<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
BRAD RAGAN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $1.00 per share
(2) Aggregate number of securities to which transaction applies:
556,924
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$37.25 per share, based on the price to be paid per share in
the proposed share exchange described herein.
(4) Proposed maximum aggregate value of transaction:
$20,745,419
(5) Total fee paid:
$4,149.08
[ ] Fee paid previously with preliminary materials:
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$4,149.08
(2) Form, Schedule or Registration Statement No.:
PRE13E3 (SEC File No. 005-13534)
(3) Filing Party:
The Goodyear Tire & Rubber Company
(4) Date Filed:
May 12, 1998
<PAGE> 2
[BRAD RAGAN, INC. LETTERHEAD]
July 24, 1998
To the Shareholders of Brad Ragan, Inc.:
On behalf of the Board of Directors of Brad Ragan, Inc. (the "Company"), it
is my pleasure to invite you to attend the annual meeting of shareholders of the
Company to be held on Tuesday, August 25, 1998, at 11:30 a.m. local time, at the
Sheraton Airport Plaza Hotel, 3315 South I-85 at Billy Graham Parkway,
Charlotte, North Carolina.
At the meeting, you will be asked to consider and vote upon a proposal to
approve an Agreement and Plan of Share Exchange (the "Exchange Agreement")
between the Company and The Goodyear Tire & Rubber Company ("Goodyear") pursuant
to which Goodyear, which currently owns approximately 74.5% of the Company's
outstanding common stock, will acquire all other outstanding shares, and each of
these shares (other than shares held by dissenting shareholders) will be
exchanged for the right to receive $37.25 in cash from Goodyear (the
"Exchange"). A copy of the Exchange Agreement is included as Annex I to the
accompanying Proxy Statement.
A special committee of directors of the Company who are not employees of
the Company or employees or directors of Goodyear has reviewed and considered
the terms of the Exchange and has recommended that the Board of Directors adopt
the Exchange Agreement. In addition, Interstate/Johnson Lane Corporation, the
special committee's financial advisor in connection with the Exchange, has
rendered its opinion that the Exchange is fair, from a financial point of view,
to the shareholders of the Company. The Board of Directors believes that the
Exchange is in the best interests of the Company and its public shareholders
and, on behalf of the Board of Directors, I urge you to vote FOR approval of the
Exchange Agreement.
Completion of the Exchange is subject to certain conditions, including
approval of a proposal to amend the Company's articles of incorporation to
provide dissenters' rights in certain transactions, including the Exchange, by
the shareholders of the Company, and approval of the Exchange Agreement by the
shareholders. Goodyear has agreed to vote its shares of the Company's common
stock in favor of the proposed amendment to the Company's articles of
incorporation and, to the knowledge of the Company, intends to vote all of its
shares in favor of the Exchange Agreement. Goodyear's favorable vote will assure
approval of such amendment and such agreement. The Exchange is expected to be
completed promptly after the annual meeting, provided all of such conditions
have been satisfied or waived by the parties.
In addition to considering the amendment to the articles of incorporation
and the Exchange Agreement at the annual meeting, you will be asked to elect six
directors of the Company for terms expiring at the 1999 annual meeting of the
Company's shareholders or such time as their respective successors are elected
and qualified. If the Exchange is consummated, holders of common stock who do
not vote in favor of the Exchange Agreement and who comply with certain notice
requirements and other procedures will have the right of dissent and to be paid
cash for the "fair value" of their shares as determined under statutory
procedures.
The enclosed Notice of Meeting and Proxy Statement explain the Exchange and
provide specific information concerning the annual meeting. Also enclosed is a
copy of the Company's 1997 Annual Report to Shareholders. I encourage you to
read and consider carefully the information contained in the enclosed documents.
Whether or not you plan to attend the annual meeting, you are urged to
complete, sign and promptly return the enclosed proxy card to assure that your
shares will be voted at the meeting.
Sincerely,
William P. Brophey
President and Chief Executive Officer
<PAGE> 3
BRAD RAGAN, INC.
4404-G STUART ANDERSON BOULEVARD
CHARLOTTE, NC 28217
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
To the Shareholders of Brad Ragan, Inc.:
The Annual Meeting of the Shareholders of Brad Ragan, Inc. (the "Company")
will be held at the Sheraton Airport Plaza Hotel, 3315 South I-85 at Billy
Graham Parkway, Charlotte, North Carolina on Tuesday, August 25, 1998, at 11:30
a.m. local time, for the following purposes:
1. To consider and vote upon a proposal to amend the Company's
articles of incorporation to grant dissenters' rights to the shareholders
of the Company in connection with certain transactions, including the share
exchange described in the following paragraph.
2. To consider and vote upon a proposal to approve an Agreement and
Plan of Share Exchange (the "Exchange Agreement") between the Company and
The Goodyear Tire & Rubber Company ("Goodyear") pursuant to which Goodyear,
which currently owns approximately 74.5% of the Company's outstanding
common stock, will acquire all other outstanding shares, and each of these
shares (other than shares held by dissenting shareholders) will be
exchanged for the right to receive $37.25 in cash (the "Exchange").
3. To elect six members to the Board of Directors for terms expiring
at the 1999 annual meeting of the Company's shareholders or such time as
their respective successors are elected and qualified.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 22, 1998 as
the record date for the determination of shareholders entitled to vote at the
meeting. Accordingly, only shareholders who are holders of record at the close
of business on that date are entitled to notice of and to vote at the meeting.
By order of the Board of Directors:
Ronald J. Carr
Secretary
Charlotte, North Carolina
July 24, 1998
CONSUMMATION OF THE EXCHANGE AGREEMENT IS SUBJECT TO PRIOR ADOPTION AND
EFFECTIVENESS OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
PROVIDING FOR DISSENTERS' RIGHTS UNDER CHAPTER 55, ARTICLE 13 OF THE GENERAL
STATUTES OF NORTH CAROLINA IN CERTAIN TRANSACTIONS, INCLUDING THE EXCHANGE.
ACCORDINGLY, ANY SHAREHOLDER SHALL HAVE THE RIGHT TO DISSENT FROM THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE EXCHANGE AGREEMENT AND TO
RECEIVE PAYMENT OF THE "FAIR VALUE" OF HIS OR HER SHARES UPON COMPLIANCE WITH
THE PROCEDURES PRESCRIBED BY CHAPTER 55, ARTICLE 13 OF THE GENERAL STATUTES OF
NORTH CAROLINA. SEE "THE EXCHANGE--DISSENTERS' RIGHTS" IN THE PROXY STATEMENT
THAT ACCOMPANIES THIS NOTICE AND THE FULL TEXT OF CHAPTER 55, ARTICLE 13
ATTACHED THERETO AS ANNEX IV FOR A DESCRIPTION OF THESE PROCEDURES.
YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND TO
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES. PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT
THIS TIME.
<PAGE> 4
BRAD RAGAN, INC.
4404-G STUART ANDERSON BOULEVARD
CHARLOTTE, NORTH CAROLINA 28217
---------------------
PROXY STATEMENT
RELATING TO ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 25, 1998
---------------------
This Proxy Statement is being furnished to the shareholders of Brad Ragan,
Inc. (the "Company") in connection with the solicitation of proxies by the Board
of Directors of the Company (the "Board") for use at the annual meeting of
shareholders of the Company, or any adjournment or postponement thereof (the
"Meeting"), which is to be held on Tuesday, August 25, 1998, at 11:30 a.m. local
time, at the Sheraton Airport Plaza Hotel, 3315 South I-85 at Billy Graham
Parkway, Charlotte, North Carolina.
At the Meeting, shareholders of the Company will be asked to consider and
vote upon a proposal to approve an Agreement and Plan of Share Exchange, dated
as of May 5, 1998 (the "Exchange Agreement"), between the Company and The
Goodyear Tire & Rubber Company, an Ohio corporation ("Goodyear"), pursuant to
which Goodyear, which currently owns approximately 74.5% of the outstanding
shares of common stock, $1.00 par value, of the Company ("Common Stock"), will
acquire all other outstanding shares of Common Stock and each such share (other
than shares held by dissenting shareholders) will be exchanged for the right to
receive $37.25 in cash from Goodyear (the "Exchange"). A copy of the Exchange
Agreement is included as Annex I to this Proxy Statement.
A SPECIAL COMMITTEE OF DIRECTORS OF THE COMPANY WHO ARE NOT EMPLOYEES OF
THE COMPANY OR EMPLOYEES OR DIRECTORS OF GOODYEAR (THE "SPECIAL COMMITTEE") HAS
REVIEWED AND CONSIDERED THE TERMS OF THE EXCHANGE AND HAS RECOMMENDED THAT THE
BOARD ADOPT THE EXCHANGE AGREEMENT. THE BOARD HAS ADOPTED THE EXCHANGE AGREEMENT
AND THE EXCHANGE AND HAS DETERMINED THAT THE EXCHANGE IS FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF COMMON STOCK (OTHER THAN GOODYEAR) AND
RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF THE EXCHANGE AGREEMENT.
The Special Committee's recommendation and the Board's adoption and
recommendation were based on a number of factors described in this Proxy
Statement, including the opinions of Interstate/Johnson Lane Corporation
("IJL"), the financial advisor to the Special Committee, dated the date of the
Exchange Agreement and the date of this Proxy Statement, that the consideration
to be received by the shareholders of the Company (other than Goodyear) pursuant
to the Exchange is fair, from a financial point of view, to such holders. The
opinion of IJL dated the date hereof is included as Annex II to this Proxy
Statement and should be read in its entirety.
Completion of the Exchange is subject to certain conditions, including
approval by the shareholders of the Company of a proposal to amend the Company's
articles of incorporation (the "Articles") to grant dissenters' rights to the
shareholders of the Company in connection with certain transactions, including
the Exchange (the "Articles of Amendment"), and approval of the Exchange
Agreement by the shareholders of the Company. To the knowledge of the Company,
Goodyear intends to vote its shares of the Common Stock in favor of the Exchange
Agreement. In addition, Goodyear has agreed in the Exchange Agreement to vote
its shares in favor of the Articles of Amendment. Goodyear's favorable vote will
assure approval of each of these matters. The Exchange is expected to be
completed by August 28, 1998, provided all of such conditions have been
satisfied or waived by the parties. Goodyear may terminate the Exchange
Agreement without cause at any time prior to the completion of the Exchange, in
which case it would be required to reimburse the Company certain expenses
incurred in connection with the Exchange Agreement and this Proxy Statement.
Shareholders of the Company will also be asked to elect six directors of
the Company ("Directors") for terms expiring at the 1999 annual meeting of the
Company's shareholders or such time as their respective successors are elected
and qualified.
This Proxy Statement, the Notice of Meeting and the enclosed proxy card,
together with the Company's Annual Report to Shareholders for the year ended
December 31, 1997, are first being mailed to shareholders of the Company on or
about July 27, 1998.
THIS TRANSACTION HAS NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THIS
TRANSACTION NOR UPON THE ADEQUACY OR ACCURACY OF ANY INFORMATION CONTAINED IN
THIS PROXY STATEMENT. ANY STATEMENT TO THE CONTRARY IS UNLAWFUL.
THE DATE OF THIS PROXY STATEMENT IS JULY 24, 1998
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements, and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the following
Regional Offices of the Commission: 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549. The Commission maintains a World Wide Web site on
the Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission, including the Company.
Shares of the Common Stock are traded on the American Stock Exchange, Inc.
(the "AMEX"), and proxy statements, reports and other information concerning the
Company can also be inspected and copied at the offices of the AMEX, 86 Trinity
Place, New York, New York 10006.
The Company and Goodyear have filed a Schedule 13E-3 with the Commission
with respect to the Exchange. As permitted by the rules and regulations of the
Commission, this Proxy Statement omits certain information contained in the
Schedule 13E-3. The Schedule 13E-3, including any amendments and exhibits filed
or incorporated by reference as a part thereof, is available for inspection or
copying as set forth above. Statements contained in this Proxy Statement or in
any document incorporated herein by reference as to the contents of any contract
or other document referred to herein or therein summarize material provisions of
such documents and in each instance reference is made to such contract or other
document filed as an exhibit to the Schedule 13E-3 or such other document, and
each such statement shall be deemed qualified in its entirety by such reference.
The information contained herein with respect to the Company has been
provided by the Company, and the information contained herein with respect to
Goodyear has been provided by Goodyear.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION IN CONNECTION WITH THE SOLICITATION OF PROXIES MADE HEREBY OTHER
THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR GOODYEAR. THIS PROXY STATEMENT DOES NOT
CONSTITUTE A SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO OR FROM
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN SUCH
JURISDICTION. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR GOODYEAR SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
under the Exchange Act are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(b) Amendment No. 1 to the Company's Annual Report on Form 10-K/A;
(c) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998; and
(d) The description of the Common Stock in the Company's registration
statement filed under the Exchange Act with respect to the Common Stock,
including all amendments and reports filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement and before the
Meeting shall be deemed to be incorporated by reference into this Proxy
Statement and to be a part hereof from the date of the filing of such documents.
ii
<PAGE> 6
In accordance with the rules and regulations of the Commission, a copy of
the Company's 1997 Annual Report to Shareholders accompanies this Proxy
Statement.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
subsequently filed document that is or is deemed to be incorporated by reference
herein) modifies or supersedes such previous statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except as
so modified or superseded.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
HEREIN) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST BY ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER OF COMMON STOCK, TO WHOM THIS PROXY
STATEMENT HAS BEEN DELIVERED. REQUESTS FOR DOCUMENTS SHOULD BE DIRECTED TO
SECRETARY, BRAD RAGAN, INC., 4404-G STUART ANDREW BOULEVARD, CHARLOTTE, NORTH
CAROLINA 28217 OR TELEPHONE: (704) 521-2107. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE RECEIVED BY AUGUST 18, 1998.
iii
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION....................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. ii
SUMMARY..................................................... 1
The Meeting; Date, Time, Place and Purposes............... 1
Parties to the Exchange Agreement......................... 1
The Exchange.............................................. 1
Votes Required............................................ 1
Dissenters' Rights........................................ 2
Recommendation of the Board; Fairness of the Exchange..... 2
Opinion of Financial Advisor.............................. 2
Certain Litigation........................................ 3
Certain Tax Consequences of the Exchange.................. 3
Interests of Certain Persons in the Exchange.............. 3
Effective Time of the Exchange; Payment for Shares of
Common Stock........................................... 3
Conditions to the Exchange................................ 3
Termination; Fees and Expenses............................ 4
Market Prices; Dividends.................................. 5
Selected Financial Data................................... 6
GENERAL INFORMATION......................................... 7
Proxy Solicitation........................................ 7
Voting Procedures......................................... 7
Voting of Proxies......................................... 8
SPECIAL FACTORS............................................. 8
Background of, and Reasons for, the Exchange.............. 8
Fairness of the Exchange.................................. 13
Interests of Certain Persons in the Exchange.............. 15
Opinion of Financial Advisor.............................. 16
Purpose of the Exchange; Plans for the Company............ 18
Certain Litigation........................................ 19
Accounting Treatment...................................... 20
Certain Tax Consequences of the Exchange.................. 20
Estimated Fees and Expenses............................... 21
THE EXCHANGE................................................ 21
Parties to the Exchange................................... 21
Effective Time of the Exchange............................ 21
Payment for Shares of Common Stock........................ 22
Terms of the Exchange..................................... 22
Source and Amount of Funds................................ 24
Dissenters' Rights........................................ 24
PROPOSAL TO AMEND THE ARTICLES.............................. 26
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS.................................................... 27
CORPORATE GOVERNANCE........................................ 28
General................................................... 28
Nominees for Director..................................... 29
Compensation of Directors................................. 30
Executive Officers of the Company......................... 30
</TABLE>
iv
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EXECUTIVE COMPENSATION...................................... 31
Summary Compensation Table................................ 31
Stock Options, SAR Grants in 1997......................... 33
Option Exercises in 1997 and Year-End Values.............. 33
Other Compensatory Arrangements........................... 34
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..... 35
Compensation Committee Policies and Practices............. 35
Compensation of Executive Officers........................ 36
Compensation of the Chief Executive Officer............... 36
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION............................................. 37
PERFORMANCE GRAPH........................................... 39
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT........... 40
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 40
PROPOSALS BY SHAREHOLDERS................................... 40
OTHER MATTERS............................................... 40
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF
GOODYEAR.................................................. 40
Directors of Goodyear..................................... 40
Executive Officers of Goodyear............................ 43
</TABLE>
Annex I -- Agreement and Plan of Share Exchange
Annex II -- Opinion of Interstate/Johnson Lane Corporation
Annex III -- Form of Articles of Amendment
Annex IV -- Article 13 of the North Carolina Business Corporation Act
v
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SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement. This Summary does not purport to be complete and should
be read in conjunction with, and is qualified in its entirety by reference to,
the more detailed information appearing elsewhere or incorporated by reference
in this Proxy Statement and the Annexes hereto. Shareholders are urged to read
this Proxy Statement, including Annexes, in its entirety.
THE MEETING; DATE, TIME, PLACE AND PURPOSES
The Meeting will be held at the Sheraton Airport Plaza Hotel, 3315 South
I-85 at Billy Graham Parkway, Charlotte, North Carolina, on Tuesday, August 25,
1998, at 11:30 a.m. local time, to (a) consider and vote upon the Articles of
Amendment, the form of which is included as Annex III to this Proxy Statement,
to grant dissenters' rights to the shareholders of the Company in connection
with certain transactions, including the Exchange; (b) consider and vote upon a
proposal to approve the Exchange Agreement; (c) elect six members to the Board
for terms expiring at the date of the 1999 annual meeting of the Company's
shareholders or such time as their respective successors are elected and
qualified; and (d) transact such other business as may properly come before the
Meeting. Holders of record of the Common Stock at the close of business on July
22, 1998 (the "Record Date") are entitled to vote at the Meeting and are
entitled to one vote for each share held. Shareholders do not have cumulative
voting rights in the election of Directors.
PARTIES TO THE EXCHANGE AGREEMENT
The Company sells new and retreaded tires, home products and automotive
services. The address of the Company's principal executive offices is 4404-G
Stuart Andrew Boulevard, Charlotte, North Carolina 28217, telephone
704-521-2100. Goodyear, an Ohio corporation, is an integrated manufacturer and
supplier of rubber and tires products. Goodyear owns approximately 74.5% of the
outstanding shares of Common Stock. The address of Goodyear's principal
executive offices is 1144 East Market Street, Akron, Ohio 44316-0001, telephone
330-796-2121.
THE EXCHANGE
The Company and Goodyear have entered into the Exchange Agreement. Pursuant
to the Exchange Agreement, Goodyear will acquire all outstanding shares of
Common Stock not already held by it, and each such share (other than shares held
by dissenting shareholders) will be exchanged for the right to receive $37.25 in
cash, without interest, from Goodyear. See "THE EXCHANGE -- Terms of the
Exchange."
VOTES REQUIRED
The presence, in person or represented by proxy, of the holders of a
majority of the shares of Common Stock entitled to vote at the Meeting is
necessary to constitute a quorum at the Meeting. Approval of the Exchange
Agreement and the Exchange requires the affirmative vote of holders of a
majority of the shares of Common Stock outstanding on the Record Date, and
approval of the Articles of Amendment requires the affirmative vote of a
majority of votes cast on this proposal. To the knowledge of the Company,
Goodyear, which owns approximately 74.5% of the outstanding Common Stock,
intends to vote its shares in favor of the Exchange Agreement. In addition,
Goodyear has agreed in the Exchange Agreement to vote its shares in favor of the
Articles of Amendment. Goodyear's favorable vote will assure the approval of
each of these matters. Directors are elected by a plurality of votes cast at the
Meeting. Goodyear has indicated its intention to vote its shares in favor of the
persons named elsewhere in this Proxy Statement as nominees for Director, which
will assure the election of these individuals.
Only shareholders of record at the close of business on the Record Date are
entitled to notice of and to vote at the Meeting. On the Record Date, 2,190,619
shares of Common Stock, held by holders of record, were issued and
outstanding and entitled to vote at the Meeting.
1
<PAGE> 10
DISSENTERS' RIGHTS
Under the Articles, as proposed to be amended, and North Carolina law,
holders of Common Stock who do not vote in favor of the Exchange Agreement and
who comply with certain notice requirements and other procedures will have the
right to dissent and to be paid cash for the "fair value" of their shares. The
"fair value" of Common Stock as finally determined under such procedures may be
more or less than the $37.25 in cash for which the shares held by non-dissenting
shareholders will be exchanged in the Exchange. The procedures to be followed by
dissenting shareholders are described elsewhere in this Proxy Statement, and the
text of the applicable statutory provisions is set forth in Annex IV to this
Proxy Statement. Failure to follow these procedures precisely may result in the
loss of dissenters' rights. Dissenting shareholders who receive cash for their
shares of Common Stock pursuant to their dissenters' rights will recognize a
gain or loss for federal income tax purposes. See "THE EXCHANGE -- Dissenters'
Rights" and "SPECIAL FACTORS -- Certain Tax Consequences of the Exchange."
RECOMMENDATION OF THE BOARD; FAIRNESS OF THE EXCHANGE
The Special Committee, at a meeting held on February 13, 1998, unanimously
recommended that the Board adopt in principle the Exchange, and the Board, at a
meeting also held on February 13, 1998, adopted in principle the Exchange,
subject to negotiation and execution by the parties of a definitive agreement.
At a meeting held on May 4, 1998, the Special Committee recommended that the
Board adopt the Exchange Agreement, and at a meeting held on May 5, 1998, the
Board adopted the Exchange Agreement. Eugene R. Culler, Jr., Chairman of the
Board of the Company and an Executive Vice President of Goodyear, Michael R.
Thomann, then Vice Chairman of the Board, President and Chief Executive Officer
of the Company, and Ronald J. Carr, Vice President -- Finance, Chief Financial
Officer, Treasurer and Secretary of the Company, abstained from the votes taken
by the Board with respect to the Exchange and the Exchange Agreement because of
Mr. Culler's employment by Goodyear and Messrs. Thomann's and Carr's prior
employment by Goodyear and current employment by the Company, which is a
74.5%-owned subsidiary of Goodyear. The Board has determined that the Exchange
Agreement is fair to, and in the best interests of, the shareholders of the
Company (other than Goodyear) and recommends that the shareholders vote FOR the
approval of the Exchange Agreement and the Exchange. For a discussion of the
factors considered by the Special Committee and the Board in reaching their
recommendation and determination, see "SPECIAL FACTORS -- Background of, and
Reasons for, the Exchange," "-- Fairness of the Exchange" and "-- Opinion of
Financial Advisor."
OPINION OF FINANCIAL ADVISOR
IJL was engaged by the Special Committee in October 1997 to act as
financial advisor to the Company in connection with the Exchange. IJL has
delivered its written opinions, dated February 13, 1998 and the date of this
Proxy Statement, to the Special Committee to the effect that the consideration
to be received by the shareholders of the Company (other than Goodyear) pursuant
to the Exchange is fair to such shareholders from a financial point of view. No
limitations were imposed on IJL by the Company with respect to the
investigations made or procedures followed by IJL in rendering its opinion. The
full text of IJL's opinion dated the date of this Proxy Statement, including the
procedures followed, the matters considered and the assumptions made by IJL, is
included as Annex II to this Proxy Statement and should be read in its entirety.
Pursuant to the terms of IJL's engagement, the Company has paid IJL (and
Goodyear has agreed to reimburse the Company in certain circumstances if the
Exchange is not completed) $65,000. For a description of IJL's opinion and of
the terms of its engagement by the Special Committee, see "SPECIAL
FACTORS -- Opinion of Financial Advisor."
CERTAIN LITIGATION
A class action complaint (the "Shareholder Litigation") relating to
Goodyear's October 15, 1997 offer to acquire the outstanding shares of Common
Stock not owned by Goodyear for $32.00 per share (the "Initial Offer") was filed
on November 13, 1997. The plaintiffs in the Shareholder Litigation have filed a
notice of voluntary dismissal of their claims without prejudice and the action
has been dismissed. See "SPECIAL FACTORS -- Background of, and Reasons for, the
Exchange" and "-- Certain Litigation."
2
<PAGE> 11
CERTAIN TAX CONSEQUENCES OF THE EXCHANGE
The receipt of cash for the Common Stock in the Exchange or upon the
exercise of dissenters' rights will be a taxable transaction for United States
federal income tax purposes and may also be a taxable transaction for state,
local, foreign and other tax purposes. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE OR OF
EXERCISING DISSENTERS' RIGHTS. See "SPECIAL FACTORS -- Certain Tax Consequences
of the Exchange."
INTERESTS OF CERTAIN PERSONS IN THE EXCHANGE
In considering the recommendations of the Special Committee and the Board
with respect to the Exchange, shareholders should be aware that members of the
Board and of management of the Company have certain interests which present them
with potential conflicts of interest in connection with the Exchange.
Specifically, by virtue of Goodyear's ownership of 74.5% of the outstanding
shares of Common Stock, Goodyear has caused the election of, and has the power
to cause the removal of, members of the Board and of management of the Company.
See "SPECIAL FACTORS -- Interest of Certain Persons in the Exchange."
EFFECTIVE TIME OF THE EXCHANGE; PAYMENT FOR SHARES OF COMMON STOCK
The Exchange will become effective when articles of share exchange (the
"Articles of Share Exchange") are duly filed with the Office of the Secretary of
State of North Carolina in accordance with the North Carolina Business
Corporation Act (the "NCBCA") or at such other time as may be specified in the
Articles of Share Exchange (the "Effective Time"). The Articles of Share
Exchange will be filed upon the satisfaction or waiver of all conditions set
forth in the Exchange Agreement. See "THE EXCHANGE -- Effective Time of the
Exchange."
First Union National Bank (the "Exchange Agent") will forward to the
holders of certificates formerly evidencing shares of Common Stock (other than
dissenting shareholders) detailed instructions with regard to the surrender of
certificates, together with a transmittal letter. The Exchange Agent will
forward payment to the former holders of Common Stock following receipt by the
Exchange Agent of certificates for their Common Stock and other required
documents. No interest will be paid or accrued on the cash payable upon the
surrender of certificates. SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
AT THIS TIME. See "THE EXCHANGE -- Payment for Shares of Common Stock."
CONDITIONS TO THE EXCHANGE
The obligations of the Company and Goodyear to effect the Exchange are
subject to the fulfillment at or prior to the closing of the transactions
pursuant to the Exchange Agreement (the "Closing") of certain conditions,
including the following: (a) at the Meeting, the Exchange Agreement must have
been approved by the affirmative vote of holders of a majority of the issued and
outstanding shares of Common Stock entitled to vote thereon; (b) all filings,
registrations, notices, consents, approvals, authorizations, certificates,
orders and permits with respect to the Exchange required from any court,
government or governmental body, agency or instrumentality having or asserting
jurisdiction over the Company or Goodyear must have been made or obtained and be
in full force and effect on a basis satisfactory to Goodyear; and (c) the
representations and warranties made by the Company in the Exchange Agreement
must be true and correct in all material respects, and the Company must have
performed in all material respects its covenants and obligations under the
Exchange Agreement. Approval of the Exchange Agreement will require the
affirmative vote of Goodyear. Goodyear is not required to vote in favor of the
Exchange Agreement under the terms of the Exchange Agreement. See "THE
EXCHANGE -- Terms of the Exchange -- Conditions to the Exchange."
TERMINATION; FEES AND EXPENSES
The Exchange Agreement and the Exchange may be terminated and abandoned at
any time prior to the Effective Time, irrespective of the prior approval of the
Exchange Agreement and the Exchange by the shareholders of the Company: (a) by
the mutual written consent of the Board (acting upon the recommendation of the
Special Committee) and the Board of Directors of Goodyear (the "Goodyear
Board"); (b) by action of the
3
<PAGE> 12
Goodyear Board or of certain executive officers of Goodyear in the event that
(i) any action, suit, investigation, or other proceeding or claim (other than
the Shareholder Litigation) is threatened or instituted before any court or by
any government or governmental agency or instrumentality in connection with the
Exchange Agreement, (ii) the status of the Shareholder Litigation shall be such
that, in Goodyear's sole judgment, pursuing the consummation of the Exchange
would not be in the best interests of Goodyear, (iii) the holders of more than
5% of the outstanding shares of Common Stock have asserted their dissenters'
rights and have not lost, surrendered or withdrawn such rights, (iv) the Company
fails to comply with or to perform any covenant or obligation of the Company
contained in or implied by the terms of the Exchange Agreement, (v) any
condition precedent to the implementation of the Exchange is not satisfied
(other than a condition which Goodyear could have caused to be satisfied without
incurring any cost or expense or taking an action or suffering a consequence
deemed by Goodyear to be adverse to Goodyear's interests), or (vi) any
representation or warranty of the Company proves to have been untrue or
incorrect when made or at any time ceases to be true and correct in all respects
(each of such events constituting "Just Cause"); or (c) by action of the
Goodyear Board or of certain executive officers of Goodyear without Just Cause.
If Goodyear unilaterally abandons and terminates the Exchange Agreement
without Just Cause, it must reimburse the Company for any fees reasonably
incurred and paid to investment bankers and legal counsel in connection with the
Exchange Agreement plus any costs reasonably incurred in connection with the
preparation and distribution of this Proxy Statement. Unless the Exchange
Agreement is terminated prior to the shareholder vote thereon, the failure by
Goodyear to vote its shares in favor of the Exchange will be deemed to be a
termination by Goodyear without Just Cause. If Goodyear terminates the Exchange
Agreement because of (a) an actual or threatened action, suit, investigation or
other proceeding, (b) the status of the Shareholder Litigation or (c) the
assertion of dissenters rights, as described above, by the holders of more than
5% of the outstanding Common Stock, Goodyear will reimburse the Company for up
to $250,000 in such expenses. See "THE EXCHANGE -- Terms of the
Exchange -- Termination; Fees and Expenses."
MARKET PRICES; DIVIDENDS
The Common Stock is listed on the AMEX under the symbol "BRD." On October
23, 1997, the last full trading day prior to the announcement by the Company
that it had received the Initial Offer, the closing sales price of the Common
Stock, as reported on the AMEX, was $30.00. On February 13, 1998, the last full
trading day prior to the announcement by the Company that it had accepted in
principle Goodyear's February 4, 1998 offer to acquire the outstanding shares of
Common Stock not owned by Goodyear for $37.25 per share (the "Revised Offer"),
the closing sales price of the Common Stock, as reported on the AMEX, was
$35.00. On July 24, 1998, the closing sales price of the Common Stock, as
reported on the AMEX, was $ .
4
<PAGE> 13
The following table sets forth, for the periods shown, the high and low
sales prices for the Common Stock, as reported on the AMEX.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Quarter Ended
March 31, 1998............................................ $39.00 $35.00
June 30, 1998............................................. 39.25 37.50
September 30, 1998 (through July 24)......................
Quarter Ended
March 31, 1997............................................ 30.50 27.50
June 30, 1997............................................. 27.50 20.00
September 30, 1997........................................ 29.00 23.63
December 31, 1997......................................... 37.00 30.00
For year 1997.......................................... 37.00 20.00
Quarter Ended
March 31, 1996............................................ 36.50 34.50
June 30, 1996............................................. 36.00 30.75
September 30, 1996........................................ 31.25 30.75
December 31, 1996......................................... 31.00 30.25
For year 1996.......................................... 36.50 30.25
</TABLE>
The Company has not paid any cash dividends on the Common Stock since 1991.
Under the Exchange Agreement, the Company has agreed not to pay any dividends on
the Common Stock prior to the Effective Time. See "THE EXCHANGE -- Terms of the
Exchange -- Conduct of the Business of the Company."
5
<PAGE> 14
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK.
SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from the historical
financial statements of the Company and should be read in conjunction with such
financial statements, which are incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Results of the Company for
the three months ended March 31, 1998 are not necessarily indicative of results
expected for the entire year. All adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of results of interim
periods have been included.
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS AT OR FOR THE
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $ 54,934 $ 54,419 $ 259,557 $ 251,999 $ 251,142 $ 249,007 $ 242,699
Costs of Products Sold... $ 37,029 $ 37,497 $ 169,276 $ 165,921 $ 165,850 $ 163,168 $ 159,972
Selling, Administrative
and General Expenses... $ 20,777 $ 20,194 $ 85,055 $ 83,386 $ 80,397 $ 79,455 $ 76,982
Income (Loss) Before
Income Tax and Effect
of Change in Accounting
Principle.............. $ (910) $ (884) $ 2,466 $ (4,644) $ 2,410 $ 4,511 $ 4,067
Provision (Benefit) for
Income Taxes........... $ (400) $ (347) $ 1,038 $ (1,735) $ 1,054 $ 675 $ --
Income (Loss) Before
Effect of Change in
Accounting Principle... $ (510) $ (537) $ 1,428 $ (2,909) $ 1,356 $ 3,836 $ 4,067
Effect of Change in
Accounting Principle... $ -- $ -- $ -- $ -- $ -- $ -- $ 1,253
Net Income
(Loss)........ $ (510) $ (537) $ 1,428 $ (2,909) $ 1,356 $ 3,836 $ 2,814
Basic Earnings per Common
Share:
Income (Loss) Before
Effect of Change in
Accounting
Principle.......... $ (0.23) $ (0.25) $ 0.65 $ (1.33) $ 0.62 $ 1.75 $ 1.85
Basic Earnings per Common
Share:
Effect of Change in
Accounting
Principle.......... $ -- $ -- $ -- $ -- $ -- $ -- $ (0.57)
Basic Earnings per Common
Share:................. $ (0.23) $ (0.25) $ 0.65 $ (1.33) $ 0.62 $ 1.75 $ 1.28
Net Income
(Loss) Cash
Dividends per
Share......... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Average Common Shares
Outstanding............ 2,190,619 2,190,619 2,190,619 2,190,619 2,190,619 2,190,619 2,190,619
Assets................... $ 130,853 $ 128,630 $ 132,010 $ 127,330 $ 122,013 $ 118,823 $ 114,037
Long-term Debt........... $ -- $ -- $ -- $ -- $ -- $ 4 $ 17
Working Capital.......... $ 39,692 $ 39,115 $ 40,345 $ 39,560 $ 41,942 $ 42,010 $ 40,231
Shareholders' Equity..... $ 47,656 $ 47,019 $ 48,166 $ 46,738 $ 49,647 $ 48,291 $ 44,454
Book Value per Share
(1).................... $ 21.75 $ 21.09 $ 21.99 $ 21.34 $ 22.66 $ 22.04 $ 20.29
</TABLE>
- ---------------
(1) Inventory valued at current period cost, as opposed to the "last in, first
out" method, would increase book value per share at years end by $1.85 in
1997, $2.22 in 1996, $2.15 in 1995, $2.00 in 1994 and $1.91 in 1993.
6
<PAGE> 15
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of proxies to be voted at the Meeting to be held at the Sheraton
Airport Plaza Hotel, 3315 South I-85 at Billy Graham Parkway, Charlotte, North
Carolina, on Tuesday, August 25, 1998, at 11:30 a.m. local time. The entire cost
of such solicitation will be borne by the Company. In addition to solicitation
by mail, arrangements will be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxy materials to their principals, and the
Company may reimburse them for their expenses in doing so. Personal
solicitations may be conducted by Directors, officers and employees of the
Company, none of whom will be specially compensated for such solicitation
activities. This Proxy Statement and accompanying proxy card are being mailed to
shareholders on or about July 27, 1998.
VOTING PROCEDURES
The Common Stock is the only outstanding voting security of the Company.
Holders of record of the Common Stock at the close of business on the Record
Date (July 22, 1998) are entitled to vote at the Meeting and are entitled to one
vote for each share held. At the close of business on the Record Date, there
were 2,190,619 shares of Common Stock issued and outstanding held of record by
holders. On the Record Date, Goodyear owned, beneficially and of
record, 1,633,695 shares of Common Stock.
The proposal to approve the Exchange Agreement, pursuant to which each
outstanding share of Common Stock of the Company not currently held by Goodyear
will be acquired by Goodyear and (except for shares held by dissenting
shareholders) will be exchanged for the right to receive from Goodyear $37.25 in
cash, will be approved if it receives the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock. Abstentions and shares held
by brokers who do not receive voting instructions from beneficial owners will,
therefore, have the same effect as a vote against this proposal. The proposal to
adopt the Articles of Amendment to grant dissenters' rights to shareholders of
the Company in connection with the Exchange requires the affirmative vote of a
majority of votes cast on such proposal. Abstentions and broker non-votes will
not be counted as votes against this proposal, and will therefore have no
effect. To the knowledge of the Company, Goodyear, which owns approximately
74.5% of the Common Stock, intends to vote its shares in favor of the Exchange
Agreement. In addition, Goodyear has agreed in the Exchange Agreement to vote
its shares in favor of the Articles of Amendment. Goodyear's favorable vote will
assure the approval of each of these matters.
According to the laws of North Carolina, under which the Company is
incorporated, shareholders do not have cumulative voting rights in connection
with the election of Directors as long as the Company has securities registered
under the Exchange Act at the record date for determining shareholders eligible
to vote at the meeting. Directors are elected by a plurality of the votes cast
at the Meeting provided that a quorum is present. Goodyear has indicated its
intention to vote its shares in favor of the persons named elsewhere in this
Proxy Statement as nominees for Director, which will assure the election of
these individuals. Votes with respect to the election of Directors may be cast
in favor or withheld. Votes that are withheld will be excluded entirely from the
vote and will have no effect on the outcome of the election, although such votes
will be counted for the purposes of establishing a quorum.
Under the North Carolina Business Corporation Act (the "NCBCA"), in order
for the shareholders to have dissenters' rights with respect to the Exchange,
the Articles of Amendment must be effective before the vote is taken with
respect to approval of the Exchange Agreement. Accordingly, the Articles of
Amendment will be the first matter voted upon at the Meeting. If they are
approved, the Meeting will be adjourned so that the Articles of Amendment can be
filed with the Office of the Secretary of State of North Carolina, at which time
they will become effective under the NCBCA. The Meeting will be reconvened after
this filing has occurred (expected to be either later that day or as soon as
practicable thereafter) to conduct the voting on the Exchange Agreement and
election of Directors.
7
<PAGE> 16
VOTING OF PROXIES
The shares represented by the accompanying proxy card and entitled to vote
will be voted if the proxy card is properly signed and received by the Secretary
of the Company prior to the Meeting. Where a choice is specified on any proxy
card as to the vote on any matter to come before the Meeting, the proxy will be
voted in accordance with such specification. Where no choice is specified, the
proxy will be voted for the proposal to approve the Articles of Amendment, for
the proposal to approve the Exchange Agreement, for the election of the persons
nominated to serve as the Directors named in this Proxy Statement and in such
manner as the persons named on the enclosed proxy card in their discretion
determine upon such other business as may properly come before the Meeting or
any adjournment thereof. Any shareholder giving a proxy has the right to revoke
it at any time before it is voted. A proxy is suspended if the person giving the
proxy attends the Meeting and elects to vote in person.
SPECIAL FACTORS
BACKGROUND OF, AND REASONS FOR, THE EXCHANGE
Since March 1986, Goodyear has owned more than a majority of the Common
Stock of the Company, having acquired most of its ownership through private
purchases made from members of the family of B. E. Ragan, Sr., the Company's
founder, and from GAMCO Investors, Inc. and Gabelli and Company, Inc.
Since the acquisition by Goodyear of majority ownership of the Company,
Goodyear has implemented procedures and policies at the Company that are
consistent with those of Goodyear generally. In addition, Goodyear has put in
place senior management consisting of current or former employees of Goodyear.
For a description of material transactions and relationships between Goodyear
and the Company for the past two years, see "COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION."
In November 1989 the Company issued to Goodyear a nontransferable option,
exercisable for up to five years, to purchase up to 650,000 additional shares of
Common Stock. Goodyear paid the Company $162,500 for this option. The purchase
price of shares under this option would have been based on the market price of
the Common Stock at the time of exercise, except that the purchase price would
have had to be at least $25.00 and could not have been more than $75.00.
Goodyear requested this option so that it could acquire the number of shares of
outstanding Common Stock that would have been necessary for consolidation of the
Company with Goodyear for federal income tax purposes in the future, if Goodyear
deemed such consolidation to be beneficial, and for inclusion of the Company in
the "Goodyear control group" for purposes of employee benefit programs, which
Goodyear and the Company considered potentially beneficial to both Goodyear and
the Company. Goodyear never purchased any shares of Common Stock pursuant to
this option, which terminated in November 1994.
On October 17, 1990, Goodyear notified the Company of its desire to acquire
the remaining outstanding shares of Common Stock not then owned by Goodyear for
a cash purchase price of $22.00 per share (the "1990 Proposal"). Goodyear made
this proposal because it believed that the shareholders of the Company would
welcome an opportunity to sell their shares at $22.00 per share, which
represented the highest reported sales price for such Common Stock for the
approximately ten month period preceding the date of the proposal, and that the
Company would benefit from certain organizational and other operating
efficiencies which could be realized if the Company were to become a wholly
owned subsidiary of Goodyear. Shortly after the proposal, a class action lawsuit
was filed against Goodyear, certain of its officers and the Company and its
directors which challenged the 1990 Proposal. Although Goodyear believed the
lawsuit to be without merit, it recognized that the defense of the lawsuit by
the Company, Goodyear and the individual defendants would have required the
expenditure of substantial amounts of time and money which would not be
productive for the Company or for Goodyear. Accordingly, Goodyear withdrew the
1990 Proposal on January 3, 1991.
After the withdrawal of the 1990 Proposal in January of 1991, there were no
discussions or communications between Goodyear and the Company regarding the
acquisition of all of the outstanding shares of the Common Stock of the Company
not owned by Goodyear (the "Public Shares") or any similar transaction until
Goodyear made the Initial Offer on October 15, 1997. Goodyear had, however, from
time to time since the withdrawal of its
8
<PAGE> 17
1990 Proposal considered acquiring all of the Public Shares in order to, among
other reasons, eliminate the potential for conflicts of interest between
Goodyear and the Company and achieve greater flexibility in managing the
Company's operations and eliminating certain costs.
During the first quarter of 1997, Goodyear received an unsolicited
preliminary proposal from an investment banking firm offering to assist Goodyear
in selling its interest in the Company. Goodyear did not retain the firm or take
any action with respect to such proposal.
In July 1997, members of Goodyear management, including Mr. E. R. Culler,
an Executive Vice President of Goodyear and the Chairman of the Board of the
Company, and other members of Goodyear's North America Tire Division, began to
evaluate the possibility of acquiring the Public Shares. In August 1997,
representatives of Goodyear and Credit Suisse First Boston ("CSFB") discussed
the possible structures for a transaction and the process involved in acquiring
the Public Shares.
During September 1997, Goodyear management approved proceeding with an
evaluation of the possible acquisition of the Public Shares and the retention of
CSFB to assist Goodyear with the financial evaluation and development of a
possible offering price. On September 12, 1997, Goodyear retained Covington &
Burling as counsel, and Kennedy Covington Lobdell & Hickman, L.L.P., as North
Carolina counsel, to assist Goodyear with the transaction. Shortly thereafter,
Goodyear formally retained CSFB to advise it on the financial aspects of the
transaction. On September 22, 1997, representatives of Goodyear, CSFB and
Covington & Burling met to consider the possible acquisition of the Public
Shares. Possible structures for the transaction were discussed (tender offer,
merger, share exchange) but no conclusions were reached. It was determined that
CSFB would not be requested to provide a fairness opinion to Goodyear, since the
transaction would not be material to Goodyear and the Company would have its own
financial advisor. Possible ranges of prices per share that might be offered for
the Public Shares were discussed but no conclusion was reached. During the last
week of September and first week of October, CSFB reviewed information with
respect to the Company and discussed telephonically certain aspects of the
Company's business and financial performance with Goodyear personnel.
On October 6, 1997, the Goodyear Board authorized management to proceed
with an offer to acquire the Public Shares. Shortly thereafter, Goodyear
management determined to make an offer to acquire all of the Public Shares
through a share exchange at $32.00 per share.
By letter dated October 15, 1997 from Goodyear to the Board, Goodyear made
the Initial Offer, pursuant to which it would acquire all outstanding shares of
Common Stock not owned by Goodyear for $32.00 per share in a share exchange that
would require the approval of the Board and the holders of a majority of the
outstanding shares of Common Stock. The letter was accompanied by a proposed
Agreement and Plan of Share Exchange, executed by Goodyear. The Initial Offer
was unsolicited by the Company, made without the prior knowledge of management
or the Board (except as set forth above), and expressly subject to approval by
the Board on or before December 18, 1997 and approval by the shareholders of the
Company on or before May 25, 1998, or as soon thereafter as possible. In its
letter, Goodyear indicated that the purpose of the offer was to facilitate
certain restructuring activities and to permit various organizational and other
operating efficiencies.
On October 23, 1997, the Board appointed the Special Committee, composed of
Richard D. Pearson and Dr. Richard E. Sorensen, neither of whom is (nor at any
time in the past was) an employee of the Company or an employee or director of
Goodyear, to study the proposal and to report its recommendations to the Board.
(Mr. Pearson is the owner and manager of a number of companies involved in the
sale and leasing of trucks and other heavy equipment that sell products to
Goodyear in the ordinary course of business. During the past five years, such
sales in the aggregate have not exceeded $10,000 per year.) The Board authorized
the Special Committee to engage special legal counsel and an investment advisor
and, if deemed appropriate by the Special Committee, to enter into negotiations
with Goodyear. On October 23, 1997, the Company issued a press release
announcing its receipt of the Initial Offer and the formation of the Special
Committee.
The Special Committee was assisted in its deliberations by Robinson,
Bradshaw & Hinson, P.A., of Charlotte, North Carolina ("Robinson Bradshaw"),
which firm had served as special counsel to the outside directors from time to
time since 1978. The Board was advised by Womble Carlyle Sandridge & Rice, PLLC,
of Charlotte, North Carolina ("Womble Carlyle"), the Company's regular counsel.
Both Robinson Bradshaw and
9
<PAGE> 18
Womble Carlyle from time to time have represented IJL in various corporate
financing, investment advisory and litigation matters.
The Special Committee first met by telephone on October 27, 1997 to discuss
the Initial Offer, a time frame for a decision with regard to the offer and the
engagement of an investment advisor. At that time, the Special Committee decided
not to engage in substantive discussions or negotiations with Goodyear until the
Special Committee had been advised by its investment advisor as to the fairness
of the Initial Offer. The Special Committee next met by telephone on November 3,
1997 and engaged IJL as its financial advisor. At that meeting, the Special
Committee was made aware of recent amendments to North Carolina law that
eliminated the dissent and appraisal rights of shareholders of the Company in
certain transactions such as the one proposed by Goodyear. The Special Committee
favored a transaction that would allow shareholders to assert dissenters' rights
in view of Goodyear's ability to control the outcome of shareholder action on
such transaction. The Special Committee also believed that Goodyear should agree
to pay the Company's fees and expenses incurred in connection with the proposed
transaction in the event the transaction was not consummated. Counsel to the
Special Committee advised that he had discussed both issues with Goodyear's
counsel, who had agreed to raise them with Goodyear.
In early November 1997, IJL began its analysis of the Initial Offer and met
with management of the Company with respect to the Company's operations and
prospects. On November 13, 1997, the Shareholder Litigation was filed on behalf
of certain shareholders of the Company against the Company and each member of
the Board alleging that the directors had violated their fiduciary duties in
connection with the proposed transaction and seeking injunctive relief,
compensatory damages in excess of $10,000 and attorneys fees. See "-- Certain
Litigation."
The Special Committee met by telephone with representatives from IJL on
November 14, 1997 to discuss IJL's preliminary analysis regarding the Initial
Offer. IJL advised the Special Committee that its preliminary opinion was that
the Initial Offer was fair from a financial point of view to the public
shareholders based on the various analyses IJL had performed. There was also
discussion regarding certain methods of valuing the Company that would result in
a value per share in excess of the Initial Offer. IJL advised the Special
Committee that a comparison to the median and mean range of book value multiples
of comparable companies could suggest that the Common Stock may have a value of
as much as $40 per share. However, IJL cautioned the Special Committee that
because of the Company's low rate of return on equity relative to comparable
companies, IJL did not believe a book value analysis was a reliable measure. See
"-- Opinion of Financial Advisor." The Special Committee observed that the
Common Stock had traded on very limited volume in the range of approximately $20
to $25 per share in late June/early July 1997 and at approximately $29 per share
one month prior to the announcement of the proposed transaction with Goodyear,
had closed at $33.50 on October 24, 1997 (the first trading day after the
Company's press release regarding the Initial Offer) and was trading that day at
a bid price of $36 and an ask price of $37. It was noted that trading in the
Common Stock was typically significantly less than 2,500 shares per day. The
Special Committee also discussed and was unable to explain the increase in
market prices for the Common Stock over the Initial Offer, and it was suggested
that certain investors were speculating as to the price Goodyear ultimately
would pay for the Company. The Special Committee also discussed with IJL the
performance of the Company's management, the reasonableness of historical and
projected financial performance, and the benefits to the Company of having
Goodyear as a majority shareholder, including the availability to the Company of
intercompany loans and certain professional and other services at below market
rates. A few days after the November 14, 1997 meeting, IJL provided its written
report to the Special Committee, which confirmed IJL's preliminary opinion that
the Initial Offer was fair to the public shareholders of the Company from a
financial point of view.
The Special Committee next met with IJL on November 20, 1997 to discuss
IJL's written report. On that day, the Common Stock was trading on limited
volume at $36 per share. (On November 14, 1997, the last day before then on
which any shares of Common Stock were traded, the high, low and closing prices
were $37.00, $33.50 and $36.00, respectively.) During the meeting, the Special
Committee continued its evaluation and review of the factors considered by IJL
in its analysis of the value of the Company. IJL advised the Special Committee
that a price of $31 to $36 per share would be within the range of fairness, but
that a price less than $31 per share could also have been determined to be
within the range of fairness. At the conclusion of this meeting, there was
10
<PAGE> 19
general agreement between members of the Special Committee that a price of $36
per share would seem favorable to the public shareholders of the Company.
The Board met at a regular board meeting on November 21, 1997, at which the
Special Committee reported that it had engaged outside legal counsel and an
investment advisor, that it had initiated discussions with Goodyear regarding
the payment by Goodyear of the Company's fees and expenses incurred in
connection with the transaction, and that it had received IJL's preliminary
report and was prepared to enter into full negotiations with Goodyear regarding
the proposed transaction. At the request of the Special Committee, the Board
again authorized the Special Committee to proceed with negotiations with
Goodyear. Thereafter, the Special Committee scheduled a meeting with
representatives of Goodyear on December 5, 1997.
On December 2, 1997, the Special Committee and representatives of IJL
conferred by telephone with a large institutional shareholder of the Company
(the "Investor") who controls a majority of the publicly held shares of the
Company and who previously had requested a meeting with the Company regarding
the Initial Offer. The Investor expressed to the Special Committee his view that
the potential stock value of the Company could be as high as $50 per share,
assuming a 20% return on equity and a price multiple of 15 times earnings. At
the request of the Special Committee, the Investor agreed to further analyze the
Company's value and to communicate to the Special Committee the results of such
analysis prior to the Special Committee's December 5th meeting with Goodyear. In
a letter dated December 4, 1997, the Investor indicated to the Special Committee
that he felt that the economic value of the Company would be no less than $45
per share assuming a 15% return on equity and a multiple of 15 times earnings.
At that time, the Special Committee thought that the assumptions underlying a
price of $45 per share were not realistic based on historical trading prices,
the Company's historical performance and Goodyear's ownership of approximately
74.5% of the outstanding shares of Common Stock.
The Special Committee met with representatives of Goodyear on December 5,
1997 and provided representatives of Goodyear with a copy of the Investor's
December 4th letter. At the direction of the Special Committee, negotiations
proceeded regarding the Special Committee's desire to condition the proposed
transaction upon the affirmative approval of the holders of a majority of the
publicly traded shares, and to provide each shareholder with dissenters' rights.
In addition, the parties discussed whether Goodyear would agree to pay the
Company's fees and expenses, then estimated to be approximately $200,000, for
considering the transaction. Representatives of Goodyear advised the Special
Committee that Goodyear would agree to the Special Committee's request for
dissenters' rights and payment of expenses, but that it would not agree to
condition the proposed transaction upon the affirmative vote of the holders of a
majority of the publicly held shares. Goodyear advised the Special Committee
that such a measure would effectively subject the transaction to the approval of
the Investor. The parties then discussed price, and it was noted that the Common
Stock had traded at a high in the range of $36 per share two years prior to the
proposed transaction and had recently traded as high as $37 per share. The
Special Committee expressed its view that Goodyear should offer a premium over
current market prices and suggested a price of $40 per share. Representatives of
Goodyear indicated that they were authorized to discuss a price of up to $36 per
share but were not authorized to exceed that price. Following a brief meeting
between members of the Special Committee and counsel, the Special Committee
determined to suggest a price of $37.25 per share, which would offer a slight
premium over market prices then prevailing, and representatives of Goodyear
reiterated their lack of authority to discuss a price in excess of $36 per
share.
Negotiations stalled during the remainder of 1997. Dr. Sorensen, on behalf
of the Special Committee, continued discussions with the Investor, who advised
Dr. Sorensen that his letter indicating a valuation of $45 per share had been
prepared by a staff associate and not reviewed by the Investor and that the
Investor would be willing to support a transaction at a reasonable price. At a
December 11, 1997 regular meeting of the Board, the Special Committee reported
that it had met by telephone with the Investor, that it had met with Goodyear
which had agreed to indemnify the Company for its fees and expenses associated
with the transaction of up to $200,000, and that current negotiations with
Goodyear were focused on price and dissenters' rights.
On December 17, 1997, representatives of Goodyear and its counsel met with
plaintiffs' counsel in the Shareholder Litigation. Although the possibility of
entering into settlement negotiations was discussed, no proposals were made by
either side at the meeting.
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<PAGE> 20
The Special Committee next met by telephone on December 22, 1997 to discuss
the status of the negotiations with Goodyear and the fact that counsel to
Goodyear had met with counsel for the plaintiffs in the Shareholder Litigation
and had advised plaintiff's counsel that an offer of $36 per share was on the
table. The Special Committee also discussed the request of plaintiff's counsel
for a meeting with the Special Committee. After discussion concerning the merits
of the Shareholder Litigation and the potential dilatory effect of such
litigation on the proposed transaction, the Special Committee concluded that it
would be of no benefit to meet with plaintiff's counsel. The Special Committee
also expressed concern that a delay in the transaction pending resolution of the
Shareholder Litigation could jeopardize the transaction.
During January 1998, Dr. Sorensen had a series of telephone conversations
with George E. Strickler, Vice President--Finance, North America Tire Division
of Goodyear, to express the Special Committee's concern that the transaction was
not progressing, the Special Committee's belief that a price of $37.25 was fair,
and the Special Committee's strong belief that the transaction should not be
delayed as a result of the Shareholder Litigation. During such conversations,
Dr. Sorensen obtained assurances from Mr. Strickler that he was seeking approval
of the transaction internally at Goodyear at a price of $37.25 per share. Dr.
Sorensen also spoke on certain occasions with the Investor, who sought and
obtained assurances from Dr. Sorensen that the transaction was still being
pursued.
In late January 1998, Goodyear determined not to pursue settlement
negotiations with respect to the Shareholder Litigation, believing that the
allegations were unfounded.
By letter dated February 4, 1998, Goodyear made the Revised Offer,
increasing its offer to $37.25 per share. The Special Committee met by telephone
with IJL on February 11, 1998 to review the Revised Offer and was advised by IJL
that in IJL's opinion, such offer was clearly fair to the shareholders of the
Company from a financial point of view. IJL subsequently delivered a written
opinion, dated February 13, 1998, to the Special Committee indicating (i) that
the Revised Offer was fair from a financial point of view to the shareholders of
the Company and (ii) that the Revised Offer represented a valuation in excess of
the composite valuation derived by IJL in its analysis of the Common Stock. In
conversations between representatives of the Special Committee and
representatives of Goodyear on February 13, 1998, Goodyear again indicated that
it would agree to provide shareholders of the Company with dissent and appraisal
rights, provided Goodyear had the right to terminate the agreement if holders of
more than five percent of the outstanding shares of Common Stock determined to
assert such rights, and such proposal was acceptable to the Special Committee.
Thereafter, the Special Committee unanimously resolved to recommend to the Board
that it accept the Revised Offer, subject to successful negotiation of a
definitive agreement that provided the public shareholders of the Company with
dissent and appraisal rights and required Goodyear to pay the Company's fees and
expenses of up to $250,000 (other than litigation costs) in connection with the
transaction. The Board met on February 13, 1998, and upon the recommendation of
the Special Committee, voted to accept the Revised Offer, subject to successful
negotiation of a definitive agreement that provided the public shareholders of
the Company with dissent and appraisal rights and required Goodyear to pay the
Company's fees and expenses of up to $250,000 (other than litigation costs) in
connection with the transaction. Eugene R. Culler, Jr., Chairman of the Board of
the Company and Executive Vice President of Goodyear, Michael R. Thomann, then
Vice Chairman of the Board and President and Chief Executive Officer of the
Company, and Ronald J. Carr, Vice President -- Finance, Chief Financial Officer,
Treasurer and Secretary of the Company, abstained from the vote taken by the
Board with regard to the Revised Offer because of their relationships with
Goodyear.
Negotiations between the Special Committee and Goodyear regarding a
definitive agreement continued during March and the first part of April 1998.
Such negotiations focused on the ability of Goodyear to terminate the Exchange
Agreement with and without "just cause," the circumstances under which Goodyear
would be required to reimburse the Company for all or part of its fees and
expenses in the event the Exchange Agreement was terminated by Goodyear and the
Company's obligations following the Exchange to maintain indemnification and
directors' and officers' liability protection. On April 8, 1998 and again on May
4, 1998, the Special Committee unanimously recommended that the Board approve
the Exchange Agreement. At the May 4, 1998 meeting, the Special Committee
conferred by telephone with representatives of IJL and was advised by such
representatives that IJL continued to believe that the Revised Offer was fair to
the public shareholders of the
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<PAGE> 21
Company from a financial point of view. Such oral opinion was subsequently
updated in writing by IJL. On May 5, 1998, the Board approved the Exchange
Agreement.
FAIRNESS OF THE EXCHANGE
The Special Committee. The Special Committee believes that a price of
$37.25 per share to be paid to public shareholders of the Company in the
Exchange is fair to such shareholders and is in the upper end of the range of
prices that Goodyear would be willing to pay for such shares. In reaching its
decision to recommend approval of the Exchange Agreement at a price of $37.25
per share, the Special Committee considered the following factors:
- The financial analysis performed by IJL, including IJL's opinion that the
Revised Offer was fair from a financial point of view to the public
shareholders of the Company, IJL's preliminary opinion that the Initial
Offer was fair from a financial point of view to the public shareholders
of the Company, IJL's statement that the Revised Offer exceeded the
composite range derived by IJL with respect to the Company's per share
value, and IJL's belief that the Company's historical and prospective
operating results could support a value of less than $31 per share. The
Special Committee also considered its discussions with the Investor, who
initially proposed a price of $45 per share but subsequently retracted
such proposal and expressed concern that the proposed transaction would
not occur.
- The relationship between Goodyear and the Company, including loans and
other administrative services provided by Goodyear to the Company at
favorable rates and the positive effect of such transactions on the
Company's historical and projected operating results, which were used by
IJL in part to evaluate the Company's value. In addition, the Special
Committee considered the Company's inability to conduct an auction or
otherwise solicit a buyer for the Company without the cooperation of
Goodyear, as well as the unlikelihood that a buyer other than Goodyear
would make a serious offer for the Company's publicly traded shares.
- The Shareholder Litigation, which the Special Committee believed raised
allegations that were unfounded in view of the Special Committee's
deliberations and negotiations with Goodyear. In evaluating the merits of
such litigation, the Special Committee also considered the fact that such
litigation commenced prior to any substantive consideration of the
Initial Offer by the Special Committee, any discussions between the
Special Committee and its financial advisor with regard to the Company's
value, and any negotiations between the Special Committee and Goodyear.
The Special Committee also believed that any delay pending resolution of
the Shareholder Litigation could have the effect of jeopardizing the
transaction, which the Special Committee believed was in the best
interests of shareholders at a price of $36 or more per share. The
Special Committee did not consider the Shareholder Litigation in
evaluating the fairness of the Initial Offer, the Revised Offer or any
other prices considered by the Special Committee during its deliberations
or negotiations with Goodyear.
- The market for the Common Stock, including the relative illiquidity of
such market, the dramatic effect on market prices caused by transactions
involving a small number of shares, and the unlikelihood that all
publicly held shares could be sold in such market at prevailing market
prices. The Special Committee also considered the premium of the Revised
Offer over market prices prevailing at the time of the public
announcement of the Initial Offer.
- Goodyear's agreement to provide shareholders of the Company with
dissenters' rights, which the Special Committee believed would allow
shareholders who objected to the transaction to dissent and obtain
payment of an amount determined by a court to represent fair value for
the Common Stock.
In view of the wide variety of the factors considered by the Special
Committee, it did not assign relative weights to these factors in coming to its
conclusions. Other than the Special Committee and its advisors, the Company did
not obtain an unaffiliated representative to act solely on behalf of the public
shareholders of the Company for the purpose of negotiating the Exchange
Agreement with Goodyear.
The members of the Special Committee (as well as other Directors) are
indemnified by the Company under the Company's bylaws and the applicable
provisions of the NCBCA, and are exculpated from certain liabilities
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<PAGE> 22
under the Articles, with respect to their actions in connection with the
Exchange. The members of the Special Committee (as well as other Directors) are
also covered by directors' and officers' liability insurance maintained by
Goodyear. (The Exchange Agreement requires the Company to maintain such
indemnification and directors' and officers' liability coverage for a period of
six years following the Exchange. See "THE EXCHANGE -- Terms of the
Exchange -- Indemnification.") According to Company policy in existence prior to
appointment of the Special Committee, members of the Special Committee are
entitled to receive, or defer receipt of, $1,000 per meeting attended not in
conjunction with a Board meeting and $500 per telephonic meeting attended,
subject to an annual maximum of $20,000, plus reimbursement of expenses. No
other compensation was received by members of the Special Committee for their
service.
The Board. The Board has concluded that the Exchange and the consideration
to be received in the Exchange are fair to the Company's public shareholders,
and has adopted the Exchange Agreement and recommended that the shareholders of
the Company vote FOR approval of the Exchange Agreement and the Exchange. The
Board's recommendation is based on (a) the conclusions and recommendation of the
Special Committee, (b) the opinion of IJL to the effect that the $37.25 per
share of Common Stock to be received in the Exchange is fair, from a financial
point of view, to the Company's public shareholders and (c) the factors referred
to above as having been considered by the Special Committee, which the Board has
adopted. In view of the number and variety of factors considered in connection
with the Board's evaluation of the Exchange Agreement and the consideration to
be received in the Exchange, the Board did not believe it practicable to assign
relative weights to such factors, and, therefore, did not assign any such
relative weights or otherwise attempt to quantify these factors.
Goodyear. Goodyear management has concluded that the Exchange and the
consideration to be received in the Exchange are fair to the public shareholders
of the Company based upon (a) the conclusions and recommendations of the Special
Committee, (b) the fact that the terms of the Exchange and the consideration to
be received in the Exchange were negotiated on a good faith, arms' length basis
between the Special Committee and its advisors and Goodyear and its advisors,
(c) IJL's opinion to the effect that the $37.25 per share of Common Stock to be
received in the Exchange is fair, from a financial view, to the Company's public
shareholders and (d) the other factors described above as having been considered
by the Special Committee. In light of the wide variety of factors taken into
account in its consideration of the Exchange, Goodyear management did not
believe it practicable to assign relative weights to these factors and,
therefore, did not attempt to do so or to otherwise quantify the factors.
Since the public announcement of Goodyear's Revised Offer and the Company's
acceptance of such offer, the Common Stock has been reported at times to have
traded at prices in excess of the $37.25 per share provided for in such offer.
Trades in excess of the offer price have involved 6,700 shares of Common Stock
(approximately 1.2% of the shares not owned by Goodyear) and prices have not
exceeded $39.25 per share. The Company is not aware of any recent developments
in the Company's business or financial condition that would explain such trading
and does not believe that these few transactions are material to an evaluation
of the fairness of the Exchange. For all of the reasons stated under "SPECIAL
FACTORS -- Fairness of the Exchange," the Company and Goodyear continue to
believe that the consideration to be received by the public shareholders in the
Exchange is fair to such shareholders notwithstanding such trading.
INTERESTS OF CERTAIN PERSONS IN THE EXCHANGE
In considering the recommendation of the Board with respect to the Exchange
Agreement and the Exchange, shareholders should be aware that Directors and
members of management of the Company at the time of the approval of the Exchange
Agreement had, and currently have, certain interests and relationships which
present them with potential conflicts of interest in connection with the
Exchange. The members of the Special Committee and the Board were aware of such
potential conflicts of interest and considered them along with the other matters
described under "SPECIAL FACTORS -- Fairness of the Exchange."
By virtue of its ownership of approximately 74.5% of the outstanding shares
of Common Stock, Goodyear has the power to elect or remove any Director at any
time. Mr. Culler, who is Chairman of the Board of the Company, has been employed
by Goodyear for 35 years and currently serves as an Executive Vice President of
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<PAGE> 23
Goodyear. Mr. Thomann, who until July 15, 1998 was Vice Chairman of the Board,
President and Chief Executive Officer of the Company, held positions with
Goodyear's retail stores, commercial tire centers and credit administration from
1973 to 1987 and from 1993 to 1996 and is currently employed by Goodyear as
Marketing Director, Commercial Tires. Mr. Carr, who is Vice
President -- Finance, Chief Financial Officer, Secretary and Treasurer and a
Director of the Company, held various financial positions in Goodyear's general
products and tire divisions and with Motor Wheel Corporation, then a Goodyear
subsidiary, between 1970 and 1992. As a result of their current or past
relationships with Goodyear, Messrs. Culler, Thomann and Carr abstained from the
vote taken by the Board with respect to approval of the Exchange Agreement and
the Exchange.
In light of such potential conflicts of interest, the Board created the
Special Committee to consider Goodyear's acquisition offer. The Special
Committee is composed of Richard D. Pearson and Richard E. Sorensen, neither of
whom has any material relationship with Goodyear other than being a Director of
the Company. (Mr. Pearson is the owner and manager of a number of companies
involved in the sale and leasing of trucks and other heavy equipment that sell
products to Goodyear in the ordinary course of business. During the past five
years, such sales in the aggregate have not exceeded $10,000 per year.) Messrs.
Sorensen and Pearson have been Directors since 1977 and 1978, respectively.
James W. Barnett, who is a Director, was employed by Goodyear from 1950 until
his retirement in 1996. Mr. Barnett participated in the vote taken by the Board
with respect to the Exchange Agreement to ensure that the vote would satisfy the
quorum requirements of the NCBCA. See "SPECIAL FACTORS -- Background of, and
Reasons for, the Exchange."
The Directors and the executive officers of the Company at the time of the
approval of the Exchange Agreement beneficially owned shares of Goodyear common
stock as follows at June 30, 1998: Mr. Barnett, 2,685 shares; Mr. Culler, 6,694
shares; Mr. Carr, 648 shares; Mr. Owens, 1,326 shares; Mr. Rumble, 1,533 shares;
and Mr. Thomann, 1,352 shares. In addition, Mr. Culler has outstanding options
granted by Goodyear pursuant to its employee stock option and performance
incentive plans to purchase 51,000 shares of Goodyear common stock at a weighted
average exercise price of $50.28 per share. Messrs. Pearson and Sorensen do not
beneficially own, directly or indirectly, any shares of, or hold any options to
purchase, Goodyear common stock.
Executive officers of the Company participate in an incentive compensation
program and, by virtue of such participation, they are routinely awarded options
to purchase shares of Goodyear common stock. The executive officers of the
Company at the time of the approval of the Exchange Agreement held options
granted by Goodyear pursuant to its employee stock option and performance
incentive plans to purchase Goodyear common stock as follows at June 30, 1998:
Mr. Carr, 18,450 shares at a weighted average exercise price of $37.73 per
share; Mr. Owens, 12,550 shares at a weighted average exercise price of $43.80
per share; Mr. Rumble, 20,400 shares at a weighted average exercise price of
$33.90 per share; and Mr. Thomann, 13,750 shares at a weighted average exercise
price of $50.77 per share. The closing price of Goodyear common stock on the New
York Stock Exchange Composite Transactions tape on June 30, 1998 was $64.4375
per share. See "EXECUTIVE COMPENSATION," "COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION -- Compensation of Executive Officers," and "COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION."
Goodyear is the Company's principal supplier of tires and also provides
financing and certain administrative services to the Company. See "COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION."
OPINION OF FINANCIAL ADVISOR
IJL has been engaged by the Special Committee to render an opinion with
respect to the fairness from a financial point of view to the shareholders of
the Company (other than Goodyear) of the consideration to be received by such
shareholders pursuant to the Exchange. IJL is a recognized investment banking
firm and, as part of its investment banking activities, is regularly engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The Special Committee
selected IJL to render its opinion on the basis of its proposed fees, its
experience and
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<PAGE> 24
expertise in merger transactions, and its reputation in the banking and
investment communities. In the ordinary course of its business, IJL from time to
time trades the equity securities of the Company and Goodyear for its own
account and for the accounts of its customers, and, accordingly, may at any time
hold a long or short position in such securities.
On February 13, 1998, IJL delivered a written opinion (the "IJL February
Opinion") to the Special Committee to the effect that, as of such date and based
upon and subject to certain matters, the cash consideration to be received by
the shareholders of the Company (other than Goodyear) pursuant to the Exchange
is fair to such shareholders from a financial point of view. IJL has updated the
IJL February Opinion as of the date of this Proxy Statement (the "IJL Update
Opinion"). In connection with the preparation of the IJL Update Opinion, IJL
updated certain of its analyses, as necessary, and reviewed the assumptions on
which such analyses were based and the factors considered in connection
therewith.
THE FULL TEXT OF THE IJL UPDATE OPINION TO THE SPECIAL COMMITTEE, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE
OF REVIEW UNDERTAKEN BY IJL, IS ATTACHED HERETO AS ANNEX II AND IS INCORPORATED
HEREIN BY REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN
CONNECTION WITH THIS PROXY STATEMENT. IN ADDITION, THE IJL UPDATE OPINION SHALL
BE MADE AVAILABLE FOR INSPECTION AND COPYING AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE COMPANY DURING REGULAR BUSINESS HOURS BY ANY HOLDER OF SHARES OF COMMON
STOCK OR HIS OR HER REPRESENTATIVE WHO HAS BEEN SO DESIGNATED IN WRITING. THE
FOLLOWING SUMMARY OF THE IJL UPDATE OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE IJL UPDATE OPINION. THE IJL UPDATE OPINION,
WHICH IS ADDRESSED TO THE SPECIAL COMMITTEE, IS DIRECTED ONLY TO THE FAIRNESS
FROM A FINANCIAL POINT OF VIEW TO THE SHAREHOLDERS OF THE COMPANY (OTHER THAN
GOODYEAR) OF THE CONSIDERATION TO BE RECEIVED PURSUANT TO THE EXCHANGE, DOES NOT
ADDRESS ANY OTHER ASPECT OF THE PROPOSED EXCHANGE OR ANY RELATED TRANSACTION AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE MEETING.
In connection with its opinion, IJL: (i) reviewed certain publicly
available financial and other data with respect to the Company, including the
consolidated financial statements of the Company for recent fiscal years and
interim periods to September 30, 1997, and certain other relevant financial and
operating data relating to the Company made available to IJL from published
sources and from the internal records of the Company; (ii) reviewed the Exchange
Agreement and certain related documents provided to IJL by the Company; (iii)
compared the Company from a financial point of view with certain other public
companies which IJL deemed to be relevant; (iv) reviewed and discussed with
representatives of management of the Company certain information regarding the
business and financial issues of the Exchange; and (v) made inquiries regarding
and discussed the Exchange, the Exchange Agreement and other matters related
thereto with the Company's management.
In connection with its review, IJL did not assume any obligation to verify
any of the foregoing information and relied on all such information being
complete and accurate in all material respects. IJL assumed, with the Special
Committee's consent, that there were no material changes in the Company's
assets, financial condition, results of operations, business or prospects since
the date of the last financial statements reviewed by IJL and that off-balance
sheet activities of the Company will not materially and adversely affect the
future financial position or results of operations of the Company. IJL further
assumed, with the Special Committee's consent, that in the course of obtaining
the necessary regulatory and third party consents for the Exchange, no
restriction will be imposed that will have a material adverse effect on the
contemplated benefits of the Exchange or the transactions contemplated thereby.
IJL further assumed, with the Special Committee's consent, that the Exchange
will be consummated in accordance with the terms and provisions of the Exchange
Agreement, without any amendments to, and without any waiver by the Company or
Goodyear of, any of the material conditions to the consummation of the Exchange.
IJL did not assume responsibility for reviewing any individual credit files or
making an independent evaluation, appraisal or physical inspection of the assets
or individual properties of the Company, nor was IJL furnished with any such
evaluations or appraisals. Finally, IJL's opinion was based on economic,
monetary and market and other conditions as in effect on, and the information
made available to IJL as of, the
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<PAGE> 25
date thereof. No limitations were imposed by the Board or the Special Committee
on IJL with respect to the investigations made or procedures followed by IJL in
rendering its opinion.
Set forth below is a summary of the material analyses performed and relied
upon by IJL in connection with the IJL February Opinion and the IJL Update
Opinion.
Comparable Company Analysis. Based on publicly available information and
earnings estimates, IJL reviewed and compared actual and estimated selected
financial, operating and stock market information and financial ratios of the
Company and a group of five companies consisting of Bandag, Inc.; Cooper Tire &
Rubber Co.; Goodyear; Standard Products Co.; and Treadco Inc. (the "Comparable
Companies").
IJL noted that based on recent market data, the Comparable Companies had a
median enterprise value (defined as the market value of equity plus short and
long-term debt, including capitalized lease obligations, minus cash and
marketable securities) to EBITDA (earnings before interest, taxes, depreciation
and amortization) multiple of 10.2x, while the Company had an enterprise value
to EBITDA multiple of 20.1x. Using the $37.25 per share to be received by the
shareholders pursuant to the Exchange to calculate the market value of the
Company's equity, the Company would have an enterprise value to EBITDA multiple
of 21.6x, or more than 2.0 times the median enterprise value to EBITDA multiple
of the Comparable Companies. Furthermore, based on the same market data the
Comparable Companies had a median share price to latest twelve months earnings
("P/E") multiple of 14.0x, while the $37.25 per share to be received by
shareholders in the Exchange represents a significantly greater multiple (in
excess of 100x) of the Company's earnings for the same twelve month period.
No other company used in the above analysis as a comparison is identical to
the Company. Accordingly, an analysis of the results of the foregoing is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the acquisition or public trading
multiples of the companies to which the Company is being compared.
Other Analysis. In addition, IJL prepared an overview of the historical
financial performance of the Company and analyzed its financial condition and
the impact on the Company and its shareholders (other than Goodyear) if the
Exchange is not consummated. IJL also considered the Company's stock price
performance relative to that of the Comparable Companies and to the market as a
whole.
In evaluating the fairness of the consideration to be received by the
Company's shareholders in the Exchange, IJL determined that a discounted cash
flow analysis, a capitalization of earnings analysis and the median share price
to book value of equity multiple were not reliable indicators of value. Given
the Company's low EBITDA margin and the low estimated free cash flow, the equity
valuation resulting from the discounted cash flow analysis was significantly
lower than the Revised Offer and not within a reasonable range of value relative
to the values indicated by other valuation methodologies employed. Because the
Company has had declining or flat earnings in the last five years, the
capitalization of earnings analysis resulted in a low average earnings level and
an exceptionally low equity valuation that was also not within a reasonable
range of value relative to other methodologies employed. And finally, because of
the same low earnings in recent years, the Company's return on equity is
minimal, indicating that it would not be appropriate to rely upon a valuation
methodology using a multiple of book value of equity derived from the comparable
companies identified by IJL.
The foregoing is a summary of the material analyses performed by IJL in
connection with the IJL February Opinion and the IJL Update Opinion dated the
date of this Proxy Statement. The summary set forth above does not purport to be
a complete description of the analyses performed by IJL. The preparation of a
fairness opinion is not necessarily susceptible to partial analysis or summary
description. IJL believes that its analyses and the summary set forth above must
be considered as a whole and that selecting portions of its analyses and of the
factors considered, without considering all analyses and factors, would create
an incomplete view of the process underlying the analyses. In addition, IJL may
have given various analyses more or less weight than other analyses, and may
have deemed various assumptions more or less probable than other assumptions, so
that the ranges of valuations resulting from any particular analysis described
above should not be taken to be IJL's view of the actual values of the Company.
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<PAGE> 26
In performing its analyses, IJL made numerous assumptions with respect to
industry performance, regulatory, general business and economic conditions and
other matters, many of which are beyond the control of the Company. The analyses
performed by IJL are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than those
suggested by such analyses. Such analyses were prepared solely as part of IJL's
analysis of the fairness from a financial point of view of the consideration to
be received by the shareholders of the Company (other than Goodyear) in
connection with the delivery of IJL's opinion. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. Any projections and estimates are based on numerous variables and
assumptions which are inherently unpredictable and must be considered not
certain of occurrence as projected. Accordingly, actual results could vary
significantly from those set forth in such projections.
Pursuant to the terms of IJL's engagement, the Company has paid IJL a fee
equal to $65,000. Goodyear has agreed to reimburse the Company for such fee
under certain circumstances if the Exchange is not completed. See "THE
EXCHANGE -- Terms of the Exchange -- Termination; Fees and Expenses." The
Company also has agreed to reimburse IJL for its reasonable out-of-pocket
expenses, including the fees and expenses of IJL's legal counsel. The Company
has agreed to indemnify IJL, its affiliates, and their respective partners,
directors, officers, agents, consultants, employees and controlling persons
against certain liabilities, including liabilities under the federal securities
laws.
PURPOSE OF THE EXCHANGE; PLANS FOR THE COMPANY
The purpose of the Exchange is to effect the acquisition by Goodyear of all
outstanding shares of Common Stock not currently held by Goodyear. In the
Exchange, each such share will be exchanged for the right to receive from
Goodyear $37.25 in cash. The acquisition of such shares has been structured as a
share exchange in order to provide a prompt and orderly transfer to Goodyear of
ownership of the shares of Common Stock not currently owned by it. Goodyear
considered various alternatives to the Exchange, including carrying out any
restructuring without acquiring the shares of Common Stock not owned by
Goodyear. Alternatives were rejected because the Exchange was the most efficient
way of accomplishing the purposes set forth below.
In determining to propose the Exchange, Goodyear focused on a number of
factors. Generally, Goodyear believes that today's changing market conditions
indicate the need for changes in the business and operations of the Company that
can best be accomplished if it is a wholly-owned subsidiary.
Goodyear believes that it may be necessary to reposition the retail
operations of the Company due to the current and anticipated economic conditions
and increasing competitive pressures in many of the markets where the Company's
retail stores are located. If the Exchange is consummated, Goodyear intends to
conduct a marketing analysis to evaluate the effectiveness of the Company's
product format and the demographic and economic trends in each of the Company's
retail markets. Based on these studies, the Company will invest in those
locations where there is potential for growth and divest or close those
locations where the expected returns would not meet desired levels.
With a view to enhancing the growth potential of the Company's off-the-road
retreading and commercial truck tire sales and service business, Goodyear will
study the Company's operations and the relevant markets to determine whether and
the extent to which combining the Company's operations with Goodyear's
commercial truck tire sales and service operations would increase sales and
reduce costs. Goodyear will also study each market to determine whether the
Company's or Goodyear's commercial format and trade style should be employed. It
is expected that the integration of the retreading and the tire sales and
service operations of Goodyear and the Company would result in greater sales
force effectiveness and lower costs.
Goodyear will also evaluate the prospects of the Company's Piedmont Service
Truck operation, which designs and fabricates service vehicles to transport and
mount truck and heavy equipment tires. Piedmont supplies vehicles to the
Company, Goodyear and independent tire dealers. After evaluation, Piedmont may
become a candidate for divestiture, closure, or additional investment if its
prospects indicate continued operation. It is expected that the Company's tread
rubber mixing plant in Radford, Virginia, will provide additional mixing
capacity for the Company and Goodyear, which is expanding its retreading
business.
18
<PAGE> 27
In addition, Goodyear will review the Company's operations to identify
opportunities for integrating the Company's operations with similar activities
of Goodyear in those instances where the combination would result in enhanced
operating efficiencies and cost reductions through the use of more cost
effective common operating systems. If the Exchange is consummated, certain
other costs and expenses currently being incurred by the Company, including
costs associated with its status as a publicly held company listed on the AMEX,
will be eliminated. Goodyear does not expect that the current directors of the
Company will continue to serve. It is anticipated that the Company's management
will be selected in the same manner as would be the case at any other
wholly-owned subsidiary of Goodyear.
If the Exchange is completed, public trading of the Common Stock will
cease, and Goodyear will cause the Common Stock to be delisted from the AMEX and
terminate the registration of the Common Stock under the Exchange Act. As a
result, the Company will no longer be required to file informational reports
under the Exchange Act, such as proxy statements and annual reports, and the
Company's affiliates will no longer be required to report transactions in the
Company's securities as provided by, or be subject to the "short-swing" profit
recapture provisions of, Section 16 of the Exchange Act.
No significant change in the Company's business operations is presently
contemplated if the Exchange should not be consummated.
CERTAIN LITIGATION
On November 13, 1997, a complaint was filed in the Superior Court of
Mecklenburg County, North Carolina (File No. 97 CVS 14799) against the Company
and each of the Directors by Herbert R. Behrens and Martin Bergstein, as Trustee
FBO Herbert R. Behrens. The complaint challenged Goodyear's October 23, 1997
Initial Offer, pursuant to which Goodyear would acquire all of the outstanding
shares of Common Stock not presently owned by Goodyear for $32.00 per share. The
complaint alleged that the Directors breached their fiduciary duties to the
plaintiffs and the Company's other shareholders in connection with the Initial
Offer. The plaintiffs sought to enjoin the proposed transaction as well as
compensatory damages in an unspecified amount in excess of $10,000. On April 27,
1998 the plaintiffs filed a notice of voluntary dismissal without prejudice of
the claims asserted against the defendants, and the action has been dismissed.
The Company and Goodyear have agreed that Goodyear may terminate the
Exchange for Just Cause if the status of the Shareholder Litigation is such that
pursuing the consummation of the Exchange would not, in Goodyear's sole
judgment, be in Goodyear's best interests.
The Board believes that its course of conduct in connection with the
Initial Offer and the Revised Offer was and is in compliance with the Directors'
fiduciary duties and that the allegations made in the complaint are without
merit. The Company has instructed legal counsel to vigorously defend the
complaint.
ACCOUNTING TREATMENT
The Exchange will be accounted for as a "purchase," as such term is used
under generally accepted accounting principles, for accounting and financial
reporting purposes. Accordingly, under this method of accounting the purchase
price will be allocated to the assets acquired and liabilities assumed based on
their estimated fair values.
CERTAIN TAX CONSEQUENCES OF THE EXCHANGE
The following is a summary of certain United States federal income tax
consequences of receipt by shareholders of cash for shares of Common Stock in
the Exchange. The discussion is for general information only and does not
purport to consider all aspects of federal income taxation that might be
relevant to shareholders.
The receipt by shareholders of cash for shares of Common Stock in the
Exchange, whether from Goodyear in accordance with the Exchange Agreement or
upon the exercise of dissenters' rights, will be a taxable transaction for
federal tax purposes and may also be a taxable transaction under applicable
state, local, foreign or other tax laws. Generally, a shareholder will recognize
gain or loss equal to the difference between the cash
19
<PAGE> 28
received and such shareholder's adjusted tax basis for the shares of Common
Stock exchanged for cash. Gain or loss and the shareholder's holding period must
be determined separately for each block of shares of Common Stock (i.e., shares
of Common Stock acquired at the same cost in a single transaction) converted to
cash. Under recently enacted changes to the Internal Revenue Code of 1986, as
amended (the "Code"), capital gains and losses that are recognized by
individuals, estates and trusts are classified into different groups according
to the type of property and the taxpayer's holding period for the property.
Gains and losses in each group are netted against each other in a specified
order, and favorable capital gain tax rates apply to certain types of property
and property held for certain holding periods. For all taxpayers, there are
significant limitations on the deductibility of capital losses.
Payments to shareholders in connection with the Exchange may be subject to
"backup withholding" at a rate of 31% unless a shareholder (a) is a corporation
or comes within certain exempt categories and, when required, demonstrates this
fact or (b) provides a correct taxpayer identification number to the payor, and
otherwise complies with applicable requirements of the backup withholding rules.
A beneficial owner who does not provide a correct taxpayer identification number
may be subject to penalties imposed by the Internal Revenue Service. Any amount
paid as backup withholding does not constitute an additional tax and will be
creditable against the beneficial owner's federal income tax liability. Each
shareholder should consult with his or her own tax advisor as to his or her
qualification of exemption from backup withholding and the procedure for
obtaining such exemption. Shareholders may prevent backup withholding by
completing a Substitute Form W-9 and submitting it to the Exchange Agent.
The summary of federal tax consequences set forth above is for general
information purposes only. The tax treatment of each shareholder will depend in
part upon such shareholder's particular situation. The discussion applies only
to shareholders in whose hands shares of Common Stock are capital assets within
the meaning of Section 1221 of the Code and may not apply to certain types of
shareholders such as insurance companies and other financial institutions;
broker-dealers; tax-exempt organizations; persons who are not citizens or
residents of the United States; foreign corporations, partnerships, estates or
trusts; shareholders who hold their stock as part of a hedge, straddle or
conversion transaction; or others who may be subject to special rules. ALL
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE EXCHANGE TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL AND FOREIGN LAWS.
ESTIMATED FEES AND EXPENSES
Estimated fees and expenses incurred or to be incurred by the Company and
Goodyear in connection with the Exchange are approximately as follows:
<TABLE>
<S> <C>
Payment of Exchange consideration........................... $20,745,419
Advisory fees(1)............................................ 67,740
Legal fees and expenses(2).................................. 246,000
Commission filing fee....................................... 4,149
Printing and mailing expenses............................... 17,132
Exchange Agent fees and expenses............................ 2,000
Miscellaneous expenses...................................... 17,560
-----------
Total............................................. $21,100,000
===========
</TABLE>
- ---------------
(1) Includes the fees and estimated expenses of IJL.
(2) Includes the estimated fees and expenses of counsel for the Company, the
Special Committee and Goodyear.
THE EXCHANGE
PARTIES TO THE EXCHANGE
The Company. The Company is a 74.5%-owned subsidiary of Goodyear. The
business of the Company is the sale of new and retreaded tires, home products
and automotive services. It is functionally divided into two
20
<PAGE> 29
industry segments: (a) commercial tire retreading and tire replacement
operations, and (b) retail automotive services, new tires and home products
operations. The address of the Company's principal executive offices is 4404-G
Stuart Andrew Boulevard, Charlotte, North Carolina 28217.
Goodyear. Goodyear, an Ohio corporation, manufactures and markets tires
for most applications, rubber and other products for the transportation industry
and various other industrial and consumer markets and rubber related chemicals
for various applications. The address of Goodyear's principal executive offices
is 1144 East Market Street, Akron, Ohio 44316.
EFFECTIVE TIME OF THE EXCHANGE
The Exchange will become effective when the Articles of Share Exchange are
duly filed with the Office of the Secretary of State of North Carolina in
accordance with the NCBCA or at such other time as may be specified in the
Articles of Share Exchange. The Articles of Share Exchange will be filed upon
the satisfaction or waiver of all conditions set forth in the Exchange
Agreement. See "THE EXCHANGE -- Terms of the Exchange -- Conditions to the
Exchange."
For dissenters' rights to be available to shareholders in connection with
the Exchange, the shareholders must approve the Articles of Amendment as
described under "PROPOSAL TO AMEND THE ARTICLES" and the Articles of Amendment
must become effective through filing with the Office of the Secretary of State
of North Carolina. This filing must precede the vote taken by shareholders with
respect to the Exchange Agreement. If the Articles of Amendment are approved at
the Meeting, it is currently expected that the Meeting will be adjourned to
permit them to be filed, then reconvened (either later on August 25, or as soon
as practicable thereafter) to allow the votes on the Exchange Agreement and the
election of Directors to take place. If the Exchange Agreement is then approved,
it is currently expected that the filing of the Articles of Share Exchange and
the Effective Time will occur by August 28, 1998, subject to the possible prior
termination of the Exchange Agreement in accordance with the terms thereof. See
"-- Terms of the Exchange -- Termination; Fees and Expenses."
PAYMENT FOR SHARES OF COMMON STOCK
As a result of the Exchange, holders (other than Goodyear) of certificates
formerly evidencing shares of Common Stock (the "Certificates") will cease to
have any equity interest in the Company, and such holders will be required to
surrender their Certificates to the Exchange Agent in order to receive the cash
price of $37.25 per share of Common Stock to which they are entitled under the
Exchange Agreement. The Exchange Agent will forward to such holders detailed
instructions with regard to the surrender of Certificates, together with a
transmittal letter. Holders of shares of Common Stock should not submit their
Certificates to the Exchange Agent until they have received such materials. The
Exchange Agent will forward the cash price of $37.25 per share, in the form of a
bank check, to the former holders of Common Stock following receipt by the
Exchange Agent of their Certificates and other required documents. No interest
will be paid or accrued on the cash payable upon the surrender of certificates.
With respect to any Certificate that has been lost or destroyed, Goodyear will
pay the holder the consideration attributable to such Certificate upon receipt
of evidence of ownership of the shares of Common Stock formerly represented by
such Certificate and an indemnity bond posted by such holder in such amount as
Goodyear may reasonably require. SHAREHOLDERS SHOULD NOT SEND IN ANY
CERTIFICATES AT THIS TIME.
TERMS OF THE EXCHANGE
The following is a summary of material provisions of the Exchange
Agreement. A copy of the Exchange Agreement is included in this Proxy Statement
as Annex I. This summary is qualified in its entirety by reference to the
Exchange Agreement.
General. The Exchange Agreement sets forth the terms and conditions upon
and subject to which the Exchange is to be effected. If the Exchange Agreement
is authorized and adopted by the shareholders in accordance with the NCBCA, and
the other conditions contained in the Exchange Agreement are satisfied or
waived, at the Effective Time, each outstanding share of Common Stock (other
than shares of Common Stock
21
<PAGE> 30
owned by Goodyear or held by dissenting shareholders) will be exchanged for the
right to receive from Goodyear $37.25 in cash, without interest.
Conditions of the Exchange. Under the Exchange Agreement, the obligations
of the Company and Goodyear to effect the Exchange are subject to the
fulfillment at or prior to the closing of the transactions pursuant to the
Exchange Agreement (the "Closing") of certain conditions, one or more of which
may be waived by Goodyear, including the following: (a) at the Meeting, the
Exchange Agreement must have been approved by the affirmative vote of holders of
a majority of the issued and outstanding shares of Common Stock entitled to vote
thereon; (b) all filings, registrations, notices, consents, approvals,
authorizations, certificates, orders and permits with respect to the Exchange
required from any court, government or governmental body, agency or
instrumentality having or asserting jurisdiction over the Company or Goodyear
must have been made or obtained and be in full force and effect on a basis
satisfactory to Goodyear; and (c) the representations and warranties made by the
Company in the Exchange Agreement must be true and correct in all material
respects, and the Company must have performed in all material respects its
covenants and obligations under the Exchange Agreement.
Representations and Warranties. The Exchange Agreement contains various
representations and warranties of Goodyear and the Company, including
representations and warranties of each party as to (a) their due organization,
valid existence and good standing, (b) their corporate power and authority to
execute the Exchange Agreement and to consummate the transactions contemplated
by the Exchange Agreement, (c) the due and valid authorization of the Exchange
Agreement and the transactions contemplated by the Exchange Agreement by their
respective boards of directors, (d) the absence of the entitlement of any third
party to receive broker's or finder's fee in connection with the Exchange
Agreement or the transactions contemplated by the Exchange Agreement and (e)
subject to certain exceptions, the absence of litigation.
In addition, in the Exchange Agreement, the Company has represented and
warranted to Goodyear as to, among other things: (a) its capital structure; (b)
its filings under the Exchange Act; (c) compliance with applicable laws; (d) the
inapplicability of the North Carolina Shareholder Protection Act to the Company;
(e) certain matters concerning the fairness opinion of IJL; (f) Board action and
recommendation concerning the Exchange Agreement and the Exchange; (g) subject
to certain exceptions, the absence of certain changes since December 31, 1997;
(h) certain tax, employee benefit and environmental matters; (i) certain matters
concerning this Proxy Statement; and (j) certain matters concerning real
property and leases.
Goodyear has also represented and warranted to the Company in the Exchange
Agreement that Goodyear has sufficient funds to consummate the Exchange.
Conduct of Business of the Company. The Company has agreed in the Exchange
Agreement that the Company shall continue to conduct its business without
material change and that the Company shall not (a) issue any security or
instrument convertible into any equity security, (b) make any distribution or
other disposition of its assets, capital or surplus except in the ordinary
course of business, (c) take any action that would impair its assets or (d) take
any action that would cause its representations and warranties to be untrue at
the Effective Time.
Indemnification. The Company has agreed in the Exchange Agreement to
indemnify all officers, directors, employees and agents of the Company for a
period of six years after the Effective Time against all claims or losses
arising from their service in such capacities at or before the Effective Time,
and to provide for the advancement of expenses incurred in defense of any action
or suit, to the fullest extent required by the Articles or the Company's bylaws
as in effect on May 5, 1998 (the date of the Exchange Agreement). The Company
has also agreed to maintain during this period directors' and officers'
liability protection with respect to matters occurring at or before the
Effective Time to the same degree as the protection provided to the Company's
officers and directors on May 5, 1998.
Termination; Fees and Expenses. The Exchange Agreement and the Exchange
may be terminated and abandoned at any time prior to the Effective Time,
irrespective of the prior approval of the Exchange Agreement and the Exchange by
the shareholders of the Company: (a) by the mutual written consent of the Board
(acting upon recommendation of the Special Committee) and the Goodyear Board;
(b) by action of the Goodyear Board or of certain executive officers of Goodyear
for Just Cause, i.e. in the event that (i) any action, suit, investigation,
22
<PAGE> 31
or other proceeding or claim (other than the Shareholder Litigation) is
threatened or instituted before any court or by any government or governmental
agency or instrumentality in connection with the Exchange Agreement, (ii) the
status of the Shareholder Litigation shall be such that, in the sole judgment of
Goodyear, pursuing the consummation of the Plan would not be in the best
interests of Goodyear, (iii) the holders of more than 5% of the outstanding
Common Stock have asserted their dissenters' rights and have not lost,
surrendered or withdrawn such rights, (iv) the Company fails to comply with or
to perform any covenant or obligation of the Company contained in or implied by
the terms of the Exchange Agreement, (v) any condition precedent to the
implementation of the Exchange is not satisfied (other than a condition which
Goodyear could have caused to be satisfied without incurring any cost or expense
or taking an action or suffering a consequence deemed by Goodyear to be adverse
to Goodyear's interests), or (vi) any representation or warranty of the Company
proves to have been untrue or incorrect in any material respect when made or at
any time ceases to be true and correct in all material respects; or (c) by
action of the Goodyear Board or of certain executive officers of Goodyear
without Just Cause.
If Goodyear unilaterally abandons and terminates the Exchange Agreement
without Just Cause, it must reimburse the Company for any fees reasonably
incurred and paid to investment bankers and legal counsel in connection with the
Exchange Agreement plus any costs reasonably incurred in connection with the
preparation and distribution of this Proxy Statement. Unless the Exchange
Agreement is terminated prior to the shareholder vote thereon, the failure by
Goodyear to vote its shares in favor of the Exchange will be deemed to be a
termination by Goodyear without Just Cause. If Goodyear terminates the Exchange
Agreement because of (a) an actual or threatened action, suit, investigation or
other proceeding, (b) the status of the Shareholder Litigation or (c) the
assertion of dissenters rights, as described below, by the holders of more than
5% of the outstanding Common Stock, Goodyear will reimburse the Company for up
to $250,000 in such expenses.
Amendments. Under the Exchange Agreement, subject to applicable law, the
Exchange Agreement may be amended only by the written agreement of the Company
and Goodyear.
SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by Goodyear to consummate the Exchange
and to pay related fees and expenses is estimated to be approximately
$21,100,000. The funds required to effect the Exchange will be obtained by
Goodyear from operations.
DISSENTERS' RIGHTS
Under the Articles, as proposed to be amended, and North Carolina law,
holders of Common Stock who do not vote in favor of the Exchange Agreement and
who comply with certain notice requirements and other procedures will have the
right to dissent and to be paid cash for the "fair value" of their shares. The
"fair value" of the Common Stock as finally determined under such procedures may
be more or less than the $37.25 in cash for which the shares held by
non-dissenting shareholders will be exchanged in the Exchange. Failure to follow
such procedures precisely may result in loss of dissenters' rights. Goodyear may
refuse to complete the Exchange if the holders of more than 5% of the
outstanding shares of Common Stock exercise their right to dissent from the
Exchange. See "-- Terms of the Exchange -- Termination; Fees and Expenses."
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the NCBCA and is qualified in its entirety by the
full text of Chapter 55, Article 13 of the NCBCA ("Article 13"), which is
reprinted in its entirety as Annex IV to this Proxy Statement.
A record shareholder may assert dissenters' rights as to fewer than all the
shares of Common Stock registered in his name only if he dissents with respect
to all shares beneficially owned by any one person and notifies the Company in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter will be determined as if
the shares as to which he dissents and his other shares were registered in the
names of different shareholders. A beneficial owner may assert dissenters'
rights as to shares of Common Stock held on his behalf only if he: (a) submits
to the Company the record shareholder's written consent to the dissent not later
than the time the beneficial shareholder asserts dissenters' rights and (b)
asserts dissenters' rights with respect to all shares of which he is the
beneficial owner.
23
<PAGE> 32
A holder of shares of Common Stock wishing to exercise dissenters' rights
must: (a) give to the Company, and the Company must actually receive before the
vote on the Exchange Agreement is taken, written notice of the holder's intent
to demand payment for his shares if the Exchange is consummated and (b) must not
vote his shares in favor of the Exchange. If the Exchange Agreement is approved
by holders of the requisite number of outstanding shares of Common Stock, the
Company will, no later than ten days after such approval, mail a written
dissenters' notice to all of the respective shareholders who gave the
aforementioned notice of intent to demand payment. Such dissenters' notice will:
(a) state where the payment demand must be sent and where and when certificates
for certificated shares must be deposited; (b) inform holders of any
uncertificated shares to what extent transfer of the shares will be restricted
after the payment demand is received; (c) supply a form for demanding payment;
(d) set a date by which the Company must receive the payment demand, which date
may not be fewer than 30 nor more than 60 days after the date on which the
dissenters' notice is sent; and (e) be accompanied by a copy of Article 13. To
exercise his dissenters' rights, a shareholder sent a dissenters' notice must
demand payment and deposit his share certificates in accordance with the terms
of the notice. A shareholder failing to do so will not be entitled to payment
for his shares under Article 13. A shareholder who demands payment and deposits
his share certificates in accordance with the terms of the notice will retain
all other rights of a shareholder until consummation of the Exchange. All
notices, demands and other communications directed to the Company in connection
with the appraisal process should be sent to 4404-G Stuart Andrew Boulevard,
Charlotte, North Carolina 28217, Attention: Secretary.
As soon as the Exchange is consummated, or within 30 days after receipt of
a payment demand (the "First Demand") by a shareholder made in compliance with
the above-described procedures, the Company will pay such shareholder the amount
the Company estimates to be the value of his shares, plus interest accrued to
the date of payment (the "First Dissent Payment"). Such payment will be
accompanied by: (a) the Company's balance sheet as of the fiscal year ended
December 31, 1997, an income statement and a statement of cash flows for that
year and the latest available interim financial statements; (b) an explanation
of how the Company estimated the fair value of the shares; (c) an explanation of
how the interest was calculated; (d) a statement of the dissenter's right to
demand payment of an amount in excess of the First Dissent Payment if he is
dissatisfied with the First Dissent Payment, if the Company fails to make
payment to a dissenter within 30 days of such dissenter's First Demand, or if
the Company, having failed to consummate the Exchange, fails to return deposited
share certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding payment;
and (e) a copy of Article 13.
If: (a) a dissenter believes that the amount of the First Dissent Payment
is less than the fair value of his shares, or that the interest due is
incorrectly calculated; (b) the Company fails to make payment to a dissenter
within 30 days after such dissenter's First Demand; or (c) the Company, having
failed to consummate the Exchange, fails to return deposited stock certificates
to a dissenter or release the transfer restrictions imposed on uncertificated
shares within 60 days after the date set for demanding payment, the dissenter
may notify the Company in writing of his own estimate of the fair value of his
shares and amount of interest due, and demand payment (the "Second Demand") of
the amount such estimate exceeds the First Dissent Payment. A dissenter will
waive his right to make a Second Demand, and will be deemed to have withdrawn
his dissent and demand for payment, unless he notifies the Company of his Second
Demand in writing within 30 days after the Company (x) makes the First Dissent
Payment for his shares or (y) fails to take the actions described in clauses (b)
and (c) of this paragraph, as the case may be.
If a Second Demand for payment remains unsettled, a shareholder may
commence a proceeding within 60 days after the earlier to occur of: (i) the date
the First Dissent Payment was made by the Company, or (ii) the date of the
dissenter's Second Demand, by filing a complaint with the Superior Court
Division of the General Court of Justice to determine the fair value of the
shares and accrued interest. If the dissenter does not commence a proceeding
within the 60 day period, the dissenter will have been deemed to have withdrawn
his dissent and Second Demand.
The court may, in its discretion, make all dissenters whose demands remain
unsettled parties to the proceeding. Each dissenter made a party to the
proceeding by the court will be entitled to judgment for the amount, if any, by
which the court finds that the fair value of his shares, plus interest, exceeds
the First Dissent Payment. The court may appoint one or more appraisers to
receive evidence and recommend decision on the
24
<PAGE> 33
question of fair value. Parties to the proceeding are entitled to the same
discovery rights as parties in other civil proceedings. Since the Company is a
"public corporation," no party to any proceeding described herein will have the
right to trial by jury.
The court may assess the costs of a proceeding described above, including
the compensation and expenses of appointed appraisers, as it finds equitable.
With respect to the fees and expenses of counsel and experts for the parties to
the proceeding, the court may assess such costs (a) against the Company, and in
favor of any or all dissenters, if it finds that the Company did not
substantially comply with the above-described procedures or (b) against either
the Company or a dissenter or in favor of either or any other party, if it finds
that the party against whom such costs are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the dissenters' rights
provided under Article 13. In addition, if the court finds that the services of
counsel to any dissenter were of substantial benefit to other dissenters and
that the costs of such services should not be assessed against the Company, the
court may award to such counsel reasonable fees to be paid out of the amounts to
the dissenters who were benefitted.
PROPOSAL TO AMEND THE ARTICLES
Pursuant to the NCBCA, shareholders of the Company would not have the right
of dissent and appraisal with respect to the Exchange absent a provision to such
effect in the Articles. As described elsewhere in this Proxy Statement, the
Company and Goodyear have agreed that shareholders will be entitled to
dissenters' rights in connection with the Exchange, although Goodyear may
terminate the Exchange Agreement at any time prior to the Exchange or refuse to
complete the Exchange if the holders of more than 5% of the outstanding Common
Stock exercise such rights. See "SPECIAL FACTORS -- Background" and "THE
EXCHANGE -- Terms of the Exchange -- Conditions to the Exchange."
For dissenters' rights to be available to shareholders as described above,
the Articles must be amended to so provide. To accomplish this, the Articles of
Amendment, the form of which is included as Annex III to this Proxy Statement,
must be approved by the shareholders and filed with the Office of the Secretary
of State of North Carolina. This filing must precede the vote taken by
shareholders with respect to the Exchange Agreement. If the Articles of
Amendment are approved at the Meeting, it is currently expected that the Meeting
will be adjourned to permit their filing, then reconvened (either later that day
or as soon as practicable thereafter) to allow the votes on the Exchange
Agreement and the election of Directors to take place.
See "THE EXCHANGE -- Dissenters' Rights" for a summary of the rights of
dissent and appraisal to which the shareholders of the Company will be entitled
in connection with the Exchange if the Articles of Amendment are approved.
The Board recommends a vote FOR the proposal to amend the Articles to
provide for dissent and appraisal rights in connection with certain
transactions, including the Exchange.
25
<PAGE> 34
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 24, 1998 by (i) each Director and nominee
for Director of the Company, (ii) each executive officer of the Company named
under the caption "Executive Compensation -- Summary Compensation Table," below,
(iii) each person who is known by the Company to beneficially own more than five
percent of the outstanding Common Stock and (iv) all Directors and executive
officers as a group. Except as set forth in the footnotes to the table below,
each of the shareholders identified in the table below has sole voting and
investment power over the shares beneficially owned by such person.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
- ------------------------------------ --------- --------
<S> <C> <C>
The Goodyear Tire & Rubber Company.......................... 1,633,695(1) 74.58%
1144 East Market Street
Akron, Ohio 44316
Dimensional Fund Advisors, Inc.............................. 127,300(2) 5.81%
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401
Gabelli & Company, Inc...................................... 334,400(3) 15.27%
GAMCO Investors, Inc.
Gabelli Funds, Inc.
Gabelli Performance Partnership
GLI, Inc.
One Corporate Center
Rye, New York 10580
Eugene R. Culler, Jr........................................ 0 --
Michael R. Thomann.......................................... 0 --
William P. Brophey.......................................... -- --
Ronald J. Carr.............................................. 0 --
Richard D. Pearson.......................................... 0 --
Richard E. Sorensen......................................... 0 --
James W. Barnett............................................ 0 --
James E. Owens.............................................. 0 --
Ronald P. Rumble............................................ 0 --
All Executive Officers and Directors as a Group (8
persons).................................................. 0 --
</TABLE>
- ---------------
(1) Based upon information provided by Goodyear.
(2) Based upon information provided by Dimensional Fund Advisors, Inc.,
("Dimensional"), and as reflected in a Schedule 13G dated February 7, 1996
and filed with the Commission. Dimensional, a registered investment advisor,
is deemed to have beneficial ownership of 127,300 shares of Common Stock as
of December 31, 1996, all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment company,
or in series of the DFA Investment Trust Company, a Delaware business trust,
or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional Fund
Advisors Inc. serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares.
(3) As reflected in Schedule 13D, dated July 1, 1997 (Amendment #14), filed with
the Commission, and other information supplied by the beneficial owner.
26
<PAGE> 35
CORPORATE GOVERNANCE
GENERAL
The Board held six meetings during 1997. All Directors attended at least
75% of the total number of meetings of the Board of Directors and committees on
which they serve.
The Board has five standing committees: Executive Committee, Audit
Committee, Nominating Committee, Compensation Committee and Litigation
Committee.
The Executive Committee consists of Messrs. Culler (Chairman), Barnett and
Pearson. The Executive Committee is empowered to act between meetings of the
Board with powers of the full Board, except with respect to certain matters. The
Executive Committee did not meet during 1997.
The Audit Committee consists of Dr. Sorensen (Chairman) and Messrs. Barnett
and Pearson. The Audit Committee reviews the scope of the Company's annual
audit, the functions performed by the Company's independent accountants, the
functions of and procedures followed by the Company's internal accounting and
auditing staff and other matters relating to accounting policies and controls.
The Audit Committee held three meetings during 1997.
The Nominating Committee consists of Messrs. Culler (Chairman), Carr and
Sorensen. Mr. Thomann also served on this committee during 1997. This
committee's function is to study the composition of the Board and the
qualifications of its members and to nominate for election to the Board persons
whose background and expertise will, in their judgment, complement the needs of
the Company. This committee will consider nominees recommended by shareholders.
Such recommendations should be submitted to the Secretary of the Company by
December 31 in order to be considered by the committee for the Annual Meeting to
follow the fiscal year-end. This committee met once during 1997.
The Compensation Committee consists of Messrs. Culler (Chairman), Pearson
and Barnett. Its principal functions are to review the Company's compensation
and benefit programs for executive officers and to recommend annual compensation
levels for the executive officers for approval by the Board. This committee met
once during 1997.
The Litigation Committee consists of Messrs. Barnett (Chairman), Carr and
Sorensen. Mr. Thomann also served on this committee during 1997. This committee
is responsible for monitoring any matters of significant litigation that involve
the Company. The committee did not meet during 1997.
27
<PAGE> 36
NOMINEES FOR DIRECTOR
The bylaws of the Company provide that the number of Directors shall be not
less than five nor more than fifteen, as determined by the Board. The Board has
set the number of Directors at six. The six persons named below are nominated to
serve on the Board until the 1999 meeting of shareholders or until their
successors are elected and qualified. Each nominee is currently a Director. The
business address for each nominee is 4404-G Stuart Andrew Boulevard, Charlotte,
North Carolina 28217. Unless authority is withheld, it is intended that proxies
received in response to this solicitation will be voted in favor of the six
nominees:
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION
AND OTHER POSITIONS AND OFFICES WITH THE COMPANY DIRECTOR SINCE
- ------------------------------------------------ --------------
<S> <C>
Eugene R. Culler, Jr., 59(1)(3)(4).......................... 1995
Chairman of the Board of the Company; Executive Vice
President of Goodyear
William P. Brophey, 60...................................... 1998
Vice Chairman of the Board, President and Chief Executive
Officer of the Company
Ronald J. Carr, 53(3)(5).................................... 1992
Vice President -- Finance, Chief Financial Officer,
Secretary and Treasurer of the Company
Richard E. Sorensen, 55(2)(3)(5)............................ 1977
Dean of the College of Business, Virginia Polytechnic
Institute and State University, Blacksburg, Virginia
Richard D. Pearson, 63(1)(2)(4)............................. 1978
Owner and manager of companies involved in selling and
leasing heavy duty trucks and other heavy equipment,
Franklin Lakes, New Jersey
James W. Barnett, 67(1)(2)(4)(5)............................ 1996
Executive in Residence, Interim Director, Institute for
Global Business, University of Akron, Akron, Ohio:
Formerly Vice President, Original Equipment Tire Sales
Worldwide for Goodyear, Akron, Ohio
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Nominating Committee.
(4) Member of Compensation Committee.
(5) Member of Litigation Committee.
Mr. Eugene R. Culler, Jr. has been employed by Goodyear for 35 years. He
has been Executive Vice President responsible for North American Tires since
April, 1995. Prior to that he was President and CEO of Goodyear's Canadian
subsidiary. He previously served as Chairman of the Board of Directors of the
Company from August, 1988 to October, 1991. He was again elected a director and
Chairman of the Board of the Company on July 27, 1995, and has held those
positions since then.
Mr. William P. Brophey has more than 35 years of service with the Company
and Goodyear. He has held numerous field and corporate positions at Goodyear in
the areas of wholesale, retail, credit and sales and marketing, including
General Marketing Manager, Commercial Tire Products. He served as President and
Chief Executive Officer and a member of the Board of Directors of the Company
from October 1988 to April 1996, and Vice Chairman of the Board of Directors
from April 1994 to April 1996, when he was named Vice President, Original
Equipment Tire Sales World Wide at Goodyear. Effective July 15, 1998 he was
again elected President and Chief Executive Officer of the Company and Vice
Chairman of the Board of Directors.
Mr. Ronald J. Carr was elected Vice President--Finance and Chief Financial
Officer, Secretary and Treasurer effective May 1, 1992. He has 30 years of
service with the Company and Goodyear and has held various financial positions
in Goodyear's General Products and Tire Divisions and at Motor Wheel
Corporation, a former Goodyear subsidiary. Most recently he was Manager,
Financial Information, for Goodyear's North American Tire Division.
28
<PAGE> 37
Mr. Richard D. Pearson is the owner and manager of a number of companies
that are involved in the sale and leasing of heavy duty trucks and other heavy
equipment, a business in which he has been engaged for more than 25 years.
Dr. Richard E. Sorensen has been Dean of the College of Business, Virginia
Polytechnic Institute and State University, since 1982. Prior to that, he was
employed in a teaching capacity and as Dean of the College of Business at
Appalachian State University.
Mr. James W. Barnett was employed by Goodyear from 1950 until his
retirement in 1996. Most recently he was Vice President for Goodyear's Original
Equipment Tire Sales Worldwide, a position he held since July, 1988. He has held
a wide range of positions in Goodyear's sales organization including Executive
Vice President of Sales and Marketing for Kelly-Springfield Tire Company in
Cumberland, Maryland. He was Chairman of the Board of the Company from March 26,
1986 to August 3, 1988. Mr. Barnett is currently employed by the University of
Akron as Executive in Residence, Interim Director, Institute for Global
Business.
It is not contemplated that any of the nominees will be unable or unwilling
for good cause to serve; but, if that should occur, it is the intention of the
agents named in the proxy to vote for such other person or persons to the office
of director as the Nominating Committee of the Board may recommend.
COMPENSATION OF DIRECTORS
Director's fees for outside directors are paid at the rate of $2,500 per
Board meeting attended, $1,000 per telephonic Board meeting, $1,000 per
committee meeting attended not in conjunction with a Board meeting and $500 per
telephonic committee meeting, all subject to an annual maximum amount of $20,000
plus reimbursement of expenses incurred as a Director. Directors may at their
option defer the payment of director's compensation. Directors who are also
officers or employees of the Company or employees of Goodyear receive no such
fees.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information regarding the current executive
officers of the Company:
<TABLE>
<CAPTION>
NAME AND AGE POSITIONS AND OFFICES WITH THE COMPANY
- ------------ --------------------------------------
<S> <C>
Eugene R. Culler (59)................. Chairman of the Board
William P. Brophey (60)............... President and Chief Executive Officer and a Director
Ronald J. Carr (53)................... Vice President -- Finance and Chief Financial
Officer, Secretary and
Treasurer and a Director
James E. Owens (63)................... Vice President and General Manager -- Retail
Division
Ronald P. Rumble (53)................. Vice President and General Manager -- Commercial
Division
</TABLE>
There are no family relationships between any of the executive officers or
Directors.
For information concerning Messrs. Culler, Brophey and Carr, see
"-- Nominees for Director."
Mr. Owens has been employed by the Company and Goodyear for 45 years. Most
recently, he was District Manager for Goodyear in Birmingham, Alabama, for three
years and District Manager in Atlanta, Georgia, for five years. He was elected
Vice President and General Manager-Retail Division on February 8, 1988.
Mr. Rumble joined the Company on March 1, 1993. He has been employed by the
Company and Goodyear for more than 25 years, most recently as Marketing Manager,
Commercial Truck Tires for the Replacement Tire Division. Prior to that, he held
various positions in Goodyear's Replacement Tire, Original Equipment and General
Products Divisions. Effective March 1, 1993, he was elected Vice President and
General Manager -- Commercial Division.
29
<PAGE> 38
None of the Directors or executive officers of the Company own any shares
of Common Stock, and none have engaged in any transactions in shares of Common
Stock during the 60 days preceding the date of this Proxy Statement.
The business address for each executive officer of the Company is 4404-G
Stuart Andrew Boulevard, Charlotte, North Carolina 28217. Officers serve for a
term of one year or until their successors are elected and qualify. The next
meeting of the Board of Directors at which officers will be elected is scheduled
for August 25, 1998.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation earned by the Chief Executive Officer and the most highly
compensated executive officers other than the Chief Executive Officer whose
total salary and bonus during 1997 exceeded $100,000 (the "Named Executives")
for services rendered to the Company and its subsidiaries in all capacities for
the fiscal years ended December 31, 1997, December 31, 1996 and December 31,
1995.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------------
AWARDS PAYOUTS
----------------------- ----------------------
SECURITIES LONG
OTHER UNDER- TERM ALL
ANNUAL RESTRICTED LYING INCEN- OTHER
COMPEN- STOCK OPTIONS/ TIVE PLAN COMPEN-
SALARY BONUS SATION AWARDS SAR'S PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($) (#)(3) ($) ($)(4)
- --------------------------- ---- ------- ------ ------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael R. Thomann(5)......... 1997 169,931 39,989 0 0 4,000 0 4,000
Vice Chairman, President, 1996 113,948 20,563 0 0 7,000 0 2,035
and Chief Executive Officer 1995 -- -- -- -- -- -- --
Ronald J. Carr................ 1997 151,131 22,385 0 0 2,500 0 4,000
Vice President -- Finance, 1996 141,586 16,192 0 0 4,200 0 3,750
Secretary, Treasurer and 1995 138,079 17,737 0 0 1,900 0 3,673
Chief Financial Officer
James E. Owens................ 1997 122,408 22,385 0 0 2,200 0 3,335
Vice President and 1996 120,547 16,218 0 0 4,100 0 3,303
GM -- Retail Division 1995 108,910 14,038 0 0 1,600 0 2,938
Ronald P. Rumble.............. 1997 150,462 22,385 0 0 2,200 0 4,000
Vice President and 1996 143,039 16,218 0 0 4,100 0 3,750
GM -- Commercial Division 1995 136,572 14,038 0 0 1,600 0 3,750
</TABLE>
- ---------------
(1) The Company's Board of Directors has approved the Brad Ragan, Inc. 1997
Performance Recognition Plan (the "Performance Plan") in which the Named
Executives participated in 1997. The Performance Plan provides incentive
cash bonuses based on the attainment of specific objectives established at
the beginning of the year for the Company. The Company was reimbursed by
Goodyear for bonus compensation paid for 1996 and 1995. The bonuses earned
in 1997 were paid to the Named Executives in March 1998.
(2) In accordance with the rules of the Commission, other compensation in the
form of perquisites and other personal benefits is not required to be
reported if the amount constituted less than the lesser of $50,000 or 10% of
the total annual salary and bonus for the Named Executives.
(3) Options were granted by Goodyear on December 2, 1997 to purchase shares of
common stock of Goodyear.
(4) Amounts paid on behalf of the Named Executives for matching 401(k) Savings
Plan Contributions.
(5) Mr. Thomann was elected to his position effective April 16, 1996, and the
salary and bonus amounts shown reflect compensation earned since that date.
Effective July 15, 1998, Mr. Thomann resigned from his positions with the
Company in connection with his employment by Goodyear as Marketing Director,
Commercial Tires.
30
<PAGE> 39
STOCK OPTIONS, SAR GRANTS IN 1997
The Company does not provide its executive officers any type of financial
compensation based on the appreciated market value of the Common Stock. On
December 2, 1997, the Named Executives were granted options by Goodyear to
purchase shares of common stock of Goodyear at an exercise price equal to the
market price on the grant date. The Company does not incur any cost related to
the grant or the exercise of Goodyear stock options. No SARs have been granted
to any Named Executive. All options in the following tables relate to shares of
common stock of Goodyear.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION
OPTIONS/SARS GRANTED TO EXERCISE OR FOR OPTION TERM(3)
GRANTED(#) EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME (1) 1997(2) ($/SH) DATE 5% 10%
- ---- ------------ ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Thomann......... 4,000 32.4% $63.50 12/02/07 $159,720 $404,800
Ronald J. Carr............. 2,500 20.3 63.50 12/02/07 99,825 253,000
James E. Owens............. 2,200 17.8 63.50 12/02/07 87,846 222,640
Ronald P. Rumble........... 2,200 17.8 63.50 12/02/07 87,846 222,640
</TABLE>
- ---------------
(1) Grants were made on December 2, 1997. The option exercise price is 100% of
the fair market value of Goodyear common stock on the date of grant. The
options vest 25% on each anniversary date of the grant.
(2) Percent of total options granted by Goodyear to all employees of the
Company. In the aggregate, these options were less than 1% of the total
options granted by Goodyear in 1997.
(3) Amounts represent hypothetical gains that could be achieved if options were
exercised at end of the option term. The dollar amounts under this column
assume 5% and 10% compounded annual appreciation in the common stock of
Goodyear from the date the respective options were granted. These
calculations and assumed realizable values are required to be disclosed
under Commission rules and, therefore, are not intended to forecast future
appreciation of common stock of Goodyear or amounts that may be ultimately
realized upon exercise.
OPTION EXERCISES IN 1997 AND YEAR-END VALUES
The following table sets forth certain information regarding the exercise
of Goodyear stock options during 1997 and the value of unexercised options held
as of December 31, 1997. The Company does not incur any cost related to the
grant or exercise of Goodyear stock options.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES REALIZED AT DEC. 31, 1997(#)(2) AT DEC. 31, 1997($)(2)(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Thomann............ 1,000 $19,500 3,500 10,250 $ 62,250 $114,406
Ronald J. Carr................ 1,000 19,625 12,850 6,600 429,694 79,663
James E. Owens................ 0 0 6,475 6,075 174,972 73,822
Ronald P. Rumble.............. 0 0 14,325 6,075 532,653 73,822
</TABLE>
- ---------------
(1) Represents the difference between the exercise price and the price of the
Goodyear common stock on the date of exercise.
(2) Shares include options granted to the named officer while employed by
Goodyear but not associated with the Company.
(3) Represents the difference between the exercise price of the outstanding
options and the closing price of Goodyear common stock on the New York Stock
Exchange ("NYSE") on December 31, 1997, which was $63.625 per share. Options
that have an exercise price greater than the year-end NYSE closing price are
excluded from the value calculation.
31
<PAGE> 40
OTHER COMPENSATORY ARRANGEMENTS
Retirement Benefits
Prior to November 1, 1994, the Named Executives, except Mr. Thomann, were
on loan from Goodyear and participated in the Retirement Plan for Salaried
Employees of The Goodyear Tire & Rubber Company (the "Salaried Plan"). The
Company was billed by Goodyear for the cost incurred to maintain each Named
Executive's participation in the Salaried Plan. Mr. Thomann participated in the
Salaried Plan prior to April 16, 1996 as a former employee of Goodyear.
The Salaried Plan is a qualified, defined benefit plan, which provides a
basic non-contributory pension benefit and a voluntary contributory pension
benefit based on various factors including years of service, compensation and
plan maximums. The annual non-contributory benefit equals $318 for each year of
service prior to 1994. The annual non-contributory benefit for 1994 and each
year thereafter equals 1.1% of annual Social Security Covered Compensation for
such year.
The Salaried Plan permits an eligible employee to make monthly optional
contributions at an annual rate of 2% of his or her earnings in excess of Social
Security Covered Compensation. For service prior to 1994, the annual
contributory benefit equals the years of service during which contributions were
made multiplied by 1.4% of average annual earnings in excess of $22,716 during
the five-year period ended December 31, 1993. The annual contributory benefit
for 1994 and each year thereafter equals 1.58% of annual earnings (up to
$150,000 for years 1994 through 1996 and up to $160,000 for 1997 and 1998) in
excess of annual Social Security Covered Compensation.
The Salaried Plan provides pension benefits to participants who have at
least 30 years of service or have at least 10 years of service and have attained
the age of 55. Benefits payable to a participant who retires between ages 55 and
62 are subject to a reduction of 4.8% for each full year of retirement before
age 62. The years of credited service at December 31, 1996, under the Salaried
Plan for each Named Executive are: Mr. Thomann, 25 years; Mr. Carr, 30 years;
Mr. Owens, 45 years; and Mr. Rumble, 29 years.
On November 1, 1994, the Named Executives (except on April 16, 1996 for Mr.
Thomann) became participants in The Goodyear Tire & Rubber Company Retirement
Benefit Plan for Employees with Service with Designated Subsidiaries (the
"Subsidiary Plan"), a non-qualified, defined benefit plan. Benefits payable to a
participant or beneficiary under the Subsidiary Plan shall be in such amount as
is required, when added to the benefits payable to the participant or
beneficiary under the Salaried Plan, to produce an aggregate benefit equal to
the benefit that would have been payable to the participant or beneficiary if
the employment of the participant with the Company were treated as employment
with an employer under the Salaried Plan, and if the limitations on compensation
pursuant to Section 401(a)(17) of the Code were not in effect.
As of December 31, 1997, the estimated annual benefits payable on a
five-year certain and life annuity basis (and not under any of the various
survivor options or the lump sum option) upon retirement at age 65 were as
follows: Mr. Thomann, $81,008; Mr. Carr, $81,563; Mr. Owens, $62,969; and Mr.
Rumble, $84,699. These estimates were based on 1997 earnings and estimated
annual Social Security Covered Compensation projected to each individual's 65th
birthday.
Long Term Incentive Awards
The Company does not provide the Named Executives any other form of
compensation based upon any long-term incentive plan or any other type of
employment arrangement.
Employment Agreements
Neither the Company nor Goodyear provides the Named Executives with any
type of employment agreement or contract.
32
<PAGE> 41
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE POLICIES AND PRACTICES
The Compensation Committee (the "Committee") annually reviews the
compensation program for the Company's executive officers, all of whom are Named
Executives in the compensation disclosures included in this Proxy Statement, and
recommends to the Board changes to the compensation program in general and
specific adjustments to individual compensation levels as it determines
appropriate.
In its annual review, the Committee seeks to determine whether (1) the
Company is competitive and can attract and retain qualified and experienced
personnel in leadership positions and (2) the executive officers are
appropriately motivated by the compensation program to seek to attain
performance goals approved by the Committee, as well as sustained earnings
growth for the benefit of all shareholders of the Company.
The Committee meets early each year to review the compensation package and
make recommendations regarding compensation for the Chief Executive Officer and
the other Named Executives for approval by the Board of Directors. The Chief
Executive Officer provides the Committee information regarding annual salary and
annual incentive based bonus compensation targets. The Committee also receives
information regarding compensation paid by Goodyear, including information
regarding options to purchase shares of Goodyear common stock for each executive
officer.
The Revenue Reconciliation Act of 1993 added Section 162(m) to the Code,
which eliminated tax deductions for compensation paid to an executive officer in
excess of $1,000,000 unless certain requirements are met. No executive officer
receives compensation in excess of the allowed deductions. The Committee will
consider the applicability of this section of the Code in the formalization of
all executive compensation plans.
COMPENSATION OF EXECUTIVE OFFICERS
Salaries for the executive officers are established using Goodyear's
compensation guidelines within a salary range that is fixed annually based on
market data derived from compensation surveys of hundreds of companies. Salaries
are established within these ranges based on the CEO's performance evaluation of
each officer and are not linked to specific performance criteria.
The Named Executives participated in the Brad Ragan, Inc. 1997 Performance
Recognition Plan (the "Performance Plan") and as a result had the opportunity to
earn bonus compensation in 1997. For the Named Executives (other than the Chief
Executive Officer), the target payout (assuming 100% payout) under the
Performance Plan was established at an average amount of approximately 16.3% of
the midpoint of the salary range of such persons. Bonuses paid pursuant to the
Performance Plan were based 40% on the attainment of specific sales objectives,
40% on the attainment of specific earnings before interest and taxes ("EBIT")
objectives and 20% on the attainment of specific cash flow objectives by the
Company. Payouts under the Performance Plan could have ranged from 0% to 150% of
the participants' target amount depending on the extent to which the Company
achieved the applicable sales, EBIT and cash flow objectives. Based on the
Company's results, bonuses were paid at 108.7% of target levels for 1997.
The target payouts for each officer and the specific goals which would
determine the payouts, if any, were reviewed and approved by the Committee.
The Committee received a report regarding stock options granted by Goodyear
for the purchase of Goodyear common stock to the Named Executives and other key
employees of the Company pursuant to the 1997 Performance Incentive Plan of The
Goodyear Tire & Rubber Company (the "Option Plan"). The size of individual
option grants was determined primarily on the basis of the responsibilities and
relative position of each executive officer within guideline ranges established
by Goodyear based on surveys of the option granting practices of other
companies. The Committee does not participate in the granting of such stock
options and the Company does not incur any cost in connection with the options
granted to the Named Executives.
33
<PAGE> 42
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The salary for Michael R. Thomann, President and CEO during 1997, was
established using Goodyear's compensation guidelines within a salary range that
is fixed annually based on market data derived from compensation surveys of
hundreds of companies. In April of 1997 Mr. Thomann was granted a 7.0% salary
increase within those guidelines in recognition of his effective leadership of
the Company.
Mr. Thomann's participation in the Performance Plan was established at a
level intended to result in a payout (assuming 100% payout under the Performance
Plan) equal to 25.2% of the midpoint of his salary range. His bonus was based
40% on the attainment of specific sales objectives, 40% on the attainment of
specific EBIT objectives and 20% on the attainment of specific cash flow
objectives by the Company. Payouts to Mr. Thomann under the Performance Plan
could have ranged from 0% to 150% of his target level, depending on the extent
to which the Company achieved the applicable sales, EBIT and cash flow
objectives. Based on the Company's results, Mr. Thomann's payout was 108.7% of
his target level, resulting in his performance based compensation being equal to
23.5% of his salary.
On March 4, 1997, Mr. Thomann was granted 500 performance equity units
under the 1989 Goodyear Performance and Equity Incentive Plan. The payout under
this performance equity unit grant may range from zero to 150% of the target
amount depending on the cumulative net income per share of Goodyear common stock
during the three-year performance period ending December 31, 1999. If total
cumulative net income per share during the three-year performance period is
$15.25 or more, 150% of the targeted amount may be paid. If total cumulative net
income per share during the three-year performance period is less than $13.25,
no amount will be paid. Units earned at the end of the three-year performance
period will be paid 50% in shares of Goodyear stock and 50% in cash unless Mr.
Thomann elects to defer receipt of the payment. The Committee did not
participate in the granting of the performance equity units and the Company does
not incur any cost relative to such units.
On December 2, 1997, pursuant to the Option Plan, Mr. Thomann was granted
an option to purchase 4,000 shares of Goodyear common stock at a per share
exercise price equal to the market price of Goodyear common stock on the date of
grant. The size of the grant was determined on the basis of guidelines
established by Goodyear based on surveys of the option granting practices of
other companies. The Committee does not participate in the granting of such
stock options, and the Company does not incur any cost relating to such options.
Stock options, however, are considered to be a part of Mr. Thomann's total
compensation package.
<TABLE>
<S> <C>
February 13, 1998 The Compensation Committee:
Eugene R. Culler, Jr. (Chairman)
Richard D. Pearson
James W. Barnett
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Goodyear is the Company's majority shareholder and its principal supplier
of new tires. Eugene R. Culler, Jr., Chairman of the Board of the Company, is an
Executive Vice President of Goodyear and has been employed by Goodyear for more
than 35 years. Michael R. Thomann, Vice Chairman of the Board, President and CEO
during 1997, was formerly General Manager, Farm, Terra, and Off-the-Road Tires
for Goodyear and has been employed by the Company and Goodyear for 25 years.
Ronald J. Carr, Vice President -- Finance, Secretary and Treasurer has been
employed by the Company and Goodyear for 30 years; James E. Owens, Vice
President and General Manager -- Retail Division, has been employed by the
Company and Goodyear for 45 years; and Ronald P. Rumble, Vice President and
General Manager -- Commercial Division, has been employed by the Company and
Goodyear for more than 25 years.
Eugene R. Culler, Jr., Chairman of the Board of the Company and Chairman of
the Company's Compensation Committee, is an Executive Vice President of
Goodyear. Mr. Culler is not an employee of the Company and does not receive any
compensation or director's fees from the Company, nor is he a member of the
Goodyear Board or its compensation committee.
34
<PAGE> 43
The Company is a member of Goodyear's network of authorized dealers. As
such, the Company purchases from Goodyear a substantial portion of its tire
inventory for resale and products and services necessary for the operation of
individual outlets (promotional material, signage, etc.) based on various
Goodyear dealer pricing and marketing policies in effect from time to time. In
addition, the Company purchases materials used in various manufacturing
processes from or through Goodyear. For these products, services and materials,
the Company paid to Goodyear $13,158,000 in the first quarter of 1998,
$62,207,000 in 1997 and $59,078,000 in 1996.
The Company may from time to time enter into various leases or other rental
agreements with Goodyear for the use of equipment and facilities. The Company
paid to Goodyear $313,000, $1,283,000 and $1,346,000 for rent on equipment and
facilities used by the Company in the first quarter of 1998, in 1997 and in
1996, respectively.
The Company has determined that Goodyear is a cost effective source for
various administrative services and support functions and other incidental items
used by or beneficial to the Company. Payments made by the Company to Goodyear
(and certain reimbursements to the Company by Goodyear) in this regard include:
<TABLE>
<CAPTION>
QUARTER
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Field auditing services.................................... $ 37,917 $ 159,439 $ 200,568
Payroll processing services................................ 29,412 115,233 76,950
Data processing services, including point of sale system... 229,235 1,017,114 1,123,999
Communications services.................................... 9,099 43,690 43,470
Automobile insurance....................................... 639,683 674,028 513,998
Executive moving expense................................... -- 11,958 13,862
Legal services............................................. -- 6,238 162,332
Workers' compensation claim cost and administration........ 385,800 1,300,950 1,550,251
General insurance.......................................... 1,058 378,726 205,826
Pension contributions and life insurance premiums withheld
for employees of the Company transferred from Goodyear
under certain conditions................................. 13,801 126,082 126,000
Mailroom services.......................................... 8,453 64,370 88,529
Miscellaneous items paid to Goodyear....................... 7,344 488 7,019
Reimbursement for certain compensation expenses by
Goodyear................................................. (9,974) (152,090) (152,343)
Reimbursement for certain expenses related to the Exchange
Agreement................................................ (117,119) -- --
Miscellaneous items credited or reimbursed by Goodyear..... -- (17,353) (25,000)
---------- ---------- ----------
Total net of credits or reimbursement............ $1,234,709 $3,728,873 $3,935,461
========== ========== ==========
</TABLE>
The Company maintains an open unsecured line of credit with Goodyear to
fund working capital requirements. The borrowing rate on the line of credit is
based on the 30-day LIBOR plus 1.5% effective the first day of each calendar
month as reported on the Reuter Money Service Monitor System. During the first
quarter 1998, year-ended December 31, 1997 and year-ended December 31, 1996, the
average balances outstanding under the credit line arrangement were $40,455,000,
$37,295,000 and $35,624,000, respectively, at average interest rates (computed
by dividing interest expense on the credit line by the weighted average
borrowings outstanding) of 7.17%, 7.14% and 6.94%, respectively. The maximum
amount outstanding at any month-end during these periods was $45,214,000 at
January 31, 1998, $42,379,000 at April 30, 1997 and $43,179,000 at October 31,
1996. The interest rate was 7.19% at March 31, 1998, 7.47% at December 31, 1997
and 6.88% at December 31, 1996. The outstanding balance under the credit line
arrangement at March 31, 1998, December 31, 1997 and December 31, 1996 was
$36,385,000, $29,550,000 and $34,766,000, respectively. The Company incurred
interest expense of $749,000, $2,760,000 and $2,504,000 in the first quarter of
1998, year-ended December 31, 1997 and year-ended December 31, 1996,
respectively, essentially all of which was related to the open line of credit.
35
<PAGE> 44
The Company sold to Goodyear approximately $1,919,000 of products and
service during the first quarter of 1998, approximately $7,454,000 of products
and services during 1997 and approximately $7,713,000 of products and services
during 1996. These sales and services consisted primarily of retreading
component materials, vehicle upfitting services and retreading services.
The Company began providing various credit related administrative services
to Goodyear's Company-owned outlets in the second quarter of 1996, and these
services were expanded in 1997. The Company is compensated for its services on
the basis of its out-of-pocket costs plus a service fee. Revenues generated from
providing these services in the first quarter of 1998, the year 1997 and the
year 1996 were approximately $81,000, $295,000 and $184,000, respectively.
The Company believes that the prices paid and received by the Company to
and from Goodyear for goods and services as described above were fair and
reasonable and on terms no less favorable to the Company than could have been
obtained in transactions with unaffiliated parties.
PERFORMANCE GRAPH
The following graph compares the cumulative shareholder returns of the
Company's Common Stock, The American Stock Exchange Market Value Index and the
Dow Jones Auto Parts Index at each December 31 for the five-year period
beginning December 31, 1992, and ended December 31, 1997. The graph shows the
total shareholder return that would have been achieved had $100 been invested in
each of these investment alternatives on December 31, 1992, with all dividends
reinvested.
COMPARISON OF FIVE CUMULATIVE TOTAL RETURN
BRAD RAGAN, INC., AMEX MARKET VALUE INDEX AND DJ AUTO PARTS INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD BRAD RAGAN, AMEX DJ AUTO
(FISCAL YEAR COVERED) INC. MARKET VALUE PARTS
<S> <C> <C> <C>
1992 100 100 100
1993 124 120 124
1994 139 109 106
1995 152 137 131
1996 135 146 148
1997 159 171 190
</TABLE>
36
<PAGE> 45
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors and certain officers of the Company and persons who own more than 10%
of the outstanding shares of Common Stock to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock. Such
persons are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on representations by
such persons as to reportable transactions and holdings, the Company believes
that during 1997 no such reports required to be filed were not filed.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse, LLP ("Price Waterhouse"), has served the Company as
independent accountants since 1986. A representative from Price Waterhouse is
expected to be present at the Meeting with the opportunity to make a statement
if he desires to do so and to respond any questions related to the firm's work
for the Company. Price Waterhouse also serves as independent accountants for
Goodyear. The Audit Committee and the Board must approve any nonaudit services
performed for the Company by Price Waterhouse.
PROPOSALS BY SHAREHOLDERS
Under certain conditions, shareholders may request the Company to include a
proposal for action at a forthcoming meeting of the shareholders of the Company
in the proxy material of the Company for such meeting. All proposals of
shareholders intended to be presented at the 1999 annual meeting of the Company
must be received by the Company no later than November 30, 1998 for inclusion in
the proxy statement and proxy card relating to such meeting. Shareholders
wishing to bring a proposal before the 1999 annual meeting (but not include it
in the Company's proxy material) must provide written notice of such proposal to
the Company by June 12, 1999.
OTHER MATTERS
The management of the Company knows of no other business which will be
presented for consideration at the Meeting. However, if other matters are
properly presented at the Meeting, it is the intention of the persons named on
the accompanying proxy card to vote such proxies in accordance with their best
judgment.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF GOODYEAR
Set forth below is the name of each director and executive officer of
Goodyear and, unless disclosed elsewhere in this Proxy Statement, the present
principal occupation or employment of each such person and a brief description
of his or her principal occupation and business experience during at least the
last five years. Each person listed below is a citizen of the United States,
except that Messrs. Gibara and Valensi are citizens of The Republic of France.
The business address for each individual listed below is 1144 East Market
Street, Akron, Ohio 44316-0001.
DIRECTORS OF GOODYEAR
The Goodyear Board is classified into three classes of directors, and
currently consists of 11 members. At each annual meeting of shareholders
directors of one of the classes, on a rotating basis, are elected to three year
terms, to serve as the successors to the directors of the same class whose terms
expire at that annual meeting of shareholders.
37
<PAGE> 46
The directors of Goodyear are:
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION
AND OTHER POSITIONS AND OFFICES WITH GOODYEAR DIRECTOR SINCE
- --------------------------------------------- --------------
<S> <C>
John G. Breen, 63........................................... 1992
Chairman of the Board and Chief Executive Officer of The
Sherwin-Williams Company, a manufacturer of paints,
coatings and related products
William E. Butler, 66....................................... 1995
Retired. Formerly Chairman of the Board and Chief
Executive Officer of Eaton Corporation, a global
manufacturer of highly engineered products for the
automotive, industrial, construction, commercial and
aerospace markets
Thomas H. Cruikshank, 66.................................... 1986
Retired. Formerly Chairman of the Board and Chief
Executive Officer of Halliburton Company, a suppler of oil
field equipment and services and engineering and
construction services
Katherine G. Farley, 48..................................... 1998
Senior Managing Director of Tishman Speyer Properties, an
international real estate developer, owner, and property
management firm
Samir G. Gibara, 58......................................... 1995
Chairman of the Board, Chief Executive Officer and
President of Goodyear
William J. Hudson, Jr., 63.................................. 1995
President and Chief Executive Officer and a Director of
AMP Incorporated, a manufacturer of electrical and
electronic connectors and terminals and related products
and systems
Steven A. Minter, 59........................................ 1985
Executive Director and President of The Cleveland
Foundation, a community trust devoted to health,
education, social services and civic and cultural affairs
Agnar Pytte, 65............................................. 1988
President of Case Western Reserve University
George H. Schofield, 68..................................... 1991
Retired. Formerly Chairman of the Board and Chief
Executive Officer of Zurn Industries, Inc., which designs,
manufactures and markets water control and HVAC products
William C. Turner, 68....................................... 1978
Chairman of the Board and Chief Executive Officer of
Argyle Atlantic Corporation, a consulting firm to
multinational corporations and investment groups on
international economic and political affairs, strategy,
investments, joint ventures and strategic alliances
Martin D. Walker, 65........................................ 1997
Retired. Formerly Chairman of the Board and Chief
Executive Officer of M. A. Hanna Company, an international
processor and distributor of polymers to the plastics and
rubber industries
</TABLE>
Mr. Breen has served as the Chairman of the Board and Chief Executive
Officer of The Sherwin-Williams Company since April 1980. He is a director of
Mead Corporation, National City Corporation and Parker-Hannifin Corporation.
Mr. Butler served as the President and Chief Operating Officer of Eaton
Corporation from February of 1989 to September 4, 1991, when he was elected
President and Chief Executive Officer. Mr. Butler was elected Chairman of the
Board and Chief Executive Officer of Eaton Corporation in January of 1992,
serving in that capacity until he retired on December 31, 1995. Mr. Butler is a
director of Applied Industrial Technologies, Inc., Ferro Corporation, Pitney
Bowes Inc., Borg Warner Corporation and Zurn Industries, Inc.
38
<PAGE> 47
Mr. Cruikshank joined Halliburton Company in 1969. He was elected its
President in November 1981, its Chief Executive Officer in May of 1983 and its
Chairman of the Board and Chief Executive Officer in June of 1989. Mr.
Cruikshank retired as Chief Executive Officer of Halliburton Company on October
1, 1995 and as its Chairman of the Board on January 2, 1996. Mr. Cruikshank is a
director of The Williams Companies, Inc., Seagull Energy Corporation and Lehman
Brothers Holdings Inc.
Ms. Farley joined Tishman Speyer Properties in 1984. She was Managing
Director -- International from 1984 to 1993, when she became Managing Director.
In January of 1998 she became Senior Managing Director. Ms. Farley is a director
of Women in Need.
Mr. Gibara joined Goodyear in 1966, serving in various managerial posts
prior to being elected Vice President for Strategic Planning and Business
Development and as the acting Vice President of Finance and Chief Financial
Officer of Goodyear on October 6, 1992. Mr. Gibara was elected Executive Vice
President for North American Tire Operations on May 3, 1994. Mr. Gibara was
elected President and Chief Operating Officer, and as a director, effective
April 15, 1995. Mr. Gibara was elected President and Chief Executive Officer
effective January 1, 1996 and Chairman of the Board, Chief Executive Officer and
President effective July 1, 1996.
Mr. Hudson served in various managerial posts with AMP Incorporated prior
to being elected its President and Chief Executive Officer effective January 1,
1993. Mr. Hudson is a director of Carpenter Technology, a director of the
National Association of Manufacturers, a member of the Executive Committee of
the Board of Governors of the National Electrical Manufacturing Association, a
member of the Board of Trustees and the Executive Committee of the United States
Council for International Business and a member of the Policy Committee of the
Business Round Table.
Mr. Minter has been the Executive Director and President of The Cleveland
Foundation, Cleveland, Ohio, since January 1, 1984. Mr. Minter served as
Associate Director and Program Officer of The Cleveland Foundation from 1975 to
1980 and from 1981 to 1983. Mr. Minter served as Undersecretary of the United
States Department of Education from May, 1980, until January, 1981. Mr. Minter
is a director of Consolidated Natural Gas Company, KeyCorp and Rubbermaid
Incorporated, a trustee of The College of Wooster and a director of The
Foundation Center.
Dr. Pytte was a research physicist at Princeton University and Professor of
Physics, Dean of Science and Dean of Graduate Studies at Dartmouth College prior
to becoming the Provost of Dartmouth College in 1982, a position he held until
July 1, 1987, when he was elected President of Case Western Reserve University.
Dr. Pytte is a director of A. O. Smith Corporation and the Sherman Fairchild
Foundation Inc.
Mr. Schofield served as the Chairman of the Board and Chief Executive
Officer of Zurn Industries, Inc. from 1986 until October 17, 1994, when he
retired as Chief Executive Officer. He retired as Chairman of the Board of Zurn
Industries, Inc. on March 31, 1995. Mr. Schofield is a director of National Fuel
Gas Company.
Mr. Turner has served as Chairman of the Board and Chief Executive Officer
of Argyle Atlantic Corporation since 1977. He is a director of Rural/Metro
Corporation and Microtest, Inc. Mr. Turner is also Chairman of the International
Advisory Council of Avon Products, Inc., a member of the Board of Governors of
the Lauder Institute of Management and International Studies of the University
of Pennsylvania, a trustee and former Chairman of the Board of American Graduate
School of International Management, a trustee and Executive Committee member of
the United States Council for International Business and a member of the Council
of American Ambassadors and of the Council on Foreign Relations.
Mr. Walker served as Chairman of the Board and Chief Executive Officer of
M. A. Hanna Company from September 1, 1986 through December 31, 1996, when he
retired as Chief Executive Officer. He retired as Chairman of the Board of M. A.
Hanna Company on June 30, 1997. Mr. Walker is a principal in MORWAL Investments.
He is a director of Comerica, Inc., Lexmark International, M. A. Hanna Company,
Meritor Automotive Corporation, Reynolds & Reynolds, The Timken Company and
Textron, Inc.
39
<PAGE> 48
EXECUTIVE OFFICERS OF GOODYEAR
The following table sets forth information regarding the current executive
officers of the Goodyear:
<TABLE>
<CAPTION>
NAME AND AGE POSITIONS AND OFFICES WITH GOODYEAR
- ------------ -----------------------------------
<S> <C>
Samir G. Gibara (58)...................... Chairman of The Board, Chief Executive Officer
and President and Director
William J. Sharp (56)..................... President, Global Support Operations
Robert W. Tieken (58)..................... Executive Vice President and Chief Financial
Officer
Eugene R. Culler, Jr. (59)................ Executive Vice President
James Boyazis (61)........................ Vice President and Secretary
Jesse T. Williams, Sr. (58)............... Vice President
John P. Perduyn (58)...................... Vice President
Richard P. Adante (51).................... Vice President
H. Clay Orme (58)......................... Vice President
Gary A. Miller (51)....................... Vice President
Mike L. Burns (56)........................ Vice President
George E. Strickler (50).................. Vice President
James C. Whiteley (50).................... Vice President
Richard W. Hauman (51).................... Vice President and Treasurer
Richard J. Steichen (53).................. Vice President
C. Thomas Harvie (54)..................... Vice President and General Counsel
Lee N. Fiedler (56)....................... Vice President
Sylvain G. Valensi (55)................... Vice President
Joseph M. Gingo (53)...................... Vice President
John C. Polhemus (53)..................... Vice President
Terry L. Persinger (53)................... Vice President
Dennis E. Dick (58)....................... Vice President
John W. Richardson (52)................... Vice President
Clark E. Sprang (55)...................... Vice President
William M. Hopkins (53)................... Vice President
Kenneth B. Kleckner (50).................. Vice President
Debra M. Walker (42)...................... Vice President
</TABLE>
For information concerning Mr. Gibara, see "-- Directors of Goodyear."
Mr. Sharp served in various tire production posts until elected, effective
April 1, 1991, an Executive Vice President of Goodyear for worldwide product
supply, serving in that capacity, as the executive officer of Goodyear
responsible for Goodyear's tire manufacturing and distribution operations and
research, development and engineering activities until October 1, 1992, when he
became the executive officer of Goodyear responsible for the operations of
Goodyear's subsidiaries in Europe. Effective January 1, 1996, Mr. Sharp was
elected Goodyear's President, Global Support Operations, and, as such, he is the
executive officer of Goodyear having corporate responsibility for Goodyear's
research and development, manufacturing, purchasing, materials management,
quality assurance, and environmental and health and safety improvement
activities worldwide. Mr. Sharp has been an employee of Goodyear since 1964.
Mr. Tieken joined Goodyear on May 3, 1994, when he was elected an Executive
Vice President and the Chief Financial Officer of Goodyear. Prior to joining
Goodyear, Mr. Tieken had been employed by the General Electric Company for 32
years, serving in various financial management posts, including Vice President,
Finance and Information Technology of General Electric Aerospace from 1988 to
April of 1993. From April of 1993 through April of 1994, Mr. Tieken was the Vice
President of Finance of Martin Marietta Corporation, which acquired General
Electric Aerospace in April of 1993. Mr. Tieken is the principal financial
officer of Goodyear.
Mr. Culler has been employed by Goodyear for 35 years. He has been
Executive Vice President responsible for North American Tires since April, 1995.
Prior to that he was President and CEO of Goodyear's Canadian
40
<PAGE> 49
subsidiary. He previously served as Chairman of the Board of Directors of the
Company from August, 1988 to October, 1991. He was again elected a director and
Chairman of the Board of the Company on July 27, 1995, and has held those
positions since then.
Mr. Boyazis joined Goodyear in 1963, serving in various posts until June 2,
1987, when he was elected a Vice President and the Secretary of Goodyear. He is
also the Associate General Counsel of Goodyear.
Mr. Williams served in various human resources posts until August 2, 1988,
when he was elected a Vice President of Goodyear. Mr. Williams was responsible
for corporate compliance with equal employment opportunity laws and regulations
until July 1, 1991, when he became the executive officer of Goodyear responsible
for Goodyear's human resources, diversity, safety and workers' compensation
activities and for compliance with the various equal employment opportunity,
workplace safety and other employment laws and regulations. Mr. Williams was the
executive officer of Goodyear responsible for Goodyear's compensation and
employment practices from March 1, 1993 through October 31, 1995. Effective
November 1, 1995, Mr. Williams became the executive officer of Goodyear
responsible for Goodyear's human resources policy, employment practices and
systems. Mr. Williams has been an employee of Goodyear since 1962.
Mr. Perduyn served in various public relations posts until he was elected a
Vice President of Goodyear effective June 1, 1989. He is the executive officer
of Goodyear responsible for Goodyear's public affairs activities. Mr. Perduyn
has been an employee of Goodyear since 1970.
Mr. Adante served in various engineering and management posts until April
of 1990, when he was appointed Vice President for merchandise distribution and
control. Mr. Adante was elected a Vice President effective April 1, 1991. He is
the executive officer of Goodyear responsible for materials management. Mr.
Adante has been an employee of Goodyear since 1966.
Mr. Orme served in various manufacturing management posts until he was
elected a Vice President of Goodyear effective September 1, 1992. He is the
executive officer of Goodyear responsible for Goodyear's worldwide
manufacturing, corporate engineering and product distribution operations. Mr.
Orme has been an employee of Goodyear since 1962.
Mr. Miller served in various management and research and development posts
until he was elected a Vice President of Goodyear effective November 1, 1992. He
is the executive officer of Goodyear responsible for Goodyear's purchasing
operations. Mr. Miller has been an employee of Goodyear since 1967.
Mr. Burns served in various human resources posts until appointed Director
of Organization Development and Training in 1986. He was elected a Vice
President of Goodyear effective March 1, 1993. He is the executive officer of
Goodyear responsible for Goodyear's human resources and total quality systems.
Mr. Burns has been an employee of Goodyear since 1965.
Mr. Strickler served in various accounting, treasury and financial posts
until August of 1988, when he became the principal financial officer of the Tire
Division. Mr. Strickler was a Vice President and the Comptroller of Goodyear
from September 1, 1993 to May 31, 1996. Since June 1, 1996, Mr. Strickler has
served as a Vice President of Goodyear and is the executive officer of Goodyear
responsible for the financial functions of Goodyear's North American Tires
operations. Mr. Strickler has been an employee of Goodyear since 1969.
Mr. Whiteley served in various quality control and quality assurance
managerial posts until appointed Director of Tire Quality Assurance on June 1,
1990. He was elected a Vice President of Goodyear on November 2, 1993, serving
as the executive officer of Goodyear responsible for product quality and safety.
Effective July 1, 1995, Mr. Whiteley became the executive officer of Goodyear
responsible for product quality and safety and environmental and occupational
health and safety improvement and government compliance programs. Mr. Whiteley
has been an employee of Goodyear since 1969.
Mr. Hauman served in various financial management posts around the world
until he was elected an Assistant Treasurer of Goodyear on August 15, 1988. He
was elected a Vice President and the Treasurer of Goodyear on October 4, 1994.
Mr. Hauman is the executive officer of Goodyear responsible for Goodyear's
worldwide treasury operations, risk management activities and pension asset
management. Mr. Hauman has been an employee of Goodyear since 1968.
41
<PAGE> 50
Dr. Steichen served in various research and development posts until August
1, 1991, when he was appointed Director of Technology Management. On November 1,
1992, Dr. Steichen was appointed the General Manager of Technology and Quality
Assurance of South Pacific Tyres, a joint venture company 50% owned by Goodyear,
serving in that capacity until November 30, 1994. Dr. Steichen was elected a
Vice President of Goodyear effective December 1, 1994. Dr. Steichen is the
executive officer of Goodyear responsible for Goodyear's research activities.
Dr. Steichen has been an employee of Goodyear since 1973.
Mr. Harvie joined Goodyear on July 1, 1995 as a Vice President and the
General Counsel of Goodyear. Prior to joining Goodyear, Mr. Harvie was a Vice
President and the Associate General Counsel of TRW Inc. from 1989 through June
1995. Mr. Harvie had been employed by TRW Inc. for 20 years in various
capacities in the TRW Inc. law department.
Mr. Fiedler served in various chemical sales and marketing positions and
managerial posts until October 1, 1991, when he became the President and Chief
Executive Officer of The Kelly-Springfield Tire Company, formerly a wholly-owned
subsidiary of Goodyear. Since January 1, 1996, he has served as the President of
the Kelly-Springfield Division. He was elected a Vice President of Goodyear on
November 5, 1996 and is the executive officer of Goodyear responsible for
Kelly-brand and private-brand tire operations. Mr. Fiedler has been an employee
of Goodyear since 1963.
Mr. Valensi served in various finance, sales and marketing positions until
1985, when he was appointed Director of Sales and Marketing for the European
region. In November 1993, he was named President and Chief Executive Officer of
Goodyear France S.A., a wholly-owned subsidiary of Goodyear. On February 1,
1996, Mr. Valensi was appointed Vice President of Goodyear's European region. On
November 5, 1996, Mr. Valensi was elected a Vice President of Goodyear and in
that capacity serves as the executive officer of Goodyear responsible for the
Goodyear's operations in Europe, Africa and the Middle East. Mr. Valensi has
been an employee of Goodyear since 1965.
Mr. Gingo served in various research and development and managerial posts
until elected a Vice President of Goodyear effective November 1, 1992, serving
in that capacity as the executive officer of Goodyear responsible for Goodyear's
worldwide tire technology activities until January 1, 1995, when he was
appointed Vice President of Goodyear's Asia region. On November 5, 1996, Mr.
Gingo was elected a Vice President of Goodyear and, in that capacity, is the
executive officer of Goodyear responsible for Goodyear's operations in Asia. Mr.
Gingo has been an employee of Goodyear since 1966.
Mr. Polhemus served in various managerial positions in Goodyear's
international operations until June 1, 1991, when he was appointed Managing
Director and President of Goodyear do Brasil Produtos de Borracha Ltda, a
wholly-owned subsidiary of Goodyear. On April 10, 1995, Mr. Polhemus was
appointed Vice President for the Latin America region. On November 5, 1996, Mr.
Polhemus was elected a Vice President of Goodyear and, in that capacity, is the
executive officer of Goodyear responsible for Goodyear's Latin American
operations. Mr. Polhemus has been an employee of Goodyear since 1969.
Mr. Persinger joined Goodyear in 1966, serving in various research and
development and managerial positions until May 16, 1989, when he was appointed
Vice President and General Manager of the Polyester Division. He served in that
capacity until December 1992, when the Polyester Division was sold to Shell Oil
Company. Mr. Persinger left Goodyear and joined Shell at that time. He rejoined
Goodyear effective January 1, 1995, when he was appointed Vice President and
General Manager of Engineered Products. On November 5, 1996, Mr. Persinger was
elected a Vice President of Goodyear and, in that capacity, is the executive
officer of Goodyear responsible for Goodyear's Engineered Products operations.
Mr. Dick served in various research and development and production posts
until elected a Vice President of Goodyear on April 9, 1984, serving as the
executive officer of Goodyear responsible for Goodyear's general products
technology management activities worldwide until October 1991, when he was
appointed Vice President and General Manager of Goodyear's Chemical Division. On
November 5, 1996, Mr. Dick was elected a Vice President of Goodyear and in that
capacity the executive officer of Goodyear responsible for Goodyear's Chemical
Division. Mr. Dick has been an employee of Goodyear since 1964.
42
<PAGE> 51
Mr. Richardson served in various financial management posts until he was
appointed General Manager and Finance Director of Goodyear Great Britain Limited
on November 1, 1990. Mr. Richardson was appointed General Auditor of Goodyear on
February 1, 1993, serving in that post until appointed Vice President and
Comptroller on June 1, 1996. He was elected Vice President Corporate Finance of
Goodyear on November 5, 1996 and in that capacity is the principal accounting
officer of Goodyear. Mr. Richardson has been an employee of Goodyear since 1967.
Mr. Sprang served in various financial posts until appointed Finance
Director for Europe on July 1, 1990, serving in that post until September 1,
1993, when he was appointed Vice President Business Development. Mr. Sprang was
elected a Vice President of Goodyear on November 5, 1996 and in that capacity is
the executive officer of Goodyear responsible for Goodyear's business
development activities. Mr. Sprang has been an employee of Goodyear since 1966.
Mr. Hopkins served in various engineering and managerial posts until
October 1, 1991 when he was appointed General Manager Light Truck Tires. He was
appointed General Manager of Multi-purpose Vehicle and Specialty Tires effective
January 1, 1993, a post he held until June 1, 1996, when he was appointed
Director of Tire Technology, North American Tires. On May 19, 1998, Mr. Hopkins
was elected a Vice President of Goodyear and is the executive officer of
Goodyear responsible for Goodyear's worldwide tire technology activities. Mr.
Hopkins has been an employee of Goodyear since 1967.
Mr. Kleckner served in various engineering and production management posts
until July 1, 1993 when he was appointed the manager of Goodyear's Lawton,
Oklahoma, tire production facility. From May 16, 1994 through May 31, 1996, he
was Vice President, Manufacturing and Operations for The Kelly Springfield Tire
Company, a subsidiary of Goodyear. Mr. Kleckner was appointed Director of Tire
Manufacturing for Goodyear's operations in Latin America effective June 1, 1996,
a post he held until he was appointed Vice President of Engineering on June 16,
1997. On May 19, 1998, Mr. Kleckner was elected a Vice President of Goodyear and
is the executive officer of Goodyear responsible for process engineering. He has
been an employee of Goodyear since 1971.
Ms. Walker served in various marketing posts until March 1, 1992, when she
was appointed Marketing Manager for passenger tires. She was appointed Manager
of Dealer Sales effective January 1, 1994, a post she held until appointed
Director of Retail Systems on February 26, 1995. She was appointed Vice
President-Retail Systems on May 16, 1996. On May 19, 1998, she was elected a
Vice President of Goodyear and, in that capacity, is the chief information
officer of Goodyear and is the executive officer of Goodyear responsible for
developing its information technology strategy and architecture. Ms. Walker has
been an employee of Goodyear since 1979.
There are no family relationships between any of the executive officers or
directors of Goodyear.
Each executive officer is elected by the board of directors of Goodyear at
its annual meeting to a term of one year or until his or her successor is duly
elected, except in those instances where the person is elected at other than an
annual meeting of the board of directors in which event such person's tenure
will expire at the next annual meeting of the board of directors unless such
person is reelected. The next annual meeting of the board of directors is
scheduled to be held in April of 1999.
None of Goodyear's directors or executive officers own any shares of Common
Stock, and neither any of these individuals nor Goodyear has engaged in any
transactions in shares of Common Stock during the 60 days preceding the date of
this Proxy Statement.
43
<PAGE> 52
PROXY CARD
BRAD RAGAN, INC.
4404-G STUART ANDERSON BOULEVARD
CHARLOTTE, NC 28217
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Eugene R. Culler, Jr., and William P. Brophey
as agents, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of Common
Stock of Brad Ragan, Inc. (the "Company") held of record by the undersigned on
July 22, 1998 at the Annual Meeting of the Shareholders to be held on Tuesday,
August 25, 1998 at 11:30 a.m. local time at the Sheraton Airport Plaza Hotel,
3315 South I-85 at Billy Graham Parkway, Charlotte, North Carolina, and at any
adjournment thereof.
<TABLE>
<S> <C>
(1) PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO
GRANT RIGHTS OF DISSENT AND APPRAISAL IN CERTAIN
TRANSACTIONS, INCLUDING THE SHARE EXCHANGE DESCRIBED IN
PROPOSAL NO. 2 BELOW:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF
SHARE EXCHANGE BETWEEN THE COMPANY AND THE GOODYEAR TIRE &
RUBBER COMPANY AND THE TRANSACTIONS CONTEMPLATED THEREBY
(CONTINGENT ON APPROVAL OF PROPOSAL NO. 1 ABOVE):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) ELECTION OF DIRECTORS:
</TABLE>
<TABLE>
<S> <C> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed below
below)
Eugene R. Culler, Jr., William P. Brophey, Ronald J. Carr, Richard E. Sorensen, Richard D. Person,
James W. Barnett
(Continued on other side)
(Continued from other side)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME
ON THE SPACE PROVIDED BELOW.)
Name(s):
---------------------------------------------------------------------------------------------------
(4) IN THEIR DISCRETION, THE PROXY AGENTS ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
</TABLE>
This Proxy, when properly dated and executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this
Proxy will be voted for Proposals 1 and 2 and for all the nominees for director
named above.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the president or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
Dated:
----------------, 1998
------------------------------
Signature
------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
<PAGE> 53
ANNEX I
AGREEMENT
AND
PLAN OF SHARE EXCHANGE
BETWEEN
THE GOODYEAR TIRE & RUBBER COMPANY
AND
BRAD RAGAN, INC.
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (the "Agreement," which
includes the "Plan" as herein set forth) is made and entered into between The
Goodyear Tire & Rubber Company, an Ohio corporation (the "Acquiring
Corporation"), and Brad Ragan, Inc., a North Carolina corporation (the "Acquired
Corporation"), pursuant to Sections 55-11-02 and 55-11-07 of the North Carolina
Business Corporation Act (the "Act"), the Acquiring Corporation and the Acquired
Corporation being herein collectively referred to as the "Participating
Corporations."
WHEREAS, the Board of Directors of the Acquired Corporation has
determined that it is advisable that the shares of its Common Stock, $1.00 par
value (the "Common Stock"), which are outstanding and not owned by the Acquiring
Corporation (the "Plan Shares") be acquired by the Acquiring Corporation on the
terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and agreements
herein contained, the Participating Corporations do hereby agree as follows:
I. THE SHARE EXCHANGE TRANSACTION.
The Acquiring Corporation will acquire all Plan Shares pursuant to the
terms and conditions of this Agreement and Plan of Share Exchange (the "Plan").
II. TERMS AND CONDITIONS OF THE EXCHANGE.
2.1 The Exchange. At the Effective Time (as defined in Section 4.2
below), the shares of the Participating Corporations shall be exchanged as
follows:
(a) Acquiring Corporation. The outstanding shares of capital
stock of the Acquiring Corporation will not be exchanged, altered or
affected in any manner as a result of the share exchange to be effected
pursuant to this Plan and will remain outstanding as shares of the
Acquiring Corporation.
(b) Acquired Corporation. Each outstanding share of Common
Stock of the Acquired Corporation except those already owned by the
Acquiring Corporation (each a "Plan Share"), will, by virtue of the
share exchange provided for by the Plan and without any further action
on the part of the holder thereof, be exchanged for, and become the
right to receive from the Acquiring Corporation, $37.25 in cash upon
surrender to the Acquiring Corporation (or an
<PAGE> 54
agent of the Acquiring Corporation designated as provided in Section
2.2 hereof) of the certificate or certificates representing such Plan
Share or Shares, as provided in Section 2.2 hereof (the "Exchange"). No
interest shall be payable with respect to payment of such cash amount
on surrender of outstanding certificates. No holder of any Plan Share
or Shares (or any certificate representing such Plan Share or Shares)
immediately prior to the Effective Time shall be entitled to receive
any dividend declared and payable in respect of such Plan Share or
Shares after the Effective Time, any such dividend being the property
of the Acquiring Corporation. The stock transfer ledger of the Acquired
Corporation shall be closed in respect of the Plan Shares from and
after the Effective Time, except that the Acquired Corporation shall
cause its transfer agent to issue a certificate representing the Plan
Shares to the Acquiring Corporation.
2.2 Surrender of Share Certificates. After the Effective Time, each
holder, other than the Acquiring Corporation, of an outstanding certificate or
certificates representing Plan Shares shall surrender the same to the Acquiring
Corporation in accordance with the instructions contained in a form of letter of
transmittal. The letter of transmittal and certificate(s) shall be delivered to
the bank, trust company or other party designated by the Acquiring Corporation
as paying agent for the exchange of Plan Shares for cash as provided herein.
Upon such surrender, each such holder shall receive cash in the amount of $37.25
for each Plan Share represented by a certificate so surrendered. Until so
surrendered, each outstanding certificate that prior to the Effective Time
represented one or more Plan Shares shall be deemed for all purposes to evidence
only the ownership of the non-transferable right to receive the cash to be
exchanged for each Plan Share represented by said certificate and from and after
the Effective Time the registered holder of said certificate shall not be
entitled to transfer, to receive dividends on or to vote the Plan Shares
represented by said certificates. With respect to any certificate for Plan
Shares that has been lost or destroyed, the Acquiring Corporation shall pay the
holder thereof the consideration attributable to such certificate upon receipt
of (i) evidence of ownership of such Plan Shares reasonably satisfactory to the
Acquiring Corporation, and (ii) an indemnity bond posted by such holder in such
amount as the Acquiring Corporation may reasonably require.
III. EFFECTS OF EXCHANGE.
The Exchange shall transpire pursuant to the provisions of and with the
effect provided in the Act.
IV. GENERAL CONDITIONS AND AGREEMENTS.
4.1 Statutory Right of Dissent. Prior to submitting the Plan to a vote
of its shareholders the Acquired Corporation shall submit to its shareholders
(with the recommendation of its Board of Directors), and the Acquiring
Corporation shall vote all of its shares of Common Stock in favor of, an
amendment of the Articles of Incorporation of the Acquired Corporation which
provides that statutory dissenters' rights, as set out in Article 13 of the Act,
shall be applicable to this transaction notwithstanding the provisions of
Section 55-13-02(c) of the Act.
4.2 Effective Time. As used in the Plan, the term "Effective Time"
means the later of (i) 11:59 P.M. (Charlotte Time) on June 15, 1998, or (ii) the
time at which appropriate Articles of Share
-2-
<PAGE> 55
Exchange, including this Agreement and Plan of Share Exchange, shall have been
filed with the Secretary of State of North Carolina in accordance with Section
55-11-05 of the Act.
4.3 Termination. This Agreement may be terminated and abandoned prior
to the Effective Time, irrespective of the prior approval of the shareholders of
the Acquired Corporation, by (i) the mutual written consent of the Board of
Directors of the Acquired Corporation, acting upon the recommendation of the
Special Committee (as defined in Section 5.9), and the Board of Directors of the
Acquiring Corporation; (ii) action of the Board of Directors, the Chairman of
the Board, any President, any Executive Vice President or any Vice President of
the Acquiring Corporation in the case of any termination of the Plan for "just
cause"; or (iii) action of the Board of Directors, the Chairman of the Board,
any President, any Executive Vice President or any Vice President of the
Acquiring Corporation in the case of a unilateral termination without just
cause. Unless this Agreement is terminated prior to the shareholder vote
thereon, the failure of the Acquiring Corporation to vote shares of Common Stock
owned by it in favor of this Agreement shall be treated as a unilateral
termination by the Acquiring Corporation without just cause hereunder. The Plan
and the Exchange shall terminate if for any reason the transactions contemplated
herein shall not have occurred by September 15, 1998. In the event of any
termination of the Plan pursuant to this Section 4.3, the Plan shall become void
and shall have no effect. Any such termination shall not give rise to any
liability on the part of either the Acquired Corporation or the Acquiring
Corporation or their respective directors, officers or shareholders, except as
expressly provided in this Section 4.3. If the Plan should be abandoned and
terminated unilaterally by the Acquiring Corporation without just cause, then
the Acquiring Corporation will reimburse the Acquired Corporation for any fees
reasonably incurred and paid to investment bankers and legal counsel in
connection with the negotiation, preparation or implementation of the Plan, plus
any costs reasonably incurred in connection with preparation and distribution of
a proxy statement and proxy and the solicitation of proxies ("Reimbursable
Expenses"), which reimbursements shall be the sole obligation of the Acquiring
Corporation in the case of its unilateral termination of the Plan and the
Acquiring Corporation shall have no other liability in connection therewith. For
the purposes hereof, any of the following or similar circumstances or events
shall constitute "just cause" for termination of the Plan by the Acquiring
Corporation:
(a) Any action, suit, investigation, other proceeding or claim
(other than the Shareholder Litigation (as defined in Section 5.6))
shall have been threatened or instituted before any court or before or
by any government or governmental agency or instrumentality either (1)
to restrain, prohibit or invalidate the transactions contemplated by
this Agreement, (2) to impose any restrictions, limitation or
conditions with respect thereto or with respect to the Acquiring
Corporation's ownership of the Acquired Corporation or any of its
subsidiaries, (3) to obtain damages or other relief in connection with
the transactions contemplated by this Agreement, excluding actions by
shareholders of the Acquired Corporation asserting dissenters' rights
if, and only if, asserted in respect of 5% or less of the outstanding
shares of the Common Stock, or (4) which the Acquiring Corporation
deems adverse to its interest or which, in the sole judgment of the
Acquiring Corporation, might materially and adversely affect its
operations or financial condition; or
-3-
<PAGE> 56
(b) The status of the Shareholder Litigation (as defined in
Section 5.6) shall be such that, in the sole judgment of the Acquiring
Corporation, pursuing the consummation of the Plan in light of such
litigation would not be in the best interests of the Acquiring
Corporation.
(c) Shareholders of the Acquired Corporation holding more than
5% of the aggregate number of outstanding shares of the Common Stock
shall have asserted their dissenters' rights and shall not have lost,
surrendered or withdrawn such dissenters' rights.
(d) The Acquired Corporation shall have failed to comply with
or to perform in any material respect any covenant or obligation of the
Acquired Corporation contained in the terms and conditions of this
Agreement and such failure has continued for a period of thirty (30)
days after notice to the Acquired Corporation; or
(e) Any condition precedent to the implementation of the Plan
shall not have been satisfied (other than a condition which the
Acquiring Corporation could have caused to be satisfied without
incurring any cost or expense or taking an action or suffering a
consequence deemed by it to be adverse to its interests); or
(f) Any representation or warranty of the Acquired Corporation
shall prove to have been untrue or incorrect in any material respect
when made or shall at any time cease to be true and correct in all
material respects;
provided, however, that if the Acquiring Corporation abandons or terminates the
Plan on the ground of either paragraph (a), (b) or (c) of this Section 4.3, the
Acquiring Corporation shall reimburse the Acquired Corporation for up to, but
not exceeding, $250,000 of Reimbursable Expenses.
4.4 Conduct of the Participating Corporations prior to the Effective
Time. Until the completion of the share exchange, the Acquired Corporation shall
continue to conduct its business without material change and it shall not (i)
issue any equity security or instrument convertible into any equity security,
(ii) make any distribution or other disposition of its assets, capital or
surplus except in the ordinary course of business, (iii) take any action which
would impair its assets, or (iv) take any action that would cause its
representations and warranties to be untrue in any material respect at the
Effective Time. Prior to the Effective Time, each of the Participating
Corporations shall promptly take all such actions as shall be necessary or
appropriate in order to effect the Exchange in accordance with the terms and
conditions of the Plan, including, but not limited to, complying with the
conditions set forth in Section 4.5(b).
4.5 Conditions to the Exchange. The obligation of the Acquiring
Corporation to acquire the Plan Shares pursuant to the Plan shall be conditioned
upon the satisfaction of the following conditions:
(a) The Plan shall have been approved at the meeting of
shareholders of the Acquired Corporation held for such purpose, or any
adjournment thereof, by the vote of the holders of a majority of the
Common Stock outstanding and entitled to vote thereon.
-4-
<PAGE> 57
(b) All filings, registrations, notices, consents, approvals,
authorizations, certificates, orders and permits with respect to the
exchange of the Plan Shares pursuant to and in accordance with the
provisions of the Plan required from any court, government or
governmental body, agency or instrumentality having or asserting
jurisdiction over the Participating Corporations shall have been made
or obtained and be in full force and effect on a basis satisfactory to
the Acquiring Corporation.
(c) The representations and warranties of the Acquired
Corporation made in this Agreement shall be true and correct in all
material respects at, and at all time prior to, the Effective Time, and
the Acquired Corporation shall have fully performed in all material
respects its covenants and obligations under this Agreement at or prior
to the Effective Time.
V. REPRESENTATIONS AND WARRANTIES OF ACQUIRED CORPORATION.
5.1 Organization, Standing and Qualification. The Acquired Corporation
is duly organized, validly existing and in good standing under the laws of the
State of North Carolina and has the corporate power to own all of its properties
and assets and to carry on its business as it is now being conducted. Each
subsidiary of the Acquired Corporation is a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, with the corporate power and authority to own its properties and
conduct its business as now being conducted. Each of the Acquired Corporation
and its subsidiaries is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the
character of the properties owned or held under lease by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have a material
adverse effect on the business or financial conditions of the Acquired
Corporation and its subsidiaries taken as a whole.
5.2 Capital Structure. The Acquired Corporation's authorized capital
stock consists of 10,000,000 shares of Common Stock, of which 2,190,619 shares
are issued and outstanding. All issued and outstanding shares have been validly
issued, are fully paid and nonassessable and have voting rights. There are no
outstanding subscriptions, options, rights, warrants, convertible securities or
other agreements or commitments obligating the Acquired Corporation to issue any
additional shares of its capital stock. There are no outstanding options,
rights, warrants, subscriptions, convertible securities or other agreements or
commitments obligating any subsidiary of the Acquired Corporation to issue any
additional shares of its capital stock. There are no outstanding obligations of
the Acquired Corporation or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of the capital stock of any of its subsidiaries.
The Acquired Corporation is, directly or indirectly, the record and beneficial
owner of all of the outstanding shares of the capital stock of each of its
subsidiaries, free and clear of any lien, mortgage, pledge, charge, security
interest or encumbrance.
5.3 Due Authorization. The Acquired Corporation has the requisite
corporate power and authority to execute and deliver this Agreement and,
following compliance with Section 4.5(b), to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
the Acquired Corporation and the consummation by the Acquired Corporation of the
transactions contemplated by this Agreement have been duly and validly
authorized by the board of directors of the Acquired Corporation and no other
corporate proceeding on the part of the Acquired
-5-
<PAGE> 58
Corporation is necessary to authorize this Agreement or to consummate the
transactions so contemplated, other than the approval and adoption of the Plan
and this Agreement by the holders of a majority of the shares of Common Stock
outstanding. This Agreement has been duly and validly executed and delivered by
the Acquired Corporation and constitutes a valid and binding agreement of the
Acquiring Corporation, enforceable against the Acquired Corporation in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject to general principles of equity (whether considered in a proceeding
in equity or at law).
5.4 Reports and Financial Statements. (a) The Acquired Corporation has
filed with the Securities and Exchange Commission (the "SEC") all forms, reports
and documents required to be filed by it pursuant to applicable law since
January 1, 1994 (the "SEC Reports"), all of which have complied as of their
respective filing dates in all material respects with all applicable
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations of the SEC promulgated under the Exchange Act. None of the
SEC Reports, including, without limitation, any financial statements or
schedules included or incorporated by reference in the SEC Reports, at the time
filed, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The audited and unaudited consolidated financial statements of the
Acquired Corporation included (or incorporated by reference) in the SEC Reports
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis (except to the extent set
forth in those financial statements, including the notes, if any) and present
fairly in all material respects the consolidated financial position of the
Company as of their respective dates, and the consolidated results of operations
and retained earnings and cash flows for the periods presented, subject, in the
case of the unaudited interim financial statements, to normal, recurring,
year-end adjustments and the absence of such footnotes as may be omitted in
unaudited interim financial statements prepared in accordance with United States
generally accepted accounting principles.
5.5 No Violation of Instruments. The execution and delivery of this
Agreement do not, and the consummation of the share exchange will not, (1)
violate any provision of the Articles of Incorporation or Bylaws of the Acquired
Corporation; (2) violate any provision of or result in the acceleration of an
obligation under, or result in the imposition of any lien or encumbrance on any
asset of the Acquired Corporation pursuant to, the terms of any mortgage, note,
lien, lease, franchise, license, permit, agreement, instrument, order,
arbitration award, judgment or decree; (3) result in the termination of any
license, franchise lease, or permit to which the Acquired Corporation is a party
or by which it is bound; (4) violate or conflict with any other restriction of
any kind or character to which the Acquired Corporation is subject; or (5)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (i) pursuant
to the Exchange Act, or (ii) the filing of appropriate Articles of Share
Exchange with the Secretary of State of North Carolina in accordance with
Section 55-11-05 of the Act.
5.6 Litigation. Other than the lawsuit styled Herbert T. Behrens and
Martin Bergstein, Trustee FBO Herbert R. Behrens v. Brad Ragan, Inc., et al.,
197 CVS 14799 (the "Shareholder
-6-
<PAGE> 59
Litigation") there is no claim, action, proceeding or governmental investigation
pending or, to the knowledge of the Acquired Corporation, threatened against the
Acquired Corporation or any of its subsidiaries before any court or governmental
or regulatory authority that, individually or in the aggregate, (i) could be
reasonably expected to have a material adverse effect on the business or
financial condition of the Acquired Corporation and its subsidiaries taken as a
whole, or (ii) in any manner seeks to amend or terminate the Plan or to prevent,
enjoin, alter the terms of, or delay the Exchange.
5.7 Compliance With Law. To the knowledge of the Acquired Corporation,
the Acquired Corporation and its subsidiaries, and the businesses of the
Acquired Corporation and its subsidiaries, are being conducted, in compliance in
all material respects with all applicable laws, orders, rules or regulations of
any governmental authority.
5.8 Shareholder Protection Act - Required Shareholder Vote. The North
Carolina Shareholder Protection Act is not applicable to the Acquired
Corporation. The only vote of shareholders of the Acquired Corporation required
to approve and adopt the Plan and approve the Exchange is the affirmative vote
of the holders of at least a majority of the outstanding shares of the Common
Stock.
5.9 Fairness Opinion. Interstate/Johnson Lane Corporation ("IJL"), the
independent financial advisor to the Special Committee of the Board of Directors
of the Acquired Corporation established to review and consider the proposal to
effect the Exchange contemplated by the Plan (the "Special Committee"), has
delivered to the Acquired Corporation its written opinion that the consideration
to be paid for the Plan Shares in the share exchange is fair, from a financial
point of view, to the holders of the Plan Shares. At the date of this Agreement,
said opinion has not been withdrawn or modified. A true and complete copy of
said opinion has been delivered to the Acquiring Corporation.
5.10 Board Action. The Board, at a meeting duly called and held on May
5, 1998, has unanimously (exclusive of directors who abstained from voting
because of their relationship with the Acquiring Corporation) (i) determined
that the Plan and the share exchange pursuant thereto are fair to and in the
best interests of the holder of the Plan Shares, (ii) approved and adopted this
Agreement and the Plan and (iii) recommended that the shareholders of the
Acquired Corporation approve and adopt this Agreement and the Plan. The Acquired
Corporation has been advised by its directors that each of them intends to vote
all shares of Common Stock owned by him in favor of the approval and adoption by
the shareholders of the Acquired Corporation of this Agreement and the Plan.
5.11 Absence of Certain Changes. Since December 31, 1997, except as
contemplated by this Agreement or disclosed in the Annual Report on Form 10-K
for the year ended December 31, 1997 (the "1997 10-K") of the Acquired
Corporation or in any SEC Report filed since the 1997 10-K and prior to the date
of this Agreement, the Acquired Corporation and its subsidiaries have conducted
their respective businesses only in the ordinary course and in a manner
consistent with past practice and, since December 31, 1997, there has not been
(i) any change in the business, operations, properties, condition (financial or
otherwise), assets or liabilities (including, without limitation, contingent
liabilities) of the Acquired Corporation and its subsidiaries having,
individually or in the aggregate a material adverse effect on the Acquired
Corporation and its subsidiaries taken as a whole, (ii) any damage, destruction
or loss (whether or not covered by insurance) with respect to any property or
asset of the Acquired Corporation or any of its subsidiaries having,
individually or in the aggregate, a material adverse effect
-7-
<PAGE> 60
on the Acquired Corporation and its subsidiaries taken as a whole, (iii) any
change by the Acquired Corporation in its accounting methods, principles or
practices not mandated by the Financial Accounting Standards Board, the American
Institute of Certified Public Accountants or the Securities and Exchange
Commission, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Acquired Corporation or any
redemption, purchase or other acquisition of any of its securities, or (v) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers, directors, or key employees of the Acquired
Corporation or any of its subsidiaries, except in the ordinary course of
business consistent with past practice.
5.12 Employee Benefit Plans. The employee benefit plans, programs and
arrangements maintained for the benefit of any current or former employee,
officer or director of the Acquired Corporation or any of its subsidiaries are
listed on Schedule 5.12 (the "Benefit Plans") and the Acquiring Corporation has
been furnished with a copy of each Benefit Plan and each material document
prepared in connection with each Benefit Plan. Except as disclosed by the
Acquired Corporation to the Acquiring Corporation: (i) none of the Benefit Plans
is a multi-employer plan within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); (ii) except as expressly disclosed
on Schedule 5.12, none of the Benefit Plans promises or provides retiree medical
or life insurance benefits to any person; (iii) each Benefit Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), has received a favorable determination letter from the Internal
Revenue Service (the "IRS") that it is so qualified and nothing has occurred
since the date of such letter to affect the qualified status of such Plan; and
(iv) each Plan has been operated in all material respects in accordance with its
terms and the requirements of applicable law.
5.13 Proxy Statement. The proxy statement to be sent to the
shareholders of the Acquired Corporation in connection with a shareholders'
meeting called for the purpose of considering the approval of the Plan (such
proxy statement, as amended or supplemented, being referred to herein as the
"Proxy Statement"), shall not, at the date the Proxy Statement (or any amendment
or supplement thereto) is first mailed to shareholders of the Acquired
Corporation, at the time of the shareholders' meeting and at the Effective Time,
be false or misleading with respect to any material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading or necessary to correct any statement in any earlier
communications with respect to the solicitation of proxies for the shareholders'
meeting which shall have become false or misleading; provided, that no
representation is made by the Acquired Corporation with respect to statements
made in the Proxy Statement based on information supplied in writing by the
Acquiring Corporation or its representatives expressly for inclusion in the
Proxy Statement. The Proxy Statement shall comply in all material respects as to
form with the requirements of the Exchange Act and the rules and regulations
thereunder.
5.14 Real Property and Leases. The Acquired Corporation and its
subsidiaries have sufficient title to all of their respective properties and
assets to conduct their respective businesses as currently conducted or as
contemplated to be conducted, with only such exceptions as, individually or in
the
-8-
<PAGE> 61
aggregate, would not have a material adverse effect on the Acquiring Corporation
and its subsidiaries taken as a whole.
5.15 Taxes. The Acquired Corporation and its subsidiaries have filed
all federal, state, local and foreign tax returns and reports required to be
filed by it and has paid and discharged all taxes shown as due thereon and has
paid all applicable ad valorem taxes as are due, other than (i) such payments as
are being contested in good faith by appropriate proceedings and (ii) such
filings, payments or other occurrences that, individually or in the aggregate,
would not have a material adverse effect on the Acquired Corporation and its
subsidiaries taken as a whole. Except as disclosed on Schedule 5.15, no taxing
authority or agency, domestic or foreign, is now asserting or, to the best
knowledge of the Acquired Corporation, threatening to assert against the
Acquired Corporation or any of its subsidiaries any deficiency or claim for
additional taxes or interest thereon or penalties in connection therewith. The
Acquired Corporation has not granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any
federal, state, county, municipal or foreign income tax. The accruals and
reserves for taxes reflected in the consolidated balance sheet of the Acquired
Corporation and its subsidiaries at December 31, 1997 are adequate to cover all
taxes accruable through such date (including interest and penalties, if any,
thereon) in accordance with generally accepted accounting principles.
5.16 Environmental Matters. There are no specific facts or
circumstances known to the Acquired Corporation that would indicate that the
Acquired Corporation or any of its subsidiaries will likely be subject to
liability in respect of a violation or alleged violation of any Environmental
Law (as defined below), which would be material to the Acquired Corporation and
its subsidiaries, taken as a whole. As used in this Agreement, "Environmental
Law" shall mean: any federal, state or local law, rule or regulation or common
law, relating to public health or safety, worker health or safety, or pollution,
damage to or protection of the environment including, without limitation, laws
relating to emissions, discharges, releases or threatened release of hazardous
materials (as defined by such laws) into the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, generation, disposal, transport or handling of any
hazardous material.
5.17 Brokers. No broker, finder or other investment banker is entitled
to receive any brokerage, finder's or other fee or commission in connection with
this Agreement or the transactions contemplated by this Agreement based upon
agreements made by or on behalf of the Acquired Corporation. IJL was retained
by, and acted as financial advisor to, the Special Committee. IJL's fee for its
financial advisory services is $65,000, plus certain expenses.
VI. REPRESENTATIONS AND WARRANTIES OF ACQUIRING CORPORATION.
6.1 Organization, Standing and Qualification. The Acquiring Corporation
is duly organized, validly existing and in good standing under the laws of Ohio,
and has the corporate power to own all of its properties and assets and to carry
on its business as it is now being conducted.
6.2 Authority for this Agreement. The Acquiring Corporation has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by
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<PAGE> 62
this Agreement. The execution and delivery of this Agreement by the Acquiring
Corporation and the consummation by the Acquiring Corporation of the
transactions contemplated by this Agreement have been duly and validly
authorized by the board of directors of the Acquiring Corporation and no other
corporate proceeding on the part of the Acquiring Corporation is necessary to
authorize this Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
the Acquiring Corporation and constitutes a valid and binding agreement of the
Acquiring Corporation, enforceable against the Acquiring Corporation in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors rights generally and
subject to general principles of equity (whether considered in a proceeding in
equity or at law).
6.3 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by the Acquiring Corporation nor the consummation of
the transactions contemplated by this Agreement will (a) conflict with or result
in a breach of any provision of the Amended Articles of Incorporation or Code of
Regulations of the Acquiring Corporation; (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except pursuant to the Exchange Act; (c) result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms of any obligation to which the Acquiring Corporation is a
party or by which any of its assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or that would not materially and
adversely affect the ability of the Acquiring Corporation to consummate the
transactions contemplated by this Agreement; or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Acquiring
Corporation or any of its assets, except for violation that would not materially
adversely affect the ability of the Acquiring Corporation to consummate the
transactions contemplated by this Agreement.
6.4 Financing. The Acquiring Corporation has sufficient funds to enable
it to satisfy its obligation to purchase the Plan Shares pursuant to this
Agreement.
6.5 Litigation. There is no claim, action, proceeding or governmental
investigation pending, or to the knowledge of the Acquiring Corporation,
threatened against the Acquiring Corporation that, individually or in the
aggregate, has had or could reasonably be expected to have a material adverse
effect on the ability of the Acquiring Corporation to consummate the
transactions contemplated by this Agreement or that in any manner seeks to
enjoin the Exchange.
6.6 Brokers. No broker, finder or other investment banker is entitled
to any brokerage, finder's or other similar fee or commission in connection with
this Agreement or the transactions contemplated by this Agreement based upon
agreements made by or on behalf of the Acquiring Corporation or its affiliates.
VII. INDEMNIFICATION; INSURANCE.
7.1 Until the sixth anniversary of the Effective Time, the Acquired
Corporation shall indemnify each of its officers, directors, employees or agents
(the "Indemnified Parties") against all losses, claims, damages, liabilities,
costs or expenses arising from his service as an officer, director,
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<PAGE> 63
employee or agent prior to and including the Effective Time, and shall provide
for the advancement of expenses incurred in defense of any action or suit, to
the fullest extent required pursuant to the Acquired Corporation's articles of
incorporation and bylaws as each is in effect on the date of this Agreement. If
any claim is made against any of the Indemnified Parties on or prior to the
sixth anniversary of the Effective Time arising from his service as an officer,
director, employee or agent at or prior to the Effective Time, the provisions of
this Section 7.1 shall continue in effect until the final disposition of all
such claims.
7.2 Until the sixth anniversary of the Effective Time, the Acquired
Corporation shall maintain, or cause to be maintained, in effect, at no expense
to the beneficiaries thereof, directors' and officers' liability protection with
respect to matters occurring at or prior to the Effective Time, providing the
same coverage with respect to the Acquired Corporation's officers and directors
as in effect on the date of this Agreement.
7.3 In the event the Acquired Corporation (i) consolidates with or
merges into any other person and shall not be the continuing or surviving entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Acquired
Corporation shall assume the obligations of the Acquired Corporation in this
Article VII.
VIII. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered personally or via courier service or when
received if mailed by registered mail, return receipt requested to the parties
at the addresses indicated below:
To Acquiring Corporation: The Goodyear Tire & Rubber Company
1144 East Market Street
Akron, Ohio 44316-0001
Attn: Clark E. Sprang, Vice President
To Acquired Corporation: Brad Ragan, Inc.
Post Office Box 240587
Charlotte, North Carolina 28224
Attn: Michael R. Thomann,
President
Copy to: Womble, Carlyle, Sandridge & Rice, PLLC
3300 One First Union Center
Charlotte, North Carolina 28202
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<PAGE> 64
Attn: Garza Baldwin, III, Esq.
and
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attn: Robin L. Hinson, Esq.
IX. MISCELLANEOUS.
9.1 Governing Law. This Agreement shall be interpreted, construed and
enforced under and in accordance with the laws of the State of North Carolina.
9.2 Binding Agreement. This Agreement shall be binding on and shall
inure to the benefit of the parties to this Agreement. Obligations undertaken by
the parties may not be assigned or delegated without the written consent of the
other party hereto and nothing herein shall be construed to create any rights
enforceable by any other person (except in the case of Sections 2.1 and 2.2
after the Effective Time).
9.3 Counterpart Originals. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
as long as one or more counterparts shall have been signed by each of the
parties and delivered to the other.
9.4 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties, superseding all prior agreements and
understandings between them relating to the subject matter of this Agreement.
9.5 Amendments. This Agreement may be amended only by the written
agreement of both parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Share Exchange to be duly executed by their respective officers
thereunto duly authorized as of the dates indicated below.
DATED: May 5, 1998 THE GOODYEAR TIRE & RUBBER COMPANY
Attest:/s/ James Boyazis By:/s/ George E. Strickler
-------------------------- -----------------------------------
James Boyazis, Secretary George E. Strickler, Vice President
DATED: May 5, 1998 BRAD RAGAN, INC.
Attest:/s/ Ronald J. Carr By:/s/ Michael R. Thomann
-------------------------- -----------------------------------
Ronald J. Carr, Secretary Michael R. Thomann, President
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<PAGE> 65
ANNEX III
FORM OF
ARTICLES OF AMENDMENT
OF
BRAD RAGAN, INC.
Pursuant to Sections 55-6-02 and 55-10-06 of the North Carolina General
Statutes, the undersigned corporation hereby submits these Articles of Amendment
for the purpose of amending its articles of incorporation to provide that
holders of the corporation's shares shall have dissenters' rights pursuant to
Section 5-13-02 of the North Carolina General Statutes:
1. The name of the corporation is Brad Ragan, Inc.
2. The following amendment to the articles of incorporation was adopted
by the corporation's shareholders on __________ ___, 1998 in the manner
prescribed by law:
Add as new Article XII the following:
XII
Notwithstanding that a class or series of shares of the
corporation may be listed on a national securities exchange or held of
record by more than 2,000 shareholders, holders of such shares shall be
entitled to dissent and obtain payment for their shares pursuant to and
as provided under Article 13 of Chapter 55 of the North Carolina
General Statutes.
3. The above amendment is effective upon the filing of these Articles
of Amendment.
This the _____ day of ____________, 1998.
BRAD RAGAN, INC.
By:
------------------------
Michael R. Thomann,
Chief Executive Officer
and President
<PAGE> 66
ANNEX IV
ARTICLE 13.
Dissenters' Rights.
Part 1. Right to Dissent and Obtain Payment for Shares.
SS. 55-13-01. DEFINITIONS. In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SS. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation
(other than a parent corporation in a merger under G.S. 55-11-04) is a
party unless (i) approval by the shareholders of that corporation is
not required under G.S. 55-11-03(g) or (ii) such shares are then
redeemable by the corporation at a price not greater than the cash to
be received in exchange for such shares;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, unless such shares are then redeemable by the corporation at
a price not greater than the cash to be received in exchange for such
shares;
(3) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than as
permitted by G.S. 55-12-01, including a sale in dissolution, but not
including a sale pursuant to court order or a sale pursuant to a plan
by which all or substantially all of the net proceeds of the sale will
be distributed in cash to the shareholders within one year after the
date of sale;
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(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's
shares because it (i) alters or abolishes a preferential right of the
shares; (ii) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares; (iii) alters or abolishes a
preemptive right of the holder of the shares to acquire shares or other
securities; (iv) excludes or limits the right of the shares to vote on
any matter, or to cumulate votes; (v) reduces the number of shares
owned by the shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under G.S. 55-6-04; or (vi)
changes the corporation into a nonprofit corporation or cooperative
organization;
(5) Any corporate action taken pursuant to a shareholder vote
to the extent the articles of incorporation, bylaws, or a resolution of
the board of directors provides that voting or nonvoting shareholders
are entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property, unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be
no right of dissent in favor of holders of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at the meeting at which the plan of merger or share
exchange or the sale or exchange of property is to be acted on, were (i) listed
on a national securities exchange or (ii) held by at least 2,000 record
shareholders, unless in either case:
(1) The articles of incorporation of the corporation issuing
the shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the
holders of the class or series are required under the plan of merger or
share exchange to accept for the shares anything except:
a. Cash;
b. Shares, or shares and cash in lieu of fractional
shares of the surviving or acquiring corporation, or of any
other corporation which, at the record date fixed to determine
the shareholders entitled to receive notice of and vote at the
meeting at which the plan of merger or share exchange is to be
acted on, were either listed subject to notice of issuance on
a national securities exchange or held of record by at least
2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SS. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
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(1) He submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
SS.SS. 55-13-04 TO 55-13-19: Reserved for future codification purposes.
Part 2. Procedure for Exercise of Dissenters' Rights.
SS. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02
is taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this
section, such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SS. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must
actually receive, before the vote is taken written notice of his intent
to demand payment for his shares if the proposed action is effectuated;
and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection
(a) is not entitled to payment for his shares under this Article.
SS. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must:
(1) State where the payment demand must be sent and where
and when certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
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(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30 nor more than 60
days after the date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SS. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22
must demand payment and deposit his share certificates in accordance with the
terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this Article.
SS. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
SS. 55-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30
days after receipt of a payment demand, the corporation shall pay each dissenter
who complied with G.S. 55-13-23 the amount the corporation estimates to be the
fair value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as
of the end of a fiscal year ending not more than 16 months before the
date of payment, an income statement for that year, a statement of cash
flows for that year, and the latest available interim financial
statements, if any;
(2) An explanation of how the corporation estimated the fair
value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment
under G.S. 55-13-28; and
(5) A copy of this Article.
SS. 55-13-26. FAILURE TO TAKE ACTION.
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(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SS. 55-13-27: Reserved for future codification purposes.
SS. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S
PAYMENT OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of the amount in excess of the payment by the corporation under G.S.
55-13-25 for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S.
55-13-25 is less than the fair value of his shares or that the interest
due is incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25;
or
(3) The corporation, having failed to take the proposed
action, does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within 60 days
after the date set for demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SS. 55-13-29: Reserved for future codification purposes.
Part 3. Judicial Appraisal of Shares
SS. 55-13-30. COURT ACTION.
(a) If a demand for payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and petition the court to determine the fair
value of the shares and accrued interest. A dissenter who takes no action within
the 60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether
or not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
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(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The parties are entitled to the same discovery
rights as parties in other civil proceedings. However, in a proceeding by a
dissenter in a public corporation, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation.
SS. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of
either or any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by this
Article.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
6
