AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made by
and among Xxxx X. Xxxxxxxxx Family Limited Partnership, a Virginia limited
partnership, ("Shareholder"), Xxxx X. Xxxxxxxxx, individually, ("Guarantor"),
and Xxxxxxxxx Holdings, Inc., a Maryland corporation ("Xxxxxxxxx") and Monro
Muffler Brake, Inc., a New York corporation, 000 Xxxxxxxx Xxxxxxx, Xxxxxxxxx,
Xxx Xxxx 00000 ("Monro"). Shareholder, Guarantor, Xxxxxxxxx, and Monro are
sometimes referred to herein as a "Party" and are referred to herein
collectively as the "Parties".
R E C I T A L S
X. Xxxxxxxxx is engaged in the Business (as later defined in this
Agreement);
II. Shareholder is the owner of one hundred percent (100%) of the issued
and outstanding capital stock of Xxxxxxxxx;
III. In general, the reorganization is intended for federal income tax
purposes to qualify as a reorganization within the meaning and definition of
Section 368(a)(1)(C) of the Code, and it will comprise the conveyance by
Xxxxxxxxx to Monro of substantially all the assets of Xxxxxxxxx, the issuance by
Monro to Xxxxxxxxx of shares of Monro's Common Stock (as later defined in this
Agreement), the payment by Monro to Xxxxxxxxx of a sum certain in cash, the
distribution by Xxxxxxxxx to the Shareholder of the shares of Monro's Common
Stock received by Xxxxxxxxx, and the dissolution of Xxxxxxxxx, all subject to
the terms and conditions set forth in this Agreement; and
VI. The Guarantor is the general partner of the Shareholder and is
familiar with the material operations of the Business.
1
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter contained, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
ascribed to them in this Article I.
AGREEMENT. This Agreement and Plan of Reorganization including all
amendments hereto and all Schedules referred to herein.
ASSETS. All or substantially all of the assets relating to the Business,
as defined and set forth in Paragraph 2.01, to be conveyed to Monro under this
Agreement.
AVERAGE TRADING PRICE. Average Trading Price means, with respect to any
publicly traded securities, as of the Closing Date, the average for the twenty
(20) full Trading Days preceding the Closing Date of:
(i) the last reported sales prices, regular way, as reported on the
principal national securities exchange on which such securities are listed or
admitted for trading, or
(ii) if such securities are not listed or admitted for trading on
any national securities exchange, the last reported sales prices, regular way,
as reported on the Nasdaq National Market or, if such securities are not listed
on the Nasdaq National Market, the average of the highest bid and lowest asked
prices on each such Trading Day as reported on the Nasdaq Stock Market, or
(iii) if such securities are not listed or admitted to trading on
any national securities exchange, the NASDAQ National Market or the NASDAQ Stock
Market, the average of the highest bid and lowest asked prices on each such
Trading Day in the domestic over-the-
2
counter market as reported by the National Quotation Bureau, Incorporated, or
any similar successor organization.
For purposes of determining the "Average Trading Price" of any securities,
(i) the applicable sales price or bid and asked prices of such
securities on any day prior to any "ex-dividend" date or any similar date
occurring prior to the Closing Date for any dividend or distribution (other than
a dividend or distribution contemplated by clause (B) of paragraph (ii) below)
paid or to be paid with respect to such securities shall be reduced by the fair
value of the per share amount of such dividend or distribution; and
(ii) the applicable sales price or bid and asked prices of such
securities on any day prior to (A) the effective date of any subdivision (by
stock split or otherwise) or combination (by reverse stock split or otherwise)
of such securities occurring prior to the Closing Date, or (B) any "ex-dividend"
date or any similar date occurring prior to the Closing Date for any dividend or
distribution with respect to such securities to be made in such securities or
securities that are convertible, exchangeable, or exercisable for such
securities shall be appropriately adjusted, as determined by the Board of
Directors of Monro, to reflect such subdivision, combination, dividend, or
distribution.
BUSINESS. The business of under-car and other automotive repairs and
service including, but not limited to state inspections, exhaust systems,
brakes, inspections, shocks, springs, struts, mufflers, tailpipes, belts,
filters, wipers, electrical systems, lights, oil changes, chassis lubrication,
steering, suspensions, alignments, tires, wheels, batteries, radiators, heating
and cooling systems, CV and U-joints and related parts and accessories, as
operated by Xxxxxxxxx.
BUSINESS DAY. Any day other than a Saturday, Sunday, or any other day upon
which banks in New York, New York generally are not open for business.
3
CAP. Seven Hundred Fifty Thousand Dollars ($750,000.00).
CLOSING. The closing of the transactions contemplated by this Agreement,
which will occur on the Closing Date.
CLOSING DATE. March 5, 2005, or such other date as the parties may agree
to in writing, upon which the Closing shall occur.
CODE. The Internal Revenue Code of 1986, as amended.
CONFIDENTIAL INFORMATION. Any and all trade secrets and other technical,
research, operational, manufacturing, marketing, sales and financial information
of Xxxxxxxxx regardless of how acquired or developed concerning the Business and
the policies, research, processes, inventions, products and business operations
and methods relating in any way to the Business.
CONTRACT. Any and all written or oral contracts or commitments of any kind
or nature relating to the Business or the Assets, including, without limitation,
any loan agreement, note, guarantee, security agreement, pledge agreement,
lease, employment or labor agreement, stock option, stock purchase, pension or
profit sharing plan, retirement or bonus plan, agreement or other arrangement
(whether current or deferred), construction or building commitment, insurance
contract, sales representation contract, advertising contract, brokerage
contract, purchase or sales order or contract or franchise or license agreement.
ENVIRONMENTAL LAWS. Any and all laws, rules, regulations, orders or
guidance documents of any Governmental Authority relating to public health and
safety, worker health and safety, pollution or the protection of the environment
including, without limitation, those relating to actual or threatened emissions,
discharges or releases of pollutants, contaminants, hazardous or toxic
materials, substances or wastes into ambient air, surface water, groundwater or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage,
4
disposal, transport or handling of pollutants, contaminants, hazardous or toxic
materials, substances or wastes.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
ESCROW AGENT. Monro's Attorney and Xxxxxxxxx'x Attorney, jointly.
ESCROW AGREEMENT. Escrow Agreement, dated as of the Closing Date, by and
among the Parties, Xxxxxxxxx'x Attorney and Monro's Attorney.
EXCHANGE ACT. The Securities Exchange Act of 1934 or any successor federal
statute, and the rules and regulations of the SEC promulgated thereunder, in
each case, as amended from time to time.
EXCLUDED ASSETS. Cash (except imprest cash), cash equivalents and
deposits, all interest receivable in connection with any such items, rights in
and to bank accounts, marketable and other securities and similar investments of
Xxxxxxxxx, if any, accounts receivable (which includes the delinquent and
questionable debt/account receivable from an insolvent affiliate of Xxxxxxxxx to
Xxxxxxxxx in the principal amount of approximately Four Hundred Thousand Dollars
($400,000.00), and that certain parcel of real estate described in the Land
Records of St. Mary's County, Maryland, in Liber 1421 Folio 100 that is more
particularly described in the deed attached to this Agreement a Exhibit A, and
those other items listed on Schedule 2.01.E.
FIXED ASSETS. Xxxxxxxxx'x furniture, fixtures, machinery, equipment,
motorized vehicles used in, and leasehold improvements relating to, the
Business, as defined in Paragraph 2.01B and as listed on Schedule 2.01B.
GAAP. Generally Accepted Accounting Principles.
GUARANTOR. Xxxx X. Xxxxxxxxx, Xx.
5
GOVERNMENTAL AUTHORITY. Any and all federal, state, municipal or other
governments or governmental departments, commissions, boards, bureaus, agencies
or instrumentalities, domestic or foreign.
HAZARDOUS SUBSTANCE. Any materials or substances defined as or included in
the definition of "Hazardous Substances", "Hazardous Materials", "Hazardous
Wastes", "Toxics", "Contamination" or "Pollutants" under any Environmental Laws,
including any substance which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, microbial or which contains
polychlorinated biphenyls (PCBs), gasoline, diesel fuel, petroleum or petroleum
hydrocarbons or asbestos.
XXXXXXXXX. Xxxxxxxxx Holdings, Inc., a Maryland Corporation.
XXXXXXXXX AGREEMENT. License Agreement, dated December 31, 1997, by and
between Monro and Xxxxxxxxx relating to the use by Xxxxxxxxx Holdings, Inc. of
the "Mr. Tire" marks.
XXXXXXXXX'X ATTORNEY. Xxxxxx & Xxxxxxxx, P.A., 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxxxxxxxx, Xxxxxxxx 00000.
INTELLECTUAL PROPERTY. All copyrights, patents, trademarks, service marks,
trade names, computer software, inventions, designs, formulas, trade secrets,
manufacturing processes, know-how and other similar rights.
INVENTORY. Xxxxxxxxx'x inventory relating to the Business, as further
defined in Paragraph 2.01A.
KNOWLEDGE. The actual knowledge of Guarantor after reasonable inquiry of
Xxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, and Xxxxx Xxxxxxxx, the "Management Employees"
of Xxxxxxxxx.
6
LITIGATION. Any and all litigation, proceedings, suits, actions,
controversies or investigations, at law or in equity, before or by any court or
Governmental Authority, or any claims in respect thereof.
LOSSES. Any loss, liability, damage, cost, or expense, including, without
limitation, reasonable attorneys' fees and expenses.
MATERIAL ADVERSE CHANGE. A material change or an extraordinary event which
could reasonably be expected to result in a material adverse change in the
financial condition, assets, liabilities or business of Xxxxxxxxx relating to
the Business as a whole, other than changes in the ordinary course of business,
none of which, individually or in the aggregate, have been materially adverse.
MONRO. Monro Muffler Brake, Inc., a New York corporation.
MONRO'S ATTORNEY. Xxxxxxxxx & Xxxxxxx LLP, 0000 Xxxxx Xxxxxx, Xxxxxxxxx,
Xxx Xxxx 00000.
MONRO COMMON STOCK.
(a) If only one class or series of common stock of Monro is publicly
traded on the Closing Date, then "Monro Common Stock" means shares of that class
or series of common stock of Monro that is publicly traded on the Closing Date.
(b) If more than one class or series of shares of common stock of
Monro is publicly traded on the Closing Date, but only one class or series of
shares of common stock of Monro is nationally traded on the Closing Date, then
"Monro Common Stock" means shares of that class or series of common stock of
Monro that is nationally traded on the Closing Date.
(c) If more than one class or series of shares of common stock of
Monro is Nationally Traded on the Closing Date, then "Monro Common Stock" means
shares of that class
7
or series of common stock of Monro that is Nationally Traded on the Closing Date
and has the highest price - adjusted trading volume as of the Closing Date.
For purposes of this definition of "Monro Common Stock," (i) the class or series
of common stock is "Nationally Traded" if it is (A) registered under Section 12
of the Exchange Act (or a successor provision of law), and (B) listed for
trading on any national securities exchange registered under Section 7 of the
Exchange Act (or any successor provision of law) or on the NASDAQ National
Market (or any successor system); and (ii) the "price adjusted trading volume"
of any class or series of common stock of Monro means the product of the Average
Trading Price of a share of such class or series of common stock as of the
Closing Date times the average daily trading volume such class or series of
common stock for the twenty (20) full Trading Days preceding the Closing Date.
PERMITTED ENCUMBRANCES. As set forth on Schedule 2.01, those encumbrances,
to the free and clear transfer of title to the Assets, which will be permitted
by Monro.
PURCHASE PRICE. Seven Million Five Hundred Thousand Dollars
($7,500,000.00).
REAL PROPERTY. Any and all of the parcels of real property, together with
the buildings, structures and other improvements thereon, which are leased or
otherwise used or occupied by Xxxxxxxxx in connection with the operation of the
Business, including, without limitation, those parcels more particularly
described in Schedule 3.10A.
SEC. The Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act or the Exchange Act.
SECURITIES ACT. The Securities Act of 1933, or any successor federal
statute, and the Rules and Regulations of the SEC promulgated thereunder, in
each case, as amended from time to time.
8
SHAREHOLDER. Xxxx X.Xxxxxxxxx Family Limited Partnership.
TAXES. Any and all Federal, state, local or foreign income, gross
receipts, franchise, estimated, minimum, sales, use, transfer, registration,
value added, excise, natural resources, severance, stamp, occupation, premium,
windfall profit, environmental, customs, duties, real property, personal
property, capital stock, social security, unemployment, disability, payroll,
license, employee or other withholding, or any other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or additional
amounts in respect of any of the foregoing.
THRESHOLD AMOUNT. Seventy-Five Thousand Dollars ($75,000.00).
TRADING DAY. With respect to any security, a day on which the principal
national securities exchange on which such security is listed or admitted to
trading, or the NASDAQ National Market or the NASDAQ Stock Market, as
applicable, if such security is not listed or admitted to trading on any
national securities exchange, is open for the transaction of business (unless
such trading shall have been suspended for the entire day), or if such security
is not listed or admitted to trading on any national securities exchange, the
NASDAQ National Market, or the NASDAQ Stock Market on any Business Day.
ARTICLE II
TRANSFER
2.01 TRANSFER OF PROPERTY RIGHTS AND ASSETS. On the Closing Date,
Xxxxxxxxx agrees to transfer, assign, and convey to Monro free and clear of any
claims, liabilities, security interests, mortgages, liens, pledges, charges, or
encumbrances of any nature whatsoever (except for Permitted Encumbrances listed
and described on Schedule 2.01) in exchange for the shares of Monro Common Stock
and cash, subject to the terms and conditions of this Agreement, all the assets,
properties and rights of Xxxxxxxxx of every kind, nature, and description,
tangible and
9
intangible, wherever situated, relating to the Business as a going concern (the
"Assets") as follows,
A. All of Xxxxxxxxx'x inventory, parts and supplies relating to the
Business, including any inventory, parts, or supplies in transit, as the same
shall exist on the Closing Date and which are usable and saleable in the
ordinary course of business, which is defined in the case of non-tire Inventory
as being listed on Xxxxxxxxx'x vendors' current price sheets and in the case of
tire Inventory as within three (3) years of its date of manufacture based upon
each Inventory item's Department of Transportation Code.
B. All of Xxxxxxxxx'x furniture, fixtures, machinery, equipment,
tools, supplies and leasehold improvements relating to the Business as the same
shall exist on the Closing Date, including, but not limited to items listed and
described in Schedule 2.01B hereto. Such schedule shall include the net book
value assigned to each item, calculated in accordance with GAAP as of March 31,
2004.
C. All of Xxxxxxxxx'x trademarks, tradenames and domain names, if
any, goodwill, intangible assets and records relating to the Business,
including, but not limited to, Xxxxxxxxx'x telephone numbers, employee files,
customer lists and history, mailing lists, accounting, sales and purchasing
correspondence and records, customer deposits, prepayments, data processing
records, all of the operational books, records and data used by Xxxxxxxxx in
connection with the Business, all as such items are listed and described on
Schedule 2.01C; and
D. Certain pre-paid expenses with respect to the Business as of the
Closing, as such expenses are described in Schedule 2.01D. All such pre-paid
expenses shall be calculated in accordance with GAAP as of the Closing Date,
with supporting calculations
10
provided to Monro, and, with respect to business licenses, must be related to
licenses transferable to Monro as of the Closing.
E. All imprest cash.
It is the intention of the parties hereto that the Assets, excluding the
Excluded Assets, shall include only those of Xxxxxxxxx'x assets used or useable
in the conduct of the Business.
The Assets shall be transferred, assigned, and conveyed by appropriate
legal instruments reasonably satisfactory to Monro's Attorney.
2.02 LIABILITIES. Except as otherwise provided in this Agreement, it is
expressly understood and agreed that Monro does not, nor will it assume or
become liable for, any of Xxxxxxxxx'x liabilities of any kind or nature at any
time existing or asserted, whether fixed, contingent or otherwise.
2.03 ASSIGNMENT OF LEASES AND CONTRACTS. Xxxxxxxxx agrees to assign to
Monro, and Monro agrees to assume and accept, all of Xxxxxxxxx'x right, title
and interest in and to (A) the Real Property leases described in Schedule 3.10A
and (B) the Contracts itemized and described in Schedule 2.03 hereto.
2.04 TRANSFER OF COMMON STOCK AND CASH BY MONRO. At the Closing, Monro
shall issue to Xxxxxxxxx Monro Common Stock equal in value (at the time of its
issuance) to Six Million Five Hundred Thousand Dollars and no cents
($6,500,000.00) and cash consideration in the amount of One Million Dollars and
no cents ($1,000,000.00) (the "Cash Consideration"), subject to the adjustment,
if any, set forth in Paragraph 2.05.
2.05 ADJUSTMENTS. So long as the amount of Common Stock issued by Monro to
Xxxxxxxxx is never less than Eighty Percent (80%) of the market value of the
Assets (including the Excluded Assets and Assumed Liabilities) owned by
Xxxxxxxxx, Monro may adjust the
11
combined value of the Monro Common Stock and/or cash to be received by Xxxxxxxxx
at Closing in the following event:
A. (i) The amount of Common Stock and cash that Xxxxxxxxx receives at
Closing under Paragraph 2.04 of this Agreement presumes that Xxxxxxxxx has on
hand Inventory as of the Closing Date, valued in accordance with GAAP (at the
lower of Xxxxxxxxx'x acquisition cost or market) of at least Eight Hundred
Thousand Dollars ($800,000.00). The actual value of the Inventory on the Closing
Date (the "Closing Inventory Schedule") shall be determined by a physical
inventory count conducted jointly by Xxxxxxxxx and Monro at or near the Closing
Date, with each item of Inventory to be valued at the lower of Xxxxxxxxx'x
acquisition cost or market in accordance with GAAP as provided on the Closing
Inventory Schedule. Within sixty (60) days after the physical inventory is
taken, Xxxxxxxxx shall prepare a final inventory schedule, setting forth each
item of Inventory by the physical count agreed upon by the Parties, valued at
the lower of its acquisition cost or market calculated in accordance with GAAP,
its extended value and the total value by store (the "Inventory Statement").
Monro shall have sixty (60) days to audit and reconcile such Inventory
Statement, during which time Xxxxxxxxx and Shareholder shall use best efforts to
respond in a timely manner to any requests of Monro for additional information
or documentation to assist Monro during its audit and reconciliation of the
Inventory Statement. If Monro disputes an item or items in the Inventory
Statement, Monro shall prepare and submit to Xxxxxxxxx a notice of inventory
dispute which shall set forth Monro's revised Inventory Statement. If Monro
fails to deliver a notice of dispute within sixty (60) days of its receipt of
the Inventory Statement from Xxxxxxxxx, the Inventory Statement shall be deemed
accepted for purposes of any adjustment to the Purchase Price. Upon receipt by
Xxxxxxxxx of a notice of dispute regarding the Inventory Statement, Xxxxxxxxx
and Monro shall, for a period of
12
twenty (20) days following delivery of such notice, seek in good faith to
resolve any disputed items and agree on a final Inventory Statement. The amount
of Monro Common Stock and/or cash to be issued to Xxxxxxxxx shall be adjusted up
or down, as necessary, in accordance with Subparagraph (ii) of this Paragraph
2.05A. In the event Xxxxxxxxx and Monro cannot resolve a disputed item, such
dispute shall be resolved by arbitration as provided in Paragraph 11.03 of this
Agreement.
(ii) If the parties determine that the actual values reflected on
the final Inventory Statement (the "Inventory Value") is greater than Nine
Hundred Thousand Dollars ($900,000.00), the value of the Monro Common Stock and
Cash Consideration issued to Xxxxxxxxx at Closing will be adjusted upward and
Monro will promptly transfer to Xxxxxxxxx the difference between the Inventory
Value and Nine Hundred Thousand Dollars ($900,000.00). If the parties determine
that the Aggregate Value is less than Seven Hundred Thousand Dollars
($700,000.00), the value of the Monro Common Stock and Cash Consideration issued
to Xxxxxxxxx at Closing will be adjusted downward, and Xxxxxxxxx will promptly
pay to Monro the difference between Seven Hundred Thousand Dollars ($700,000.00)
and the Inventory Value. Notwithstanding the immediately preceding, if the
Inventory Value is more than One Million Dollars ($1,000,000.00) at Closing, (a)
there will be no adjustment upward in the value of the Monro Common Stock or
Cash Consideration issued to Xxxxxxxxx at Closing in excess of One Hundred
Thousand Dollars ($100,00.00), and (b) a corresponding amount of Inventory (the
exact amount and specific items of which shall mutually agreed upon by Xxxxxxxxx
and Monro in the exercise of their commercially reasonable judgment) in excess
of One Million Dollars ($1,000,000.00) will remain with Xxxxxxxxx after Closing.
13
(iii) All Real Property taxes, rent payments and deposits, utility
charges and deposits, license fees and other prepaid charges relating to the
Real Property leases to be assumed by Monro pursuant to Paragraph 2.03A hereof
will be prorated as of the Closing Date, and the prorated portion of such
payments and prepayments representing payment for the period commencing with the
Closing Date will be paid Monro to Xxxxxxxxx at the Closing or shortly
thereafter. All payments due or prepayments received by Xxxxxxxxx under the
Contracts to be assigned to Monro pursuant to this Paragraph 2.03B shall be
prorated as of the Closing Date, and the prorated portion of such payments and
prepayments representing payment for the period commencing with the Closing Date
will be paid or credited by Xxxxxxxxx to Monro at the Closing or shortly
thereafter.
2.06 MONRO COMMON STOCK AND CASH TO XXXXXXXXX. The Monro Common Stock and
cash from Monro to Xxxxxxxxx shall be issued as follows:
A. Upon the execution of this Agreement, payment by Monro to
Xxxxxxxxx of Five Hundred Thousand Dollars ($500,000.00) in immediately
available funds (the "Initial Payment"). It is understood that Xxxxxxxxx will
immediately return to Monro an amount equal to the Initial Payment if the
Agreement is terminated for any reason pursuant to Section 10.01.
B. At the Closing, payment by Monro to Xxxxxxxxx of Two Hundred
Fifty Thousand Dollars ($250,000.00) at the Closing, by wire transfer of
immediately available funds to bank account(s) identified by Xxxxxxxxx within
two (2) days prior to Closing.
C. At the Closing, the deposit at Closing by Monro with the Escrow
Agent of an additional sum of Two Hundred Fifty Thousand Dollars ($250,000.00)
(the "Escrowed Amount"), to be held in an interest-bearing escrow account and to
be disbursed after Closing in accordance with the terms set forth in the Escrow
Agreement. The Escrowed Amount shall be
14
used to fund: (i) all Purchase Price adjustments (without regard to the
Threshold Amount); (ii) fixed asset adjustment, due to real property incorrectly
reported of One Hundred Twenty Eight Thousand Dollars ($128,000) (the "Real
Property Adjustment") and (iii) indemnification of Monro by Xxxxxxxxx and
Shareholder pursuant to Paragraph 9.04 of this Agreement . The Real Property
Adjustment shall be made from the Escrowed Amount on the second anniversary of
the Closing. If on such anniversary there are insufficient funds to make the
payment in full of the Real Property Adjustment to Monro, then Monro shall set
off any excess Real Property Adjustments (the "Excess Adjustments") against rent
payments due under the Guarantor Leases (as defined in Section 7.05A) over a
period of two (2) years. Such Excess Adjustments shall be allocated pro rata
among the Guarantor Leases, reducing the monthly rent of each Guarantor Lease by
an amount which equals the percentage that each individual monthly Guarantor
Lease rent payment is to the aggregate of all of the monthly Guarantor Lease
rent payments.
D. At the Closing, payment by Monro to Xxxxxxxxx of an additional
Six Million Five Hundred Thousand Dollars ($6,500,000.00) of Monro Common Stock,
represented by one stock certificate, which, upon its issuance, shall be fully
paid and (except at set forth in Section 630 of the New York Business
Corporation Law) nonassessable. Each share of Monro Common Stock issued and
delivered to Xxxxxxxxx at the Closing shall be valued at the Average Trading
Price of a share of Monro Common Stock on the Closing Date. Monro shall
thereafter divide such certificate into certificates of such denominations and
registered in such names as Xxxxxxxxx shall request, but under no circumstances
for fractions of a share.
E. So long as the amount of Monro Common Stock issued by Monro to
Xxxxxxxxx is never less than Eighty Percent (80%) of the market value of the
Assets (including the Excluded Assets and liabilities of Xxxxxxxxx assumed by
Monro under the terms hereof)
15
owned by Xxxxxxxxx, the amount of the post-Closing adjustment resulting in any
adjustment to the amount of Monro Common Stock or cash issues by Monro or
Xxxxxxxxx shall be made, as applicable, by wire transfer of immediately
available funds and/or the issuance of additional Monro Common Stock one hundred
eighty (180) calendar days after the Closing Date; provided, however, the
Parties may mutually agree to an earlier payment of such amounts.
2.07 CLOSING. Closing hereunder shall take place at the offices of
Xxxxxxxxx'x Attorney on the Closing Date.
2.08 RIGHT OF OFFSET. Monro may, at its option, use part or all of any
amounts due to Xxxxxxxxx or any Shareholder or Guarantor (or affiliate thereof)
pursuant to the terms of this Agreement, the lease agreements described in
Schedule 7.05 or any other agreements between Monro and Xxxxxxxxx, the
Shareholder, or the Guarantor, to apply against or satisfy any failure of
Xxxxxxxxx or Shareholders to satisfy liabilities arising from any of their
obligations or agreements hereunder, or any claims of Monro against Xxxxxxxxx or
Shareholders whether due to the breach of any representation or warranty made
hereunder or otherwise, together with all expenses, including reasonable
attorneys' fees and the costs of defense, incurred by Monro as a result of or in
connection therewith; if so used by Monro, such amounts shall be, and shall
constitute, a complete and absolute offset against the payment of any such
amounts which are or may become due from Monro to Xxxxxxxxx, any of the
Shareholders or their affiliates. Nothing contained in this Paragraph 2.07 shall
be construed as to limit or modify, except to provide for a right of offset,
Xxxxxxxxx'x and Shareholders' general obligation to indemnify Monro set forth in
Paragraph 9.04 thereof.
16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
XXXXXXXXX AND SHAREHOLDER
Xxxxxxxxx, Shareholder, and Guarantor jointly and severally represent and
warrant to Monro as follows:
3.01 CORPORATE STANDING. Xxxxxxxxx is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland.
Xxxxxxxxx has full corporate power and authority to own or lease its properties
and to carry on the Business as it is now being conducted. Xxxxxxxxx is (or on
the Closing Date will be) duly licensed or qualified to do business and is in
good standing as a foreign corporation under the corporation and tax laws of all
jurisdictions in which the nature of the activities conducted by it and/or the
character of the assets owned or leased by it makes such license or
qualification necessary, such jurisdictions being listed on Schedule 3.01
hereto.
3.02 AUTHORITY. Xxxxxxxxx and the Shareholder have taken all such action
as may be necessary, advisable or proper to authorize this Agreement, the
execution and delivery hereof, the consummation of the transactions contemplated
hereby and the execution and delivery of each of the documents required to be
delivered hereunder. This Agreement has been duly executed by Xxxxxxxxx and the
Shareholder and is valid, binding and enforceable against each of them in
accordance with its terms, except as the enforceability of this Agreement may be
affected by bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by the application of general equitable principles.
3.03 CONSENTS; CONFLICTS. Except as set forth on Schedule 3.03, the
execution and delivery of this Agreement and the consummation of the
transactions provided hereunder do not
17
require any third party consent and do not violate, conflict with, result in the
breach of, or cause the acceleration of or default under any provision of (a)
the Articles of Incorporation or By-Laws, as the same may have been amended from
time to time, of Xxxxxxxxx, or (b) any obligation, mortgage, lien, lease,
agreement, instrument, law, order, arbitration award, judgment, decree or any
other restriction to which Xxxxxxxxx is a party or by which Xxxxxxxxx or the
Shareholder is subject or bound.
3.04 FINANCIAL STATEMENTS. Xxxxxxxxx has delivered to Monro Xxxxxxxxx'x
reviewed financial statements for the fiscal years ended on March 31, 2002, 2003
and 2004 (the "Annual Financial Statements") and the internally prepared interim
financial statements of Xxxxxxxxx (the "Internal Financial Statements") for the
period ended October 31, 2004, each of which is annexed hereto as Schedule 3.04.
The Annual Financial Statements (a) are prepared in accordance with GAAP, (b)
are in accordance with the books and records of the Business, and (c) present
fully, fairly and accurately the consolidated financial position of the Business
as of said dates and the operational results of the Business for the periods
represented thereby. The Internal Financial Statements are not prepared in
accordance with GAAP, but (i) are in accordance with the books and records of
the Business, and (ii) present fully, fairly and accurately the consolidated
financial position of the Business as of said dates and the operational results
of the Business for the periods represented thereby. Such financial statements
set forth all of the liabilities and obligations of Xxxxxxxxx, direct and
indirect, contingent and accrued, of any nature whatsoever, whether arising out
of contract, tort, statute or otherwise, except (a) liabilities and obligations
set forth in the contracts, leases and commitments listed and described in the
attached Schedules, and (b) liabilities and obligations incurred in the ordinary
course of the Business subsequent to the respective dates thereof.
18
3.05 TITLE TO ASSETS. Except as set forth in Schedule 3.05 hereto,
Xxxxxxxxx has good title to all of the Assets, free and clear of all
liabilities, mortgages, conditional sales agreements, security interests,
leases, liens, pledges, encumbrances, restrictions, charges, claims or
imperfections of title whatsoever (other than the Permitted Encumbrances). True,
correct and complete copies of each document or instrument relating to any such
imperfection of title have been hereto delivered to Monro.
3.06 CONDITION OF ASSETS. All Assets are in good working order and useable
in the ordinary course of the Business, ordinary wear and tear alone excepted.
3.07 INVENTORY. All Inventory owned by Xxxxxxxxx, relating to the Business
and existing as of the Closing Date will (a) be located at the Real Property on
the Closing Date, (b) be useable or saleable in the ordinary course of the
Business (as defined in Paragraph 2.01A), (c) be in a quantity and of a quality
suitable for sale in the ordinary course of the Business, (d) not be damaged or
defective, and (e) in the case of non-tire Inventory, be listed on Xxxxxxxxx'x
vendors' current price sheets and, in the case of tire Inventory, be within
three (3) years of its date of manufacture based upon each item of Inventory's
Department of Transportation Code.
3.08 CONTRACTS. Xxxxxxxxx is not a party to any Contract material to the
operation of the Business that is not set forth in Schedule 2.03 hereto.
A. The Contracts listed in Schedule 2.03 are valid, binding and
enforceable on all parties thereto and in full force and effect. Xxxxxxxxx has
not violated any of the terms thereof in any material respect; and to
Xxxxxxxxx'x, Shareholder's, or Guarantor's Knowledge, no other party to any
Contract is in material breach thereof. No claim has been made by any party
thereto that any other party is in default thereunder; and Xxxxxxxxx has not
received any notice that any such Contract is being or will be canceled. Except
as set forth on Schedule 3.08,
19
neither the execution of this Agreement nor the consummation of the transactions
contemplated hereby will constitute an event which will, upon the giving of
notice, lapse of time or both, result in a default under or termination of any
such Contract. True, correct and complete copies of each of the Contracts set
forth on Schedule 2.03 have been supplied by Xxxxxxxxx to Monro prior to the
date hereof.
X. Xxxxxxxxx does not have any outstanding purchase commitment which
is in excess of the normal, usual and customary requirements of the Business or
(i) is at a price in excess of the current market price, or (ii) contains terms
and conditions which are more onerous than those which are usual and customary
in the industry. There are no outstanding bids, sales proposals, contracts or
unfilled orders quoting prices which do not include a markup over estimated
cost, based upon actual cost experience, consistent with past markup on similar
contracts. A list of all purchase commitments and orders of Xxxxxxxxx relating
to the Business which have not been received as of the date of this Agreement,
in amounts in excess of Ten Thousand Dollars ($10,000.00) in any single case and
Fifty Thousand Dollars ($50,000.00) in the aggregate from all suppliers is
annexed hereto as Schedule 3.08B. A list of all sales commitments and orders of
Xxxxxxxxx that have not been sold as of the date of this Agreement, in amounts
in excess of Ten Thousand Dollars ($10,000.00) in any single case and Fifty
Thousand Dollars ($50,000.00) in the aggregate from all customers is annexed
hereto as Schedule 3.08B. Each sales commitment or order of Xxxxxxxxx is valid,
binding and enforceable against the customer.
3.09 TRADE RELATIONS. Trade relations between Xxxxxxxxx and its respective
major customers and suppliers are in good standing and, to Xxxxxxxxx'x,
Shareholder's, or Guarantor's Knowledge, the continuation of such relations is
not dependent upon the continued ownership of
20
the Business by Xxxxxxxxx or the continued management or administration of the
Business by Xxxxxxxxx'x respective present personnel. Xxxxxxxxx has no reason to
believe that any major customer, franchisor, distributor or supplier will or may
cancel a major contract, terminate its relationship with, or materially decrease
its volume of purchases from or sales to Xxxxxxxxx, whether or not by reason of
the transactions contemplated by this Agreement.
3.10 REAL PROPERTY.
A. Schedule 3.10A hereto contains an accurate and complete list of
all Real Property occupied by Xxxxxxxxx under a lease or similar arrangement and
with regard to each lease sets forth (i) the address of the subject property,
(ii) the name and address of the lessor, (iii) the expiration date of the lease,
(iv) the monthly rent and any additional rent called for under the lease, and
(v) any other material terms which affect possession or occupancy thereunder.
True, correct and complete copies of such leases and amendments thereto have
heretofore been delivered to Monro. Xxxxxxxxx: (i) is in good standing under
each such lease and there are no material breaches of any such lease; and (ii)
has not received any notice of default from any lessor or received any notice of
non-compliance with applicable laws, rules or regulations of any Governmental
Authority. Xxxxxxxxx has no obligation as lessee, which it has not fully
performed, nor is it aware of any expenditures which are likely to be required
under the provisions of any such lease for any purpose other than the payment of
rent and except as otherwise disclosed on Schedule 3.10A. Unless otherwise
indicated in Schedule 3.10A, the consummation of the transactions contemplated
by this Agreement will not, by itself or upon the giving of notice or lapse of
time or both, result in a default under or termination of any such lease.
X. Xxxxxxxxx does not own any Real Property.
21
C. The Real Property and the current use thereof by Xxxxxxxxx, do
not violate any building, zoning or similar land use law, rule or regulation of
any Governmental Authority that is material to the operation of the Business as
currently conducted at the affected Real Property location. All buildings,
structures and other improvements located on the Real Property are (i) in good
operating condition, (ii) in a state of good maintenance and repair, ordinary
wear and tear excepted, (iii) adequate and suitable for the purposes for which
they are presently being used, and (iv) located fully within the lines of record
title. Xxxxxxxxx has not received any notice, official or otherwise, that any
condemnation proceeding is contemplated or has been commenced against any of the
Real Property or that any Real Property, or the use thereof, is in violation of
any applicable building, zoning or similar land use law, rule or regulation of
any Governmental Authority. Xxxxxxxxx has all necessary occupancy certificates,
licenses and permits with respect to its use and occupancy of each parcel of
Real Property.
D. To the Knowledge of Xxxxxxxxx, the Shareholder, and the
Guarantor, except as may be set forth in Schedule 3.10D, no Real Property
(whether now or previously owned or leased by Xxxxxxxxx) has ever been used for
the generation, storage or disposal of Hazardous Substances or as a landfill or
other waste disposal site. No Hazardous Substances exist on the Real Property in
violation of applicable law; and prior to Closing all Hazardous Substances shall
be legally removed from the Real Property, except for those stored in compliance
with applicable law and used in ordinary course of the Business. Except as set
forth in Schedule 3.10D, (i) there are not now, nor have there ever been,
underground storage tanks, septic tanks or in ground lifts on the Real Property,
and (ii) the improvements on the Real Property do not contain asbestos or lead
based paint nor does any equipment on the Real Property contain any
polychlorinated biphenyls (PCB's).
22
E. There are no agreements, judgments, orders, writs, injunctions,
decrees, license or permit conditions or other directives of any court or
Governmental Authority which relate to the use of the Real Property or require
any change in the present condition of such premises.
F. To Xxxxxxxxx'x, Shareholder's, or Guarantor's Knowledge, no
parcel of Real Property is in violation of any Environmental Law or any permit
or license issued thereunder, and no event has occurred which, with the passage
of time or the giving of notice or both, would constitute a violation of any
Environmental Law or any such permit or license.
X. Xxxxxxxxx and Shareholder have delivered or caused to be
delivered to Monro all instrument surveys, certificates of title, title
insurance policies and environmental reports covering or relating to the Real
Property which are in its possession or control.
3.11 INTELLECTUAL PROPERTY. Schedule 3.11 contains an accurate and
complete list of all Intellectual Property, which Xxxxxxxxx has, except as
otherwise noted on Schedule 3.11, the exclusive right to use and transfer or
otherwise assign to Monro, free and clear of all royalties, claims or rights of
others and all of which represents the Intellectual Property necessary or
desirable to the conduct of the Business. Except as set forth in Schedule 3.11
hereto, (a) Xxxxxxxxx does not own any copyright, patent, trademark, service
xxxx or trade name or have any application pending with respect thereto relating
to the Business, (b) Xxxxxxxxx does not utilize any assumed names relating to
the Business and (c) Xxxxxxxxx is not a party to any franchise, copyright,
patent, trademark or service xxxx license agreement relating to the Business.
Xxxxxxxxx is not a party to and, there is no Litigation relating to or arising
from Intellectual Property which is necessary or desirable to the conduct of the
Business, or any basis for any such Litigation, adversely affecting or which
might adversely affect the Business.
23
Xxxxxxxxx has not given any notice of infringement to any third party with
respect to any of the Intellectual Property and, no such infringement exists.
3.12 TAXES. Xxxxxxxxx has delivered to Monro true and correct copies of
its Federal Tax returns for the years 2001, 2002 and 2003. Xxxxxxxxx has filed
returns for and paid in full all of its Taxes to the extent such filings and
payments are required. All such returns were true and correct when filed.
Xxxxxxxxx has not received notice of any governmental investigation, examination
or audit of any Tax return of Xxxxxxxxx and, no such investigation, examination
or audit is currently in progress. Xxxxxxxxx has had no Tax deficiencies
proposed against it, which remain unpaid, nor has it executed any waiver of the
statute of limitations on the assessment or collection of any Tax. Consolidated
Federal tax returns of Xxxxxxxxx have not been audited by the Internal Revenue
Service through the fiscal year-ended March 31, 2003.
3.13 LITIGATION. Except as set forth in Schedule 3.13, there is no
Litigation existing, pending or, threatened against Xxxxxxxxx, and there is no
fact known to Xxxxxxxxx, the Shareholder, or the Guarantor which could form the
basis for any such Litigation. To Xxxxxxxxx'x, the Shareholder's, or the
Guarantor's Knowledge, there are no judgments, orders, writs, injunctions or
decrees of any court or any Governmental Authority, whether or not filed,
against Xxxxxxxxx. Neither Xxxxxxxxx, the Shareholder, or the Guarantor has
received any inquiry, written or oral, from any Governmental Authority
concerning the Business or its operations.
3.14 GOVERNMENTAL COMPLIANCE.
X. Xxxxxxxxx has complied with all applicable federal, state and
local laws, rules, regulations, judgments, orders, writs, injunctions or decrees
of all courts and Governmental Authorities that are material to the operation of
the Business as currently
24
conducted. Xxxxxxxxx has not received any notice that it is claimed to be in
violation of any law, rule or regulation or in default with respect to any
judgment, order, injunction or decree, of any court or Governmental Authority.
All reports, returns and other documents which have been filed by Xxxxxxxxx with
any Governmental Authority are true, correct and complete in all material
respects.
X. Xxxxxxxxx has obtained all permits, licenses and other
authorizations that are material to the operation of the Business as currently
conducted and the ownership, use and operation of its real and personal
properties, including without limitation all permits, licenses and other
authorizations that are, to Xxxxxxxxx'x, the Shareholder's, and the Guarantor's
Knowledge, required under any Environmental Law, all of which are listed and
described on Schedule 3.14B. The operation of the Business (as currently
conducted and as previously conducted by Xxxxxxxxx) does not, to the Knowledge
of Xxxxxxxxx, the Shareholder, or the Guarantor, violate any Environmental Law
or any permit or license issued thereunder, and no event has occurred which by
itself or with the passage of time or the giving of notice or both, would
constitute a violation of any Environmental Laws or such permits or licenses.
C. To Xxxxxxxxx'x, the Shareholder's, or the Guarantor's Knowledge,
there are no agreements, judgments, orders, writs, injunctions, decrees, license
or permit conditions or other directives of any court or Governmental Authority
that relate to the operation of the Business or require any change in the
present methods of operation of the Business. There is no Litigation pending or,
to Xxxxxxxxx'x, the Shareholder's, or the Guarantor's Knowledge, threatened
relating to (i) violation of or non-compliance with any Environmental Law, (ii)
the disposal, discharge or release of liquid or solid wastes or Hazardous
Substances or (iii) exposure to any chemical or other Hazardous Substances,
noises or vibrations. To Xxxxxxxxx'x, the
25
Shareholder's, or the Guarantor's Knowledge, no consent or approval pursuant to
any Environmental Law is needed from any Governmental Authority in connection
with the execution of this Agreement or the Closing, nor is any notice required
to be given by any party.
3.15 LABOR RELATIONS. With respect to the employees of the Business,
Xxxxxxxxx has complied in all material respects with all applicable agreements,
laws, rules and regulations relating to the employment of labor, including those
related to wages, hours and payroll taxes that are material to the operation of
the Business. Xxxxxxxxx has withheld and remitted to the proper Governmental
Authorities all amounts required by law or agreement to be withheld from wages
or salaries of its employees and is not liable for any arrearage of wages or any
Taxes or penalties for failure to comply with any of the foregoing. With respect
to the employees of the Business, within the last twelve (12) months there have
been no strikes, work stoppages, slowdowns, threatened unfair labor practice
charges or other material controversies pending or threatened by any of its
employees; and Xxxxxxxxx has not entered into any collective bargaining
agreement and no union represents, or in the past twelve (12) months has
demanded or requested to represent or is currently attempting to represent, any
of the employees of Xxxxxxxxx. Except as set forth in Schedule 3.15 hereto,
Xxxxxxxxx has not promulgated any policy or entered into any agreement relating
to the payment of any medical insurance premium, retirement pay, severance pay,
vacation pay or sick leave to any present or former employees of Xxxxxxxxx.
Schedule 3.15 lists all of the employees of Xxxxxxxxx employed by the Business
and their current wage rates, none of which since September 16, 2004, has been
increased, except for the implementation of annual wage rate increases and
bonuses consistent with past practice. Schedule 3.15 reflects all unused
vacation pay and sick leave accrued as of September 30, 2004 for all of
Xxxxxxxxx'x employees employed by the Business. Schedule 3.15 also sets forth
the
26
name of any employees of Xxxxxxxxx engaged in the Business who are currently on
a leave of absence for any reason including military duty, sickness, injury or
disability, and states the reason for and other details of such leave. True,
correct and complete copies of all written employment policies and all employee
manuals which are still in effect for any present, former or retired employee of
Xxxxxxxxx employed by the Business have heretofore been delivered to Monro.
3.16 ERISA MATTERS.
A. Employee Plans. Xxxxxxxxx does not maintain any pension benefit,
profit sharing, retirement, deferred compensation, welfare, insurance, health,
survivor, disability, bonus, incentive, commission, vacation pay, severance pay
and other similar plans, programs and agreements, whether reduced to writing or
not or whether defined in ERISA Section 3(3) or not, relating to the employees
of Xxxxxxxxx being transferred to Monro hereunder, except as listed on Schedule
3.16 (the "Employee Plans"), neither Xxxxxxxxx nor any employer within a group
of employers of which Xxxxxxxxx is a member (as defined in Code Section 414 (b),
(c), (m) or (o) as an "ERISA Affiliate") has ever been obligated to contribute
to any "multi-employer plan," as such term is defined in Section 3(37) of ERISA,
or to any multiple employer or single employer plan covered by the termination
provisions of Title IV of ERISA. Xxxxxxxxx agrees that it retains all liability
that may arise on account of contributions that may have been made to any such
plan prior to the Closing Date, such that there will be no carryover liability
to Monro with respect thereto.
B. Copies of Employee Plans and Related Documents. Xxxxxxxxx has
previously delivered to the Monro true, correct and complete copies of all
Employee Plans which have been reduced to writing and written descriptions of
all Employee Plans which have not
27
been reduced to writing, and all agreements, including trust agreements and
insurance contracts, related to such Employee Plans, the Summary Plan
Description and all modifications thereto for each Employee Plan communicated to
employees and, if applicable, the Form 5500 filed in each of the last three plan
years with respect to each Employee Plan.
3.17 BOOKS AND RECORDS. Xxxxxxxxx does not have any records, systems,
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of Xxxxxxxxx.
3.18 INTERESTS IN CLIENTS, SUPPLIERS, ETC. Except as set forth in Schedule
3.18, neither the Shareholder nor any officer or director of Xxxxxxxxx or the
Shareholder possesses, directly or indirectly, any financial interest in, or is
a director, officer, owner or employee of, any corporation, firm, association or
business organization which is a client, supplier, customer, lessor, lessee,
competitor or potential competitor of Xxxxxxxxx or has any right, option or
agreement to be or become any of the foregoing. Ownership of less than five
percent (5%) of the securities of a company which are traded on a recognized
stock exchange or market shall not be deemed to be a financial interest for
purposes of this Paragraph 3.18.
3.19 INSURANCE. Xxxxxxxxx has in full force and effect insurance policies
of the types and in the amounts described in Schedule 3.19 hereto. True, correct
and complete copies of said policies have heretofore been delivered to Monro.
These policies are in types and amounts customarily deemed to be adequate in
Xxxxxxxxx'x industry, and all premiums due to the date hereof have been paid in
full. All of such policies have been issued by reputable insurance
28
companies which are actively engaged in the insurance business and authorized to
issue policies in the State of Maryland.
3.20 ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule 3.20
hereto, there has not been since March 31, 2004:
A. Any Material Adverse Change;
B. Any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the Assets;
C. Any material transactions entered into or any material
liabilities or obligations incurred by Xxxxxxxxx (to be considered a "material
transaction" or a "material liability or obligation", it must be for an amount
of at least $10,000.00), or any sale, transfer, encumbrance of, or any contract
to sell, transfer or encumber, any of the Assets, or any payment, cancellation
or compromise of any debt, other than in the ordinary course of business;
D. Any payment or declaration of any bonus or salary increase other
than in the ordinary course of the Business and consistent with past practice,
or adjustment or additional or extraordinary payment to any officer, employee or
agent of Xxxxxxxxx; or
E. Any other event of any kind or character which would or could
materially and adversely affect the Business or the Assets.
3.21 GENERAL WARRANTY. Xxxxxxxxx has made due inquiry with respect to each
fact, matter or thing relating to or arising from the representation and
warranty set forth in this Agreement. No representation or warranty of Xxxxxxxxx
or Shareholder contained in this Agreement, and no Schedule, exhibit, statement,
document, instrument or certificate furnished to or to be furnished by Xxxxxxxxx
or the Shareholder to Monro pursuant to the terms hereof, or in connection with
the transactions contemplated hereby, contains or will contain any untrue
29
statement of a material fact, or fails or will fail to state a necessary to make
the statements contained or incorporated therein or herein not misleading.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF MONRO
Monro represents and warrants to Xxxxxxxxx and Shareholder as follows:
4.01 CORPORATE STANDING. Monro is a corporation duly organized, validly
existing and in good standing under the corporation and franchise tax laws of
the State of New York. Monro has full corporate power and authority to own its
properties and to carry on its business as currently conducted and to own and
use the assets currently owned and used by it.
4.02 CORPORATE AUTHORITY. Monro has full corporate power and authority to
enter into, execute and deliver this Agreement, to purchase the Assets and
comply with the terms and conditions of this Agreement. Monro has taken all such
corporate action as may be necessary or advisable and proper to authorize this
Agreement, the execution and delivery thereof, the consummation of the
transactions contemplated hereby and the execution and delivery of each of the
documents required to be delivered hereunder, so that Monro will have full
right, power and authority to purchase the Assets from Xxxxxxxxx and to perform
all of its obligations under this Agreement at the Closing. This Agreement
constitutes the legal, valid and binding obligation of Monro enforceable against
Monro in accordance with its terms and conditions, except as the enforceability
of this Agreement may be effected by bankruptcy, insolvency or similar laws
affecting creditor's rights generally or by the application of general equitable
principles.
4.03 CONSENTS. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby on the part of Monro
requires the consent of any third party.
30
4.04 COMPLIANCE WITH LAWS. The Monro is in compliance in all material
respects with all applicable federal, state and local laws, rules and
regulations and, to Monro's knowledge, Monro has received no notice of any
action threatened or pending alleging non-compliance therewith.
4.05 LITIGATION. There is not pending or, to Monro's knowledge,
threatened, any suit, claim, action, proceeding or arbitration relating to the
business or operations of the Monro which seeks to enjoin or obtain damages in
respect to the transactions contemplated hereby. Monro has received no citation,
order, judgment, writ, injunction or decree of any court, government or
governmental or administrative agency against or affecting the Monro for the
operation of the Monro's business.
4.06 ARTICLES OF INCORPORATION, BYLAWS, AND CAPITALIZATION OF MONRO. A
true, correct, and complete copy of the Articles of Incorporation and Bylaws of
Monro, as amended to date, have been provided to Xxxxxxxxx. As of September 30,
2004, the authorized capital stock of Monro consists solely of Twenty Four
Million Nine Hundred Thousand (24,900,000) shares, consisting of: (a) Twenty
Million (20,000,000) shares of Common Stock ($0.01 par value per share) of which
Thirteen Million Four Hundred Forty Thousand Four Hundred One (13,440,401)
shares are issued and outstanding; (b) One Hundred Fifty Thousand (150,000)
shares of Class C Preferred Stock ($1.50 par value per share) of which Sixty
Five Thousand (65,000) shares are issued and outstanding; and (c) Four Million
Seven Hundred Fifty Thousand (4,750,000) shares of undesignated Preferred Stock
($0.01 par value per share) of which none are issued and outstanding.
All such issued and outstanding shares have been duly authorized, validly
issued, and fully paid and (except as set forth in Section 630 of the New York
Business Corporation Law)non-
31
assessable and, to Monro's actual knowledge, have been issued in all material
respects in compliance with all applicable state and federal laws concerning the
issuance of securities, and none of such shares were issued in violation of the
preemptive rights of past or present stockholders.
ARTICLE V
COVENANTS OF XXXXXXXXX, SHAREHOLDER, AND GUARANTOR
Xxxxxxxxx, Shareholder, and Guarantor, jointly and severally, covenant and
agree with Monro as follows:
5.01 CONDUCT OF BUSINESS. To keep and maintain the Business as a going
business with sufficient personnel, to conduct the Business pending the Closing
in the normal and usual manner consistent with past practice. Without the prior
approval of Monro (which approval may be withheld by Monro for any reason in its
sole discretion), Xxxxxxxxx shall not to make any change in the policies
affecting the operation and conduct of the Business, the Assets or the Real
Property nor, except as permitted in Schedule 5.01 hereof, to commence
negotiations for, or enter into, any material or unusual contracts or agreements
affecting the Business, the Assets or the Real Property, or extending beyond the
Closing. From the date hereof through the Closing Date, Xxxxxxxxx shall not
enter into any purchase commitments or orders, except in the ordinary course of
the Business and in amounts not in excess of Ten Thousand Dollars ($10,000.00)
for each such order or Fifty Thousand Dollars ($50,000.00) in the aggregate from
all suppliers, without the prior written approval of Monro. From the date hereof
through the Closing Date, Xxxxxxxxx will not enter into any sales commitments or
orders, except in the ordinary course of the Business and in amounts not in
excess of Ten Thousand Dollars ($10,000.00) for each such
32
order or Fifty Thousand Dollars ($50,000.00) in the aggregate from all
customers, without the prior written approval of Monro.
5.02 INSTRUCTION. From the date hereof and for twelve (12) months
thereafter, instruct Monro, through the authorized personnel and agents of
Monro, concerning the Business and its operations, including such reasonable
assistance and cooperation as may be reasonably be requested or necessary to
assure the orderly transfer of the Business to Monro and the continuation
thereof by Monro subsequent to the Closing.
5.03 CHANGES. Between the date hereof and the Closing, to notify Monro of
any adverse changes, problems or developments that are material to the operation
of Business and the status of its material liabilities, obligations and
relationship with its creditors, customers and suppliers.
5.04 ACCESS. Upon reasonable prior notice, allow the authorized personnel
and agents of Monro to have access to any and all of the employees, records and
premises of Xxxxxxxxx relating to the Business; at all reasonable times between
the date hereof and the Closing to permit Monro to conduct at its expense any
tests, surveys, audits, inquires or investigations relating to Environmental Law
matters which are contemplated by this Agreement; to furnish Monro with all
information concerning the affairs of Xxxxxxxxx relating to the Business as
Monro may reasonably request; and to permit Monro to make extracts from, and
copies of, all of the tax returns, books, records, appraisals, files, purchase
orders, sales orders and other business records of Xxxxxxxxx relating to the
Business, whether written or in machine readable form.
5.05 EXCLUSIVE DEALING. Pending Closing hereunder, to refrain and cause
Xxxxxxxxx, and the officers, directors, employees and agents thereof to refrain
from taking any action, directly or indirectly, to encourage, initiate or engage
in discussions or negotiations with or
33
provide any information to, any corporation, partnership, person, or other
entity or group, other than Monro, concerning any purchase of the capital stock
in Xxxxxxxxx, any merger of, with or into Xxxxxxxxx, sale of the Assets or
similar transaction involving Xxxxxxxxx or the Business.
5.06 COOPERATION. To (a) execute, acknowledge and deliver to Monro on
request, both prior and subsequent to the Closing, all such instruments,
consents, authorizations, certifications, books, records and data, (b) take all
other actions, as heretofore agreed or as may be reasonably necessary or
advisable in the opinion of Monro to satisfy the Conditions to Closing contained
in Article VII hereof, and (c) refrain from taking any actions which would, may
or could cause a breach of the representations and warranties contained in
Article III hereof or cause the Conditions to Closing contained in Article VII
hereof to fail to be satisfied; and, further, to assist and cooperate with Monro
in connection with any litigation involving the Business acquired from Xxxxxxxxx
hereunder, before or after Closing.
5.07 LIABILITIES. In the ordinary course of Xxxxxxxxx'x business,
Xxxxxxxxx shall pay and discharge, or make adequate provision for, all of
Xxxxxxxxx'x liabilities, indebtedness, obligations, claims and losses arising
out of, or by reason of, the operation of the Business prior to Closing.
5.08 NON-HIRE. Neither Xxxxxxxxx, Shareholder, nor the Guarantor shall,
for a period of one (1) year following the Closing, directly or indirectly,
solicit or hire any store manager or other management-level employee of the
Business retained after Closing by Monro, to become an employee or contractor to
any other business or business entity in competition with the business currently
conducted by Xxxxxxxxx; provided, however, that the provisions of this Section
5.09 shall not apply to any such employee terminated by Monro after the Closing
Date.
34
5.09 DISSOLUTION OF XXXXXXXXX. Xxxxxxxxx shall dissolve and wind up its
affairs as promptly as practical after the Closing Date, and after such time
shall not, without the consent of Monro, engage in any business, and Xxxxxxxxx
shall take all necessary steps requisite to make available to Monro the use of
Xxxxxxxxx'x trade name "Mr. Tire" for the geographical area in which it
currently conducts it Business.
5.10 EMPLOYEE MATTERS. Xxxxxxxxx shall pay, discharge and be responsible
for (i) all salary, compensation and accrued vacation pay and sick leave arising
out of or relating to the employment of its employees prior to and including the
Closing Date, and (ii) any employee benefits arising under the benefit plans or
benefit arrangements of Xxxxxxxxx during the period prior to and including the
Closing Date. Xxxxxxxxx shall be responsible for all severance liabilities and
all COBRA liabilities for all of Xxxxxxxxx'x employees who do not become
employed by the Monro on the Closing Date.
ARTICLE VI
COVENANTS OF MONRO
Monro covenants and agrees with Xxxxxxxxx as follows:
6.01 CHANGES. Between the date hereof and the Closing, to notify Xxxxxxxxx
of any adverse changes, problems or developments with respect to the Monro's
ability to consummate the transactions contemplated by this Agreement.
6.02 COOPERATION. To (a) execute, acknowledge and deliver to Xxxxxxxxx on
request, both prior and subsequent to the Closing, all such instruments,
consents, authorizations, certifications, books, records and data; (b) take all
other action, as heretofore agreed or as may be reasonably necessary or
advisable in the opinion of Xxxxxxxxx to satisfy the Conditions to
35
Closing contained in Article VIII hereof; and (c) refrain from taking any
actions which would, may or could cause a breach of the representations and
warranties contained in Article IV hereof or cause the Conditions to Closing
contained in Article VIII hereof to fail to be satisfied; and, further, to
assist and cooperate with Xxxxxxxxx in connection with any litigation involving
the Business after the Closing Date regarding events prior to the Closing Date.
6.03 ASSUMPTION OF LIABILITIES. On the Closing Date, to assume: (a) the
liabilities set forth on Schedule 2.03 to this Agreement; (b) the liabilities
relating to customer warranty work, road hazard warranties sold by Xxxxxxxxx
prior to Closing, or warranty claims arising after the Closing relating to
Xxxxxxxxx'x operation of the Business prior to Closing; and (c) the liabilities
relating to those employees of Xxxxxxxxx hired by Monro as of the Closing Date,
in each case for obligations accruing from and after the Closing Date.
6.04 EMPLOYEE MATTERS.
X. Xxxxx intends to offer employment after the Closing Date to all
store personnel employed by Xxxxxxxxx as of the Closing Date and shall use
reasonable efforts to do so.
B. From and after the Closing Date, Monro shall pay, discharge and
be responsible for all salary, compensation and benefits arising out of or
relating to the employment of those of Xxxxxxxxx'x employees hired by Monro
after the Closing Date. Monro shall be responsible for all COBRA liabilities, if
applicable, for such employees hired by Monro. Monro shall cause all of
Xxxxxxxxx'x employees hired by Monro as of the Closing Date to be eligible to
participate in its "employee welfare benefit plans" and "employee pension
benefit plans" (as defined in Paragraph 3(1) and 3(2) of ERISA, respectively),
if applicable, in accordance with Monro's benefits policies.
36
D. For purposes of any length of service requirements, waiting
period, vesting periods or differential benefits based on length of service in
any such plan for which an employee of Xxxxxxxxx may be eligible after the
Closing, Monro shall ensure that, to the extent permitted by law, and except as
limited by Monro's existing personnel policies, service by such employee with
Xxxxxxxxx, or any prior owner of the Business, shall be deemed to have been
service with the Monro.
F. As soon as practicable following the Closing Date, Monro shall
make available its 401(k) Plan to any of Xxxxxxxxx'x employees hired by Monro as
of the Closing Date in accordance with the terms of such Plan.
G. Nothing in this Agreement shall be construed to provide employees
of Xxxxxxxxx with any rights under this Agreement, and no person, other than the
Parties hereto, is or shall be entitled to bring any action to enforce any
provision of this Agreement against any of the parties hereto, and the covenants
and agreements set forth in this Agreement shall be solely for the benefit of,
and shall only be enforceable by, the parties hereto and their respective
successors and assigns as permitted hereunder.
6.05 CONFIDENTIALITY. Except as may be otherwise required by law, Monro
will keep confidential any information obtained by it in connection with the
provisions of this Agreement; and if this Agreement is terminated, Monro will
return to Xxxxxxxxx all information obtained by Monro from Xxxxxxxxx in
connection with this Agreement, including, but not limited to, all of the
information referred to in Section 5.04 of this Agreement.
6.06 SEC FILINGS. Within ten (10) days after the Closing, Monro shall
cause to be filed with the SEC such appropriate registration statement so as to
allow for the shares of Monro Common Stock issued and delivered to Xxxxxxxxx at
Closing to be freely transferable without
37
restriction under the Securities Act and the Exchange Act. Monro will respond
expeditiously to any and all comments and correspondence from the SEC with
regard to such registration statement.
ARTICLE VII
CONDITIONS OF CLOSING BY MONRO
The obligation of Monro to consummate the transactions contemplated by
this Agreement shall be subject, at Monro's sole option, to the satisfaction of
the following conditions precedent:
7.01 REPRESENTATIONS. All of the representations and warranties of
Xxxxxxxxx, the Shareholder, and the Guarantor (as applicable) herein contained
shall be true and correct as of the date of this Agreement, and as of the
Closing Date as if expressly made on and as of the Closing Date (except for
representations and warranties that speak as of a specific date or time which
need only be true and complete as of such date or time).
7.02 PERFORMANCE OF COVENANTS. All of the covenants to be performed and
all of the conditions to be satisfied by Xxxxxxxxx, the shareholder, and the
Guarantor (as applicable) prior to the Closing Date shall have been performed or
satisfied on or before the Closing.
7.03 CONDITION OF PROPERTY. All of the Assets of Xxxxxxxxx shall be in the
same condition on the Closing Date as the same are as of the date hereof,
ordinary wear and tear alone excepted, it being understood and agreed between
the Parties hereto that any uninsured destruction, loss or damage by fire or
casualty prior to the Closing which exceeds One Hundred Thousand Dollars
($100,000.00) individually or in the aggregate shall constitute a failure of the
condition precedent set forth in this Paragraph 7.03.
38
7.04 TERMINATIONS. Except with respect to Permitted Encumbrances and
except as otherwise provided by this Agreement, the termination by Xxxxxxxxx of
any and all encumbrances to the Assets, including but not limited to those
listed on Schedule 3.05. With respect to any encumbrances arising from leases of
equipment by Xxxxxxxxx, whether listed on Schedule 3.05 or otherwise, Xxxxxxxxx
shall be obligated at Closing to provide reasonable evidence of: (a) its
satisfaction of any and all payment obligations to the lessor; and (b) such
lessor's commitment as a secured party to complete any documentation necessary
to terminate any UCC filing or other encumbrance with respect thereto. Xxxxxxxxx
shall work diligently to ensure the filing of all documentation necessary to
terminate such encumbrances as soon as practicable, but in no event later than
sixty (60) days after the Closing Date.
7.05 CONSENTS AND ASSIGNMENTS.
A. The assignment to Monro of Xxxxxxxxx'x rights under the Real
Property leases described on Schedule 3.10A, including the landlord's written
consent, where required, the landlord's executed estoppel certificates
confirming the commencement and termination dates of the lease, any renewal
options, the monthly rent and any additional rent, and that there are no
defaults by landlord or tenant under the terms of the lease (or setting forth
the details of such defaults, if any and the Landlord's written agreement to
amend such leases with respect to the matters described on Schedule 7.05. The
execution and delivery by the Guarantor (or affiliates of the Guarantor) of
leases of each parcel of the Real Property described in Schedule 3.10A, except
for Stores numbered 28 and 34 on the form of lease agreement attached to
Schedule 7.05 and on the respective terms described in Schedule 7.05. Leases for
Real Property in Schedule 3.10A, except for Stores 28 and 34 are referred to in
this Agreement individually as the "Guarantor Lease" and collectively as the
"Guarantor Leases."
39
B. The execution and delivery of a lease for the Real Property
described as Store 28 in Schedule 3.10A.
C. An assignment of the lease for the Real Property described as
Store 34 in Schedule 3.10A. For each lease of Real Property Xxxxxxxxx will
provide or cause to be provided to Monro a subordination and non-disturbance
agreement, in form reasonably acceptable to Monro from the holders of all
mortgages on the Real Property.
D. The assignment to and assumption by Monro of Xxxxxxxxx'x rights
and obligations under the Contracts set forth in Schedule 2.03.
7.06 DUE DILIGENCE; ENVIRONMENTAL TESTS. Monro and its professional
advisors shall have completed the due diligence examination of the Business and
its officers, employees, books and records, suppliers and customers, and Monro
shall be satisfied, in its sole discretion, with respect to matters relevant to
the business and financial condition of the Business. Monro shall have received
results satisfactory to Monro, in its sole discretion, of environmental reports
and testing for all of the Real Property.
7.07 DELIVERY OF DOCUMENTS. Monro shall have received all such documents,
certificates, opinions and papers required of Xxxxxxxxx and Shareholder pursuant
to the terms of this Agreement, or which shall have been reasonably requested by
Monro in connection therewith, in form and substance as approved prior to the
Closing by Monro's Attorney, including expressly, but not limited to, the
following:
A. Bills of Sale or other instruments in form and substance
satisfactory to Monro's Attorney sufficient to properly evidence the transfer of
the Assets from Xxxxxxxxx to Monro.
40
B. A certificate executed by Xxxxxxxxx'x or Shareholder's Secretary,
as applicable, of resolutions unanimously adopted by Xxxxxxxxx'x Board of
Directors and by the general partner of the Shareholder authorizing the
execution of this Agreement, the consummation of the transactions contemplated
hereby and the execution and delivery of the documents required to be delivered
hereunder.
C. A certificate, dated as of the Closing Date, certifying to the
effect that, (i) as of the Closing Date, all of the representations and
warranties of Xxxxxxxxx and Shareholder contained in this Agreement and the
Schedules hereto are true, correct and complete respects as of the Closing Date
(except for representations and warranties that speak as of a specific date or
time, which need only be true and complete at such date or time), and (ii) all
of the agreements, covenants and conditions contained in this Agreement to be
performed or satisfied by Xxxxxxxxx and Shareholder on or prior to the Closing
have been performed or satisfied in all material respects on or before the
Closing Date.
D. A favorable written opinion of Xxxxxxxxx'x Attorney, dated as of
the Closing Date, in the form of Schedule 7.07D hereto.
E. The Escrow Agreement executed by Xxxxxxxxx.
F. Written termination by Xxxxxxxxx of the Xxxxxxxxx Agreement.
7.08 LICENSES, PERMITS, ETC. Monro shall have obtained all licenses,
permits, approvals and authorizations from any Governmental Authority necessary,
in Monro's opinion, to operate the Business after Closing.
7.09 NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement and
the Closing, there shall not have been any Material Adverse Change.
41
ARTICLE VIII
CONDITIONS TO CLOSING BY XXXXXXXXX, SHAREHOLDER, AND GUARANTOR
The obligation of Xxxxxxxxx and Shareholder to consummate the transactions
contemplated by this Agreement shall be subject, at Xxxxxxxxx'x and
Shareholder's sole option, to the satisfaction of the following conditions
precedent:
8.01 REPRESENTATIONS. All of the representations and warranties of Monro
herein contained shall be true and correct as of the date of this Agreement and
as of the Closing Date as if made on and as of the Closing Date (except for
representations and warranties that speak as of a specific date or time which
need only be true and complete as of such date and time).
8.02 COVENANTS AND CONDITIONS. All of the covenants to be performed and
all of the conditions to be satisfied by Monro prior to the Closing Date shall
have been performed or satisfied in all material respects on or before the
Closing except.
8.03 DELIVERY OF DOCUMENTS. Xxxxxxxxx shall have received all such
documents, certificates, opinions and papers required of Monro pursuant to the
terms of this Agreement, or which shall have been reasonably requested by
Xxxxxxxxx and Shareholder in connection therewith, in form and substance as
approved prior to the Closing by Xxxxxxxxx'x Attorney, including expressly, but
not limited to, the following:
A. Payment of the Purchase Price as adjusted, to the extent and in
the manner set forth in this Agreement.
B. A stock certificate in the name of Xxxxxxxxx representing the
Monro Common Stock for the number of shares of Monro Common Stock calculated in
accordance with Section 2.06C.
42
C. A certificate of resolutions adopted by Monro's Board of
Directors or the Governance Committee thereof authorizing the execution of this
Agreement, the consummation of the transactions contemplated hereby and the
execution and delivery of the documents required to be delivered hereunder,
appropriately certified by Monro's corporate Secretary.
D. A certificate of Monro, dated as of the Closing Date certifying,
to the effect that, (i) as of the Closing Date, all of the representations and
warranties of Monro contained in this Agreement are true and correct in all
material respects as of the Closing Date (except for representations and
warranties that speak as of a specific date or time, which need only be true and
complete as such date or time), (ii) all of the covenants and conditions
contained in this Agreement to be performed or met by Monro prior to Closing
have been performed or satisfied on or prior to the Closing Date, and (iii) all
shares of Monro Common Stock delivered to Xxxxxxxxx on the Closing Date are duly
authorized and are validly issued and outstanding, fully paid, and
non-assessable, with no personal liability attaching to the ownership thereof,
and are freely transferable without restriction under the Securities Act and the
Exchange Act.
E. A written agreement pursuant to which Monro assumes certain
liabilities of Xxxxxxxxx including but not limited to, those liabilities set
forth on Schedule 2.03 and the Real Property lease obligations described in
Schedule 3.10A.
F. The Escrow Agreement executed by Monro.
H. Written termination by Monro of Xxxxxxxxx Agreement.
ARTICLE IX
OTHER MATTERS
9.01 TAX STATUS AND EFFECT. It is understood and agreed that neither
Xxxxxxxxx, Shareholder, the Guarantor nor Monro has or have made any
representations to each other as to
43
the tax status or tax effect of the transactions contemplated by this Agreement,
and each of the Parties hereto is therefore separately consulting with their
respective counsel as to such matters and each is responsible and shall assume
liability, subject only to the express and specific provisions of this
Agreement, any tax which may be incurred by reason of the carrying out of the
terms and provisions hereof. In the event that (a) any sales or use Tax shall be
due to any state or local Governmental Authority by reason of the sale of the
Assets, or (b) any transfer Taxes or the like shall be due to any state or local
Governmental Authority by reason of the assignment to Monro or creation in favor
of Monro of leases of the Real Property as contemplated by Paragraph 7.05, such
tax or taxes, if any, split equally between Xxxxxxxxx and Monro. In addition,
Xxxxxxxxx shall be solely responsible for any sales taxes arising out of the
operation of the Business prior to Closing Date.
9.02 BROKERAGE COMMISSIONS. Xxxxxxxxx, Shareholder and Monro represent and
warrant, each to the other, that this Agreement and the transactions
contemplated hereunder were brought about without the assistance of any broker,
person or firm, and that no one is entitled to a commission, fee or payment of
any kind relative to this Agreement or the transactions contemplated hereby.
9.03 EXPENSES OF PARTIES. Except as otherwise provided by this Agreement
or any Schedule hereto, all expenses involved in the preparation, authorization
and consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants, shall be borne
solely by the Party which shall have incurred the same, and the other Party
shall have no liability with respect thereto; provided, however, that in the
event this Agreement fails to close on the Closing Date due to breach or failure
to comply with the terms of this Agreement by Xxxxxxxxx, Shareholder or Monro,
then the breaching party
44
shall, upon demand, be liable to reimburse the non-breaching party for the
non-breaching party's expenses, including, without limitation, disbursements,
accounting and attorney's fees, in connection with the non-breaching party's
negotiation and performance of this Agreement. The parties acknowledge and agree
that any fees payable to any landlord in connection with the assignment by
Xxxxxxxxx to Monro of any leases for the Real Property shall be paid by
Xxxxxxxxx.
9.04 INDEMNIFICATION BY XXXXXXXXX, SHAREHOLDER, AND GUARANTOR. Except as
set forth in Paragraph 9.04D, Xxxxxxxxx and Shareholder jointly and severally
covenant and agree to fully indemnify and hold harmless Monro, its directors,
officers, agents, employees, successors and assigns, as applicable, from and
against and in respect of any and all liabilities, obligations, damages, losses
and expenses, including claims of every kind and nature, whether accrued,
absolute, contingent or otherwise, and reasonable attorneys' fees and the costs
of defense, incurred by any of the indemnified parties:
A. as a result, or by reason, of the breach, falsity or failure of
any of Xxxxxxxxx'x or Shareholder's representations, warranties, covenants or
undertakings contained in this Agreement;
B. for any liability with respect to litigation disclosed on
Schedule 3.13; or
C. as a result of a breach or violation of any Environmental Law
prior to Closing, the release or discharge of Hazardous Substances prior to
Closing, or the release or discharge of Hazardous Substances, any of which has
an effect on the Real Property.
X. Xxxxxxxxx and Shareholder will have no liability with respect to
claims for indemnification pursuant to this Paragraph 9.04 or otherwise under or
in connection with this Agreement, unless Monro has paid, suffered, and/or
incurred losses in excess of the Threshold
45
Amount, after which time Xxxxxxxxx and Shareholder, jointly and severally, shall
indemnify Buyer for all Losses incurred, subject, however, to the Cap. Neither
Xxxxxxxxx nor Shareholder, collectively, shall have any liability to indemnify
Monro for Losses, in the aggregate, after payment has been made to Monro in the
amount of the Cap;
E. notwithstanding anything to the contrary in Paragraph 9.04D,
under no circumstances shall the Threshold Amount or the Cap apply to any Losses
resulting from (i) fraud, which shall be defined to be the knowing and
intentional misrepresentation or omission of facts in connection with the
transactions contemplated by this Agreement; and (ii) liability arising from any
carrier of the liability on account of contributions that may have been made
toward "multi-employer plan" or to any multiple employer or single employer
plan, as described in Paragraph 3.16A.
9.05 INDEMNIFICATION BY MONRO. Monro covenants and agrees to fully
indemnify and hold harmless Xxxxxxxxx and Shareholder, their directors,
officers, agents, employees, successors and assigns, as applicable, from and
against and in respect of any and all liabilities, obligations, damages, losses
and expenses, including claims of every kind and nature, whether accrued,
absolute, contingent or otherwise, and reasonable attorneys' fees and the cost
of defense, incurred by any of the indemnified parties as a result or by reason
of the breach, falsity or failure of any of the Monro's representations,
warranties, covenants or undertakings contained in this Agreement.
9.06 PROCEDURE FOR INDEMNIFICATION.
A. If any Party shall claim indemnification pursuant to Paragraphs
9.04 and 9.05, such Party shall promptly notify the other Parties in writing of
such claim, setting forth the
46
nature and amount of the claim in detail; provided however, that the failure of
a Party to so notify the other Parties shall not bar any claim for
indemnification hereunder.
B. If the indemnification claim arises from the claim or demand of a
third party, the indemnifying Party shall have the right, with the indemnified
Party or Parties prior consent, not to be unreasonably withheld, to compromise
or, if appropriate, conduct and defend at their own cost and through counsel of
their own choosing, reasonably acceptable to such indemnified Party, the claim
or demand of any third party giving rise to such claim for indemnification. The
opportunity to compromise or defend, if applicable, shall be conditions
precedent to any asserted indemnification liability under Paragraphs 9.04 and
9.05. If the indemnifying Party undertakes to compromise or defend any such
claim or demand, they shall promptly notify the indemnified party in writing of
its or their intention to do so. After the assumption of the defense by the
indemnifying Party and so long as such Party shall diligently pursue such
defense, the indemnifying Party shall be liable for any legal expenses
subsequently incurred by the indemnifying Party in connection with such defense,
but the indemnified Party may participate in such defense at its own expense.
Each Party shall fully cooperate with the other Party and its counsel in the
defense or compromise of such claim or demand. The indemnifying Party shall not,
except with the written consent of the indemnified Party, consent to the entry
of a judgment or settlement which does not include as an unconditional term
thereof, the unconditional release of the indemnified Party from all liability
in respect of such third party claim or demand.
B. If the indemnification claim arises from other than the claim or
demand of a third party and the indemnifying Party does not object in writing to
the indemnification claim from the indemnified Party within 20 business days of
receipt of the notice of claim, the
47
indemnifying Party shall be deemed to have accepted the claim and shall have no
further right to dispute the obligation to indemnify the indemnified Party. If
the indemnifying Party shall notify the indemnified Party in writing within 20
business days with an objection to the claim for indemnification or the amount
thereof, then, the validity of the indemnification claim and/or the amount
thereof shall be conclusively determined by arbitration pursuant to Paragraph
11.03. Attorney's fees and expenses in connection with the indemnified Party's
pursuit of indemnification shall become part of the indemnified Party's claim
under Paragraphs 9.04 or 9.05, as applicable. The provisions of this
indemnification shall survive the Closing Date and may be enforced against the
Monro's right to offset, as described in Paragraph 2.08, as well as against the
Escrowed Amount or any payments due to Xxxxxxxxx or Shareholder (or affiliate
thereof) arising from the lease agreements described in Schedule 7.05 or
otherwise from the transactions contemplated by this Agreement, without limiting
in any respect any and all other rights which Monro may have against Xxxxxxxxx
and Shareholder, in law or in equity, to enforce the provisions hereof.
ARTICLE X
TERMINATION
10.01 TERMINATION. This Agreement may be terminated at any time prior to
the Closing in accordance with the following:
A. Upon the mutual consent to all parties hereto;
B. By Monro or Xxxxxxxxx and Shareholder and Guarantor if any order
to restrain, enjoin or otherwise prevent the consummation of this Agreement or
transaction contemplated hereby shall have been entered and remains in effect on
the Closing Date or, if on the Closing Date, there is any pending or threatened
litigation in any court, or any proceeding by
48
or before any governmental body, seeking to restrain or prohibit consummation of
this Agreement or in which damages are sought in connection with this Agreement,
or if any investigation by any governmental body is pending or threatened which
might result in any such litigation or other proceeding;
C. By Monro or Xxxxxxxxx and Shareholder and Guarantor if the
Closing has not occurred (other than through the failure of the party seeking to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before the thirtieth (30th) day following the Closing Date.
D. By Monro, if Xxxxxxxxx is unable to comply with the conditions to
Closing set forth in Article VII by the Closing Date.
10.02 EFFECT OF TERMINATION. Except as set forth in Section 2.06A,
termination of this Agreement pursuant to Paragraph 10.01A shall not result in
any liability on the part of any Party hereto or their respective
representatives, directors, officers, shareholders or agents. Upon termination
of this Agreement pursuant to Paragraph 10.01B, C or D, the Party effecting the
termination shall retain such rights, if any, it may have against the other
Party(s), including as a result of the other Party(s) breach or failure of the
representations, warranties, covenants or conditions of this Agreement.
49
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Xxxxxxxxx, Shareholders and Monro contained in this Agreement
shall survive the execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and the transfer and delivery of the Assets
for a period of thirty-six (36) calendar months from the Closing Date. The
representations and warranties of a party shall not be deemed waived or
otherwise affected by any investigation made by or knowledge of the other party.
11.02 PUBLICITY AND CONFIDENTIALITY. No press release shall be released by
any Party hereto prior to the Closing Date concerning the execution of this
Agreement and the transactions contemplated hereunder except with the consent of
the other Parties hereto or when required by law. Notwithstanding the
immediately preceding sentence, it is understood that, upon the execution of
this Agreement by the parties, Xxxxxxxxx shall disclose the execution of this
Agreement to its employees. The provisions of the Confidentiality and
Non-Disclosure Agreement, dated September 7, 2004, executed between Monro and
Xxxxxxxxx shall survive until the Closing Date (and thereafter in respect of any
of Monro's confidential information delivered to Xxxxxxxxx) and, if the Closing
does not occur, in accordance with the terms of such agreement. If for any
reason the transactions provided for hereunder shall not be consummated, each
Party hereto (a) shall return all Confidential Information which it received
from any other Party hereto in the course of investigating and negotiating the
transactions provided for hereunder and (b) shall not disclose to any third
party any such Confidential Information.
11.03 ARBITRATION. Claims arising pursuant to or in connection with the
covenants and agreements in Paragraphs 5.08 and 11.02 shall be resolved in the
courts of competent jurisdiction
50
specified in Paragraph 11.11. In the event that any other dispute shall arise in
connection with the transactions provided for hereunder subsequent to the
Closing Date, the matter shall be submitted to arbitration in Rochester, New
York before a single arbitrator designated by the American Arbitration
Association and in accordance with the expedited rules thereof relating to the
arbitration of commercial disputes.
11.04 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective personal
representatives, successors and assigns.
11.05 ENTIRE AGREEMENT. This Agreement contains the entire understanding
and agreement among the Parties hereto and supersedes any prior understandings,
memoranda or other written or oral agreements between or among any of them
respecting the within subject matter. There are no representations, agreements,
arrangements or understandings, oral or written, between or among any of the
Parties relating to the subject matter of this Agreement which are not fully
expressed herein.
11.06 MODIFICATIONS; WAIVER. No modification or waiver of this Agreement
or any part hereof shall be valid or effective unless in writing and signed by
the Party or Parties sought to be charged therewith and no waiver of any breach
or condition of this Agreement shall be deemed to be a waiver of any other
subsequent breach or condition, whether of like or different nature. No course
of dealing between or among any of the Parties hereto will be deemed effective
to modify, amend or discharge any part of this Agreement or the rights or
obligations of any Party hereunder.
11.07 PARTIAL INVALIDITY. If any provision of this Agreement shall be held
by an arbitrator or court of competent jurisdiction to be invalid or
unenforceable, such provision shall
51
be construed so as to be limited or reduced to be enforceable to the maximum
extent compatible with the law as it shall then appear. The total invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
11.08 NO THIRD PARTY BENEFICIARY. None of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any person or entity which is
not a Party hereto.
11.09 NOTICES. Any notice or other communication required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given: (i) upon hand delivery; (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid; or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service, fee prepaid,
return receipt or other confirmation of delivery requested. Any such notice or
communication shall be directed to a Party at its address set forth below or at
such other address as may be designated by a party in a notice given to all
other Parties hereto in accordance with the provisions of this Paragraph.
Notice to Monro shall Monro Muffler Brake, Inc.
be sent to: 000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: President and General Counsel
with a copy to: Xxxxxxxxx & Xxxxxxx LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxx, Esquire
Notice to Xxxxxxxxx or Xxxxxxxxx Holdings, Inc.
Shareholder 0000 Xxxxxxx Xxxxxxx Xxxx
Shall be sent to: Xxxx Xxxxxxx, XX 00000
Attn: President
52
with a copy to: Xxxxxx & Xxxxxxxx, P.A.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esquire
11.10 GOVERNING LAW. Except with respect to any provisions herein
regarding indemnification, which shall be construed in accordance with the laws
of the State of New York (without taking into account conflicts of laws
principles), this Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland pertaining to contracts made and to be
wholly performed within such state, without taking into account conflicts of
laws principles.
11.11 JURISDICTION AND VENUE. In the event that any legal proceedings are
to be commenced in any court pursuant to the terms of this Agreement, the
Parties hereto specifically consent and agree that:
(a) the courts of the State of Maryland and/or the United States
Federal Courts for the District of Maryland (Northern Division) shall have
exclusive jurisdiction over each of the Parties and such proceedings; and
(b) the venue of any such action shall be in Baltimore County,
Maryland or the United States District Court for the District of Maryland
sitting in Baltimore, Maryland.
11.12 HEADINGS. The headings contained in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
11.13 GENDER. Whenever the context may require, any pronoun used herein
shall include the corresponding masculine, feminine or neuter forms and the
singular of nouns, pronouns and verbs shall include the plural and vice versa.
53
11.14 FAIR MEANING. This Agreement shall be construed according to its
fair meaning, the language used shall be deemed the language chosen by the
Parties hereto to express their mutual intent, and no presumption or rule of
strict construction should be applied against any Party hereto.
11.15 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of said
counterparts shall together constitute but one and the same instrument which may
be sufficiently evidenced by one counterpart.
[REST OF PAGE LEFT INTENTIONALLY BLANK
SIGNATURES ON FOLLOWING PAGE]
54
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement
on January 11, 2005.
MONRO: MONRO MUFFLER BRAKE, INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
Xxxxxx X. Xxxxx
President and Chief Executive Officer
XXXXXXXXX: XXXXXXXXX HOLDINGS, INC.
By: /s/ Xxxx X. Xxxxxxxxx, Xx.
----------------------------------------
Xxxx X. Xxxxxxxxx, Xx.
President
SHAREHOLDER: THE XXXX X. XXXXXXXXX FAMILY LIMITED
PARTNERSHIP
By: /s/ Xxxx X. Xxxxxxxxx, Xx.
----------------------------------------
Xxxx X. Xxxxxxxxx, Xx., General
Partner
GUARANTOR: XXXX X. XXXXXXXXX, XX.
/s/ Xxxx X. Xxxxxxxxx, Xx.
-----------------------------------
Xxxx X. Xxxxxxxxx, Xx.
55
