January 23, 2007
By facsimile to (414) 297-4900 and U.S. Mail
Mr. Martin G. Carver
Chairman, Chief Executive Officer, and President
Bandag, Incorporated
Bandag Headquarters
2905 North Highway 61
Muscatine, IA 52761-5886
Re: Bandag, Incorporated
Preliminary Proxy Statement on Schedule 14A
Filed December 22, 2006
Annual Report on Form 10-K for the fiscal year ended December 31,
2005 and other Exchange Act reports incorporated by reference
File No. 1-7007
Dear Mr. Carver:
We limited our review of the filings to those issues that we
have addressed in our comments. Where indicated, we think that
you
should revise the documents in response to the comments. If you
disagree, we will consider your explanation why a comment is
inapplicable or a revision is unnecessary. Be as detailed as
necessary in your explanation. To understand better your
disclosure,
we may ask you in some comments to provide us supplemental
information. We may raise additional comments after reviewing
this
information.
Our review`s purpose is to assist you in your compliance with
applicable disclosure requirements and to enhance the overall
disclosure in your documents. We look forward to working with you
to
achieve these objectives. We welcome any questions that you may
have
about comments or any other aspect of our review. You may call us
at
the telephone numbers listed at the end of this letter.
Pre14A
Summary, page 1
1. Under "Our Reasons for the Merger," include a brief description
of
the most materials reasons for and risks of engaging in the
transaction.
2. Include a brief description of the merger related litigation.
We
note the disclosure on page 26.
Material U.S. Federal Income Tax Consequences, page 5
3. Delete the words "Generally" and "generally" in the first and
second sentences because the words may imply that stockholders
cannot
rely on the disclosure. Please revise also the disclosures under
"U.S. Federal Income Tax Consequences to U.S. Holders," "Backup
Withholding and Information Reporting," and "FIRPTA Tax" on pages
28
and 29. Delete also the phrase "for general information purposes
only" in the first paragraph under "Material U.S. Federal Income
Tax
Consequences" on page 26 and the words "In general" in the first
paragraph`s first sentence under "Backup Withholding and
Information
Reporting" on page 28 for the same reason.
Appraisal Rights, page 5
4. If holders of the common stock and class A common stock do not
have appraisal rights as indicated here and elsewhere in the proxy
statement, tell us why section 2.3 of the agreement and plan of
merger filed as appendix A contemplates appraisal rights.
Required Vote, page 8
5. Under a discrete caption or heading, explain briefly that
stockholders are being asked to vote on an adjournment of the
special
meeting, including to solicit additional votes in favor of the
merger
transaction and that a separate box on the proxy card is being
provided for this purpose. We note the disclosure in the first
paragraph`s second sentence.
Background of the Merger, page 10
6. Throughout this subsection, identify the members of senior
management who participated in the various meetings leading up to
the
proposal to engage in this transaction.
7. Disclosure on page 11 states that Bandag provided a summary of
its
preliminary 2007-2009 financial plan to Bridgestone and JPMorgan
on
October 6, 2006. Disclose the material features of this plan,
including any material projections that it may have included.
8. Disclosure on the October 27, 2006 meeting suggests that the
parties may have considered structuring the transaction as a
tender
offer. Disclose the advantages and disadvantages of this
alternative
structure that Bandag`s board considered and why it concluded, if
it
did so, that a merger was preferable.
9. Disclosure on page 12 states that Foley & Lardner advised
Bandag`s
board on November 29, 2006 on whether additional marketing of the
company was necessary. Elaborate on why the board did not conduct
any sort of market test or auction to determine whether
shareholders
were getting the maximum consideration for their shares.
10. Disclosure on page 12 states that Bandag`s board and its
financial and legal advisors discussed "generally" the possible
level
of interest of other parties, strategic or financial, in pursuing
an
acquisition of Bandag at a price in excess of $50.75 per share.
Please summarize the discussion.
Our Reasons for the Merger; Recommendation of Our Board of
Directors,
page 13
11. Rather than presenting an "outline" of factors considered by
Bandag`s board, elaborate on each of the bullet points on pages
13-14
as necessary for investors to understand how consideration of each
of
the listed factors impacted the board`s determination. For
example:
* You state in the first bullet point that the board considered
Bandag`s current and historical financial condition and results of
operations, including its prospects, if Bandag were to remain a
publicly-owned corporation. What was the board`s assessment of
Bandag`s current and historical financial condition and results of
operations, including its prospects, if Bandag were to remain a
publicly-owned corporation?
* You state in the seventh bullet point that the board considered
the
risk of significant damage to Bandag`s ongoing operations from a
broad sale process and the board`s belief that there was a low
likelihood of receiving a proposal superior to the merger.
Explain
why the board thought that a broad sale process could cause
significant damage to Bandag`s ongoing operations and why the
board
believed that there was a low likelihood of receiving a proposal
superior to the merger.
* You state in the eighth bullet point that the board believes the
merger represents the best strategic alternative for Bandag and in
the eleventh bullet point that the board considered the potential
value that might result from other alternatives available,
including
the alternative of remaining an independent public company.
Explain
why the board believed that the merger represents the best
strategic
alternative for Bandag. Other than the alternative of remaining
an
independent public company, indicate what other alternatives
available were considered by the board. How did each of the other
alternatives available inform the board`s determination?
* You state in the seventeenth bullet point that the board
considered
the potentially negative impact of the transaction on Bandag`s
employees and in the nineteenth bullet point the possible further
disruption of Bandag`s business that might result from the
announcement of the merger. Explain why the board thought that
the
merger could have a potentially negative impact on Bandag`s
employees
and why the board thought that the announcement of the merger
could
cause a possible further disruption of Bandag`s business. We note
disclosure in exhibit 99.2 of the current report on Form 8-K dated
and filed December 5, 2006 and elsewhere that "this transaction is
about opportunity, not cost cutting."
Review and revise, as necessary, the factors listed in the bullet
points on pages 13-14 with this comment in mind so that you
include a
meaningful discussion and analysis of how each of the factors
impacted the board`s recommendation.
12. The thirteenth bullet point states that "certain potentially
adverse decisions or actions" by customers, dealers, franchisees
or
distributors after December 5, 2006 would not in and of themselves
give rise to a right by Bridgestone to terminate the merger
agreement, provided Bandag has met "certain conditions." Describe
sufficiently the "certain potentially adverse decisions or
actions"
and the "certain conditions" so that a stockholder may understand
what they are.
Opinion of Our Financial Advisor, page 15
13. Expand the disclosure to state that William Blair consents to
the
use of its opinion and the related disclosure in this proxy
statement. Revise also the opinion attached as appendix B to
remove
the word "solely" from the statement in the penultimate paragraph
that "this opinion...will be solely for the confidential use of
the
Board of Directors" since shareholders should be entitled to rely
on
the opinion.
14. Provide us two copies of any outlines, summaries, reports, or
board books prepared and furnished by William Blair to Bandag`s
board
of directors.
Selected Public Company Analysis, page 17
15. We note that William Blair considered Bandag`s EBITDA, EBIT,
and
EPS on an historical and an adjusted basis. Explain why William
Blair conducted the analysis on an adjusted basis, and discuss how
you believe this affects the comparability of the analysis of
Bandag
to the selected companies.
16. Disclosure states that Bandag`s implied enterprise value based
on
the proposed merger`s terms is based on the equity value implied
by
the merger consideration plus the total debt and minority interest
less cash and cash equivalents assumed to be held by Bandag at
December 31, 2006. Disclose the amount of the implied enterprise
value for Bandag that William Blair used in its analyses, and show
how the amount was determined.
General, page 21
17. Disclose compensation paid or to be paid to William Blair and
any
of its affiliates for any other services to Bandag or any
affiliates
in the most recent two years. See Item 14 of Schedule 14A and
Item
1015(b)(4) of Regulation M-A. We note the disclosure in the
penultimate paragraph on page 21 and in the definitive proxy
statement on Schedule 14A filed April 17, 2006.
Interests of Our Executive Officers and Directors in the Merger,
page
22
18. We note the disclosure in this subsection relating to stock
options, restricted stock, and Pus of Bandag`s directors and
officers. We note also the disclosures under "Treatment of Stock
Options and Other Equity Awards" on pages 31-32 and in section 2.5
of
the agreement and plan of merger filed as appendix A to the proxy
statement. Further, section 8.1(31) of the agreement and plan of
merger defines "Company Equity Awards" as all stock options,
shares
of restricted stock, performance shares, company stock
appreciation
rights or SARs, company performance units or Pus, and company
dividend equivalent units or DEUs. Confirm that Bandag`s
directors
and officers do not hold performance shares, company SARs, and
company DEUs. Alternatively, provide disclosure of these awards
for
the directors and officers in the proxy statement.
19. Disclosure states that Bandag will use its best efforts to
obtain
before the merger`s effective time all waivers from holders of
equity
awards under its equity incentive plans as may be necessary to
give
effect to the treatment of options and other equity-based awards.
Clarify that Bandag is required to obtain equity award waivers
from
at least 65% of the shares subject to the common stock equity
awards
granted under its 1999 stock award plan, as amended on March 12,
2002. We note the disclosure on page 42.
Severance Agreements, page 24
20. Disclosure states that Messrs. Mark A. Winkler, David W.
Dahms,
Frederic U. Kopittke, and Jeffrey C. Pattison also are parties to
severance agreements that provide for a severance payment of two
years` base salary for Mr. Kopittke and one year`s base salary for
the other executive officers. State the base salary amount for
each
executive officer. See Item 14(b)(7) of Schedule 14A and Item
1011(a)(1) of Regulation M-A. We note that a form of severance
agreement was filed as exhibit 10.2 to the current report on Form
8-K
dated December 14, 2006 and filed December 20, 2006.
Regulatory Approvals and Requirements, page 26
21. As appropriate, continue to update the status of any required
regulatory approvals.
Litigation Related to the Merger, page 26
22. As appropriate, continue to update the disclosure of any
merger
related litigation.
Special Meeting of Our Shareholders; Recommendation of Our Board
of
Directors, page 39
23. We note the phrase "cleared by the SEC." Since the phrase
implies that we bear responsibility for disclosures contained in
the
proxy statement, please delete.
Security Ownership of Certain Beneficial Owners, page 46
24. Disclosures in the table relating to the beneficial ownership
of
Messrs. Martin G. Carver and Roy J. Carver, Jr. are inconsistent
with
the disclosures in footnotes 5 and 7.
The table states that:
* Mr. Marvin G. Carver beneficially owns 3,146,132 shares or 31.5%
of
common stock and 4,089,941 shares or 43.1% of class A common
stock.
* Mr. Roy J. Carver, Jr. beneficially owns 3,522,406 shares or
37.1%
of class A common stock.
Footnotes 5 and 7 state that:
* Mr. Marvin G. Carver beneficially owns 3,145,745 shares or 31.5%
of
common stock and 3,866,248 shares or 40.8% of class A common
stock.
* Mr. Roy J. Carver, Jr. beneficially owns 3,509,471 shares or
37.0%
of class A common stock.
Please reconcile the disclosures. We note that the disclosure
under
"Voting Agreements" on page 39 is consistent with the disclosures
in
footnotes 5 and 7.
Shareholders Owning More Than Five Percent, page 48
25. Disclosure in footnote 2 states that the parties have sole
voting
power over 506,312 of the 567,486 shares and sole dispositive
power
over 567,846 shares and share voting and dispositive power over
none
of the shares. Since the parties have sole voting power over
506,312
of the 567,486 shares, it appears that they share voting power
over
61,174 shares. Please revise or advise.
Where You Can Find More Information, page 49
26. Include the Commission`s filing number for filings made by
Bandag
under the Exchange Act.
27. Notwithstanding the disclaimers in the last paragraph on page
50
relating to the representations and warranties made in the
agreement
and plan of merger filed as appendix A to the proxy statement,
Bandag
is responsible for considering whether additional specific
disclosures in the proxy statement are required to put into
context
information about the representations and warranties so that the
information in the proxy statement is not misleading. Please
confirm
your understanding.
8-K dated December 5, 2006 and filed December 6, 2006
Exhibit 2.1
28. We note that you have not filed the related schedules to the
agreement and plan of merger. We note the reference to annexes
and
schedules in section 8.2 of the agreement and plan of merger.
File
by amendment to the 8-K a list to identify briefly the contents of
all omitted schedules or similar supplements to the agreement and
plan of merger. See Item 601(b)(2) of Regulation S-K.
Closing
File a revised Pre14A and an amendment to the 8-K dated
December
5, 2006 and filed December 6, 2006 in response to the comments.
To
expedite our review, you may wish to provide us three marked
courtesy
copies of the filings. Include with the filing a cover letter
tagged
as correspondence that keys the responses to the comments and any
supplemental information requested. If you think that compliance
with any of the comments is inappropriate, provide the basis in
the
letter. We may have additional comments after review of the
filings,
the responses to the comments, and any supplemental information.
We urge all persons responsible for the accuracy and adequacy
of
the disclosures in the filings reviewed by us to make certain that
they have provided all information that investors require for an
informed decision. Since Bandag and its management are in
possession
of all facts relating to the disclosures in the filings, they are
responsible for the adequacy and accuracy of the disclosures that
they have made.
When responding to our comments, provide a written statement
from Bandag acknowledging that:
* Bandag is responsible for the adequacy and accuracy of the
disclosures in the filings.
* Our comments or changes to disclosures in response to our
comments
do not foreclose the Commission from taking any action on the
filings.
* Bandag may not assert our comments as a defense in any
proceedings
initiated by the Commission or any person under the United States`
federal securities laws.
The Commission`s Division of Enforcement has access to all
information that Bandag provides us in our review of the filings
or
in response to our comments on the filings.
You may direct questions on comments and other disclosure issues
to
Edward M. Kelly, Senior Counsel, at (202) 551-3728 or me at (202)
551-3760.
Very truly yours,
Pamela A. Long
Assistant Director
cc: Peter D. Fetzer, Esq.
Jay O. Rothman, Esq.
Foley & Lardner LLP
777 East Wisconsin Avenue
Milwaukee, WI 53202-5306
Mr. Martin G. Carver
January 23, 2007
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE