You are cordially invited to attend a special meeting of the shareholders of Bandag, Incorporated to be held on April 3, 2007, at 10:00 a.m., Central time, at the Bandag, Incorporated Learning Center, 2000 Bandag Drive, Muscatine, Iowa.

On December 5, 2006, we entered into a merger agreement providing for the merger of Bandag and Grip Acquisition Corporation, a wholly owned subsidiary of Bridgestone Americas Holding, Inc. A copy of the merger agreement is attached as Appendix A to the enclosed proxy statement. If the merger is completed, the owners of each outstanding share of our Common Stock and Class A Common Stock as of the effective time of the merger will be entitled to receive $50.75 per share in cash, without interest. At the special meeting, you will be asked to approve the merger agreement. For our shareholders to approve the merger agreement, assuming a quorum is present, votes cast by the holders of Common Stock and Class A Common Stock, each voting separately as a class, favoring approval of the merger agreement must exceed the votes cast against the approval of the merger agreement. Accordingly, your vote is very important. (All share information contained in the attached proxy materials reflects the conversion on January 16, 2007 of each share of our Class B Common Stock into one share of Common Stock.)

Our board of directors unanimously determined that the merger is in the best interests of our company and shareholders, and unanimously adopted and approved the merger agreement and the transactions contemplated by the merger agreement. Our board of directors recommends that our shareholders vote “FOR” the approval of the merger agreement. The recommendation of our board of directors is based, in part, on the written opinion, dated December 5, 2006, of William Blair & Company, L.L.C., the financial advisor to our board of directors, to the effect that as of that date, and based upon and subject to the assumptions made, procedures followed, matters considered, limitations and qualifications set forth therein, the merger consideration of $50.75 per share to be received by holders of our Common Stock and Class A Common Stock (other than Bridgestone or its affiliates) in the merger was fair, from a financial point of view, to such holders, as described in the enclosed proxy statement. The full text of William Blair’s written opinion is attached as Appendix B to the enclosed proxy statement. We urge you to read the opinion carefully in its entirety.

Each of Martin G. Carver, Roy J. Carver, Jr. and Carver Partners LP have entered into a voting agreement, dated as of December 5, 2006, with Grip Acquisition pursuant to which they have each agreed to vote for and to grant irrevocable proxies to Grip Acquisition’s designees for the purpose of voting all of their aggregate shares in favor of the merger agreement and the transactions contemplated thereby and against, among other things, any proposal made in opposition to, or in competition or inconsistent with, the merger agreement or the merger.

The enclosed proxy statement provides you with detailed information about the merger agreement, the proposed merger and the special meeting. We urge you to read the entire proxy statement carefully, including

Regardless of the number of shares you own, your vote is very important. Whether or not you plan to attend the special meeting, please complete, sign, date and mail the enclosed proxy in the postage-paid envelope provided (or, if your shares are held in “street name” by a broker, nominee, fiduciary or other custodian, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct it to vote your shares). You retain the right to revoke the proxy at any time before it is actually voted by giving notice in writing to our Secretary prior to commencement of the special meeting, or by submitting a duly executed proxy bearing a later date. You may vote in person at the special meeting even if you have returned a proxy. If you have instructed a broker, nominee, fiduciary or other custodian to vote your shares, then you must follow directions received from the broker, nominee, fiduciary or other custodian to change or revoke your voting instructions. Your cooperation in voting your shares will be greatly appreciated. Please do not send in stock certificates at this time. If the merger is completed, we will send you instructions detailing the procedures for exchanging existing Bandag stock certificates for the merger consideration.

On behalf of our board of directors, I thank you for your continued support.

The enclosed proxy is solicited on behalf of our board of directors for use at a special meeting of our shareholders to be held on April 3, 2007, at 10:00 a.m., Central time, at the Bandag, Incorporated Learning Center, 2000 Bandag Drive, Muscatine, Iowa, or at any adjournment or postponement of the special meeting.

At the special meeting, our shareholders will be asked to:

Each shareholder on the record date will be entitled to vote at the meeting. Holders of Common Stock are entitled to one vote for each share held and holders of Class A Common Stock are entitled to one vote for each share held (holders of Class A Common Stock are not entitled to vote except as otherwise required by law, such as at the special meeting). All of our shares of Class B Common Stock were converted into shares of Common Stock prior to the record date.

We have fixed February 22, 2007 as the record date for the special meeting. Only shareholders of record as of the close of business on the record date are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. As of the close of business on the record date, there were 9,981,019 shares of our Common Stock issued and outstanding and 9,522,597 shares of our Class A Common Stock issued and outstanding. A list of shareholders will be available for review at our executive offices during regular business hours beginning two business days after notice of the meeting is given and continuing to the date of the special meeting and will be available for review at the special meeting or any adjournment or postponement thereof.

If you sell or transfer your shares of our Common Stock or Class A Common Stock after the record date but before the special meeting, you will transfer the right to receive the merger consideration, if the merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote at the special meeting.

All votes will be tabulated by the inspector of election appointed for the special meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. Absent specific instructions from the beneficial owner of the shares, brokers are not allowed to exercise their voting discretion with respect to the approval of non-routine matters, such as approval of the merger agreement. Proxies submitted without a vote by brokers on these matters are referred to as “broker non-votes.” Abstentions and broker non-votes will be counted for purposes of determining the presence of a quorum, but do not constitute a vote “for” or “against” any proposal at the special meeting and will be disregarded in the calculation of “votes cast.”

Holders of shares of our stock entitled to vote at the special meeting may take action on a matter at the special meeting only if a quorum of those shares exists with respect to that matter. Accordingly, the presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of each of our Common Stock and Class A Common Stock entitled to vote at the special meeting is necessary to constitute a quorum for the transaction of business at the special meeting by each of the Common Stock and Class A Common Stock, voting separately as a class. In the event that a quorum is not present at the special meeting, we currently expect that we will adjourn or postpone the special meeting to solicit additional proxies.

If a share of our Common Stock or Class A Common Stock is represented for any purpose at the special meeting, other than for the purpose of objecting to the special meeting or the transacting of business at the special meeting, it will be deemed present for purposes of determining whether a quorum exists.

Any shares of our Common Stock or Class A Common Stock held in treasury by us are not considered to be outstanding on the record date or otherwise entitled to vote at the special meeting for purposes of determining a quorum.

Shares represented by proxies reflecting abstentions and properly executed broker non-votes will be counted as present and entitled to vote for purposes of determining a quorum.

Proposal to Approve the Merger Agreement.  To approve the merger agreement, assuming a quorum exists, votes cast by the holders of Common Stock and Class A Common Stock, each voting separately as a class, favoring approval of the merger agreement must exceed the votes cast against the approval of the merger agreement.

The principal shareholders have entered into a voting agreement, dated as of December 5, 2006, with Grip Acquisition pursuant to which the principal shareholders have each agreed to vote for and to grant irrevocable proxies to Grip Acquisition’s designees for the purpose of voting all of the principal shareholders’ aggregate shares in favor of the merger agreement and the transactions contemplated thereby and against, among other things, any proposal made in opposition to, or in competition or inconsistent with, the merger agreement or the merger.

Proposal to Adjourn Meeting to Permit Further Solicitation of Proxies.  If there are not sufficient votes at the time of the special meeting to approve the merger agreement, we may propose that the meeting be adjourned or postponed to permit further solicitation of proxies. The proxy card contains a separate box for shareholders to mark their vote on this proposal should we elect to bring it before the shareholders at the special meeting. If a quorum exists at the special meeting, the proposal to approve the adjournment or postponement of the special meeting to solicit additional proxies in favor of the merger agreement will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against the proposal, with the Common Stock and Class A Common Stock voting together.

General.  As of February 22, 2007, the record date, our directors and executive officers held and are entitled to vote, in the aggregate, 3,554,228 shares of our Common Stock, representing 35.6% of the issued and outstanding shares of our Common Stock; and 4,107,000 shares of our Class A Common Stock, representing 43.1% of the issued and outstanding shares of our Class A Common Stock. Our directors and executive officers have informed us that they intend to vote all of their shares of our Common Stock and Class A Common Stock “FOR” the approval of the merger agreement and “FOR” the meeting adjournment proposal.

Abstentions and broker non-votes will be counted for purposes of determining the presence of a quorum, but do not constitute a vote “for” or “against” any proposal at the special meeting and will be disregarded in the calculation of “votes cast.”

If the special meeting is adjourned or postponed for any reason, at any subsequent reconvening of the special meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the meeting, except for any proxies that have been revoked or withdrawn.

You may vote by attending the special meeting and voting in person by ballot or by completing the enclosed proxy and then signing, dating and mailing it in the postage-paid envelope provided. Submitting a proxy now will not limit your right to revoke your proxy and to vote at the special meeting if you decide to attend in person. If your shares are held in “street name” by a broker, nominee, fiduciary or other custodian, then follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct it to vote your shares.

Shares represented by a properly executed proxy will be voted at the special meeting and, when instructions have been given by the shareholder, will be voted in accordance with those instructions. If you submit a proxy without giving voting instructions, then the persons named as proxies on the proxy card will vote your shares “FOR” the approval of the merger agreement, and “FOR” the proposal to adjourn or postpone the special meeting if necessary to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the merger agreement.

If you hold shares of our stock as a participant in one of our 401(k) savings plans, the trustee for the savings plan will vote the shares you hold through the plan as you direct. We will provide plan participants who hold stock through the savings plan with forms on which participants may communicate their voting instructions. If voting directions are not received for shares held in the savings plan, then the shares credited to your account will not be voted.

You may revoke your proxy at any time before it is actually voted by giving notice in writing to our Secretary prior to commencement of the special meeting, or by submitting a duly executed proxy bearing a later date. Attendance at the special meeting will not, by itself, revoke a proxy. If you have given voting instructions to a broker, nominee, fiduciary or other custodian that holds your shares in “street name,” then you may revoke those instructions by following the directions given by the broker, nominee, fiduciary or other custodian.

Please do not send in stock certificates at this time. If the merger is completed, we will send you instructions detailing the procedures for exchanging existing Bandag stock certificates for the merger consideration.

Any shareholder who has questions or requests assistance in completing and submitting a proxy should contact Georgeson Inc., which is assisting us, toll free at (866) 425-8557.

This proxy statement is being furnished in connection with the solicitation of proxies by our board of directors. We will bear the costs of soliciting proxies. These costs include the preparation, assembly and mailing of the proxy statement, the notice of the special meeting of shareholders and the enclosed proxy, as well as the cost of forwarding these materials to the beneficial owners of our Common Stock. Our directors, officers and employees may, without compensation other than their regular compensation, solicit proxies by mail, e-mail or telephone, in person or via the Internet. We have retained Georgeson Inc., a proxy solicitation firm, for assistance in connection with the solicitation of proxies for the special meeting at a cost of $7,500 and reimbursement of reasonable out-of-pocket expenses. We will also reimburse brokers, nominees, fiduciaries and other custodians for expenses reasonably incurred in forwarding proxy material to the beneficial owners of our Common Stock and Class A Common Stock.

Under Iowa law, since our Common Stock and Class A Common Stock are traded on the New York Stock Exchange and we are not being acquired by a person, or by an affiliate of a person, who at any time in the one-year period immediately preceding December 5, 2006 was the beneficial owner of twenty percent or more of the voting power of the company, holders of the Common Stock and Class A Common Stock do not have the right to exercise appraisal rights in connection with the merger. Prior to the January 16, 2007 conversion of our Class B Common Stock into Common Stock, the holders of the Class B Common Stock would have had appraisal rights in connection with the merger because the Class B Common Stock was not traded on an exchange.

If the special meeting is adjourned to a different place, date or time, we do not need to give notice of the new place, date or time if the new place, date or time is announced at the meeting before adjournment, unless a new record date is or must be set for the adjourned meeting. Our board of directors must fix a new record date if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

In order to attend the special meeting in person, you must be a shareholder of record on the record date, hold a valid proxy from a record holder or be our invited guest. You may be asked to provide proper identification at the registration desk on the day of the meeting or any adjournment of the meeting.

In our traditional business, we engage primarily in the production and sale of precured tread rubber and equipment used by our franchisees for the retreading of tires for transportation companies, and their trucks, buses, light commercial trucks, and industrial equipment, off-the-road equipment and cars. We have increasingly found that transportation companies actively seek to use a single vendor that can offer tire management programs that include the full range of tire products, including both new tires and retreaded tires.

In this regard, we have had a decades-long business relationship with Bridgestone. Our TDS stores have been authorized dealers of Bridgestone new tires. In addition, several GCR Tire Centers, which are owned by Bridgestone and service the truck and off-the-road trucking industry, are our franchisees. In addition, we and Bridgestone have numerous franchisees and dealers in the United States and Canada who sell both Bandag and Bridgestone products. Our relationship with Bridgestone also has been important because retreads and new Bridgestone tires are complementary, serving different customer needs. Retreading enables customers to get the full value of a new tire by retreading the tire’s casing. As such, being able to sell new tires as well as retreading materials and services is an integral part of a successful total tire management program.

Prior to Bridgestone’s offer to acquire us, we had engaged in discussions concerning a possible joint venture relationship with Bridgestone in North America. The desire was to find a way, among other things, to provide enhanced service to our customers through our shared distribution network. The joint venture discussions with Bridgestone were terminated prior to our execution of the merger agreement, as we determined that the merger presented a better alternative for our shareholders and a better strategic alternative for putting the combined business in a more favorable position to serve customers seeking a total tire management program.

Bridgestone made an initial inquiry regarding a potential business combination on September 1, 2006, when Martin G. Carver, our Chairman, President and Chief Executive Officer, met with Mark A. Emkes, Chairman and Chief Executive Officer of Bridgestone. Mr. Emkes indicated that Bridgestone was interested in considering a business combination transaction involving us. Bridgestone indicated that it was prepared to enter into a customary confidentiality and standstill agreement. Because none of the members of our board of directors was affiliated with Bridgestone, and because a majority of the board was independent (in accordance with recognized exchange listing requirements), the board did not believe (based on the advice of counsel) it necessary to constitute a special committee of directors to consider a possible transaction with Bridgestone.

On September 5, 2006, we received a proposed confidentiality and standstill agreement and an initial due diligence request list from Bridgestone. In addition, on September 5, 2006, our board of directors held a meeting at which Mr. Carver briefed the directors about the September 1 meeting he had with Mr. Emkes. The directors discussed the steps related to the proposed business combination and the necessity for confidentiality of any discussions relating to a proposed business combination. It was unanimously agreed that management should continue the business combination discussions with Bridgestone, and the board determined that no information should be provided to Bridgestone before Bridgestone executed an acceptable confidentiality and standstill agreement. The directors also approved the retention of William Blair as financial advisor, provided that the written agreement engaging William Blair and the fee to be paid to William Blair remained subject to the board’s future approval.

In addition, on September 5, 2006, we contacted William Blair to retain their services as financial advisor in connection with discussions with Bridgestone.

On September 18, 2006, Bridgestone entered into a confidentiality and standstill agreement with us.

On September 25, 2006, we delivered preliminary due diligence materials to Bridgestone and its financial advisor, JPMorgan.

On October 2, 2006, members of our senior management (Messrs. Carver, Heidbreder and Pattison) met with members of senior management of Bridgestone (Ken Weaver, Vice President-Finance of North American

On October 6, 2006, we provided additional preliminary due diligence materials to Bridgestone and JPMorgan, including a summary of our preliminary 2007-2009 financial plan. See “— Forward-Looking Financial Information.”

On October 20, 2006, Bridgestone submitted a written indication of interest to pursue a business combination transaction that would include the payment of $49.50 per share to the holders of each class of our stock. In this letter, Bridgestone reiterated that its proposal was predicated on negotiating on an exclusive basis until the signing of definitive agreements. Our board of directors met by telephone to consider the indication of interest. Representatives of William Blair also attended the meeting and discussed the indication of interest with the directors. In determining to enter into exclusive negotiations with Bridgestone, our board of directors considered: (1) the level of Bridgestone’s indicated price; (2) Bridgestone’s indication that it would not participate in a bidding contest, and if Bridgestone would not join in a competitive process, the risk of losing Bridgestone’s proposal; (3) based on our industry knowledge and advice from our advisors, that other parties were unlikely to be interested in pursuing a transaction or would be unlikely to offer a higher price; and (4) the significant risk of damage to our competitive position and on-going operations if we conducted a broad sale process because such process could negatively impact our relationship with our fleet customers, dealers, franchisees and distributors.

During the next several days, our advisors continued to discuss the due diligence process with the financial and legal advisors for Bridgestone.

On October 27, 2006, our board of directors held a meeting to further consider the proposed merger. Representatives of William Blair attended the meeting, updated the board on the status of negotiations and discussed a preliminary valuation analysis of the proposed transaction with the board. A representative of Foley & Lardner LLP (which we refer to as “Foley & Lardner”), our outside legal counsel, also attended the meeting and advised the directors on a number of matters, including (1) the requirement in our articles of incorporation that each class of stock receive the same per share consideration in any merger transaction; (2) the fiduciary obligations of the directors when considering an acquisition proposal such as the one presented by Bridgestone; and (3) the advantages and disadvantages of effecting an acquisition by way of tender offer versus a merger transaction. The chief advantage of a tender offer that our board of directors considered was the potential speed with which a tender offer could be completed. Among the disadvantages of a tender offer that our board of directors considered were the fact that the time period for obtaining regulatory approvals could materially exceed the customary tender offer period, the lack of certainty that a sufficient number of holders will tender their shares, the complexity of effecting a tender offer for our three classes of stock and the need for a two-step process versus the one-step process for a negotiated merger. Our board of directors determined that a negotiated merger would be preferable, as the board believed that there would be a higher degree of certainty of being able to successfully complete the transaction as a negotiated merger and that the timeline for a merger transaction would align more closely with the timeline for obtaining the necessary regulatory approvals. Representatives of management updated the directors on the status of the due diligence process. Also at this meeting, our board of directors approved the written agreement engaging William Blair as our financial advisor in connection with the proposed business combination.

Following the board meeting, on October 27, 2006, representatives of William Blair discussed with representatives of JPMorgan the indicated price and certain terms of the indication of interest and indicated that certain of these terms, including the indicated price of $49.50 per share, would need to be improved. The

During the week of October 30, 2006, we continued the due diligence process, which continued through the end of November. During this period we provided additional due diligence materials to Bridgestone.

On October 30, 2006, Jones Day, outside legal counsel to Bridgestone, provided us with a draft merger agreement regarding the proposed transaction with Bridgestone. During the next several weeks, William Blair, JPMorgan, Jones Day and Foley & Lardner held a number of conference calls to discuss the due diligence materials and process. These parties also had a number of discussions relating to legal documentation, the specific terms of the proposed merger agreement and related ancillary documents. During this period, the parties exchanged drafts of the merger agreement, voting agreements, consulting agreements and disclosure letters.

On November 7, 2006, our board of directors held a regular quarterly meeting. Representatives of William Blair updated the board on the actions taken, particularly in the due diligence process, since the October 27 meeting. The representatives reported that, as requested by us, they had informed Bridgestone’s financial advisor that various terms, including the proposed $49.50 price, would need to be improved, but that Bridgestone’s proposal provided a basis for additional due diligence and for negotiations of price and other terms. The board of directors also discussed the necessity to retain our key executives during the period following any public announcement of the transaction. In that regard, it considered the advisability of providing severance agreements for certain key employees in order to assure their continued services and the viability of the business following the public announcement.

On November 22, 2006, Bridgestone submitted a revised indication of interest to pursue a merger at $50.75 per share, subject to the completion of its due diligence investigation and the negotiation of an acceptable merger agreement.

On November 28, 2006, Bridgestone, William Blair, JPMorgan, Jones Day and Foley & Lardner conducted negotiations to finalize the merger agreement and related ancillary agreements. As part of those negotiations, our representatives requested and obtained changes to the proposed termination fee provisions, closing conditions and certain other matters.

On November 29, 2006, our board of directors met by telephone to consider the status of the proposed transaction with Bridgestone. A representative of Foley & Lardner reviewed the current draft of the merger agreement, a summary of which had been previously provided to the directors. Among other items, Foley & Lardner reviewed the various circumstances under which the merger agreement could be terminated, including the ability of the board to terminate the merger agreement and accept a “superior proposal” upon the payment of a termination fee to Bridgestone. Foley & Lardner also advised the board with respect to its fiduciary obligations relative to considering the transaction and whether additional marketing of our company was necessary. In this regard, our board of directors determined, based on the evidence available to it, that an active survey of the market was not advisable, taking into consideration: (1) Bridgestone’s indication that it would not participate in a bidding contest and, if it would not join in a competitive process, the risk of losing Bridgestone’s proposal; (2) based on our industry knowledge and advice from our advisors, that there was a limited likelihood that another strategic buyer would emerge; (3) advice from William Blair that based on forecasts provided by management and the financial and strategic requirements of financial buyers, it was unlikely that a financial buyer would offer merger consideration in excess of the price negotiated with Bridgestone; (4) William Blair’s indication that, if requested, it would likely be able to render an opinion that the merger consideration was fair, from a financial point of view, to the shareholders; (5) the significant risk of damage to our competitive position and on-going operations if we conducted a broad sale process because such process could negatively impact our relationship with our fleet customers, dealers, franchisees and distributors; and (6) that Bridgestone’s proposal included provisions that would permit us to pursue other “superior proposals” after the execution of the merger agreement. Representatives of William Blair also attended the meeting and discussed the key financial aspects of the proposed transaction. The directors also discussed the issues of severance agreements, consulting agreements and related matters.

Following our November 29, 2006 board meeting, we, along with our legal and financial advisors, continued to negotiate the terms of the proposed merger with Bridgestone and its legal and financial advisors.

On December 4, 2006, our board of directors met to consider the terms of the merger agreement as finally negotiated. Representatives of Foley & Lardner and William Blair attended the meeting. They reviewed the terms and conditions of the merger agreement and William Blair’s fairness analysis. A copy of the written materials used by William Blair in making its presentation had been provided to the directors in advance of the meeting. William Blair then delivered its oral opinion to our board of directors, subsequently confirmed in a written letter, dated December 5, 2006, that, as of that date and based upon and subject to the assumptions and qualifications set forth in its opinion, the consideration of $50.75 in cash per share of our stock was fair, from a financial point of view, to the holders (other than Bridgestone or its affiliates) of each class of our stock. Representatives of William Blair and Foley & Lardner discussed our decision not to seek other potential buyers, noting that the terms of the merger agreement provided our board with a fiduciary out in the event that we receive a “superior proposal” (as defined in the merger agreement). Foley & Lardner provided an assessment of the regulatory issues related to the merger and certain other potential strategic buyers. The 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 us at a price in excess of $50.75 per share. In this discussion, our board considered the same issues it had considered at the November 29 board meeting, namely: (1) Bridgestone’s indication that it would not participate in a bidding contest and, if it would not join in a competitive process, the risk of losing Bridgestone’s proposal; (2) based on our industry knowledge and advice from our advisors, that there was a limited likelihood that another strategic buyer would emerge; (3) advice from William Blair that based on forecasts provided by management and the financial and strategic requirements of financial buyers, it was unlikely that a financial buyer would offer merger consideration in excess of the price negotiated with Bridgestone; (4) William Blair’s opinion that the merger consideration was fair, from a financial point of view, to the shareholders; (5) the significant risk of damage to our competitive position and on-going operations if we conducted a broad sale process because such process could negatively impact our relationship with our fleet customers, dealers, franchisees and distributors; and (6) that Bridgestone’s proposal included provisions that would permit us to pursue other “superior proposals” after the execution of the merger agreement.

Following deliberations, our board of directors unanimously approved the merger agreement, determined that the merger agreement is in the best interests of our company and our shareholders, and recommended that shareholders vote “FOR” approval of the merger agreement and “FOR” the approval of any proposal to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies in the event that there were not sufficient votes in favor of the approval of the merger agreement at the time of the special meeting.

Following completion of the respective meetings of our board of directors and the board of directors of Bridgestone on December 4, 2006, as well as the board of directors of Bridgestone Japan on December 5, 2006, Messrs. Carver and Emkes advised each other that their respective boards of directors had approved the proposed merger. The companies and their outside legal counsel then agreed upon all final revisions to the definitive documents, including the disclosure letters (in each case consistent with the terms that were approved by the respective boards of directors). The companies then executed the definitive merger agreement and ancillary documents and issued a joint press release prior to the opening of the markets on Tuesday, December 5, 2006 announcing the execution of the merger agreement.

On December 4, 2006, our board of directors unanimously adopted resolutions:

Our board of directors believes that the merger agreement is in the best interests of our company and shareholders. In reaching these conclusions, our board of directors consulted with certain members of our senior management and our legal and financial advisors, and considered the short-term and long-term interests of our shareholders and the future prospects of our company. In reaching the foregoing determinations, the board of directors considered the following material factors:

The board of directors also considered a variety of risks and other potentially negative factors concerning the merger. These factors included the following:

The foregoing discussion of the information and factors considered by our board of directors is not intended to be exhaustive but, we believe, includes the material factors considered by the board. Based on the factors outlined above, the board of directors determined that the merger agreement is in the best interests of our company and our shareholders.

Our board of directors believes that the merger agreement is in the best interests of our company and our shareholders. Our board of directors recommends that you vote “FOR” approval of the merger agreement.

William Blair & Company, L.L.C. was retained to act as our financial advisor to render certain investment banking services in connection with a potential business combination. As part of its engagement, we requested William Blair to render an opinion as to whether the $50.75 per share merger consideration to be received by the holders (other than Bridgestone or its affiliates) of the outstanding shares of each of the Common Stock, Class A Common Stock and Class B Common Stock of Bandag (which we sometimes refer to collectively as “common equity”) was fair to such holders from a financial point of view. (On January 16, 2007, each share of Class B Common Stock was converted into one share of Common Stock.) On December 4, 2006, William Blair delivered its oral opinion to our board of directors and subsequently confirmed in writing, dated December 5, 2006, that, as of that date and based upon and subject to the assumptions and qualifications stated in its opinion, the consideration of $50.75 in cash per share of common equity was fair, from a financial point of view, to the holders (other than Bridgestone or its affiliates) of each class of common equity.

In rendering its opinion, William Blair performed certain financial analyses and took into account the provisions in our restated articles of incorporation, as amended, providing that the holders of each class of the common equity shall be entitled to receive the same per share consideration in the event of a merger or consolidation of Bandag. Based upon the totality of the facts and circumstances, including, but not limited to its financial analysis and its review of the provisions of our restated articles of incorporation, as amended, William Blair concluded that the merger consideration was fair, from a financial point of view, to the holders (other than Bridgestone or its affiliates) of each class of common equity. William Blair did not express any opinion as to the relative fairness of the consideration offered to each class of the common equity.

William Blair provided the opinion described above for the information and assistance of our board of directors in connection with its consideration of the merger. The terms of the merger agreement and the amount and form of the merger consideration, however, were determined through negotiations between us and Bridgestone and were approved by our board of directors. William Blair has consented to the inclusion in this proxy statement of its opinion and the description of its opinion appearing under this subheading “Opinion of Our Financial Advisor.” The William Blair opinion is addressed to the Board of Directors for its use in evaluating Bridgestone’s proposal and determining whether to recommend that proposal to the shareholders. The William Blair opinion is included in this proxy statement so that the shareholders can assess the role of such opinion in the Board of Directors’ development of its recommendation to shareholders.

THE FULL TEXT OF WILLIAM BLAIR’S WRITTEN OPINION, DATED DECEMBER 5, 2006, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT AND INCORPORATED INTO THIS DOCUMENT BY REFERENCE. YOU ARE URGED TO READ THE ENTIRE OPINION CAREFULLY AND IN ITS ENTIRETY TO LEARN ABOUT THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY WILLIAM BLAIR IN RENDERING ITS OPINION. WILLIAM BLAIR’S OPINION WAS DIRECTED TO OUR BOARD OF DIRECTORS FOR ITS BENEFIT AND USE IN EVALUATING THE FAIRNESS OF THE MERGER CONSIDERATION AND RELATES ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF THE OUTSTANDING SHARES OF COMMON EQUITY (OTHER THAN BRIDGESTONE OR ITS AFFILIATES) IN THE MERGER PURSUANT TO THE MERGER AGREEMENT, DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW THAT SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT OR THE MERGER. WILLIAM BLAIR DID NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY BANDAG TO ENGAGE IN THE MERGER. THE FOLLOWING SUMMARY OF WILLIAM BLAIR’S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.

In connection with its opinion, William Blair examined or discussed, among other things:

William Blair also held discussions with certain members of our senior management to discuss the foregoing, considered other matters which it deemed relevant to its inquiry, and took into account the accepted financial and investment banking procedures and considerations that it deemed relevant. William Blair was not requested to, nor did William Blair, solicit the interest of other parties in a possible business combination transaction with Bandag.

In rendering its opinion, William Blair assumed and relied, without independent verification, upon the accuracy and completeness of all the information examined by or otherwise reviewed or discussed with William Blair for purposes of the opinion including, without limitation, the forecasts, and William Blair did not assume any responsibility or liability therefor. William Blair did not make or obtain an independent valuation or appraisal of the assets, liabilities or solvency of Bandag, nor were any such valuations or appraisals provided to William Blair. William Blair was advised by our senior management that the forecasts examined were reasonably prepared on a basis reflecting the best estimates then available and judgments of our senior management. In that regard, William Blair assumed, with our consent, that (i) the forecasts would be achieved in the amounts and at the times contemplated thereby and (ii) all of our material assets and liabilities (contingent or otherwise) were as set forth in our financial statements or other information made available to William Blair. William Blair expressed no opinion with respect to the forecasts or the estimates and judgments on which they were based. William Blair was not asked to consider, and its opinion did not address, the relative merits of the merger as compared to any alternative business strategies that might exist for us or the effect of any other transaction in which we might engage. William Blair’s opinion was based upon economic, market, financial and other conditions existing on, and other information disclosed to William Blair as of December 5, 2006. Although subsequent developments may affect its opinion, William Blair does not have any obligation to update, revise or reaffirm its opinion. William Blair relied as to all legal, accounting and tax matters on advice of our advisors. William Blair assumed that the executed forms of the transaction agreements would conform in all material respects to the last drafts thereof reviewed by William Blair and that the merger would be consummated substantially on the terms described in the draft merger agreement, without any amendment or waiver of any material terms or conditions. William Blair did not express any opinion as to the impact of the merger on the solvency or viability of the surviving corporation.

The following is a summary of the material financial analyses performed and material factors considered by William Blair to arrive at its opinion. William Blair performed certain procedures, including each of the financial analyses described below, and reviewed with our board of directors the assumptions upon which such analyses were based, as well as other factors. Although the summary does not purport to describe all of the

Selected Public Company Analysis.  William Blair reviewed and compared certain financial information relating to us to corresponding financial information, ratios and public market multiples for a selected group of publicly-traded companies in excess of $100 million in enterprise value that were focused on tire and retread manufacturing and distribution or heavy truck component manufacturing. The companies selected by William Blair were:

Among the information William Blair considered was revenue, earnings before interest, taxes, depreciation and amortization (which we refer to as “EBITDA”), earnings before interest and taxes (which we refer to as “EBIT”) and earnings per share (which we refer to as “EPS”). William Blair considered the enterprise value as a multiple of revenue, EBITDA and EBIT for each company for the last twelve months for which results were publicly available (which we refer to as “LTM”) and the stock price of common equity as a multiple of EPS for each company for the respective calendar year EPS estimates for 2006 and 2007. The operating results and the corresponding derived multiples for us and each of the selected public companies were based on each company’s most recent available publicly disclosed financial information, closing share prices as of November 30, 2006 and consensus Wall Street analysts’ EPS estimates for calendar years 2006 and 2007.

William Blair derived our implied enterprise value by multiplying the proposed purchase price per share of $50.75 by the aggregate number of shares, in-the-money options, stock appreciation rights and other performance units outstanding as of October 31, 2006 (9,467,966 shares of Class A Common Stock, 917,251 shares of Class B Common Stock, 9,072,129 shares of Common Stock and 1,196,218 options and other equity securities) and subtracting the related implied exercise proceeds for the options and other equity securities of $36.6 million to arrive at an implied net equity value of $1,011.6 million. William Blair then added our estimated December 31, 2006 debt of $38.3 million and minority interest of $1.7 million and subtracted the estimated cash of $101.1 million to the implied net equity value to arrive at our implied enterprise value of $950.5 million.

To enhance the comparability of our financial results to the selected public companies’ results, William Blair adjusted our reported EBITDA and EBIT for the latest twelve month period and our forecasted EPS for 2006 as set forth below to (1) in the case of “adjusted” and “pro forma” results, add-back 2006 severance costs, and (2) in the case of “pro forma” results only, reflect cost-savings from pension plan changes and a headcount reduction for the full twelve months ended December 31, 2006. In June 2006, we announced changes to our pension plans and an employment reduction program. The main financial effects of

William Blair then compared the multiples implied for us based on the terms of the proposed merger to the range of trading multiples for the selected public companies. Information regarding the multiples from William Blair’s analysis of the selected publicly traded companies is set forth in the following table.

William Blair noted that the implied multiples for us based on the terms of the merger were within, and in several instances above, the range of multiples of the selected public companies set forth above.

Although William Blair compared the trading multiples of the selected public companies to those implied for us, none of the selected public companies is identical to us. Accordingly, any analysis of the selected publicly traded companies necessarily involved complex considerations and judgments concerning the differences in financial and operating characteristics and other factors that would necessarily affect the analysis of trading multiples of the selected publicly traded companies.

Selected M&A Transactions Analysis.  William Blair performed an analysis of seventeen selected business combinations consisting of transactions for target companies focused primarily on the tire and retread manufacturing and distribution industry as well as the heavy truck component manufacturing industry. William Blair’s analysis was based solely on publicly available information regarding such transactions. The selected transactions were not intended to be representative of the entire range of possible transactions in the respective industries. The transactions examined had transaction values between $100 million and $1.1 billion. All closed after January 1, 1999 and the first ten listed closed after January 1, 2004. The transactions examined were (target/acquirer):

William Blair reviewed the consideration paid in the selected transactions in terms of the enterprise value of the target as a multiple of its revenue, EBITDA and EBIT for the latest twelve months prior to the announcement of the respective transaction. William Blair compared the resulting range of transaction multiples of revenue, EBITDA and EBIT for the selected transactions to the implied transaction multiples for us based on the terms of the proposed merger. William Blair also considered the adjusted and pro forma EBITDA and EBIT for us for the last twelve months ending September 30, 2006 and compared them to the respective range of transaction multiples of LTM EBITDA and EBIT for the selected transactions. William Blair similarly adjusted the historical results of the targets referenced in the selected transactions, where appropriate and publicly disclosed, to eliminate the impact of non-recurring items included in their financial results. Information regarding the multiples from William Blair’s analysis of the selected transactions is set forth in the following table:

William Blair noted that the implied multiples for us based on the terms of the merger were generally within the range of multiples, and in some instances above the highest observed multiple, of the selected transactions set forth above.

Although William Blair analyzed the multiples implied by the selected transactions and compared them to the implied transaction multiples of us, none of these transactions or associated companies is identical to the merger or us. Accordingly, any analysis of the selected transactions necessarily involved complex considerations and judgments concerning the differences in financial and operating characteristics, parties involved and terms of their transactions and other factors that would necessarily affect the implied value of us versus the values of the companies in the selected transactions.

Premiums Paid Analysis.  William Blair reviewed data from 183 acquisitions of publicly traded domestic companies, in which 100% of the target’s equity was acquired, occurring since January 1, 2002 and with transaction equity values between $500 million and $1.5 billion. Specifically, William Blair analyzed the acquisition price per share as a premium to the closing share price one day, one week, one month, 60 days and 90 days prior to the announcement of the transaction, for all 183 transactions. William Blair compared the range of resulting per share stock price premiums for the reviewed transactions to the premiums implied by the merger based on our respective Common Stock and Class A Common Stock prices one day, one week, one

William Blair noted that the Common Stock premiums implied by the terms of the merger exceeded the 25th percentile for each of the one day, 60 day and 90 day time periods. William Blair also noted that the Class A Common Stock premiums implied by the terms of the merger exceeded the 75th percentile for each of the one day, 60 day and 90 day time periods.

Discounted Cash Flow Analysis.  William Blair utilized the forecasts referred to below in the “— Forward-Looking Financial Information” section, as well as input from our management for long-term sales growth rates, margins and other financial trends, to perform a discounted cash flow analysis of our projected future cash flows for the period commencing December 31, 2006 and ending December 31, 2011.

Using discounted cash flow methodology, William Blair calculated the present values of the projected free cash flows for us. In this analysis, William Blair assumed terminal multiples of 2011 EBITDA ranging from 6.5x to 8.5x and assumed discount rates ranging from 10% to 14%. William Blair noted to us that these assumed terminal multiples are consistent with the mean and median multiples from the selected public company analysis and selected M&A transactions analysis shown above. William Blair made its discount rate assumption based on an analysis of the weighted average cost of capital for the selected public companies. William Blair aggregated (1) the present value of the free cash flows over the applicable forecast period with (2) the present value of the range of terminal values. The aggregate present value of these items represented the enterprise value range. William Blair derived a range of fully-diluted equity value per share by adding our net cash to the resulting enterprise value range and by dividing by our total shares outstanding and common share equivalents as of October 31, 2006. The fully-diluted equity value implied by the discounted cash flow analysis ranged from $40.36 per share to $56.50 per share, as compared to the merger consideration per share of $50.75.

Leveraged Acquisition Analysis.  William Blair utilized the forecasts referred to below in the “Forward-Looking Financial Information” section, as well as input from our management for long-term sales growth rates, margins and other financial trends, to perform an analysis as to the price that could be paid by a typical leveraged buyout purchaser to acquire us. In this analysis, William Blair assumed a capital structure and financing rate scenario representative of the prevailing market for leveraged acquisitions for companies similar to us. This analysis assumed (1) a five year holding period commencing December 31, 2006; (2) a targeted internal rate of return to equity investors of approximately 20%-25%; and (3) the midpoint (7.5x) of a range of exit multiples of projected 2011 EBITDA of 6.5x to 8.5x. This analysis indicated that the consideration a leveraged buyout purchaser might be willing to pay per share of the common equity based on these assumptions ranged from $42.22 to $47.17, as compared to the merger consideration of $50.75 per share.

General.  This summary is not a complete description of the analysis performed by William Blair but contains the material elements of the analysis. The preparation of an opinion regarding fairness is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances, and, therefore, such an opinion is not readily susceptible to partial analysis or summary description. The preparation of an opinion regarding fairness does not involve a mathematical evaluation or weighing of the results of the individual analyses performed,

William Blair is a nationally recognized firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with merger transactions and other types of strategic combinations and acquisitions. William Blair is familiar with us, having provided certain investment banking services to us from time to time, including acting as financial advisor in connection with the adoption of our shareholder rights plan in August 2006 and certain other matters, for which William Blair received $150,000 in compensation, and acting as financial advisor with respect to our acquisition of Speedco in February 2004, for which William Blair received $550,000 in compensation. In addition, William Blair has provided brokerage and investment management services to us and certain of our affiliates for which it received customary fees, and may provide such services in the future. In the ordinary course of business, William Blair may from time to time trade our securities or the securities of Bridgestone Corporation for its own account and for the accounts of customers, and accordingly may at any time hold a long or short position in such securities.

We hired William Blair based on its qualifications and expertise in providing financial advice to companies and its reputation as a nationally recognized investment banking firm. Pursuant to a letter agreement dated September 15, 2006, a fee of $750,000 became payable to William Blair upon delivery of its opinion. In addition, under the terms of the September 15, 2006 letter agreement, William Blair will be entitled to receive an additional fee of approximately $6.6 million upon consummation of the merger. In addition, we have agreed to reimburse William Blair for certain of its out-of-pocket expenses (including fees and expenses of its counsel) reasonably incurred by it in connection with its services and will indemnify William Blair against potential liabilities arising out of its engagement, including certain liabilities under the U.S. federal securities laws.

As part of our internal planning process, we make projections for the subsequent three fiscal years. We do not as a matter of course publicly disclose projections as to future revenues, earnings or other results. However, in the course of our discussions relating to the proposed merger with Bridgestone, we provided Bridgestone with certain business and financial information which we believe was not publicly available. The information provided to Bridgestone included forward-looking financial information for the period commencing December 31, 2006 and ending December 31, 2009, based upon preliminary projections developed by us through a regular internal planning and forecasting process. Also, for the period commencing December 31, 2009 and ending December 31, 2011, our management provided input on long-term sales growth rates, margins and other financial trends to William Blair in connection with William Blair’s Discounted Cash Flow

We provided Bridgestone with the following projected financial information for the period commencing December 31, 2006 and ending December 31, 2009:

The estimates and assumptions underlying the forward-looking financial information are inherently uncertain and, though considered reasonable by our management as of the date of its preparation, are subject to a wide variety of significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking financial information. See “Forward-Looking Statements.” Accordingly, there can be no assurance that the forward-looking results are indicative of our future performance or that actual results will not differ materially from those presented in the forward-looking financial information. Inclusion of the forward-looking financial information in this proxy statement should not be regarded as a representation by any person that the results contained in the forward-looking financial information will be achieved.

We do not generally publish our business plans and strategies or make external disclosures of our anticipated financial position or results of operations. Accordingly, we do not intend to update or otherwise revise the forward-looking financial information to reflect circumstances existing since its preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error. Furthermore, we do not intend to update or revise the forward-looking financial information to reflect changes in general economic or industry conditions. The information concerning forward-looking financial information provided by us is not included in this proxy statement in order to induce any shareholder to vote in favor of the merger agreement.

In addition to their interests in the merger as shareholders, certain of our executive officers and directors have interests in the merger that differ from, or are in addition to, your interests as a shareholder. In considering the recommendation of our board of directors to vote “FOR” the approval of the merger agreement, you should be aware of these interests. Our board of directors was aware of, and considered the conflicting interests of, our directors and executive officers in approving the merger agreement. All material interests are described below and, except as described below, such persons have, to our knowledge, no employment arrangements for continued employment with the company following the merger and no material interests in the merger that differ from your interests generally.

Stock Options and Other Equity Based Awards.  At the effective time of the merger, all options to purchase our stock outstanding under our equity incentive plans, whether or not vested, will be cancelled (subject to the rights of the holders thereof) and will represent solely the right to receive a cash payment equal to the option consideration.

At the effective time of the merger, all shares of restricted stock outstanding under our equity incentive plans, whether or not vested, will be cancelled (subject to the rights of the holders thereof) and the holders

At the effective time of the merger, all unvested PUs outstanding immediately prior to the effective time will be cancelled (subject to the rights of the holders thereof) and the holder thereof will be entitled to receive the performance award consideration.

Prior to the effective time of the merger, we will use our best efforts to obtain all waivers from holders of equity awards under our equity incentive plans as may be necessary to give effect to the treatment of options and other equity-based awards described above (in particular, we are required to obtain equity award waivers from at least 65% of the shares subject to the common equity awards granted pursuant to our 1999 Stock Award Plan, as amended on March 12, 2002). The obligations of Bridgestone and Grip Acquisition to complete the merger are subject to the condition that we have performed in all respects our obligations to obtain any equity award waivers. See “The Merger Agreement — Conditions to Completing the Merger.” If the requisite waivers are not obtained, and the merger is consummated, then the holders of the equity awards will not be entitled to receive the cash payments contemplated by the merger agreement, and the parties will take all appropriate and advisable steps to provide that following the merger the holders of the equity awards have no right to acquire any equity securities of the post-merger company or any subsidiary of the post-merger company.

The following table indicates the number of options held by our executive officers and directors on November 30, 2006, the weighted average exercise prices of those options, those options vested as of November 30, 2006, those options that will vest prior to or as a result of the merger, and the amounts our executive officers and directors are estimated to receive in settlement of their respective options if the merger is completed:

As of November 30, 2006, the number and value of the aggregate restricted stock holdings (based on the merger consideration of $50.75 per share) for our executive officers and directors were as follows:

The table below shows the number and value of the aggregate PU holdings (based on the merger consideration of $50.75 per share) for our executive officers, assuming for purposes of the table only that the merger is consummated on March 31, 2007 (none of our directors hold any PUs):

Severance Agreements.  Under severance agreements, entered into in 1999, certain of our executive officers (Martin G. Carver, Warren W. Heidbreder and John C. McErlane) are entitled to receive severance benefits equal to the greater of a specified dollar amount ($1,000,000 for Mr. Carver; $650,000 for Mr. Heidbreder; and $610,000 for Mr. McErlane) or an amount equal to 24 months base salary if their employment is involuntary terminated or they voluntarily terminate their employment for good reason, except for death, disability or retirement. For purposes of these severance agreements, “good reason” means (1) a 15% or greater reduction in the executive’s base pay, (2) a materially adverse change, without the executive’s prior written consent, in the nature or scope of the executive’s title or responsibilities, or (3) the relocation of the executive’s principal place of employment by more than fifty (50) miles. The severance agreements restrict the executive officers from competing with us for twenty-four months following the termination of employment and also contain extensive restrictions on disclosure of our confidential information. In connection with entering into the consulting agreements discussed below, the employment of Martin G. Carver and Warren W. Heidbreder will be terminated as of the effective date of the merger, thereby triggering our obligation to make severance payments to them under these agreements.

Certain other executive officers (Mark A. Winkler, David W. Dahms, Frederico U. Kopittke and Jeffrey C. Pattison) are parties to severance agreements entered into in connection with the merger agreement that provide for a severance payment of one year’s base salary (two year’s base salary for Mr. Kopittke) in the event that, within one year following a change of control of the company, the executive officer is terminated without “cause” or the executive officer terminates his or her employment for “good reason” (namely, a reduction in salary and benefits to amounts which are not substantially the same as those in effect as of the date of the agreement or the relocation of the officer’s principal place of employment to a location more than 50 miles from such person’s principal place of employment as of the date of the agreement). The base salaries for each of Messrs. Winkler, Dahms, Kopittke and Pattison are $230,000, $202,175, $361,000 and $229,175, respectively.

Consulting Agreements.  Each of Martin G. Carver, Chairman of the Board, President and Chief Executive Officer, and Warren W. Heidbreder, Vice President, Chief Financial Officer and Secretary, whose employment with us will terminate as of the effective date of the merger, entered into a consulting agreement with us, to be effective as of the effective date of the merger, pursuant to which Messrs. Carver and Heidbreder will provide certain consulting and other related services to us in accordance with the terms and conditions contained therein, if requested by us (we are not required to request any such services). If we request that Mr. Carver provide consulting services during the nine months following the effective date of the merger, we will make a payment to Mr. Carver in an amount equal to $3,000 for each full day that Mr. Carver provides consulting services. In addition, for the first three months after the effective date of the merger, we will reimburse Mr. Carver for payments for the continuation of his coverage under our group health plan. The consulting agreement with Mr. Carver is terminable by us upon 30 days prior written notice. In consideration of Mr. Heidbreder’s performance of the consulting services on a substantially full-time basis during the six months following the effective date of the merger we will make a monthly payment to Mr. Heidbreder in an amount equal to $41,000 and will reimburse Mr. Heidbreder for payments for the continuation of his coverage under our group health plan.

Indemnification and Insurance of Our and Our Subsidiaries’ Directors and Officers.  The officers and directors of our company and our subsidiaries will also receive liability insurance coverage and indemnification promises from the surviving corporation pursuant to the merger agreement. For more information, see “The Merger Agreement — Indemnification and Insurance of Our and Our Subsidiaries’ Directors and Officers.”

On August 21, 2006, we entered into a rights agreement with Computershare Trust Company, N.A., as rights agent. In general, the rights agreement imposes significant adverse consequences upon any person or group that acquires 20% or more of the outstanding Common Stock, 20% or more of the outstanding Class A Common Stock or 20% or more of the outstanding Common Stock and Class A Common Stock on a combined basis without the approval of our board of directors.

At the time we adopted the rights agreement, we indicated that the rights were designed to enable our shareholders to realize the full long-term value of their investment and to provide for fair and equal treatment for all shareholders in the event that an unsolicited attempt was made to acquire the company. In particular, our board of directors was mindful at the time of the upcoming automatic conversion of our Class B Common Stock into Common Stock and the potential impact of that conversion on our ability to execute our long-term strategy.

On December 5, 2006, immediately prior to the execution of the merger agreement, we and Computershare Trust Company, N.A., entered into an amendment to the rights agreement which provides that neither the execution of the merger agreement nor the completion of the merger will trigger the provisions of the rights agreement.

In particular, the amendment to the rights agreement provides that neither Bridgestone nor any of its subsidiaries shall become an “Acquiring Person,” and no “Shares Acquisition Date” or “Distribution Date” will occur, in each case as a result of:

The merger is not conditioned on Bridgestone obtaining financing.

In connection with the merger, we are required to make certain filings with, and comply with certain laws of, various federal and state governmental agencies, including:

On December 8, 2006, a purported class action shareholder complaint was filed in the Muscatine County District Court in the State of Iowa (which we refer to as the “complaint”) by Plumbers and Pipefitters Local 572 Pension Fund, seeking to pursue a class action on behalf of all of our shareholders. The complaint names us, Martin G. Carver, our Chairman, President and Chief Executive Officer, and our other directors, Gary E. Dewel, R. Stephen Newman, Roy J. Carver, Jr., James R. Everline, Phillip J. Hanrahan and Amy P. Hutton, as defendants. The complaint alleges, among other things, that our directors breached their fiduciary duties of due care and good faith by failing to solicit bids from other potential bidders and failing to maximize shareholder value and by creating deterrents to third party offers. Among other things, the complaint seeks class action status, and a court order enjoining the consummation of the merger and directing the defendants to take appropriate steps to maximize shareholder value. While the lawsuit is in its preliminary stage, we believe that the claims in the lawsuit are without merit and intend to vigorously defend it.

The following summary sets forth the U.S. federal income tax consequences of the merger that are expected to be material to U.S. holders (as defined below) of our Common Stock and Class A Common Stock. With respect to Non-U.S. holders (as defined below), the following summary addresses the applicability of the FIRPTA Tax (as defined below) in connection with the merger but does not address any other U.S. federal, state, or local tax consequences. This summary does not purport to be a complete technical analysis or listing of all potential tax consequences that may be relevant to parties to the merger. It is not intended to be, nor should it be construed as being, legal or tax advice. For this reason, holders of our Common Stock and Class A Common Stock should consult their own tax advisors concerning the tax consequences of the merger. Further, this discussion does not address any tax consequences arising under the income or other tax laws of any state, local or foreign jurisdiction or any tax treaties.

This discussion is based upon the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”), the applicable regulations of the U.S. Treasury Department, and publicly available judicial and administrative rulings and decisions, all as in effect on the date of this proxy statement, any of which may change, possibly retroactively. Any changes could affect the continuing validity of this discussion.

For purposes of this summary, the term “U.S. holder” means a beneficial owner of shares of our Common Stock or Class A Common Stock who is:

For purposes of this summary, the term “Non-U.S. holder” means a beneficial owner of shares of our Common Stock or Class A Common Stock that (i) is an individual or is an entity classified as a corporation for U.S. federal income tax purposes and (ii) is not a U.S. holder. The discussion below addresses the applicability of the FIRPTA Tax to Non-U.S. holders in connection with the merger but does not address the applicability of the FIRPTA Tax to any trust or estate that is not a U.S. holder.

For purposes of this discussion, an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes is neither a U.S. holder nor a Non-U.S. holder. The U.S. federal income tax treatment of a partnership and its partners depends upon a variety of factors, including the activities of the partnership and the partners. Holders of our Common Stock or Class A Common Stock that are entities or arrangements classified for U.S. federal income tax purposes as partnerships, and any members of such entities or arrangements, should consult their tax advisors concerning the U.S. federal income tax consequences of the merger.

This summary assumes that you hold your shares of our Common Stock or Class A Common Stock as a capital asset within the meaning of Section 1221 of the Code. Further, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to you in light of your particular circumstances or that may be applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:

This discussion does not address any non-income tax or any foreign, state or local tax consequences of the merger. Tax matters are very complicated, and the tax consequences of the merger to you will depend upon the facts of your particular situation. Accordingly, you are strongly urged to consult with a tax advisor to determine the particular federal, state, local or foreign income or other tax consequences of the merger to you.

The merger will be taxable to U.S. holders for U.S. federal income tax purposes. A U.S. holder of our Common Stock or Class A Common Stock will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount of cash received in the merger and the holder’s adjusted tax basis in the shares of our Common Stock or Class A Common Stock that are surrendered.

Gain or loss recognized by such holder will be capital gain or loss, which will be long-term capital gain or loss if the holder’s holding period for the shares of our Common Stock or Class A Common Stock, as the case may be, exceeds one year at the time of the merger. Long-term capital gains recognized by an individual are generally subject to tax at reduced rates. In addition, there are limits on the deductibility of capital losses. The amount and character of gain or loss must be determined separately for each block of our Common Stock and Class A Common Stock (in other words, shares acquired at the same cost in a single transaction) converted into cash in the merger.

Information reporting requirements will apply to cash received by a U.S. holder in connection with the merger. This information reporting obligation, however, does not apply with respect to certain U.S. holders, including corporations, tax-exempt organizations, qualified pension and profit sharing trusts, and individual retirement accounts. In the event that a U.S. holder subject to the reporting requirements fails to supply its correct taxpayer identification number in the manner required by applicable law or is notified by the Internal Revenue Service that it has failed to properly report payments of interest and dividends, a backup withholding tax (at a rate that is currently 28%) will be imposed on the amount of the cash received. A U.S. holder may credit any amounts withheld under the backup withholding provisions against its U.S. federal income tax liability, and, as a result, may entitle the U.S. holder to a refund, provided the required information is furnished to the Internal Revenue Service. Such amounts, once withheld, are not refundable by us or the paying agent.

We believe that at all times during the five years preceding the closing date of the merger we have not been, and will not be, a “United States Real Property Holding Corporation” (sometimes referred to as a USRPHC) as defined under the provisions of Section 897 of the Code which were enacted under the Foreign Investment in Real Property Tax Act of 1980 (sometimes referred to as FIRPTA). A corporation generally is characterized as a USRPHC if the fair market value of the United States real property interests (sometimes referred to as USRPIs) owned by the corporation and its subsidiaries equals or exceeds 50% of the sum of (i) the fair market value of the worldwide real property interests owned by the group and (ii) the other assets used or held for use by the group in a trade or business. USRPIs include any interest (other than an interest solely as a creditor) in real property located in the United States or the Virgin Islands.

If, contrary to our belief, we were a USRPHC at any time during the five years preceding the closing date of the merger, a Non-U.S. holder that owned, directly or constructively, more than 5% of the total fair market value of either our Common Stock or Class A Common Stock at any time during that period would be subject to U.S. federal income tax under Section 897 of the Code (sometimes referred to as the FIRPTA Tax) on the gain recognized by that Non-U.S. Holder as a result of the merger.

Under Section 1445 of the Code, a person acquiring shares of stock in a USRPHC from a foreign person generally is required to deduct and withhold a tax equal to 10% of the amount realized by that foreign person on the sale or exchange of those shares (sometimes referred to as FIRPTA Withholding). However, Section 1445(b)(6) of the Code exempts from FIRPTA Withholding the sale or exchange of a share of stock in a USRPHC if that share of stock is regularly traded on an established securities market.

We expect that our Common Stock and Class A Common Stock will continue to be regularly traded on the New York Stock Exchange and the Chicago Stock Exchange at all times leading up to and as of the effective time of the merger, such that the our Common Stock and Class A Common Stock should be considered to be “regularly traded on an established securities market” for purposes of Section 897(c)(3) of the Code. Assuming that this expectation proves to be correct, the paying agent will not be required to deduct and withhold amounts on account of FIRPTA Withholding with respect to payments in the merger to a non-U.S. holder of Common Stock or Class A Common Stock, even if we were a USRPHC at any time during the five years preceding the closing date of the merger.

This section of the proxy statement describes the material provisions of the merger agreement but does not purport to describe all of the provisions of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Appendix A to this proxy statement and is incorporated into this proxy statement by reference. We urge you to read the full text of the merger agreement because it is the legal document that governs the merger. The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide you with any other factual information about us. Such information can be found elsewhere in this proxy statement and in the other public filings that we make with the SEC, which are available without charge at www.sec.gov.

The merger agreement provides that, at the effective time of the merger, Grip Acquisition will merge with and into us. Upon completion of the merger, Grip Acquisition will cease to exist, and we will continue as the surviving corporation.

At the closing, Bandag and Grip Acquisition will file articles of merger with the Secretary of State of the State of Iowa in accordance with Section 490.1106 of the IBCA. The merger will become effective at such time as the articles of merger has been duly filed with the Secretary of State of the State of Iowa or at such

If our shareholders approve the merger agreement, the parties intend to complete the merger as soon as practicable thereafter. The parties to the merger agreement expect to complete the merger in the second quarter of 2007. Because the merger is subject to certain conditions, the exact timing of the merger cannot be determined.

When the merger is completed:

At the effective time of the merger, by virtue of the merger, each share of our Common Stock and Class A Common Stock outstanding immediately prior to the effective time will automatically be converted into and represent the right to receive $50.75 in cash, without interest, except for shares of our Common Stock and Class A Common Stock held by us or any of our subsidiaries (other than shares held on behalf of third parties). All shares of our Common Stock or Class A Common Stock held by Bridgestone or any of its subsidiaries immediately prior to the effective time, and in each case not held on behalf of third parties, will be cancelled without any payment therefor.

At the effective time of the merger, each share of Common Stock of Grip Acquisition outstanding immediately before the effective time will be converted into and exchanged for one share of Common Stock of the surviving corporation.

At or prior to the effective time of the merger, Bridgestone will deposit with a paying agent appointed by it sufficient funds to pay the aggregate merger consideration (which we refer to as the “payment fund”). As promptly as practicable after the effective time of the merger, we, as the surviving corporation in the merger, will cause the paying agent to mail to each holder of record of shares of our Common Stock and Class A Common Stock immediately prior to the effective time, a form of letter of transmittal and instructions to effect the surrender of their stock certificate(s) in exchange for payment of the merger consideration. You should not send in your Bandag stock certificates until you receive the letter of transmittal and instructions. The letter of transmittal and instructions will tell you what to do if you have lost a certificate, or it if has been stolen or destroyed. You will have to provide an affidavit to that fact and, if required by us, post a bond in a reasonable amount as we direct as indemnity against any claim that may be made against us with respect to that certificate.

The paying agent will promptly pay you your merger consideration after you have surrendered your certificates to the paying agent and provided to the paying agent any other items specified by the letter of transmittal and instructions. The surrendered certificates will be cancelled upon delivery of the merger

Any portion of the payment fund (including the proceeds of any investments thereof) that remains unclaimed for nine months after the effective time of the merger will be delivered to us, as the surviving corporation. After that nine-month period, holders of shares outstanding before the effective time of the merger will be entitled to look only to us for payment of any claims for merger consideration to which they may be entitled. None of the surviving corporation, Bridgestone, the paying agent or any other person will be liable to any person in respect of any merger consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar laws.

After the effective time of the merger, there will be no transfers on our stock transfer books of the shares of our Common Stock or Class A Common Stock outstanding immediately prior to the effective time. If, after the effective time, any certificate for shares of our Common Stock or Class A Common Stock is presented to the surviving corporation or the paying agent for transfer, it will be cancelled and exchanged for per share merger consideration, multiplied by the number of shares represented by the certificate.

At the effective time of the merger, all options to purchase our stock and SARs outstanding under our equity incentive plans will be cancelled (subject to the rights of the holders thereof) and will represent solely the right to receive a cash payment equal to the option consideration.

At the effective time of the merger, all shares of restricted stock and restricted stock units outstanding under our equity incentive plans, whether or not vested, will be cancelled (subject to the rights of the holders thereof) and the holders thereof will be entitled to receive a cash payment with respect to each share subject to any such award equal to the merger consideration or, with respect to restricted stock or restricted stock units granted under the 2004 Award Plan, the “Change of Control Price” as defined therein if greater than the merger consideration.

At the effective time of the merger, all unvested PUs outstanding immediately prior to the effective time will be cancelled (subject to the rights of the holders thereof) and the holder thereof will be entitled to receive the performance award consideration.

At the effective time of the merger, all dividend equivalent units outstanding under our equity incentive plans will become fully vested and will be paid.

Prior to the effective time of the merger, we will use our best efforts to obtain all waivers from holders of equity awards under our equity incentive plans as may be necessary to give effect to the treatment of options and other equity-based awards described above.

The merger agreement contains various representations and warranties made by us to Bridgestone and Grip Acquisition, subject to identified exceptions, including representations and warranties relating to:

Certain aspects of our representations and warranties are qualified by the concept of “material adverse effect.” Under the merger agreement, the term “material adverse effect” means any event, state of facts, circumstance, development, change or effect that, individually or in the aggregate with all other events, states of fact, circumstances, developments, changes and effects, is materially adverse to our business, assets, liabilities, financial condition or results of operations of us and our subsidiaries taken as a whole, or would prevent us from consummating the merger, provided any effect that results from any of the following will not be taken into account in determining whether there has been a “material adverse effect” with respect to us:

The merger agreement also contains various representations and warranties by Bridgestone and Grip Acquisition to us, subject to identified exceptions, including representations and warranties relating to:

None of the representations and warranties in the merger agreement will survive the completion of the merger.

We are subject to covenants requiring that, prior to the effective time of the merger, we will, and will cause each of our subsidiaries to, (1) conduct its operations only in the ordinary course of business consistent with past practice in all material respects and (2) use commercially reasonable efforts to maintain and preserve intact its business organization, including the services of its key employees and the goodwill of its customers, lenders, dealers, franchisees, suppliers, and other persons with whom it has material business relationships. We have also agreed, with some exceptions, that we will not do any of the following without the prior written consent of Bridgestone:

The merger agreement provides that we, our subsidiaries and our respective officers and directors will not, and we will cause our and our subsidiaries’ employees, consultants, accountants, legal counsel, investment bankers, agents and other representatives not to, directly or indirectly:

However, at any time prior to the approval of the merger agreement by our shareholders, we may:

We may not make a recommendation change or terminate the merger agreement unless: (A) our board of directors has determined in good faith, after consultation with outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary obligations to our shareholders under applicable laws, (B) we give Grip Acquisition prompt written notice advising Grip Acquisition of (i) the decision of our board of directors to take such action and (ii) the material terms and conditions of the takeover proposal, including the identity of the party making the takeover proposal and, if available, a copy of the relevant proposed transaction agreements with such party and other material documents, (C) we give Grip Acquisition five business days (or three business days in the event of each subsequent material revision to such takeover proposal) after delivery of such notice to propose revisions to the terms of the merger agreement (or make another proposal) and shall have negotiated in good faith with Grip Acquisition with respect to such proposed revisions or other proposal, if any, and (D) at the end of such period, our board of directors has determined in good faith, after considering the results of such negotiations and giving effect to the proposals made by Grip Acquisition, if any, after consultation with outside legal counsel, that (i) in the case of a recommendation change, failure to take such action would be inconsistent with its fiduciary obligations to our shareholders under applicable laws and (ii) in the case of a termination of the merger agreement, that the takeover proposal remains a superior proposal relative to the merger, as supplemented by any counterproposals made by Grip Acquisition.

For purposes of the merger agreement, the term “takeover proposal” means any proposal or offer from any person or group of persons other than Bridgestone, Grip Acquisition or their affiliates relating to any direct or indirect acquisition or purchase of (1) a business or division (or more than one of them) that in the aggregate constitutes 15% or more of the net revenues, net income or assets of us and our subsidiaries, taken as a whole, (2) 15% or more of the equity interest in us (by vote or value), (3) any tender offer or exchange offer that if consummated would result in any person or group of persons beneficially owning 15% or more of the equity interest (by vote or value) in us, or (4) any merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving us (or any of our subsidiaries whose business constitutes 15% or more of the net revenues, net income or assets of us and our subsidiaries, taken as a whole).

For purposes of the merger agreement, the term “superior proposal” means any bona fide written takeover proposal that our board of directors determines in good faith (after consultation with a financial advisor of nationally recognized reputation, which may be William Blair) to be more favorable (taking into account (1) any legal, financial, regulatory and other aspects of such takeover proposal and the merger and other transactions contemplated by the merger agreement deemed relevant by our board of directors, and (2) the anticipated timing, conditions (including financing conditions) and prospects for completion of such takeover proposal) to our shareholders than the merger and the other transactions contemplated by the merger agreement (taking into account all of the terms of any proposal by Bridgestone to amend or modify the terms of the merger and the other transactions contemplated by the merger agreement), except that the reference to “15%” in the definition of “takeover proposal” shall be deemed to be a reference to “50%.”

The merger agreement provides that we will take, subject to applicable law and our restated articles of incorporation and by-laws and the fiduciary duties of our directors, all action necessary to convene a special meeting of our shareholders as promptly as practicable for the purpose of considering and voting upon approval of the merger agreement and the merger. Except in certain circumstances, our board of directors must recommend, and use its reasonable best efforts to solicit, approval of the merger agreement by our shareholders.

In connection with the merger agreement, each of Martin G. Carver, Roy J. Carver, Jr. and Carver Partners LP entered into a voting agreement, dated as of December 5, 2006, with Grip Acquisition pursuant to which the principal shareholders have each agreed to vote the 3,546,477 shares of Common Stock, representing 35.5% of the Common Stock, and the 4,029,659 shares of Class A Common Stock, representing 42.5% of the Class A Common Stock, that the principal shareholders beneficially own, as well as any shares of which they acquire beneficial ownership, in favor of the merger agreement and the transactions contemplated thereby and against, among other things, any proposal made in opposition to, or in competition or inconsistent with, the merger agreement or the merger.

Each of the principal shareholders, in their capacity as shareholders, also agreed that they will not, and will not permit or authorize any of their representatives to, directly or indirectly:

The voting agreements terminate upon the earliest to occur of (1) the effective time of the merger and (2) the termination of the merger agreement in accordance with its terms.

Nothing in the voting agreements will in any way restrict Martin G. Carver in the exercise of his fiduciary duties as an executive officer and director of Bandag or Roy J. Carver, Jr. in the exercise of his fiduciary duties as a director of Bandag.

The merger agreement provides that, from and after the effective date of the merger, the surviving corporation will indemnify each of our and our subsidiaries’ present and former directors and officers against any losses, claims, damages, liabilities, costs, legal and other expenses (including reimbursement for legal and other fees and expenses incurred in advance of the final disposition of any claim, suit, proceeding or investigation), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such claim, action, suit, proceeding or investigation, arising out of matters existing or occurring at or prior to the effective time of the merger, to the fullest extent that we would have been permitted under Iowa law and our restated articles of incorporation or by-laws in effect on the date of the merger agreement to indemnify, and advance expenses to, such person.

The surviving corporation will (1) maintain in effect for a period of six years after the effective time of the merger, if available, the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by us immediately prior to the effective time (provided that the surviving corporation may substitute therefor policies with reputable and financially sound carriers, of at least the same coverage and amounts containing terms and conditions that are no less favorable to our directors and officers) or (2) obtain as of the effective time “tail” insurance policies with a claims period of six years from the effective time with at least the same coverage and amounts and containing terms and conditions that are no less favorable to our directors and officers, in each case with respect to claims arising out of or relating to events which occurred before or at the effective time. However, the surviving corporation is not required to expend an annual premium for such coverage in excess of 250% of the last annual premium paid by us for such insurance prior to December 5, 2006. If such insurance coverage can only be obtained at an annual premium in excess of this limit, the surviving corporation will obtain a directors’ and officers’ insurance and fiduciary liability policy providing the greatest coverage obtainable for an annual premium equal to the limit.

Subject to certain limitations, for a period of one year following the closing date (which we refer to as the “continuation period”), the surviving corporation and its affiliates will provide our employees and our subsidiaries’ employees (other than those employees covered by a collective bargaining agreement) as of the effective time who continue employment with the surviving corporation and its affiliates with compensation and benefits that are no less favorable in the aggregate than those provided under our compensation and benefit plans, programs, policies, practices and arrangements (excluding equity-based programs) in effect at the effective time.

The surviving corporation and its affiliates will honor all of our benefit plans (including any severance, retention, change of control and similar plans, agreements and written arrangements) in accordance with their terms, subject to any amendment or termination thereof that may be permitted by such plans, agreements or written arrangements. In any event, during the continuation period, the surviving corporation will provide all of our U.S. employees (other than those covered by an individual agreement providing severance benefits outside our severance policies) who suffer a termination of employment with severance benefits no less favorable than those that would have been provided to such employees under a specified severance policy in effect at Bridgestone.

We and Bridgestone have made or will make appropriate filings of the notification and report form pursuant to the HSR Act and appropriate filings under all other applicable antitrust laws as promptly as practicable and will cooperate with each other in all respects in connection with any related filing, submission or investigation.

We and Bridgestone have agreed to cooperate with each other and use reasonable best efforts to take all actions necessary to complete the merger and the other transactions contemplated by the merger agreement, including taking such actions necessary to obtain any required consents from third parties and/or governmental entities. The merger agreement does not require Bridgestone to, and we may not, without the prior written consent of Grip Acquisition, become subject to, consent or agree to, or otherwise take any action with respect to, any requirement, condition, limitation, understanding, agreement or order to sell, to hold separate or otherwise dispose of, or to conduct, restrict, operate, invest or otherwise change its assets or business or any of its affiliates, including us, in any manner which, individually or in the aggregate with all other such requirements, conditions, understandings, agreements and orders would reasonably be expected to have a “retread business material adverse effect” (as defined below) at or after the effective time. “Retread business material adverse effect” means any event, state of facts, circumstance, development, change or effect that, individually or in the aggregate with all other another events, states of fact, circumstances, developments, changes or effects, is materially adverse to (1) the business, assets, liabilities, financial condition or results of operations of us and our subsidiaries, and (2) the business, assets, liabilities, financial condition or results of

The obligations of us, Bridgestone and Grip Acquisition to complete the merger are subject to the satisfaction or waiver of certain conditions, including the following:

The obligations of Bridgestone and Grip Acquisition to complete the merger are subject to the satisfaction or waiver of the following additional conditions:

Our obligation to complete the merger is subject to the satisfaction or waiver of the following additional conditions:

We may mutually agree with Grip Acquisition (on behalf of itself and Bridgestone) in writing to terminate the merger agreement at any time prior to the effective time of the merger. Either we or Grip Acquisition may also terminate the merger agreement at any time if:

We may also terminate the merger agreement at any time prior to the effective time:

Grip Acquisition may also terminate the merger agreement at any time prior to the effective time of the merger:

We have agreed to pay Bridgestone a cash termination fee equal to $32 million, less expenses of Bridgestone, if any, previously paid:

Under certain circumstances, we may be required to pay the actual expenses of Bridgestone (up to a maximum of $5,500,000), which payment will be credited against any later payment of the termination fee discussed above. Specifically, we must pay the actual expenses of Bridgestone if:

Our Common Stock is traded on the New York Stock Exchange under the symbol “BDG.” Our Class A Common Stock is traded on the New York Stock Exchange under the symbol “BDGA.” On February 22, 2007, the record date, there were 9,981,019 shares of our Common Stock outstanding, held by approximately 1,460 shareholders of record and 9,522,597 shares of our Class A Common Stock outstanding, held by approximately 870 shareholders of record.

The following table shows, for the periods indicated, the reported high and low sales prices per share of our Common Stock and Class A Common Stock on the New York Stock Exchange.

The closing sale price for shares of our Common Stock on the New York Stock Exchange was $45.04 per share on December 4, 2006, the last full trading day prior to the date of the public announcement of the merger. The closing sale price for shares of our Class A Common Stock on the New York Stock Exchange

During each quarter of 2006, we declared and paid regularly quarterly cash dividends, as set forth below. Under the merger agreement, prior to the completion of the merger, we are not permitted to pay any dividends other than regular quarterly cash dividends of $0.34 per share.

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Ownership by Directors and Executive Officers.  The following table sets forth information as to the Common Stock and Class A Common Stock beneficially owned as of January 31, 2007 by each director, our principal executive officer, principal financial officer and each of our three other most highly compensated executive officers as of December 31, 2006, whose total cash compensation exceeded $100,000 for fiscal 2006, and by all directors and executive officers as a group as of January 31, 2007:

Shareholders Owning More Than Five Percent of the Common Stock.  The following table provides information concerning persons known by us to beneficially own more than five percent of our Common Stock as of January 31, 2007, based on Schedule 13D or Schedule 13G filings by such persons, other than the ownership of Martin G. Carver and Roy J. Carver, Jr., which is contained in the previous table, and the beneficial ownership of Grip Acquisition Corporation resulting from its entering into the voting agreements discussed earlier: