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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 19, 1998
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TBC Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-11579 31-0600670
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
4770 Hickory Hill Road, Memphis, Tennessee 38141
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (901) 363-8030
-----------------------------
Not Applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
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On November 19, 1998, TBC Corporation ("TBC") acquired all of the
outstanding capital stock of Carroll's, Inc., a Georgia corporation
("Carroll's") from its three shareholders, Robert E. Carroll, Jr. ("Mr.
Carroll"), the 2nd Amended and Restated Stock Bonus Plan and Trust of Carroll's,
Inc. (the "Stock Bonus Plan"), and the Money Purchase Plan and Trust of
Carroll's, Inc. (the "Money Purchase Plan"). Of the outstanding capital stock of
Carroll's, approximately 60% was owned by Mr. Carroll, 29% was owned by the
Stock Bonus Plan, and the remaining 11% was owned by the Money Purchase Plan.
Pursuant to the Share Purchase Agreement, dated November 19, 1998,
among the parties (the "Agreement"), the total consideration paid by TBC for the
outstanding capital stock of Carroll's was $28 million, $25.2 million of which
was paid in cash at the closing and the $2.8 million balance of which was placed
in escrow to satisfy pending claims, if any, that may arise against Mr. Carroll
under the Agreement.
Carroll's is a wholesale tire distributor operating in the southeastern
United States. Carroll's has been a TBC distributor for nearly 30 years and is
TBC's largest customer. In addition, Mr. Carroll served as a director of TBC
from 1970 until his retirement from the Board in October 1998.
Carroll's distributes TBC's products in the States of Georgia,
Florida, North Carolina, South Carolina, and Alabama. Carroll's customer base
includes approximately 4,000 retail tire dealers, none of whom accounted for
more than 3% of Carroll's sales in each of its last three fiscal years.
For the years ended December 31, 1995, 1996, and 1997, TBC's sales to
Carroll's and distributors operating under agreements with Carroll's totaled
$81.8 million, $73.5 million, and $68.8 million, respectively, and represented
14.9%, 12.2%, and 10.7%, respectively, of TBC's consolidated net sales. During
the nine months ended September 30, 1998, TBC's sales to Carroll's and its
related distributors were $56.4 million and represented 11.8% of TBC's
consolidated net sales for the period.
The consideration payable by TBC for the Carroll's Common Stock was
determined in arms length negotiations conducted by TBC with Mr. Carroll, the
Stock Bonus Plan, and the Money Purchase Plan. Mr. Carroll did not participate
in any discussion or action taken by the TBC Board of Directors with respect to
the Carroll's acquisition.
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Carroll's operates sixteen warehouse facilities located throughout the
southeastern United States, all of which are leased by Carroll's from a
corporation controlled by Mr. Carroll. Carroll's will continue to lease the
warehouse facilities under new leases executed at the closing.
For the years ended December 31, 1995, 1996, and 1997, Carroll's net
sales were $140.6 million, $144.5 million, and $148.3 million, respectively, and
net income after tax was $1.7 million, $519,000, and $1.6 million, respectively.
For the nine months ended September 30, 1998, Carroll's net sales totaled $122.1
million and net income after tax was $310,500.
At September 30, 1998, Carroll's had total assets of $52.0 million,
approximately $2.1 million of which consisted of property, plant, and equipment,
$49.1 million of which consisted of current assets, and $825,000 of which was
represented by intangibles and other assets. Stockholders' equity totaled
approximately $17.9 million at September 30, 1998.
At the present time, it is expected that the business of Carroll's,
which is now a wholly-owned subsidiary of TBC, will be conducted substantially
as it was prior to the acquisition, including the utilization of its physical
assets. However, TBC reserves the right to make changes in the business
operations of Carroll's or the utilization of its physical assets from time to
time as TBC deems the same to be necessary or appropriate.
At the time of the closing, TBC also repaid approximately $3.8 million
outstanding under Carroll's existing credit facilities and repurchased 37,968
shares of TBC Common Stock from the Stock Bonus Plan at the closing price for
TBC Common Stock on the day prior to the closing.
The funds utilized by TBC to pay the $28 million purchase price for
Carroll's, to repay Carroll's existing credit facilities, and to repurchase TBC
shares from the Stock Bonus Plan were obtained by TBC by borrowings under TBC's
existing revolving credit facilities with First Tennessee Bank, SunTrust Bank,
and The Chase Manhattan Bank. At November 30, 1998, TBC owed $52.7 million, and
had $25.5 million of unused availability, under these facilities.
Item 7. Financial Statements and Exhibits.
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(a) Financial statements of businesses acquired - None required.
(b) Pro forma financial information - None required.
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(c) Exhibits - See Exhibit Index.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
TBC CORPORATION
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(Registrant)
December 3, 1998 By:/s/LOUIS S. DiPASQUA
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(Date) Louis S. DiPasqua,
Vice Chairman and
Chief Executive Officer
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EXHIBIT INDEX
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Exhibit No. and Description:
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
2.1 Share Purchase Agreement, dated November 19, 1998, by and
among TBC Corporation, Robert E. Carroll, Jr., and William
J. Baker II, Trustee.
As permitted by Item 601(b)(2) of Regulation S-K, the
Schedules delivered by Robert E. Carroll, Jr. to TBC
Corporation contemporaneously with the execution of the above
Share Purchase Agreement are not being filed herewith. A
description of the contents of the Schedules is set forth on
page (vi) of the Share Purchase Agreement. TBC Corporation
agrees to furnish a copy of the Schedules to the Commission
upon request.
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Exhibit 2.1
SHARE PURCHASE AGREEMENT
by and among
TBC CORPORATION,
ROBERT E. CARROLL, JR.,
and
WILLIAM J. BAKER II
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TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS .................................................1
1.01 Defined Terms ...............................................1
1.02 Interpretation ..............................................4
ARTICLE 2 - SALE AND PURCHASE OF SHARES .................................5
2.01 Agreement to Sell and Purchase ..............................5
2.02 Option Agreement Matters ....................................5
2.03 Stock Bonus Plan Pledge Matters .............................5
2.04 Money Purchase Plan Pledge Matters ..........................5
ARTICLE 3 - PURCHASE PRICE AND PAYMENT TERMS ............................6
3.01 Aggregate Purchase Price; Allocation ........................6
3.02 Payment of Stock Bonus Plan Purchase Price ..................6
3.03 Payment of Money Purchase Plan Purchase Price ...............7
3.04 Payment of Carroll Purchase Price ...........................7
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
PLANS .......................................................7
4.01 The Stock Bonus Plan ........................................7
4.02 The Money Purchase Plan .....................................8
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF MR. CARROLL ...............9
5.01 Schedules ...................................................9
5.02 Corporate Organization ......................................9
5.03 Authority; Authorization; Enforceability ....................9
5.04 Capitalization .............................................10
5.05 Subsidiaries ...............................................10
5.06 Consents and Approvals; No Violation .......................10
5.07 Financial Statements .......................................11
5.08 Taxes ......................................................11
5.09 Employee Plans .............................................13
5.10 Material Contracts .........................................14
5.11 Absence of Certain Changes or Events .......................14
5.12 Litigation; Pending Decrees ................................14
5.13 Compliance with Laws and Orders; Permits and Licenses ......14
5.14 Conduct to Date ............................................15
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5.15 Labor Matters ..............................................16
5.16 Undisclosed Liabilities; Net Worth .........................16
5.17 Title to Properties; Absence of Liens, Etc. ................16
5.18 Receivables ................................................17
5.19 Inventories ................................................17
5.20 Proprietary Rights .........................................17
5.21 Insurance ..................................................17
5.22 Environmental Matters ......................................17
5.23 Certain Transactions .......................................18
5.24 Disclosure .................................................18
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF TBC ......................19
6.01 Authority; Authorization; Enforceability ...................19
6.02 Consents and Approvals; No Violation .......................19
6.03 Disclosure .................................................19
ARTICLE 7 - PRE-CLOSING OBLIGATIONS ....................................20
7.01 Conduct of the Business ....................................20
7.02 Further Assurances .........................................21
7.03 Notice .....................................................21
7.04 Access; Confidentiality ....................................22
ARTICLE 8 - CONDITIONS .................................................22
8.01 Conditions to Obligations of Each Party ....................22
8.02 Additional Conditions to the Obligations of TBC ............23
8.03 Additional Conditions to the Obligations of the
Shareholders ...............................................24
ARTICLE 9 - CLOSING ....................................................25
9.01 Time and Place .............................................25
9.02 Deliveries at the Closing ..................................25
ARTICLE 10 - TERMINATION, AMENDMENT, AND WAIVER .........................25
10.01 Termination ................................................25
10.02 Effect of Termination ......................................26
10.03 Amendment ..................................................26
10.04 Waiver .....................................................26
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ARTICLE 11 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION ...........................................26
11.01 Survival ..................................................26
11.02 Indemnification by Each Shareholder .......................26
11.03 Indemnification by TBC ....................................27
11.04 Limit on Indemnification Rights ...........................27
11.05 Escrow ....................................................28
11.06 Sole Remedy ...............................................28
ARTICLE 12 - NONCOMPETITION AND CONFIDENTIALITY COVENANTS ..............28
12.01 Noncompetition ............................................28
12.02 Competitive Business ......................................28
12.03 Confidentiality ...........................................28
12.04 Injunctive Relief .........................................28
12.05 Reformation ...............................................29
ARTICLE 13 - MISCELLANEOUS .............................................29
13.01 Public Statements .........................................29
13.02 Notices ...................................................29
13.03 Headings ..................................................30
13.04 Counterparts ..............................................30
13.05 Transaction Expenses ......................................30
13.06 Indemnification Procedures ................................30
13.07 Attorneys' Fees ...........................................30
13.08 Termination of Stock Bonus Plan and Money Purchase Plan;
1998 Bonuses ..............................................30
13.09 Whole Agreement ...........................................31
13.10 Severability ..............................................31
13.11 Binding Effect; Assignment ................................31
EXHIBIT A - Form of Opinion of Rock & Leitz
EXHIBIT B - Form of Escrow Agreement
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INDEX OF DEFINED TERMS
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Defined Term Defined in Section or Subsection
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Aggregate Purchase Price 3.01
Appraisal 3.01(a)
Business Representations and Warranties 1.01
Carroll Purchase Price 3.01(c)
Carroll Shares 5.04(b)
Closing 2.01
Closing Date 9.01
Code 1.01
Common Shares 5.04(a)
Company Introduction
Competitive Business 12.02
Employee Plans 1.01
Equipment Leases 5.17(b)
Entity 1.01
Environmental Laws 1.01
ERISA 1.01
Escrow Agent 1.01
Escrow Agreement 11.05
Financial Statements 1.01
Governmental Entity 1.01
HSR Act 1.01
Hazardous Substance
IRS 1.01
Liens 1.01
Losses 11.04(d)
Material Adverse Effect 1.01
Material Contracts 1.01
Money Purchase Plan Introduction
Money Purchase Plan Note 2.04
Money Purchase Plan Note Payoff Amount 3.03(a)
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Defined Term Defined in Section or Subsection
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Money Purchase Plan Pledge Agreement 2.04
Money Purchase Plan Purchase Price 3.01(b)
Money Purchase Plan Shares 4.02(a)
Mr. Carroll Introduction
New Real Estate Leases 8.02(i)
Option Agreement 2.02
Proprietary Rights 5.20
Real Property Leases 5.17(b)
Repair Payments 11.02(c)
Representatives 7.04
Rights of Purchase 1.01
Schedules 1.01
Shareholder Plans Introduction
Shareholders Introduction
Shares 1.01
Stock Bonus Plan Introduction
Stock Bonus Plan Note 2.03
Stock Bonus Plan Note Payoff Amount 3.02(a)
Stock Bonus Plan Pledge Agreement 2.03
Stock Bonus Plan Purchase Price 3.01(a)
Stock Bonus Plan Shares 4.01(a)
TBC Introduction
Tax Returns 1.01
Taxes 1.01
Trustee Introduction
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INDEX TO SCHEDULES
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Schedule No. Description
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5.02 Qualification To Do Business
5.06 Consents and Approvals; No Violation
5.07 Financial Statement Exceptions
5.08 Tax Matters
5.09 Employee Plans
5.10 Material Contracts
5.12 Litigation
5.13 Compliance With Laws
5.14 Changes Since December 31, 1997
5.17 Equipment and Real Property Leases; Title;
Condition of Assets
5.18 Receivables
5.21 Insurance
5.22 Environmental Matters
5.23 Certain Transactions
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SHARE PURCHASE AGREEMENT
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THIS AGREEMENT is being executed this 19th day of November, 1998, by
and among TBC CORPORATION, a Delaware corporation ("TBC"), ROBERT E. CARROLL,
JR. ("Mr. Carroll"), and WILLIAM J. BAKER II, in his capacity as the Trustee of
the 2ND AMENDED AND RESTATED STOCK BONUS PLAN AND TRUST OF CARROLL'S, INC. (the
"Stock Bonus Plan") and the MONEY PURCHASE PLAN AND TRUST OF CARROLL'S, INC.
(the "Money Purchase Plan") and not individually (the "Trustee"), under the
following circumstances:
A. Mr. Carroll and the Trustee (collectively, the
"Shareholders") are the owners of all of the issued and outstanding
capital stock of Carroll's, Inc., a Georgia corporation (the
"Company").
B. TBC, Mr. Carroll, and the Trustee have agreed that TBC will
purchase the capital stock of the Company for $28,000,000.
C. In view of the provisions of the Employee Retirement Income
Security Act of 1974, the Trustee is not willing to sell, and TBC is
not willing to purchase, the capital stock owned by either the Stock
Bonus Plan or the Money Purchase Plan (collectively, the "Shareholder
Plans") at less than the current appraised fair market value thereof.
Mr. Carroll, nevertheless, will accept a price for his shares which may
be less than the per share price paid to the Shareholder Plans.
D. As a result thereof, Mr. Carroll and the Shareholder Plans
have agreed to sell to TBC, and TBC has agreed to purchase from the
Shareholders, the capital stock of the Company upon and subject to the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, the parties hereby agree as follows:
ARTICLE 1. DEFINITIONS.
1.01 DEFINED TERMS. In addition to the capitalized terms defined
elsewhere in this Agreement, the capitalized terms set forth below shall have
the following meanings whenever used in this Agreement:
"Business Representations and Warranties" means all representations and
warranties set forth in Article 5, other than those set forth in Subsections
5.02(a), (c), and (d) and Sections 5.03, 5.04 and 5.05.
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"Code" means the Internal Revenue Code of 1986 and the rules and
regulations thereunder, all as from time to time amended.
"Employee Plans" means all employment, bonus, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase or bonus,
employee stock ownership, stock appreciation rights, savings, consulting,
severance, termination, collective bargaining, group insurance, fringe benefit,
and other employee benefit, incentive, or welfare plans, policies, contracts, or
arrangements, formal or informal, written or oral, of the Company and all trust
agreements related thereto, relating to any present or former director, officer,
or employee of the Company.
"Entity" means an individual, firm, trust, corporation, partnership,
limited liability company, joint venture, business, enterprise, association, or
organization, however constituted or existing.
"Environmental Laws" means all applicable federal, state or local laws,
statutes, ordinances, rules, regulations, codes, licenses, permits,
authorizations, approvals, consents, orders, judgments, decrees, injunctions, or
agreements with any governmental entity related to (i) the protection,
preservation, or restoration of the environment (including, without limitation,
air, water vapor, surface water, ground water, drinking water supply, surface
soil, subsurface soil, plant and animal life, or any other natural resource),
and/or (ii) the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release, or disposal of Hazardous
Substances. The term "Environmental Laws" includes, without limitation: the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. sec.9601, et seq.; the Resource Conservation and Recovery
Act, as amended, 42 U.S. C. sec. 6901, et seq.; the Clean Air Act, as amended,
42 U.S.C. sec. 7401, et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S. C. sec. 1251, et seq.; the Toxic Substances Control Act, as
amended, 15 U.S.C. sec. 2601, et seq.; the Emergency Planning and Community
Right to Know Act, 42 U.S.C. sec. 11001, et seq.; the Safe Drinking Water Act,
42 U.S.C. sec. 300f, et seq.; all comparable state and local laws; and any
common law (including without limitation, common law that may impose strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of or exposure to any Hazardous
Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
the rules and regulations thereunder, all as from time to time amended.
"Escrow Agent" means SunTrust Bank, Atlanta.
"Financial Statements" means the (i) audited financial statements,
schedules, and notes of the Company, at and for the years ended December 31,
1995, 1996, and 1997; (ii) the interim financial statements of the Company at
and for the nine months ended September 30, 1998, together with the review
report of Blackwell Poole LLP thereon; and (iii) those unaudited
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financial statements of the Company at and for periods thereafter to be
delivered by Mr. Carroll to TBC pursuant to Subsection 7.01(e) hereof.
"Governmental Entity" means any federal, state, or local court,
governmental authority, or other regulatory or administrative agency or
commission.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the rules and regulations thereunder, all as from time to time amended.
"Hazardous Substance" means any substance presently listed, defined,
designated, or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a component.
Hazardous Substances include, without limitation, petroleum or any derivative or
by-product thereof, asbestos, radioactive materials, polychlorinated biphenyls,
and battery acids.
"IRS" means the Internal Revenue Service.
"Liens" means any mortgage, pledge, charge, security interest, or other
encumbrance of any nature whatsoever upon or conditional assignment of any
property or assets.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, operations, or prospects of the
Company.
"Material Contracts" means all of the following to which the Company is
a party, is bound or affected by, receives any benefits under, or by which any
property or assets of any of the Company may be bound: (i) the Real Property
Leases; (ii) the Equipment Leases; (iii) all franchise, dealer, or other
distribution agreements pursuant to which the Company sells or otherwise
distributes its products or services or pursuant to which any Entity sells or
otherwise distributes products or services of the Company, other than any of the
foregoing to which TBC is also a party; (iv) all supply contracts or other such
agreements or understandings pursuant to which the Company purchased in its last
fiscal year, or expects to purchase in this fiscal year, in excess of $50,000
worth of products, other than any of the foregoing to which TBC is also a party;
(v) any agreement, arrangement, or commitment which materially restricts the
conduct of any line of business, including without limitation, all standstill or
noncompete agreements, other than any of the foregoing to which TBC is also a
party other than any of the foregoing to which TBC is also a party ; (vi) any
contract, agreement, or other arrangement (other than pursuant to the Employee
Plans), providing for the furnishing of services to or by, providing for the
rental of real or personal property to or from, or otherwise requiring payments
to or from, any director, officer, or shareholder of the Company, any family
member of any such director, officer or shareholder, or any Entity in which any
of the foregoing holds, directly or indirectly, a substantial interest; (vii)
any agreement, indenture or other instrument relating to the borrowing of money
by the Company (other than trade payables entered into in the ordinary course of
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business); (viii) any agreement pursuant to which the Company is obligated to
lend money or make advances, or has lent money or made advances which are still
outstanding, to any person (other than routine travel advances to any employee
not to exceed $5,000 or deposits or advances in respect of products purchased in
the ordinary course of business); (ix) any agreement, arrangement, or commitment
to guarantee the obligations of or to indemnify or exonerate from liability any
Entity, or the directors or officers of the Company (other than pursuant to the
Articles of Incorporation or Bylaws of the Company or applicable law); (x) any
power of attorney presently in effect giving Entity the right to act on behalf
of the Company; (xi) any partnership or joint venture agreement to which the
Company is a party; (xii) any confidentiality or secrecy agreement to which the
Company is a party; (xiii) any consulting agreement to which the Company is a
party; (xiv) the Shareholder Plans and all other Employee Plans; (xv) any other
contract, commitment, agreement, or understanding, whether written or oral,
which involves more than $25,000 and is not terminable without penalty upon not
more than 90 days' notice; and (xvi) any other contract or agreement that would
be required to be filed as an exhibit to a Form 10-K filed by the Company with
the Securities and Exchange Commission.
"Rights of Purchase" means any subscriptions, options, warrants, scrip,
rights, calls, convertible securities, commitments, promises, or any other
similar agreements or arrangements of any character.
"Schedules" means the Schedules to this Agreement being delivered by
Mr. Carroll to TBC simultaneously with the execution and delivery of this
Agreement.
"Shares" means, collectively, the Carroll Shares, the Stock Bonus Plan
Shares, and the Money Purchase Plan Shares.
"Taxes" means all federal, state, local, or foreign income, franchise,
sales, use, excise, real and personal property, transfer, employment, social
security, unemployment, withholding, and other taxes, assessments, charges,
fees, or levies, and any interest or penalties on any of the foregoing.
"Tax Returns" means all federal, state, local, and foreign returns and
reports relating to or required to be filed in connection with the
determination, collection, assessment, or reporting of Taxes.
1.02 INTERPRETATION. As used in this Agreement, (i) the masculine,
feminine and neuter genders and the plural and singular numbers shall be deemed
to include the others in all cases where they would so apply; and (ii) the
phrase "to the best knowledge" of any party shall mean to the knowledge of such
party after due and appropriate inquiry.
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ARTICLE 2. SALE AND PURCHASE OF SHARES.
2.01 AGREEMENT TO SELL AND PURCHASE. Subject to the terms and
conditions of this Agreement, at the closing for which provision is made in
Article 9 (the "Closing"), the Shareholders shall sell the Shares to TBC and TBC
shall purchase the Shares from the Shareholders.
2.02 OPTION AGREEMENT MATTERS. To enable TBC to purchase the Carroll
Shares, the Trustee does hereby waive its right of first refusal to purchase the
Carroll Shares and its option to purchase the Carroll Shares, which right and
option were granted to the Shareholder Plans pursuant to the terms of the
Agreement, dated December 7, 1989, among the Trustees, David F. Rock, as
trustee, the Company, and Mr. Carroll, as amended November 3, 1990, October 1,
1993, and September 1, 1995 (as so amended, the "Option Agreement").
2.03 STOCK BONUS PLAN PLEDGE MATTERS. To enable TBC to purchase the
Stock Bonus Plan Shares, Mr. Carroll does hereby agree that (a) between the date
of this Agreement and the Closing, Mr. Carroll's right to foreclose upon and
enforce his security interest and pledge in the Stock Bonus Plan Shares pursuant
to the terms of the Stock Pledge Agreement, dated January 1, 1997, between the
Stock Bonus Plan and Mr. Carroll (the "Stock Bonus Plan Pledge Agreement") shall
be suspended; and (b) he will deliver to TBC the Stock Bonus Plan Shares held by
him pursuant to the Stock Bonus Plan Pledge Agreement against payment by the
Stock Bonus Plan of the $2,501,760 principal balance, plus accrued interest,
outstanding under the Promissory Note, dated January 1, 1997, given by the Stock
Bonus Plan to Mr. Carroll (the "Stock Bonus Plan Note"). In addition, for the
purposes of the Stock Bonus Plan Pledge Agreement, Mr. Carroll hereby consents
to the sale of the Stock Bonus Plan Shares to TBC in accordance with the terms
of this Agreement.
2.04 MONEY PURCHASE PLAN PLEDGE MATTERS. To enable TBC to purchase the
Money Purchase Plan Shares, Mr. Carroll does hereby agree that (a) between the
date of this Agreement and the Closing, Mr. Carroll's right to foreclose upon
and enforce his security interest and pledge in the Money Purchase Plan Shares
pursuant to the terms of the Stock Pledge Agreement, dated January 3, 1997,
between the Money Purchase Plan and Mr. Carroll (the "Money Purchase Plan Pledge
Agreement") shall be suspended; and (b) he will deliver to TBC the Money
Purchase Plan Shares held by him pursuant to the Money Purchase Plan Pledge
Agreement against payment by the Money Purchase Plan of the $613,704 principal
balance under the Promissory Note, dated January 1, 1997, given by the Money
Purchase Plan to Mr. Carroll (the "Money Purchase Plan Note"). In addition, for
purposes of the Money Purchase Plan Pledge Agreement, Mr. Carroll hereby
consents to the sale of the Money Purchase Plan Shares to TBC in accordance with
the terms of this Agreement.
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ARTICLE 3. PURCHASE PRICE AND PAYMENT TERMS.
3.01 AGGREGATE PURCHASE PRICE; ALLOCATION. The aggregate purchase price
payable by TBC for the Shares (the "Aggregate Purchase Price") shall be Twenty
Eight Million Dollars ($28,000,000). The Aggregate Purchase Price shall be paid
to the Shareholders in the following manner:
(a) TBC shall pay $10,632,281.35 to the Stock Bonus Plan, such
amount being the fair market value of the Stock Bonus Plan Shares as of
the close of business on the date preceding the Closing Date, as
determined by an independent appraisal of the Company (the "Appraisal")
conducted by Mitchell Kaye, C.F.A. (The amount payable by TBC to the
Stock Bonus Plan pursuant to this Subsection 3.01(a) is hereinafter
referred to as the "Stock Bonus Plan Purchase Price.")
(b) TBC shall pay $3,854,641.95 to the Money Purchase Plan,
such amount being the fair market value of the Money Purchase Plan
Shares as of the close of business on the date preceding the Closing
Date, as determined by the Appraisal. (The amount payable by TBC to the
Money Purchase Plan pursuant to this Subsection 3.01(b) is hereinafter
referred to as the "Money Purchase Plan Purchase Price.")
(c) TBC shall pay $13,513,076.70 to Mr. Carroll, such amount
(the "Carroll Purchase Price") being equal to the difference between
the Aggregate Purchase Price and the sum of the Stock Bonus Plan
Purchase Price and the Money Purchase Plan Purchase Price.
3.02 PAYMENT OF STOCK BONUS PLAN PURCHASE PRICE. The Stock Bonus Plan
Purchase Price shall be payable in cash at the Closing as follows:
(a) On the day prior to the Closing Date, the Stock Bonus Plan
and Mr. Carroll shall provide to TBC written confirmation, signed by
the Trustees and Mr. Carroll, as to the amount necessary to discharge
the principal balance and all accrued interest outstanding under the
Stock Bonus Plan Note in full on the Closing Date (the "Stock Bonus
Plan Note Payoff Amount").
(b) On the Closing Date, TBC shall wire transfer the Stock
Bonus Plan Note Payoff Amount in immediately available funds to such
bank account as may be specified by Mr. Carroll.
(c) On the Closing Date, TBC shall wire transfer the balance
of the Stock Bonus Plan Purchase Price to such bank account as may be
specified by the Trustee, on behalf of Stock Bonus Plan.
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<PAGE> 14
3.03 PAYMENT OF MONEY PURCHASE PLAN PURCHASE PRICE. The Money Purchase
Plan Purchase Price shall be payable in cash at the Closing as follows:
(a) On the day prior to the Closing Date, the Money Purchase
Plan and Mr. Carroll shall provide to TBC written confirmation, signed
by the Trustees and Mr. Carroll, as to the amount necessary to
discharge the principal balance and all accrued interest outstanding
under the Money Purchase Plan Note in full on the Closing Date (the
"Money Purchase Plan Note Payoff Amount").
(b) On the Closing Date, TBC shall write transfer the Money
Purchase Plan Note Payoff Amount in immediately available funds to such
bank account as may be specified by Mr. Carroll.
(c) On the Closing Date, TBC shall wire transfer the balance
of the Money Purchase Plan Purchase Price to such bank account as may
be specified by the Trustee, on behalf of the Money Purchase Plan.
3.04 PAYMENT OF CARROLL PURCHASE PRICE. The Carroll Purchase Price
shall be payable as follows:
(a) $10,713,076.70 of the Carroll Purchase Price shall be
payable in cash at the Closing, by wire transfer of immediately
available funds to such bank account as may be specified by Mr.
Carroll.
(b) The $2,800,000 balance of the Carroll Purchase Price shall
be payable by delivering such amount to the Escrow Agent at the
Closing, such amount to be held by the Escrow Agent for distribution in
accordance with the terms of the Escrow Agreement.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER PLANS.
4.01 THE STOCK BONUS PLAN. The Trustee, on behalf of the Stock Bonus
Plan, represents and warrants to TBC as follows, both as of the date of this
Agreement and as of the time of the Closing:
(a) THE STOCK BONUS PLAN SHARES. The Stock Bonus Plan owns
679,379 Common Shares, $1.00 par value, of the Company (the "Stock
Bonus Plan Shares"), represented by Certificates No. 120, 127, 136,
145, 146, and 147. The Trustee holds the Stock Bonus Plan Shares for
the benefit of the Stock Bonus Plan participants pursuant to the terms
of the Stock Bonus Plan. Except for the interests of the Stock Bonus
Plan participants pursuant to the Plan and the interest of Mr. Carroll
under the Stock Bonus Plan Pledge Agreement, the Stock Bonus Plan owns
the Stock Bonus Plan Shares free and clear of all Liens. The Stock
Bonus Plan has not granted any Entity other than TBC any Right of
Purchase with respect to any of the Stock Bonus Plan Shares.
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(b) AUTHORITY; AUTHORIZATION; ENFORCEABILITY. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized and approved by all
necessary action on the part of the Trustee, the Stock Bonus Plan, and
its participants. This Agreement has been duly executed and delivered
by the Trustee and constitutes a valid and binding obligation of the
Stock Bonus Plan, enforceable against it in accordance with its terms.
(c) CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement by the Stock Bonus Plan nor
the consummation by the Stock Bonus Plan of the transactions
contemplated hereby, nor compliance by the Stock Bonus Plan with any of
the provisions hereof, will violate, conflict with, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination of, accelerate
the performance required by, or result in a right of termination or
acceleration of, any agreement or instrument to which the Stock Bonus
Plan is bound, with the exception of the Stock Bonus Plan Pledge
Agreement, adequate provision for and consent with respect to which are
set forth in Section 2.03.
4.02 THE MONEY PURCHASE PLAN. The Trustee, on behalf of the Money
Purchase Plan, represents and warrants to TBC as follows, both as of the date of
this Agreement and as of the time of the Closing:
(a) THE MONEY PURCHASE PLAN SHARES. The Money Purchase Plan
owns 246,303 Common Shares, $1.00 par value, of the Company (the "Money
Purchase Plan Shares"), represented by Certificates No. 126, 137, 144,
148, and 149. The Trustee holds the Money Purchase Plan Shares for the
benefit of the Money Purchase Plan participants pursuant to the terms
of the Money Purchase Plan. Except for the interests of the Money
Purchase Plan participants pursuant to the Plan and the interest of Mr.
Carroll under the Money Purchase Plan Pledge Agreement, the Money
Purchase Plan owns the Money Purchase Plan Shares free and clear of all
Liens. The Money Purchase Plan has not granted any Entity other than
TBC any Right of Purchase with respect to any of the Money Purchase
Plan Shares.
(b) AUTHORITY; AUTHORIZATION; ENFORCEABILITY. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized and approved by all
necessary action on the part of the Trustee, the Money Purchase Plan,
and its participants. This Agreement has been duly executed and
delivered by the Trustee and constitutes a valid and binding obligation
of the Money Purchase Plan, enforceable against it in accordance with
its terms.
(c) CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement by the Money Purchase Plan nor
the consummation by the Money Purchase Plan of the transactions
contemplated hereby, nor compliance by the Money Purchase Plan with any
of the provisions hereof, will violate, conflict with,
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<PAGE> 16
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, result in the termination
of, accelerate the performance required by, or result in a right of
termination or acceleration of, any agreement or instrument to which
the Money Purchase Plan is bound, with the exception of the Money
Purchase Plan Pledge Agreement, adequate provision for and consent with
respect to which are set forth in Section 2.04.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF MR. CARROLL.
Mr. Carroll represents and warrants to TBC as follows, both as of the
date of this Agreement and as of the time of the Closing:
5.01 SCHEDULES. Mr. Carroll has heretofore delivered to TBC two sets of
the Schedules, identified by his signature thereon. Each Schedule is true,
accurate and complete in all material respects.
5.02 CORPORATE ORGANIZATION. (a) The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Georgia.
(b) The Company is qualified to do business as a foreign corporation in
the States of Alabama, Florida, and South Carolina. Except as set forth on
Schedule 5.02, the Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which its ownership or
leasing of property or the nature of the business conducted by it makes such
qualification necessary, except for such jurisdictions in which the failure to
be so qualified or in good standing would not, in the aggregate, have a Material
Adverse Effect.
(c) The Company has the requisite corporate power and authority to own,
lease, and operate its properties and assets and to carry on its business as it
is now being conducted.
(d) The Company has heretofore delivered to TBC true and complete
copies of the Company's Articles of Incorporation and Bylaws, both as currently
in effect.
5.03 AUTHORITY; AUTHORIZATION; ENFORCEABILITY. (a) Mr. Carroll has full
right and lawful authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
(b) No corporate proceedings on the part of the Company or its
shareholders or directors are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby.
(c) This Agreement has been duly executed and delivered by Mr. Carroll
and constitutes a valid and binding obligation of Mr. Carroll, enforceable
against him in accordance with its terms.
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<PAGE> 17
5.04 CAPITALIZATION. (a) The authorized capital stock of the Company
consists of 10,000,000 Common Shares, $1.00 par value ("Common Shares"), of
which 2,337,002 are issued and outstanding and 7,098 are held as treasury
shares. Of the issued and outstanding Common Shares, 246,303 are owned by the
Money Purchase Plan, 679,379 are owned by the Stock Bonus Plan, and 1,411,320
are owned by Mr. Carroll.
(b) The 1,411,320 Common Shares owned by Mr. Carroll (the
"Carroll Shares") are owned by him free and clear of all Liens, other than those
created by the Option Agreement. Mr. Carroll has not granted any person or
entity other than TBC or, pursuant to the Option Agreement, the Shareholder
Plans, any Right of Purchase with respect to any of the Carroll Shares. No
Entity other than Mr. Carroll has any legal or beneficial interest in the
Carroll Shares.
(c) There are no outstanding Rights of Purchase relating to
the issued or unissued Common Shares or other capital shares or securities of
the Company which obligate or may obligate the Company to issue, deliver, or
sell, or cause to be issued, delivered, or sold, additional Common Shares or
other capital shares or securities of the Company or to grant, extend, or enter
into any such Rights of Purchase.
(d) With the exception of the Option Agreement, the Stock
Bonus Plan Pledge Agreement, and the Money Purchase Plan Pledge Agreement, there
are no contracts, agreements, or understandings between or among any
shareholders of the Company which limit, restrict, or otherwise affect the
voting, sale, transfer, or other disposition of any Common Shares.
(e) All outstanding Common Shares are duly authorized, validly
issued, fully paid, and nonassessable, and not subject to any right of
rescission. No outstanding Common Shares were issued in violation of any
preemptive right of any shareholder of the Company, and no Shareholder currently
has any preemptive right with respect to any Common Shares. No Shareholder has a
valid claim or cause of action against the Company based on any violation of any
applicable securities law in connection with the issuance or other sale by the
Company of Common Shares to such Shareholder.
(f) Since January 1, 1997, the Company has not repurchased or
otherwise acquired any of its Common Shares or other capital shares or
securities.
5.05 SUBSIDIARIES. The Company does not have any investment in or own
any securities of any Entity, except certificates of deposit, commercial paper,
or similar money equivalents, 50 shares of The Hercules Tire & Rubber Company
and 360 shares of Carmerica, Inc.
5.06 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth on
Schedule 5.06, neither the execution and delivery of this Agreement by the
Shareholders, nor the consummation by the Shareholders of the transactions
contemplated hereby, nor compliance by the Shareholders with any of the
provisions hereof, will:
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<PAGE> 18
(a) Conflict with or result in any breach of any provision of
the Company's Articles of Incorporation or Bylaws.
(b) Violate, conflict with, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, result in the termination of, accelerate the
performance required by, result in a right of termination or
acceleration of, or result in the creation of any Lien upon any of the
properties or assets of the Company under, any Material Contract or any
agreement or instrument to which Mr. Carroll or either Shareholder Plan
is a party or by which Mr. Carroll or either Shareholder Plan is bound,
with the exception of the Option Agreement, the Stock Purchase Plan
Pledge Agreement, and the Money Purchase Plan Pledge Agreement,
adequate provision for and consent with respect to which are set forth
in Sections 2.02, 2.03, and 2.04.
(c) Violate any judgment, ruling, order, writ, injunction,
decree, statute, rule, or regulation of any Governmental Entity
applicable to Mr. Carroll, the Company, or any of their respective
properties or assets.
(d) Require any consent, approval, authorization or permit of
or from, or filing with or notification to, any Governmental Entity,
except filings required under the HSR Act, or any other party to any
Material Contract.
5.07 FINANCIAL STATEMENTS. Except set forth on Schedule 5.07, the
Financial Statements have been, and in the case of Financial Statements for
periods ending after the date of this Agreement, will be, prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein) and fairly present or will fairly present,
as the case may be, the financial position of the Company at the dates thereof
and the results of operations and cash flows for the periods then ended subject,
in the case of unaudited interim financial statements, to normal year-end and
audit adjustments and any other adjustments described therein, which adjustments
will not, in the aggregate, have a Material Adverse Effect.
5.08 TAXES. (a) Except as set forth on Schedule 5.08, the Company has
prepared in good faith and duly and timely filed, or caused to be duly and
timely filed, all Tax Returns required to be filed by it. Except as set forth on
Schedule 5.08 and except for Taxes as to which the assessment of deficiencies
and other means of collection have been barred by the applicable statute of
limitations, the Company has paid, or has adequately reserved or made adequate
accruals (in accordance with generally accepted accounting principles) with
respect to, all Taxes due and payable pursuant to such Tax Returns or otherwise
owing by the Company, whether or not shown to be owing on such Tax Returns. The
Company does not or will not have any liability for Taxes referable to any
period prior to the Closing Date, except for Taxes accrued on the Financial
Statements and ordinary and normal Taxes which are not yet due and payable. The
Company will not incur any liability under Section 280G of the Code as a result
of the transactions contemplated by this Agreement.
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<PAGE> 19
(b) Schedule 5.08 sets forth the following information with
respect to the Company: (i) the most recent tax year through which the IRS has
completed its examination of the Company; (ii) whether there is an examination
pending by the IRS with respect to the Company, and, if so, the tax years
involved; (iii) whether the Company has executed or filed with the IRS or any
other Governmental Entity any agreement which is still in effect extending the
period for assessment and collection of any Tax and, if so, the Tax years
covered by such agreement and expiration date of such extension; and (iv)
whether there are any existing disputes as to any Taxes.
(c) Except as set forth on Schedule 5.08, the Company is not a
party to any action or proceeding, nor to the best of Mr. Carroll's knowledge,
is any such action or proceeding threatened, by any Governmental Entity for the
assessment or collection of Taxes, and no deficiency notices or reports have
been received by the Company in respect of any deficiencies for Taxes. After the
date of this Agreement, Mr. Carroll will promptly notify TBC of (i) the
commencement or threat of any such action or proceeding, (ii) the receipt by the
Company of any such deficiency notice or report, and (iii) the existence or
commencement of any such action or proceeding to which the Company is a party or
the receipt by the Company of any such deficiency notice or report.
(d) Set forth on Schedule 5.08 is information as of the most
recent practicable date concerning: (i) the amount and date of expiration of any
net operating loss, net capital loss, unused investment, minimum, or other tax
credit, or excess charitable contribution deduction of the Company; (ii) all
expenses that have been paid or accrued but not yet deducted for Tax purposes;
(iii) the aggregate amount of net Section 1231 losses incurred since January 1,
1993 under the Code that has been deducted or is expected to be deducted by the
Company; (iv) any effective election made by the Company with respect to any
Taxes; and (v) a list of jurisdictions in which the Company is required to file
Tax Returns. Since January 1, 1993, no claim has been made by a taxing authority
in any jurisdiction where the Company does not file Tax Returns that the Company
is subject to taxation by such jurisdiction.
(e) The Company has never been a member of an affiliated group
within the meaning of Section 1504 of the Code.
(f) Except as otherwise set forth on Schedule 5.08, (i) the
Company has not taken any position on its federal income Tax returns (and its
not considering taking a position on a federal income Tax return required to be
filed before or after the Closing Date) that would subject it to an underpayment
of federal income Tax within the meaning of Section 6662 of the Code or any
corresponding provision of state or local Tax law; (ii) the Company is not a
party to any Tax allocation or Tax sharing agreement; (iii) the Company has not
agreed to make, nor is it required to make, any adjustment under Section 481 of
the Code by reason of a change in accounting method, accounting period, or
otherwise; (iv) the Company has not engaged in a transfer of assets that would
have resulted in gain pursuant to Section 311 of the Code, but which
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<PAGE> 20
gain was treated as a deferred intercompany gain pursuant to the Code; and (v)
the Company has not deferred any gain from the sale of assets pursuant to
Section 453 of the Code.
5.09 EMPLOYEE PLANS. (a) Schedule 5.09 sets forth a complete list of
all Employee Plans. Mr. Carroll has previously delivered or made available to
TBC true and complete copies of all such Employee Plans, in each case as in
effect on the date of this Agreement. (b) Each Employee Plan has been
maintained, operated, and administered in substantial compliance with its terms.
The Company and each Employee Plan currently complies, and has at all relevant
times complied, in all material respects with ERISA, the Code, and any other
applicable laws (including, without limitation, provisions relating to fiduciary
obligations and disclosure and reporting requirements).
(c) The Company does not currently maintain, and has at no
time in the past maintained, any pension plan, as defined in Section 3(2) of
ERISA, other than the Shareholder Plans. With respect to each Shareholder Plan:
(i) the Plan as amended (and any trust relating thereto) is intended to be a
qualified plan under Section 401(a) of the Code and either has been determined
by the IRS to be so qualified or is the subject of a pending application for
such a determination that was timely filed; and (ii) no nonexempt prohibited
transaction (as defined in Section 4975 of the Code) has occurred. The Company
is not a party to and has not completely or partially withdrawn from any
multi-employer plan, within the meaning of Section 3(37) of ERISA, which is
subject to any of the provisions of ERISA.
(d) Except as set forth on Schedule 5.09, no Employee Plan
provides benefits, including without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees beyond
their retirement or other termination of service, other than (i) temporary
coverage mandated by applicable law, (ii) death benefits or retirement benefits
under any employee pension plan, as that term is defined in Section 3(2) of
ERISA, (iii) deferred compensation benefits accrued as liabilities on the books
of the Company, or (iv) benefits the full cost of which are borne by the current
or former employee (or his or her beneficiary).
(e) No Employee Plan is involved in or is the subject of any
litigation or any claims other than routine benefit claims, and Mr. Carroll is
not aware of any such litigation or claims which can reasonably be expected to
be filed.
(f) All required contributions to each Employee Plan have been
made, except for current contributions not yet due and payable, all of which
through that date of the most recent balance sheet included in the Financial
Statements have been accrued and are reflected in the Financial Statements.
(g) With respect to each Employee Plan, (i) to the best of Mr.
Carroll's knowledge, no event has occurred and no condition exists that would
subject the Company or TBC to any tax under Sections 4971 through 4980B of the
Code or to a fine or liability under
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Section 502 of ERISA, and (ii) no provision of any such Plan prevents the
Company or TBC from terminating such Plan.
(h) Mr. Carroll has delivered or made available to TBC true
and complete copies of the most recently filed IRS Form 5500 and accountant's
opinion of the three most recent plan years for each Shareholder Plan. All
information provided by the Company to any actuary in connection with the
preparation of such actuarial valuation report was true, correct, and complete
in all material respects.
5.10 MATERIAL CONTRACTS. Set forth on Schedule 5.10 is a complete list
of all Material Contracts in force and effect on the date of this Agreement. Mr.
Carroll has delivered to TBC true and complete copies of all such Material
Contracts and will deliver to TBC true and complete copies of all Material
Contracts executed after the date of this Agreement. Except as set forth on
Schedule 5.10, to the best of Mr. Carroll's knowledge, (i) all of the Material
Contracts are valid, binding, and in full force and effect; (ii) neither of the
Company nor any other party thereto is in default under any Material Contract,
which default is reasonably likely to have a Material Adverse Effect; and (iii)
there has not occurred any event that with the lapse of time or the giving of
notice or both would constitute a default.
5.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997,
there has not been any adverse change in the financial condition, results of
operations, business, or prospects of the Company, other than such changes as
will not have a Material Adverse Effect.
5.12 LITIGATION; PENDING DECREES. (a) Except as set forth on Schedule
5.12, there is no litigation, action, arbitration, or proceeding pending against
the Company, to the best of Mr. Carroll's knowledge, threatened against or
affecting the Company.
(b) There is no judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company.
5.13 COMPLIANCE WITH LAWS AND ORDERS; PERMITS AND LICENSES. (a) Except
as disclosed on Schedule 5.13, the business of the Company is not being
conducted, and, since December 31, 1992, has not been conducted, in violation of
any law, ordinance, regulation, judgment, order, decree, license or permit of
any Governmental Entity (including without limitation, zoning ordinances,
building codes, Environmental Laws, occupational health and safety laws and
regulations, and franchise laws and regulations), except for possible violations
which have not had, and, insofar as reasonably can be foreseen will not have, a
Material Adverse Effect. To the best of Mr Carroll's knowledge, no investigation
or review by any Governmental Entity is pending or threatened with respect to
the Company, nor has any Governmental Entity indicated an intention to conduct
the same.
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(b) Except as disclosed on Schedule 5.13, of the Company is in
material compliance with the terms of all licenses and permits required for the
operation of its business, including without limitation, all licenses and
permits required by any Environmental Laws.
5.14 CONDUCT TO DATE. Except as disclosed on Schedule 5.14 and except
for the transactions contemplated by this Agreement, since December 31, 1997:
(a) The Company has carried on its business in the ordinary
and usual course consistent with its current practices.
(b) The Company has not issued or sold any of its Common
Shares or other capital stock.
(c) The Company has not declared, set aside, or paid any
dividend or other distribution in respect of its Common Shares or other
capital stock, or, directly or indirectly, redeemed or otherwise
acquired any of its Common Shares or other capital stock.
(d) The Company has not incurred or prepaid any corporate debt
or instruments which are or would be classified as long-term debt on
its balance sheet, nor has the Company made any loan or advance to any
person.
(e) The Company has not sold, assigned, transferred, or
otherwise disposed of any of its material properties or assets other
than in the ordinary course of its business.
(f) The Company has not purchased or otherwise acquired from a
third party assets constituting any other line of business or any
material properties or assets outside the ordinary course of its
business.
(g) The Company has not entered into any supply contract or
other such agreement or understanding relating to the purchase of
products by it which would constitute a Material Contract and which is
not listed on Schedule 5.10.
(h) The Company has not increased the rate of compensation of,
or paid any bonus to, any of its directors, officers, or other
employees, except as required under existing Employee Plans; secured,
collateralized, or funded any Employee Plan not previously secured,
collateralized, or funded; entered into, terminated, or substantially
modified any employment agreement or other Employee Plan; or agreed to
do any of the foregoing.
(i) The Company has not entered into, or amended, modified or
terminated, any Material Contract outside the ordinary course of
business.
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5.15 LABOR MATTERS. There are no controversies pending between the
Company and any of its employees, other than routine individual grievances which
will not have a Material Adverse Effect. No employee of the Company is
represented by any labor union and, to the best of Mr. Carroll's knowledge, no
labor union is attempting any such representation.
5.16 UNDISCLOSED LIABILITIES; NET WORTH. (a) Except as and to the
extent disclosed, reflected or reserved against in the Financial Statements, the
Company does not have or will not have, as of the respective dates thereof, any
material liabilities or obligations (whether known or unknown, accrued,
absolute, contingent or otherwise) of the type which, if known, would be
required to be reflected on a balance sheet prepared in accordance with
generally accepted accounting principles or disclosed in the notes thereto, and
there was or will be no material loss contingency, as defined in paragraph 1 of
Statement of Financial Accounting Standards No. 5, of the Company which was not
so reflected or disclosed. Since December 31, 1997, the Company has not incurred
any such material liability or obligation (other than liabilities and
obligations voluntarily assumed in the ordinary course of business), and no such
material loss contingency has arisen.
(b) The warranty reserve set forth on the most recent balance
sheet included in the Financial Statements is adequate to satisfy in full all
present and future warranty claims with respect to products or services sold by
the Company as of the date of such balance sheet.
(c) On the Closing Date, the net worth of the Company,
determined in accordance with generally accepted accounting principles, will be
not less than $18,400,000. (before giving effect to the payment in full of the
Stock Bonus Plan Note and the Money Purchase Plan Note).
5.17 TITLE TO PROPERTIES; ABSENCE OF LIENS, ETC. (a) The Company does
not own any real property.
(b) Schedule 5.17 contains a true and complete list of (i) all
leases of equipment or other personal property to which the Company is a party
(the "Equipment Leases"), and (ii) all leases of real property to which the
Company is a party (the "Real Property Leases").
(c) Except for the equipment subject to the Equipment Leases,
the real property subject to the Real Property Leases, and various personal
items of nominal value belonging to the Company's employees, the Company owns
all properties and assets used in the conduct of its business since January 1,
1997, other than any properties or assets disposed of since such date in the
ordinary course of business.
(d) Except as disclosed on Schedule 5.17, the Company has good
and marketable title to all of its properties and assets, including without
limitation, those assets and properties reflected in the Financial Statements,
free and clear of all Liens, except (i) the Lien of current Taxes not yet
delinquent or which are being contested in good faith by appropriate
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<PAGE> 24
proceedings; (ii) properties and assets disposed of since the dates of such
Financial Statements in the ordinary course of business; (iii) such secured
indebtedness as is disclosed in the Financial Statements; (iv) Liens and
imperfections of title which do not individually or in the aggregate materially
detract from the value, or impair the use, of the properties as currently used;
(v) inchoate mechanics' and materialmens' Liens for construction in progress;
and (vi) Liens of workmen, repairmen, warehousemen and carriers arising in the
ordinary course of business which are not, either individually or in the
aggregate, material in amount.
(e) Except as set forth on Schedule 5.17, (i) all of the
buildings and material tangible personal property owned or leased by the Company
are in normal working condition (normal wear and tear excepted), considering
their age and the use which they have had, and adequate and suitable for the
purposes for which they are presently being used; and (ii) the assets of the
Company are sufficient to operate its business as presently conducted.
5.18 RECEIVABLES. Except as set forth on Schedule 5.18, all of the
accounts, notes and other receivables which are reflected in the most recent
balance sheet included in the Financial Statements were acquired in the ordinary
and regular course of business and, except to the extent reserved against on
such balance sheet, have been collected in full, or are expected to be collected
in full, in the ordinary and regular course of business.
5.19 INVENTORIES. The inventories set forth on the Company's September
30, 1998 balance sheet which constitute part of the Financial Statements are,
and the inventories thereafter acquired by the Company will be, properly valued
in accordance with generally accepted accounting principles and consist of items
of a quality and quantity currently usable and saleable in the ordinary course
of business. The Company has no reason to believe that its inventories will not
be used in the business or sold within a reasonable period of time following the
Closing at not less than the amount reflected on such balance sheet or, in the
case of inventories acquired or manufactured after September 30, 1998, at not
less than the amount reflected on the Company's books.
5.20 PROPRIETARY RIGHTS. With the exception of the tradename
"Carroll's", the Company does not own or hold any patents, trademarks,
tradenames, or copyright registrations (collectively, "Proprietary Rights"). To
the best of Mr. Carroll's knowledge, with the exception of the tradename
"Carroll's" and the right to advertise, display, and sell products purchased by
the Company from its suppliers using the trademarks of those suppliers, no
Proprietary Rights are used in or necessary for the conduct of the Company's
business as now being conducted.
5.21 INSURANCE. Set forth on Schedule 5.21 is a description (including
applicable deductible amounts and limitations) of all insurance maintained by
the Company.
5.22 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.22,
(i) neither the Company nor any real property previously owned or previously or
currently leased by the Company, has been or is in violation of or liable under
any Environmental Law; and (ii) no
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Hazardous Substances are present in soils or groundwater on or underlying, or
are emanating from, any real property currently leased by the Company, except
for such concentrations of Hazardous Substances which do not present an imminent
and substantial risk to human health or the environment or the removal or
remediation of which is not required under any Environmental Law.
(b) Except as set forth in Schedule 5.22, (i) there are no
actions, suits, demands, notices, claims, or proceedings under any Environmental
Law pending or, to the best of Mr. Carroll's knowledge, threatened against the
Company or relating to any real property previously owned or previously or
currently leased by the Company, including without limitation, any notices,
demand letters, or requests for information from any Governmental Entity making
inquiries relating to any Environmental Law or any notice that the Company is or
may be a potentially responsible party under any Environmental Law, and (ii) to
the best of Mr. Carroll's knowledge, there are no investigations pending or
threatened against the Company or relating to any real property previously owned
or previously or currently leased by the Company. Except as set forth on
Schedule 5.22, to the best of Mr. Carroll's knowledge, there are no past or
present conditions, circumstances, activities, practices, omissions, plans or
contractual undertakings that will interfere with or prevent continued
compliance by the Company with Environmental Laws and the requirements of any
permits or licenses issued under any Environmental Law or that will give rise to
any liability or other obligation under any Environmental Law.
(d) Except as set forth on Schedule 5.22, (i) no Lien exists,
and no condition exists which could result in the filing of a Lien, against any
property of the Company under any Environmental Law, and (ii) the Company has
not been requested or required by any Governmental Entity to perform any
investigatory or remedial activity under or in connection with any Environmental
Law.
5.23 CERTAIN TRANSACTIONS. Except pursuant to the Employee Plans, the
Real Property Leases, or as set forth on Schedule 5.23, none of the officers,
directors, or employees of the Company is currently a party to any transaction
with the Company, including without limitation, any contract, agreement, or
other arrangement (a) providing for the furnishing of services (other than as an
officer, director, or employee) to or by, (b) providing for rental of real or
personal property to or from, or (c) otherwise requiring payments to or from,
any such officer, director, or employee, any member of the family of any such
officer, director or employee, or any Entity in which any such officer,
director, or employee has a substantial interest or which is an affiliate of
such officer, director, or employee.
5.24 DISCLOSURE. The representations and warranties of Mr. Carroll
contained in this Agreement and the information set forth on the Schedules do
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein or therein not
misleading.
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ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF TBC.
TBC represents and warrants to the Shareholders as follows,
both as of the date of this Agreement and as of the time of the Closing:
6.01 AUTHORITY; AUTHORIZATION; ENFORCEABILITY. (a) TBC has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
and approved by the Board of Directors of TBC. No corporate proceedings on the
part of TBC are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby.
(c) This Agreement has been duly executed and delivered by,
and constitutes a valid and binding obligation of, TBC, enforceable against TBC
in accordance with its terms.
6.02 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by TBC, nor the consummation by TBC of the
transactions contemplated hereby, nor compliance by TBC with any of the
provisions hereof, will:
(a) Conflict with or result in any breach of any provision of
the Certificate of Incorporation or Bylaws of TBC.
(b) Violate, conflict with, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or
acceleration of, any agreement, instrument, or obligation to which TBC
is a party or to which TBC or any of its properties or assets may be
subject and which is material in respect of TBC's financial condition
or TBC's ability to perform its obligations under this Agreement.
(c) Violate any judgment, ruling, order, writ, injunction,
decree, statute, rule, or regulation applicable to TBC or any of its
properties or assets.
(d) Require any consent, approval, authorization or permit of
or from, or filing with or notification to, any Governmental Entity,
except filings required under the HSR Act.
6.03 DISCLOSURE. The representations and warranties of TBC contained in
this Agreement do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements contained herein not
misleading.
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ARTICLE 7. PRE-CLOSING OBLIGATIONS.
7.01 CONDUCT OF THE BUSINESS. Mr. Carroll covenants and agrees that,
prior to the Closing, unless TBC shall otherwise agree in writing, or except as
disclosed in the Schedules as of the date hereof, or as otherwise expressly
contemplated by this Agreement, Mr. Carroll will cause the Company to act or
refrain from acting as follows:
(a) The Company shall not take any action except in the
ordinary course of business and consistent with past practices, and the
Company shall use its best efforts to maintain and preserve its
business organization, franchisee network, assets, prospects,
employees, and advantageous business relationships.
(b) The Company shall not, directly or indirectly, do any of
the following: (i) take any action or incur any expenses in
contemplation of a reorganization or restructuring of the Company; (ii)
amend its Articles of Incorporation or Bylaws or similar organizational
documents; (iii) split, combine or reclassify any shares of its capital
stock or declare, set aside or pay any dividend or make any
distribution, payable in cash, stock, property or otherwise, with
respect to its capital stock; (iv) adopt a plan of liquidation or
resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of the Company; or (v) authorize
or propose any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
(c) The Company shall not, directly or indirectly: (i) issue,
sell, pledge, encumber or dispose of, or authorize, propose, or agree
to the issuance, sale, pledge, encumbrance or disposition of, any
shares of its capital stock or any other equity securities or any
Rights of Purchase with respect thereto; (ii) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or make
any material investment either by purchase of stock or securities,
contributions to capital, property transfer, or purchase of any
material amount of property or assets, in any other individual or
entity; (iii) other than as set forth in the Schedules or other than
indebtedness incurred from borrowings made pursuant to existing lending
arrangements set forth in the Schedules, incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee,
endorse (other than to a Company account) or otherwise as an
accommodation become responsible for, the obligations of any other
individual or entity, or make any loans or advances, including without
limitation, advances to dealers or franchisees and guarantees of
leases, regardless of whether made in the ordinary course of business
or consistent with past practice; (iv) enter into any new Material
Contract or release or relinquish any Material Contract right; (v)
materially increase the Company's inventory levels beyond the average
levels maintained by the Company since January 1, 1997 or allow to
remain in inventory any damaged, unusable or obsolete goods which
otherwise should have been disposed of; (vi) take any action involving
possible expenditures, contingent liabilities or
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the acquisition or disposition of assets in each case in excess of
$25,000, other than the purchase or sale of inventory in the ordinary
course of business; or (vii) authorize or propose any of the foregoing,
or enter into or modify any contract, agreement, commitment, or
arrangement to do any of the foregoing.
(d) The Company shall use its best efforts to keep in place
its current insurance policies, and if any such policy is cancelled,
the Company shall use its best efforts to replace such policy or
policies.
(e) The Company shall deliver to TBC, within fifteen days
after the end of each calendar month ending after the date of this
Agreement and prior to the Closing, the Company's unaudited interim
financial statements at and for such month.
(f) Except in accordance with the provisions of this Article
7, the Company shall not enter into any agreement or otherwise agree to
do anything, which, would make any representation or warranty of any of
the Shareholders in this Agreement untrue or incorrect in any material
respect as of the date hereof and as of the Closing.
7.02 FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the parties agree to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, and to cooperate
with each other in connection with the foregoing, including, but not limited to,
using reasonable efforts (a) to obtain all necessary waivers, consents, and
approvals from other parties to Material Contracts; (b) to obtain all necessary
consents, approvals, and authorizations as are required to be obtained under any
federal, state or foreign law or regulations; (c) to effect all necessary
filings, including, but not limited to, filings under the HSR Act and under the
rules or regulations of any other Governmental Entity; (d) to fulfill all
conditions to this Agreement; and (d) to keep the other parties reasonably
apprised of the status of all such efforts.
7.03 NOTICE. The Shareholders shall give prompt notice to TBC, and TBC
shall give prompt notice to the Shareholders, of (a) the occurrence, or failure
to occur, of any event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing, (b) any material failure of the Shareholders or TBC or any of their
respective affiliates, as the case may be, or of any of their respective
officers, directors, employees, or agents, to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it under
this Agreement, (c) any material claims, actions, proceedings, or investigations
commenced or, to the best of its or their knowledge, threatened, involving or
affecting the Company or any of its properties or assets, or, to the best of its
or their knowledge, against any employee, consultant, director, officer, or
shareholder of the Company, in his, her or its capacity as such and (d) any
material adverse change in the condition (financial or otherwise), business or
prospects of the Company, or the occurrence of an event which, so far as
reasonably
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can be foreseen at the time of its occurrence, would result in any such change;
provided, however, that no such notification shall affect the representations or
warranties of the parties or the conditions to the obligations of the parties
hereunder.
7.04 ACCESS; CONFIDENTIALITY. From the date hereof to the Closing, Mr.
Carroll shall cause the Company and the officers, directors, employees, and
agents of the Company to, afford the officers, employees, advisors, and agents
of TBC and the banks or other financial institutions arranging or providing any
financing to TBC in connection with the transactions contemplated by this
Agreement (collectively, the "Representatives") complete access at all
reasonable times to its officers, employees, agents, properties, books, records
and contracts, and shall furnish TBC and the Representatives with such operating
and other data and information as they may reasonably request. Subject to the
requirements of law, TBC shall, and shall use reasonable efforts to cause the
Representatives to, hold in confidence and not use all such nonpublic
information until such time as such information is otherwise publicly available
other than through a breach of this Section 7.04. If this Agreement is
terminated, TBC will, and will use reasonable efforts to cause the
Representatives to, deliver to the Company all documents, work papers and other
material (including copies, extracts and summaries thereof) obtained by or on
behalf of any of them directly or indirectly from the Company as a result of
this Agreement or in connection herewith, whether so obtained before or after
the execution hereof. No investigation pursuant to this Section 7.04 shall
affect any representations or warranties of the parties herein or the conditions
to the obligations of the parties hereunder.
ARTICLE 8. CONDITIONS.
8.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY . The respective
obligations of each party under this Agreement, including the obligation to
consummate the transactions contemplated by this Agreement, shall be subject to
the fulfillment or waiver at or prior to the Closing of the following
conditions:
(a) HART-SCOTT-RODINO ACT. Any waiting period (and any
extension thereof) under the HSR Act which is applicable to the
consummation of the transactions contemplated by this Agreement shall
have expired or been terminated.
(b) NO INJUNCTION OR PROCEEDINGS. No preliminary or permanent
injunction or other order, decree, or filing issued by a Governmental
Entity, nor any statute, rule, regulation, or executive order
promulgated or enacted by any Governmental Entity, shall be in effect
which materially adversely affects the transactions contemplated by
this Agreement, and no suit, action, or proceeding shall be pending by
or with any Governmental Entity which seeks to have declared illegal or
would make illegal or otherwise prevent the consummation of such
transactions or seeks damages with respect thereto.
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(c) CONSENTS. The Company and TBC shall have obtained such
licenses, permits, consents, approvals, authorizations, qualifications,
and orders of Governmental Entity and parties to Material Contracts as
are necessary for consummation of the transactions contemplated by this
Agreement, excluding licenses, permits, consents, approvals,
authorizations, qualifications or orders which the failure to obtain
will not, in the aggregate, have a Material Adverse Effect.
8.02 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF TBC . TBC's
obligations under this Agreement, including its obligation to consummate the
transactions contemplated by this Agreement, shall be subject to the
satisfaction at or prior to the Closing of the following additional conditions,
unless waived by TBC:
(a) PERFORMANCE OF OBLIGATIONS OF THE SHAREHOLDERS. The
Shareholders shall have performed in all material respects all
obligations and agreements required to be performed by them under this
Agreement prior to the Closing.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Shareholders set forth in this Agreement shall be
true and correct in all material respects at and as of the time of the
Closing as if made at and as of such time, except as expressly
contemplated by this Agreement.
(c) FINANCING. TBC shall have obtained financing or other
sources of funds necessary to pay the Aggregate Purchase Price and to
replace certain of the existing indebtedness of the Company, all upon
terms acceptable to TBC in its sole discretion.
(d) EMPLOYMENT AGREEMENT. An employment agreement between the
Company and William J. Baker II, upon terms and conditions mutually
acceptable to TBC, shall be in full force and effect.
(e) LEGAL OPINION(S). TBC shall have received an opinion of
Rock & Leitz, counsel to the Shareholders and the Company, dated the
Closing Date and addressed to TBC, substantially in the form of Exhibit
A to this Agreement.
(f) RESIGNATIONS AND RELEASES. TBC shall have received letters
of resignation, effective as of the Closing, executed and tendered by
(i) each of the then incumbent directors of the Company, and (ii) any
non-employee officers of the Company. Each such resignation shall
contain an acknowledgment that the director or officer has been paid
all amounts owing to him by the Company in connection with his services
as a director or officer and shall release the Company from any further
liability of any nature whatsoever to the director or officer.
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(g) SHAREHOLDERS' CERTIFICATES. Each Shareholder shall have
furnished to TBC a Certificate that the conditions set forth in
Subsections 8.02(a) and 8.02(b) have been satisfied as of the Closing
Date.
(h) ACCOUNTANT'S REVIEW REPORT. At the Closing, TBC shall have
received a signed copy of Blackwell Poole, LLP's review report with
respect to the interim financial statements of the Company at and for
the nine months ended September 30, 1998.
(i) NEW REAL ESTATE LEASES. The Company shall have entered
into new leases ("New Real Estate Leases") replacing the Real Property
Leases (other than the Real Property Leases covering the Florence,
South Carolina and Dothan, Alabama warehouse facilities) upon terms
mutually acceptable to TBC and the lessor thereof.
(j) NO MATERIAL ADVERSE CHANGE. Except as disclosed in the
Schedules, since December 31, 1997, there shall have been no change in
the financial condition, results of operations, business, properties,
or prospects of the Company that, in the aggregate, have had or can
reasonably be expected to have, a Material Adverse Effect.
(k) OTHER DOCUMENTS. TBC shall have received such other
certificates and documents (customary in similar transactions) relating
to the satisfaction of the conditions to the obligations of TBC as TBC
or its counsel shall have reasonably requested.
(l) APPROVAL OF DOCUMENTS. All certificates, agreements,
instruments, and other documents required by this Agreement to be
delivered by the Shareholders to TBC at the Closing shall have been
approved by counsel for TBC, which approval shall not be unreasonably
withheld.
8.03 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS. The
obligations of the Shareholders under this Agreement, including the obligation
of each to consummate the transactions contemplated by this Agreement, shall be
subject to the satisfaction at or prior to the Closing of the following
additional conditions, unless waived by them:
(a) PERFORMANCE OF OBLIGATIONS OF THE SHAREHOLDERS. TBC shall
have performed in all material respects all obligations and agreements
required to be performed by it under this Agreement prior to the
Closing.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of TBC set forth in this Agreement shall be true and correct
in all material respects at and as of the time of the Closing as if
made at and as of such time, except as expressly contemplated by this
Agreement.
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(c) TBC'S CERTIFICATE. TBC shall have furnished to the
Shareholders a Certificate of its Chief Executive Officer that the
conditions set forth in Subsections 8.03(a) and 8.03(b) have been
satisfied as of the Closing Date.
(d) RELEASE OF GUARANTIES. At the Closing, Mr. Carroll shall
have received from TBC a Release of all Guaranties relating to the
Company which were previously given to TBC by Mr. Carroll.
(e) OTHER DOCUMENTS. The Shareholders shall have received such
other certificates and documents (customary in similar transactions)
relating to the satisfaction of the conditions to the obligations of
the Shareholders as the Shareholders or their counsel shall have
reasonably requested.
(f) APPROVAL OF DOCUMENTS. All certificates, agreements,
instruments, and other documents required by this Agreement to be
delivered by TBC to the Shareholders at the Closing shall have been
approved by counsel for the Shareholders, which approval shall not be
unreasonably withheld.
ARTICLE 9. CLOSING.
9.01 TIME AND PLACE . The Closing shall take place at the offices of
Rock & Leitz, 2985 Piedmont Road, N.E., Atlanta, Georgia, at 10:00 a.m., local
time, on November 19, 1998 or at such other place or at such other time as TBC
and the Shareholders may mutually agree (the date of the Closing being referred
to herein as the "Closing Date").
9.02 DELIVERIES AT THE CLOSING . At the Closing, TBC and the
Shareholders shall take any and all actions and do all other lawful things
called for by this Agreement or necessary to consummate the transactions
contemplated by this Agreement.
ARTICLE 10. TERMINATION, AMENDMENT, AND WAIVER.
10.01 TERMINATION . Notwithstanding anything in this Agreement to the
contrary, this Agreement may be terminated at any time prior to the Closing:
(a) By mutual written consent of the Shareholders and TBC.
(b) By the Shareholders or TBC if (i) the Closing shall not
have occurred on or before November 30, 1998, or (ii) any of the
conditions set forth in Section 8.01 hereof shall not be met at the
Closing; provided, however, that the right to terminate this Agreement
under this Subsection 10.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or
before such date.
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(c) By TBC if any of the conditions set forth in Section 8.02
shall not be met at or prior to the Closing.
(d) By the Shareholders if any of the conditions set forth in
Section 8.03 shall not be met at or prior to closing.
10.02 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 10.01, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of the
Shareholders or TBC or their affiliates except that a party shall be liable for
willful defaults of its obligations hereunder. By way of example and not in
limitation of the foregoing, TBC shall not be liable to the Shareholders if this
Agreement is terminated because TBC was were unable to obtain financing or other
sources of funds necessary to pay the Aggregate Purchase Price and to replace
certain of the existing indebtedness of the Company on terms acceptable to TBC
in its sole discretion.
10.03 AMENDMENT. This Agreement may be amended only by an instrument
in writing signed on behalf of each of the parties hereto.
10.04 WAIVER. At any time prior to the Closing, any party hereto may
(i) extend the time for the performance of any of the obligations or other acts
of any other party hereto or (ii) waive compliance with any of the agreements of
any other party or with any conditions to its or his own obligations. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
11.01 SURVIVAL. The respective representations and warranties of each
party shall survive the Closing, any investigation made by the parties hereto,
and payment of all or any portion of the Aggregate Purchase Price.
Notwithstanding the foregoing, the Business Representations and Warranties set
forth in Subsection 5.02(b) and Sections 5.06, 5.07, 5.09 through 5.21, 5.23,
and 5.24 shall survive only for a period of two years after the Closing Date and
the Business Representations and Warranties set forth in Section 5.08 shall
survive only until expiration of the respective statute of limitations
applicable to each Tax matter described therein.
11.02 INDEMNIFICATION BY EACH SHAREHOLDER. (a) If the Closing occurs,
each Shareholder shall indemnify and hold TBC harmless from and against all
claims, liabilities, losses, and damages arising out of, in connection with, or
as a result of (i) any misrepresentation or inaccuracy or nonfulfillment of any
representation, warranty, covenant, or agreement of the part of that Shareholder
contained in this Agreement or in Exhibit, Schedule, agreement, certificate, or
document furnished to TBC by that Shareholder pursuant hereto or in connection
with the transactions contemplated hereby; (ii) any employment or alleged
employment by that Shareholder of any finder, broker, agent, or other
intermediary in connection with the negotiation or consummation of this
Agreement or any of the transactions contemplated hereby; and (iii) all
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actions, suits, judgments, costs, and expenses (including reasonable attorneys'
fees) incident to any of the foregoing.
(b) If the Closing occurs, in addition to his obligations under
Subsection 11.02(a), Mr. Carroll shall indemnify and hold TBC harmless from and
against all claims, liabilities, and damages arising out of any matter described
on Schedule 5.12 or Schedule 5.22 and all actions, suits, judgments, costs, and
expenses (including reasonable attorneys' fees) incident thereto.
(c) If the Closing occurs, in addition to his obligations under
Subsections 11.02(a) and (b), Mr. Carroll shall indemnify and hold TBC harmless
from and against all amounts ("Repair Payments") paid by the Company during the
Primary Term (as defined therein) of each New Real Estate Lease, other than the
lease covering the Welcome All Road warehouse facilities in Fulton County,
Georgia, to discharge the Company's obligations under the second paragraph of
Section 10.1 of each such Lease.
11.03 INDEMNIFICATION BY TBC. If the Closing occurs, TBC shall
indemnify and hold the Shareholders harmless from and against all claims,
liabilities, losses, and damages arising out of, in connection with, or as a
result of (i) any misrepresentation or inaccuracy or nonfulfillment of any
representation, warranty, covenant, or agreement on the part of TBC contained in
this Agreement or in any Exhibit, agreement, certificate, or document furnished
to the Shareholders by TBC pursuant hereto or in connection with the
transactions contemplated hereby; (ii) TBC's employment or alleged employment of
any finder, broker, agent, or other intermediary in connection with the
negotiation or consummation of this Agreement or any of the transactions
contemplated hereby; and (iii) all actions, suits, judgments, costs, and
expenses (including reasonable attorneys' fees) incident to any of the
foregoing.
11.04 LIMIT ON INDEMNIFICATION RIGHTS. (a) Notwithstanding the
foregoing, Mr. Carroll shall not have any liability under Subsection 11.02(a) or
Subsection 11.02(c) for any Loss (as hereinafter defined) incurred by TBC or the
Company, to the extent that the amount of such Loss, when added to all other
Losses which have been incurred by TBC or the Company, is less than $150,000.
(b) In no event shall the amount of Mr. Carroll's liability under
Section 11.02 exceed the Carroll Purchase Price.
(c) TBC's indemnification with respect to any matter described in
Section 11.02 shall be reduced by the amount of any insurance or Tax benefits
which TBC or the Company realizes as a result thereof.
(d) As used herein, "Loss" means (i) any claims, liabilities, losses,
damages, actions, suits, judgments, costs, or expenses arising out of, in
connection with, or as a result of any inaccuracy or breach of any Business
Representation and Warranty; and (ii) any Repair Payments.
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11.05 ESCROW. (a) At the Closing, Mr. Carroll, TBC, and the Escrow
Agent shall execute an Escrow Agreement in the form attached hereto at Exhibit B
(the "Escrow Agreement"), and TBC shall deposit with the Escrow Agent, to be
held and distributed in accordance with the terms of the Escrow Agreement, that
portion of the Carroll Purchase Price described in Subsection 3.04(b) hereof.
(b) Until such time as the Escrow Agreement expires or there
are no longer any funds being held by the Escrow Agent thereunder, amounts owing
to TBC by Mr. Carroll pursuant to Section 11.02 shall be paid from the escrowed
funds in accordance with the provisions of the Escrow Agreement. Thereafter,
subject to the provisions of Section 11.01, TBC shall direct to Mr. Carroll any
remaining claims TBC may have under Section 11.02.
11.06 SOLE REMEDY. If the Closing occurs, the rights and remedies
afforded to each party in this Article 11 shall be the sole and exclusive remedy
of such party for all matters described in Sections 11.02 and 11.03, other than
matters relating to breach of the covenants described in Article 12 or any
breach involving fraud.
ARTICLE 12. NONCOMPETITION AND CONFIDENTIALITY COVENANTS.
12.01 NONCOMPETITION. Mr. Carroll covenants and agrees with TBC that,
if the Closing occurs, for a period of five years after the Closing Date, Mr.
Carroll will not, without TBC's prior written consent, either directly or
indirectly (i) engage in a Competitive Business, as hereinafter defined; (ii)
have any interest in (whether as a proprietor, partner, stockholder, associate,
or any type of principal or owner whatsoever) any Entity which is engaged in a
Competitive Business; or (iii) provide financial or other assistance or act as
an agent of or adviser to any Entity which is or is about to become engaged in a
Competitive Business.
12.02 COMPETITIVE BUSINESS. As used in this Article 12, "Competitive
Business" means a wholesale or retail tire business operating in the States of
Alabama, Florida, Georgia, Maryland, North Carolina, South Carolina, West
Virginia, or Virginia.
12.03 CONFIDENTIALITY. Mr. Carroll covenants and agrees with TBC that,
if the Closing occurs, Mr. Carroll will not, without TBC's prior written
consent, either directly or indirectly, use or disclose to any third party any
customer information, trade secrets, or other confidential or proprietary
information relating to the Company or its business.
12.04 INJUNCTIVE RELIEF. Mr. Carroll acknowledges that his satisfaction
of the covenants set forth in this Article 12 is necessary to protect the
business, goodwill, and other proprietary interests of TBC and that a breach of
such covenants may result in irreparable and continuing damage to TBC for which
there will be no adequate remedy at law. Mr. Carroll agrees that, in the event
of any breach of the aforesaid covenants, TBC shall be entitled to injunctive
relief, without the necessity of proof of actual damage, reimbursement of all
attorneys' fees and expenses of litigation, and such other and further relief as
may be proper.
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12.05 REFORMATION. If the scope of any restriction contained in this
Article 12 is too broad to permit enforcement of such restriction to its full
extent, then such restriction shall be enforced to the maximum extent permitted
by law, and Mr. Carroll hereby consents and agrees that such scope may be
judicially modified accordingly in any proceeding brought to enforce such
restriction.
ARTICLE 13. MISCELLANEOUS.
13.01 PUBLIC STATEMENTS. The parties agree to consult with each other
and their respective counsel prior to issuing any press release or public
announcement with respect to this Agreement, or the transactions contemplated
hereby. Each shall use all reasonable efforts to give to the other parties
sufficient opportunity to review any such press release or other public
announcement in advance of release.
13.02 NOTICES. All notices and other communications hereunder shall be
in writing, shall be delivered personally or sent by U.S. mail, telecopy, or
overnight delivery service, to the parties at the following addresses or at such
other addresses as shall be specified by the parties by like notice, and shall
be deemed given when received by the party for whom intended:
(a) If to TBC:
TBC Corporation
4770 Hickory Hill Drive
P.O. Box 18342
Memphis, Tennessee 38181-0342
Attn: Louis S. DiPasqua
Fax #: (901) 541-3639
with a copy to:
Thompson Hine & Flory LLP
2000 Courthouse Plaza N.E.
P.O. Box 8801
Dayton, Ohio 45401-8801
Attn: Sharen Swartz Neuhardt, Esq.
Fax #: (937) 443-6635
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(b) If to the Shareholders:
c/o Mr. Robert E. Carroll, Jr.
8515 Senoia Road
Fairburn, GA 30213
with a copy to:
Rock & Leitz, P.C.
2985 Piedmont Road N.E.
Atlanta, Georgia 30305
Attn: David Rock, Esq.
Fax #: (404) 264-0432
The sending party shall have the burden of proving receipt.
13.03 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.04 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
13.05 TRANSACTION EXPENSES. Each party to this Agreement shall bear all
costs and expenses, including legal and accounting fees, incurred by such party
in connection with the transactions contemplated by this Agreement. In
connection therewith, if the Closing occurs, TBC shall have the right to
indemnification by Mr. Carroll under Article 11 to the extent that the aggregate
transaction costs and expenses paid by or invoiced to the Company (exclusive of
amounts incurred to effect the termination of the Shareholder Plans) exceed
$120,000.
13.06 INDEMNIFICATION PROCEDURES. Any party claiming indemnification
under any provision of this Agreement shall promptly notify the party from whom
indemnification is sought of the facts and circumstances giving rise to such
claim and give the party from whom indemnification is sought the opportunity to
participate in the defense or settlement of the same.
13.07 ATTORNEYS' FEES. If any legal action or any other proceeding is
brought for the enforcement of this Agreement or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in connection with
such action or proceeding, in addition to any other remedies available.
13.08 TERMINATION OF STOCK BONUS PLAN AND MONEY PURCHASE PLAN; 1998
BONUSES. (a) TBC acknowledges and agrees that the Stock Bonus Plan and Money
Purchase Plan will be terminated as of the Closing Date. TBC covenants and
agrees to cause the Trustee to promptly
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<PAGE> 38
file Applications for Determination for Terminating Plan with the IRS. TBC shall
additionally take any and all action required to pay Plan assets to participants
and their beneficiaries as soon as possible after receipt of favorable
determination letters from the IRS. TBC shall maintain William J. Baker II as
Trustee of the Shareholder Plans and shall not remove him except for cause.
(b) TBC covenants and agrees to cause the Company to pay bonuses for
the year ending December 31, 1998 in accordance with the description thereof set
forth in item 3 of Schedule 5.09.
13.09 WHOLE AGREEMENT. This Agreement and the Exhibits, Schedules,
other instruments, and documents referred to herein contain the entire agreement
between the parties with respect to the transactions contemplated hereby, and
supersede all negotiations, representations, warranties, commitments, offers,
contracts, and writings prior to the date hereof, including without limitation,
the letter of intent, dated June 4, 1998, between certain of the parties hereto.
13.10 SEVERABILITY. If any provision of this Agreement is invalid,
illegal, or incapable of being enforced by any rule of law or public policy, all
other terms and provisions of this Agreement will nevertheless remain in full
force and effect so long as, and only so long as, the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party hereto. Upon any determination that any
provision is invalid, illegal, or incapable of being enforced and does not
adversely affect the substance of these transactions in a material way, the
parties hereto will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are consummated to the extent possible.
13.11 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
devisees, or other successors and assigns, and shall be enforceable by and
against such parties, persons, or entities. No assignment of this Agreement
shall relieve the assigning party of responsibility for the performance of all
of its or his obligations hereunder. Nothing herein is intended to nor shall it
create any rights in any person other than the parties hereto and their
respective successors and assigns.
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<PAGE> 39
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date first set forth above.
TBC CORPORATION
By: /s/ LOUIS S. DIPASQUA
----------------------
Louis S. DiPasqua,
Vice Chairman and Chief Executive Officer
/s/ ROBERT E. CARROLL, JR.
-------------------------
ROBERT E. CARROLL, JR.
2ND AMENDED AND RESTATED STOCK
BONUS PLAN AND TRUST OF
CARROLL'S, INC.
By: /s/ WILLIAM J. BAKER II
-----------------------
William J. Baker II,
Trustee, and Not Individually
MONEY PURCHASE PLAN AND TRUST
OF CARROLL'S, INC.
By: /s/ WILLIAM J. BAKER II
-----------------------
William J. Baker II,
Trustee, and Not Individually
32
<PAGE> 40
EXHIBIT A
---------
OPINION OF COUNSEL
------------------
1. The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Georgia and has the requisite
corporate power and authority to own, lease, and operate its properties and
assets and to carry on its business as it is now being conducted. The Company is
qualified to do business and in good standing as a foreign corporation in the
States of Alabama, Florida, and South Carolina. To the knowledge of such
counsel, the Company is not qualified to do business as a foreign corporation in
any other state and neither the Company's ownership or leasing of property or
the nature of the business conducted by it makes such qualification necessary.
2. The authorized capital stock of the Company is as set forth in
Section 5.04 of the Agreement. To such counsel's knowledge, (i) the ownership of
the issued and outstanding Common Shares is as set forth in Section 5.04; (ii)
none of the outstanding Common Shares was issued in violation of any preemptive
rights of any shareholder; (iii) no Shareholder currently has any preemptive
right with respect to any Common Shares; (iv) all outstanding Common Shares are
duly authorized, validly issued, fully paid and nonassessable; (v) except as set
forth in Sections 5.04(b) and (c) of the Agreement, there are no outstanding
Rights of Purchase with respect to any Common Shares or other capital stock of
the Company; and (vi) except as set forth in Sections 3.02(a), 4.02(a), and
5.04(b) of the Agreement, the Common Shares owned by each Shareholder are owned
by such Shareholder free and clear of all Liens.
3. To the knowledge of such counsel, each Shareholder has full right
and lawful authority to execute and deliver the Agreement and to consummate the
transactions contemplated thereby. No corporate proceedings on the part of the
Company or its shareholders or directors are necessary to authorize the
Agreement or to consummate the transactions contemplated thereby. The execution
and delivery of the Agreement and the consummation of the transactions
contemplated thereby have been duly authorized and approved by all necessary
action on the part of the Stock Bonus Plan, the Money Purchase Plan, and their
respective participants.
4. The Agreement has been duly and validly executed and delivered by
each Shareholder and constitutes a legal, valid and binding obligation of each
Shareholder, enforceable against each Shareholder in accordance with its terms,
except as such enforceability may be limited by (i) insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium or other laws relating to or
affecting creditors' rights generally, and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding at law
or in equity).
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<PAGE> 41
5. Except as set forth in Section 5.06 and Schedule 5.06, neither the
execution and delivery of the Agreement by the Shareholders nor the consummation
by the Shareholders of the transactions contemplated thereby will:
(a) conflict with or result in any breach of any provision of
the Company's Articles of Incorporation or Bylaws.
(b) to such counsel's knowledge, violate, conflict with,
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, result in the termination
of, accelerate the performance required by, result in a right of
termination or acceleration of, or result in the creation of any Lien
upon any of the properties or assets of the Company under, any Material
Contract or any agreement or instrument to which any Shareholder is a
party or by which any Shareholder is bound.
(c) to such counsel's knowledge, violate any judgment, ruling,
order, writ, injunction, decree, statute, law, rule or regulation of
any Governmental Entity applicable to any Shareholder, the Company, or
any of their respective properties or assets.
(d) require any consent, approval, authorization or permit of
or from, or filing with or notification to, any Governmental Entity,
except filings required under the HSR Act, or any other party to any
Material Contract of which such counsel is aware.
6. To such counsel's knowledge, except at set forth on Schedule 5.12,
there are no actions, suits or proceedings pending or threatened against the
Company, nor is there outstanding against the Company any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator.
2
<PAGE> 42
EXHIBIT B
---------
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (this "Agreement") is being executed this 19th
day of November, 1998, by and among SUNTRUST BANK, ATLANTA, a Georgia banking
corporation ("Escrow Agent"), TBC CORPORATION ("TBC"), and ROBERT E.
CARROLL, JR. ("Mr. Carroll"), under the following circumstances:
A. TBC, Mr. Carroll, the 2nd Amended and Restated Stock Bonus
Plan and Trust of Carroll's, Inc. (the "Stock Bonus Plan"), and the
Money Purchase Plan and Trust of Carroll's, Inc. (the "Money Purchase
Plan") are parties to a Share Purchase Agreement, dated November 19,
1998 (the "Purchase Agreement"), pursuant to the terms of which TBC is
purchasing from Mr. Carroll, the Stock Bonus Plan, and the Money
Purchase Plan all of the issued and outstanding capital stock of
Carroll's, Inc. a Georgia corporation (the "Company").
B. Contemporaneously with the execution of this Agreement,
TBC, Mr. Carroll, the Stock Bonus Plan, and the Money Purchase Plan are
closing the transactions contemplated by the Purchase Agreement.
C. TBC and Mr. Carroll have agreed to escrow a portion of the
purchase price payable by TBC to Mr. Carroll under the Purchase
Agreement for the purposes and upon the terms set forth hereinafter.
D. TBC and Mr. Carroll desire to appoint the Escrow Agent as
the agent for such escrow arrangement, and Escrow Agent is agreeable to
acting as such.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. (a) In addition to the capitalized terms
defined elsewhere in this Agreement, the capitalized terms set forth below shall
have the following meanings whenever used in this Agreement:
"Claim" means a claim for indemnification pursuant to Section 11.02 of
the Purchase Agreement.
"Third Party Claim" means a Claim which involves a claim or demand
being asserted or sought to be collected by a third party.
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<PAGE> 43
(b) All capitalized terms used but not defined in this Agreement shall
have the meanings given to them in the Purchase Agreement.
2. APPOINTMENT OF ESCROW AGENT. TBC and Mr. Carroll hereby appoint the
Escrow Agent, and Escrow Agent hereby accepts appointment, as agent to hold the
Escrowed Amounts (as defined in Section 4(b) hereof) and to distribute the same
in accordance with the terms of this Agreement.
3. DEPOSIT OF FUNDS. TBC hereby deposits with the Escrow Agent, and
Escrow Agent acknowledges receipt of, $2,800,000 (the "Principal Funds").
4. ESCROW ACCOUNT; OBLIGATIONS OF THE ESCROW AGENT. (a) Escrow Agent
shall maintain an account (the "Escrow Account"), into which it shall deposit
the Principal Funds.
(b) Escrow Agent shall invest any and all amounts from time to time
held in the Escrow Account in certificates of deposit or short term obligations
of the U.S. government. The interest earned as a result of any such investment
("Interest") shall be credited to and deposited into the Escrow Account. (The
sum of the Principal Funds plus the Interest from time to time held in the
Escrow Account is referred to hereinafter as the "Escrowed Amounts.")
(c) Escrow Agent shall maintain and preserve the Escrowed Amounts and
shall disburse the same from the Escrow Account only as provided hereinafter or
by court order.
5. CLAIM NOTICES; RESOLUTION NOTICES. (a) Promptly upon become aware of
facts and circumstances indicating that a Claim exists, TBC shall provide a
written notice to Mr. Carroll which sets forth all relevant information with
respect to the Claim and includes copies of all relevant documents (a "Claim
Notice").
(b) If any Third Party Claim is finally resolved, whether by
settlement, by final and non-appealable judicial determination, or otherwise
(collectively, a "Resolution"), TBC shall provide a written notice to Mr.
Carroll setting forth all relevant information with respect to the Resolution of
the Third Party Claim, including copies of all relevant documents (a "Resolution
Notice"). The Resolution Notice shall be provided promptly after the date on
which the Resolution of the Third Party Claim occurs (the "Resolution Date").
(c) TBC's failure to provide a Claim Notice or Resolution Notice within
any specified period of time shall not affect TBC's rights hereunder if TBC
cures such failure by providing the required Claim Notice or Resolution Notice
on or before the Termination Date (as defined in Section 7(a) hereof).
6. TBC'S RIGHT TO ISSUE DISBURSAL INSTRUCTIONS. (a) If Mr. Carroll
makes payment of the amount of any Claim within thirty days after receipt of the
Claim Notice relating thereto (in the case of any Claim which is not a Third
Party Claim) or within thirty days after receipt of the Resolution Notice
relating thereto (in the case of any Third Party Claim), or if TBC and Mr.
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<PAGE> 44
Carroll enter into any written settlement of any Claim described in any Claim
Notice or Resolution Notice within such thirty day period, TBC shall not be
entitled to issue disbursal instructions to the Escrow Agent with respect to
such Claim.
(b) Unless otherwise provided in Section 6(a), TBC shall have the right
to instruct the Escrow Agent, in writing, to disburse Principal Funds from the
Escrow Account to TBC under the following circumstances:
(i) At any time which is at least thirty days after the date
TBC gives Mr. Carroll a Claim Notice relating to any Claim which is not
a Third Party Claim, TBC shall have the right to instruct Escrow Agent,
in writing, to disburse to TBC from the Principal Funds an amount equal
to the amount of the Claim described in such Claim Notice.
(ii) At any time which is at least thirty days after the date
TBC gives Mr. Carroll a Resolution Notice with respect to any Third
Party Claim, TBC shall have the right to instruct Escrow Agent, in
writing, to disburse to TBC from the Principal Funds an amount equal to
the amount of the Claim, as so resolved.
(c) At the time TBC gives any disbursal instructions to the Escrow
Agent, TBC shall provide to the Escrow Agent written evidence that a Claim
Notice or Resolution Notice (as the case may be) with respect to the Claim has
been given to Mr. Carroll.
7. TERMINATION OF RIGHT TO ISSUE DISBURSAL INSTRUCTIONS. (a) Subject to
the provisions of Sections 7(b) and (c) hereof, TBC's right to issue disbursal
instructions to the Escrow Agent shall end on November 18, 2003 (the
"Termination Date"), and Escrow Agent shall not disburse to TBC any Principal
Funds from the Escrow Account for which written disbursal instructions are not
received by the close of business on the Termination Date.
(b) In the event that TBC gives Mr. Carroll any Claim Notice with
respect to any Claim which is not a Third Party Claim within the thirty day
period preceding the Termination Date, TBC's right to issue disbursal
instructions to Escrow Agent with respect to such Claim shall end at the close
of business on the 40th business day after Mr. Carroll's receipt of the Claim
Notice with respect to such Claim.
(c) In the event that a Third Party Claim is pending on the Termination
Date and has not yet been resolved, TBC's right to issue written disbursal
instructions to Escrow Agent with respect to such Claim shall end at the close
of business on the 40th business day after the Resolution Date which respect to
the Third Party Claim.
(d) Escrow Agent shall assume that there are no pending Claims, as
described in Sections 7(b) and (c) above, unless TBC notifies Escrow Agent in
writing to the contrary prior to the close of business on the Termination Date.
Any such notice to the Escrow Agent shall indicate the amount of the pending
Claim, or if the amount is not yet known, TBC's reasonable good faith estimate
of the maximum amount of such Claim, and if then known to TBC, the day
3
<PAGE> 45
which is the last day upon which TBC will be entitled to issue written disbursal
instructions in respect of such Claim.
8. DISBURSAL OF ESCROWED AMOUNTS. (a) Subject to the provisions of
Section 7 above, on the fifth business day following the date the Escrow Agent
receives any disbursal instructions from TBC pursuant to Sections 6(b) and (c),
Escrow Agent shall disburse to TBC from the Principal Funds then remaining in
the Escrow Account the amount specified by TBC in such disbursal instructions.
All disbursals to TBC from the Escrow Account shall be made by wire transfer of
funds to such bank account as TBC shall specify to Escrow Agent in the disbursal
instructions relating thereto.
(b) On or prior to November 18, 2000, TBC shall notify Mr. Carroll and
the Escrow Agent in writing whether there exists any pending Claim for which a
Claim Notice or Resolution Notice has not yet been given by TBC, together with
the amount of such Claim, or if the amount is not yet known, TBC's reasonable
good faith estimate of the maximum amount of such Claim. On November 19, 2000,
the Escrow Agent shall disburse to Mr. Carroll an amount, if any, equal to the
difference between twenty-five percent (25%) of the balance of the Principal
Funds then remaining in the Escrow Account and the amount of any pending Claims,
as described in the notice provided by TBC pursuant to this Section 8(b).
(c) On or prior to November 18, 2001, TBC shall notify Mr. Carroll and
the Escrow Agent in writing whether there exists any pending Claim for which a
Claim Notice or Resolution Notice has not yet been given by TBC, together with
the amount of such Claim, or if the amount is not yet known, TBC's reasonable
good faith estimate of the maximum amount of such Claim. On November 19, 2001,
the Escrow Agent shall disburse to Mr. Carroll an amount, if any, equal to the
difference between one-third of the balance of the Principal Funds then
remaining in the Escrow Account and the amount of any pending Claims, as
described in the notice provided by TBC pursuant to this Section 8(c).
(d) On or prior to November 18, 2002, TBC shall notify Mr. Carroll and
the Escrow Agent in writing whether there exists any pending Claim for which a
Claim Notice or Resolution Notice has not yet been given by TBC, together with
the amount of such Claim, or if the amount is not yet known, TBC's reasonable
good faith estimate of the maximum amount of such Claim. On November 19, 2002,
the Escrow Agent shall disburse to Mr. Carroll an amount, if any, equal to the
difference between fifty percent (50%) of the balance of the Principal Funds
then remaining in the Escrow Account and the amount of any pending Claims, as
described in the notice provided by TBC pursuant to this Section 8(d).
(e) On the second business day after the Termination Date, Escrow Agent
shall disburse to Mr. Carroll the balance of the Principal Funds then remaining
in the Escrow Account, less the amount of any pending Claim, as described in any
notice given to Escrow Agent by TBC in accordance with Section 7(d). On the
second business day after the last day on which TBC is entitled to issue
disbursal instructions with respect to each such pending Claim, Escrow Agent
shall disburse to Mr. Carroll the amount being held in respect of such Claim in
the Escrow
4
<PAGE> 46
Account, unless the same has previously been disbursed to TBC pursuant to
disbursal instructions received by the Escrow Agent.
(f) At the time any Principal Funds are distributed from the Escrow
Account, Escrow Agent shall also disburse to the party receiving such Principal
Funds all Interest accrued thereon through the date of disbursal and then
remaining in the Escrow Account.
(g) All disbursals to Mr. Carroll from the Escrow Account shall be made
by wire transfer to such bank account as may be specified by Mr. Carroll by
notice given to the Escrow Agent.
9. OBLIGATION TO DISBURSE. Escrow Agent shall comply with any written
disbursal instructions received from TBC in accordance with Section 6 hereof
regardless of whether there is any dispute between Mr. Carroll and TBC as to the
Claim to which such disbursal instructions relate, TBC's right to issue such
disbursal instructions, or the validity of such disbursal instructions.
10. DISPUTE OF DISBURSALS; INDEMNIFICATION OF MR. CARROLL. (a) Mr.
Carroll shall not have any right to dispute any disbursal made or to be made to
TBC from the Escrow Account unless and until Mr. Carroll shall give notice to
TBC that he disputes the disbursal. Any such notice shall be signed Mr. Carroll.
(b) If not earlier resolved, any dispute between Mr. Carroll and TBC as
to any disbursal made or to be made to TBC from the Escrow Account shall be
deemed to be conclusively resolved in favor of TBC if Mr. Carroll shall fail,
within one year after the date of delivery of a copy of the disbursal
instructions relating thereto to Mr. Carroll, to commence legal proceedings for
the purpose of disputing the disbursal in any court of competent jurisdiction.
(c) TBC shall be liable to Mr. Carroll for all damages, costs, and
expenses (including reasonable attorneys' fees) incurred by Mr. Carroll if it is
finally determined, by agreement of the parties or, failing such agreement, by
appropriate legal proceedings, that TBC was not entitled under the Purchase
Agreement and this Agreement to recover from Mr. Carroll the amount disbursed to
TBC by the Escrow Agent in accordance with TBC's disbursal instructions.
11. ESCROW AGENT'S LIABILITY; INDEMNIFICATION OF ESCROW AGENT;
RESIGNATION AND SUCCESSOR. (a) Escrow Agent shall not be liable to Mr. Carroll
or to TBC for any action taken or omitted to be taken by it under this
Agreement, unless such action or omission constitutes gross negligence or
willful misconduct on the part of the Escrow Agent. In any action or legal
proceeding relating to the disbursal of any Escrowed Amounts from the Escrow
Account or Escrow Agent's failure to disburse the same, Escrow Agent shall be
indemnified and held harmless from all costs, expenses, and damages (including
reasonable attorneys' fees) incurred by it in connection with such action or
proceeding (i) by TBC, if it is determined that TBC is not or was not entitled
to receive the Escrowed Amounts, or (ii) by Mr. Carroll, if it is determined
that TBC is or was entitled to receive the same.
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<PAGE> 47
(b) The Escrow Agent may resign at any time, upon thirty days prior
written notice to TBC and Mr. Carroll, and shall deposit all amounts then held
in the Escrow Account with a successor escrow agent to be jointly designated in
writing by TBC and Mr. Carroll. Any such successor escrow agent must agree to be
and shall be bound by, and shall have all the rights, duties, and
responsibilities of the Escrow Agent under this Agreement. If, upon the
effective date of such resignation, no successor escrow agent shall have been
designated, the Escrow Agent shall have the right to tender into the registry or
custody of any court of competent jurisdiction any part or all of the Escrow
Account and shall be relieved of any further obligations under this Agreement.
Such resignation shall not deprive the Escrow Agent of its compensation earned
prior thereto, and the provisions of Section 11(a) hereof shall survive any
resignation by the Escrow Agent.
12. FORM AND CONTENT OF DISBURSAL INSTRUCTIONS; DELIVERY OF COPIES. (a)
All disbursal instructions shall be in writing and shall be personally
delivered, telexed, telecopied, telegraphed, or mailed, certified mail return
receipt requested, to Escrow Agent at its address indicated in Section 14(d).
(b) A copy of all disbursal instructions, together with any other
documents delivered to Escrow Agent in connection therewith, shall be personally
delivered, telexed, telecopied, telegraphed, or mailed, certified mail return
receipt requested, by TBC to Mr. Carroll at his address indicated in Section
14(d), at the same time that such disbursal instructions are given to the Escrow
Agent.
13. ESCROW AGENT'S FEES AND EXPENSES. (a) Escrow Agent shall be paid a
fee of $3,500 per year for its services under this Agreement, together with an
initial $500 setup fee. In addition, Escrow Agent shall be reimbursed for all
reasonable and customary expenses, such as wire transfer and certified or
cashier's check charges, incurred by Escrow Agent in connection with this
Agreement or the servicing and administration of the Escrow Account. (Such fees
and expenses of Escrow Agent are referred to hereinafter as the "Fees and
Expenses.")
(b) All Fees and Expenses of the Escrow Agent shall be paid by TBC.
14. MISCELLANEOUS. (a) In any action or legal proceeding relating to
the disbursal to TBC of any Escrowed Amounts from the Escrow Account or Escrow
Agent's failure to disburse the same, if it is determined that TBC is or was
entitled to receive the same, Mr. Carroll shall indemnify and hold TBC harmless
from all costs, expenses, and damages (including reasonable attorneys' fees)
incurred by it in connection with such action or proceeding.
(b) No modification or amendment of any provision of this Agreement
shall be effective unless made in written instrument, duly executed by the party
to be bound thereby, which refers specifically to this Agreement and states that
an amendment or modification is being made in the respects set forth in such
instrument.
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<PAGE> 48
(c) This Agreement shall be binding upon and shall inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns, including, in the case of Mr. Carroll, his heirs, legatees, and legal
representatives.
(d) All notices or other communications which are required or permitted
hereunder shall be in writing and shall be delivered personally or sent by U.S.
certified mail, return receipt requested, or by overnight courier service, to
the party or parties for whom intended at such party's address set forth below:
If to TBC:
TBC Corporation
4770 Hickory Hill Road
P.O. Box 18342
Memphis, TN 38181-0342
Attention: President
Phone: (901)363-8030
Fax: (901)541-3639
With copy to:
Thompson Hine & Flory LLP
2000 Courthouse Plaza NE
Dayton, OH 45402
Attention: Sharen Swartz Neuhardt, Esq.
Phone: (937)443-6705
Fax: (937)443-6635
If to Mr. Carroll:
Mr. Robert E. Carroll, Jr.
8515 Senoia Road
Fairburn, GA 30213
Phone: (770)964-7062
With copy to:
Rock & Leitz, P.C.
2985 Piedmont Road NE
Atlanta, GA 30305
Attention: David Rock, Esq.
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<PAGE> 49
Phone: (404)231-1240
Fax: (404)264-0432
If to Escrow Agent:
SunTrust Bank, Atlanta
Corporate Trust Division
3495 Piedmont Road
Building 10, Suite 810
Atlanta, GA 30305-1727
Attention: Ronald C. Painter
Phone: (404)240-1932
Fax: (404)240-2030
Any party may change the address to which notices and other communications are
to be directed to such party by giving written notice of such change to the
other parties hereto. All notices and other communications shall be deemed given
upon receipt by the party for whom intended. The sending party shall have the
burden of proving receipt.
(e) The failure of any party to insist in any one or more instances
upon performance of any of the provisions of this Agreement or to take advantage
of any of such party's rights hereunder shall not be construed as a waiver of
any such provisions or the relinquishment of any such rights, and the same shall
continue and remain in full force and effect. No single or partial exercise by
any party of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. Waiver by any party of any
breach of any provision of this Agreement shall not constitute or be construed
as a continuing waiver or a waiver of any other breach of any other provision of
this Agreement.
(f) Until the earlier of the Termination Date or the date upon which
all Principal Funds have been disbursed from the Escrow Account, all Claims
shall be paid from the Escrow Account or as otherwise provided in Section 6(a).
Thereafter, TBC shall direct any remaining Claims to Mr. Carroll.
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<PAGE> 50
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
TBC CORPORATION
By
----------------------------
Louis S. DiPasqua,
Vice Chairman and Chief
Executive Officer
------------------------------
ROBERT E. CARROLL, JR.
SUNTRUST BANK, ATLANTA
By
----------------------------
Rebecca Fischer,
Trust Officer
9
