence of such an election, within
fifteen (15) days after the date upon which any determination and
calculation of the Reduced Amount becomes final and binding in accordance
with D. above. The balance of the Reduced Amount shall be paid promptly
as the same becomes due and payable under this Agreement.
H. In the event that the Internal Revenue Service or a court of
competent jurisdiction makes a final determination that any payments to
the Executive under this Agreement are taxable to the Executive pursuant
to Section 4999 of the Code, and such payments should not have been
-48-<PAGE>
made under the terms of Sections 11.B. and C. hereof (such taxable
payments and benefits being referred to hereinafter as an "Overpayment")
or in the event that the Code shall be amended or final regulations
thereunder adopted and, as a result thereof, payments or benefits
previously made to the Executive under this Agreement should not have been
made under the terms of Sections 11.B. and C. and are thus recharacterized
as an Overpayment, the amount of such Overpayment shall be treated for all
purposes as a loan to the Executive which shall be repayable by the
Executive within thirty (30) days after demand by the Company, together
with interest at the applicable federal rate specified for a demand loan
in Section 7872(f)(2) of the Code, compounded semiannually. The foregoing
provision relating to Overpayments shall be applicable notwithstanding
previous compliance by the Company and the Executive with the requirements
of this Section 11; provided, however, that no such Overpayment shall be
repaid by the Executive to the Company if and to the extent that, despite
making such repayment, the amount which is subject to taxation under
Section 4999 of the Code would not be reduced.
Section 12. Review of Agreement. The Compensation Committee of the
Board of Directors of the Company may consider such extension and
modification of the terms of this Agreement for a period or periods
subsequent to its expiration as it may deem appropriate at any time or
from time to time.
Section 13. Waiver. The failure of either party to insist, in any
one or more instances, upon the performance of any of the terms, covenants
or conditions of this Agreement by the other party hereto, shall not be
construed as a waiver or as a relinquishment of any right granted
hereunder to the party failing to insist on such performance, or as a
waiver of the future performance of any such term, covenant or condition,
but the obligations hereunder of both parties hereto shall remain
unimpaired and shall continue in full force and effect.
Section 14. Successor; Binding Agreement. The Company shall require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance reasonably
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness
of such succession shall be deemed to be a Change in Control of the
Company effective on the date of such succession. As used herein,
"Company" shall mean TBC Corporation and any successor to its business
and/or its assets as aforesaid which executes and delivers the agreement
provided for in this Section 14 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
Section 15. Notices. All notices required or permitted to be given
under this Agreement shall be in writing and shall be mailed (postage
prepaid via either registered or certified mail) or delivered, if to the
Company, addressed to:
TBC Corporation
4770 Hickory Hill Drive
Post Office Box 18342
Memphis, Tennessee 38181-0342
Attention: Chairman of the Board
-49-<PAGE>
and if to the Executive, addressed to the Executive at his then current
home address as set forth in the Company's books and records. Either
party may change the address to which notices to it or him are to be
directed by giving written notice of such change to the other party in the
manner specified in this paragraph.
Section 16. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in Memphis, Tennessee, in accordance with the Rules of the
American Arbitration Association, and judgment upon the award rendered by
the Arbitrator(s) may be entered in any court having jurisdiction thereof.
Section 17. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of
the day and year first above written.
TBC CORPORATION
By/s/ LOUIS S.DiPASQUA
Louis S. DiPasqua,
President and Chief Executive
Officer
/s/LAWRENCE C. DAY
LAWRENCE C. DAY (Executive)
-50-
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> (1052)<F1>
<SECURITIES> 0
<RECEIVABLES> 90644
<ALLOWANCES> 7175
<INVENTORY> 96895
<CURRENT-ASSETS> 196933
<PP&E> 61930
<DEPRECIATION> 23521
<TOTAL-ASSETS> 281905
<CURRENT-LIABILITIES> 67945
<BONDS> 0
0
0
<COMMON> 2307
<OTHER-SE> 134085
<TOTAL-LIABILITY-AND-EQUITY> 281905
<SALES> 140735
<TOTAL-REVENUES> 140735
<CGS> 118401
<TOTAL-COSTS> 118401
<OTHER-EXPENSES> 15777
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1440
<INCOME-PRETAX> 5117
<INCOME-TAX> 1967
<INCOME-CONTINUING> 3150
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3150
<EPS-PRIMARY> .14<F2>
<EPS-DILUTED> .14
<FN>
<F1>THIS ITEM IS SHOWN NET OF "OUTSTANDING CHECKS, NET" ON THE CONSOLIDATED
BALANCE SHEETS.
<F2>AMOUNT IS "BASIC" EPS AS COMPUTED PER FASB STATEMENT NO. 128.
</FN>
</TABLE>
