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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of Earliest Event Reported):
April 13, 1998
MONRO MUFFLER BRAKE, INC.
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(Exact name of registrant as specified in its charter)
Commission File Number 0-19357
New York 16-0838627
(State of incorporation) (I.R.S. Employer Identification No.)
200 Holleder Parkway, Rochester, New York 14615
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (716) 647-6400
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Item 5. Other Events.
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On April 13, 1998, the Company announced the execution of a definitive asset
purchase agreement with Speedy Muffler King Inc., Bloor Automotive Inc. and
Speedy Car-X Inc. for the purchase of certain assets relating to the United
States business of Bloor Automotive Inc. and certain assets of Speedy Car-X Inc.
for an aggregate purchase price of $52.0 million. The complete text of the press
release issued by the Company is attached hereto as exhibit 99.1 to this Form
8-K. The asset purchase agreement has been filed as exhibit 10.1 to this Form
8-K.
Item 7. Financial Statements and Exhibits.
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The following is a list of exhibits filed with this Current Report on Form 8-K
indexed to their location in the sequentially numbered copy.
Exhibit No. Description
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99.1 Press Release
dated April 13, 1998
10.1 Asset Purchase Agreement
dated April 13, 1998
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MONRO MUFFLER BRAKE, INC.
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(Registrant)
April 28, 1998 /s/ Catherine D'Amico
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Catherine D'Amico
Sr. Vice President-Finance & CFO
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Exhibit 99.1
Contacts: Jack M. Gallagher
President
Chief Executive Officer
(716) 647-6400
Catherine D'Amico
Sr. V.P. - Finance
Chief Financial Officer
(716) 647-6400
FOR IMMEDIATE RELEASE
MONRO MUFFLER BRAKE TO ACQUIRE 205
SPEEDY MUFFLER STORES IN THE U.S.
ROCHESTER, N.Y., APRIL 13, 1998 -- MONRO MUFFLER BRAKE, INC. (NASDAQ: MNRO)
announced today that it has signed a definitive agreement with Speedy Muffler
King Inc. (TSE: SMK) of Toronto, Canada to acquire 192 company-operated and 13
franchised Speedy stores in the United States. Sales for the fiscal year ended
January 3, 1998 for the 192 company-operated stores, some of which were opened
only part of the year, were approximately $86.5 million. The all-cash purchase
transaction will be effected by the payment of $52 million and is subject to
customary terms and conditions, including review under the Hart-Scott-Rodino
Act, the obtaining of necessary consents, and Monro's securing of financing
necessary to consummate the transaction. The transaction is expected to close
this summer.
"We are delighted with the opportunity to substantially enhance our competitive
position in the attractive northeast market where both our Monro stores and the
Speedy stores to be acquired are located," said Jack Gallagher, Chief Executive
Officer of Monro Muffler Brake. "The purchase of these stores will grow our
store base to approximately 550 locations. While we expect the acquisition to
have a slightly dilutive impact on our fiscal 1999
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earnings per share while we integrate the business, we anticipate that these
operations should begin to contribute to our earnings per share during our
fiscal year 2000, and should be increasingly accretive in subsequent years.
"Like Monro, Speedy is a strong chain with an excellent reputation for providing
customer-oriented service. The similarities in fundamental strategy, management
infrastructure, geographic coverage, and store size, should enable Monro to
achieve immediate synergies and economies with the new locations. Changes in
inventory purchasing and distribution methods should provide a very strong
opportunity for increased margins in the acquired locations.
"Additionally, we expect the new stores will create substantial long-term
opportunities to improve margins and overall operating performance as Monro
diversifies and enhances the product and service offerings at the acquired
locations."
Mr. Gallagher explained, "Monro has aggressively responded to fundamental
changes in our industry's dynamics in recent years by expanding our focus beyond
exhaust systems to include brakes, steering and suspension systems, tires, and
batteries. In March, we completed the roll-out of our scheduled maintenance
services which offer customers a convenient and affordable way to keep their
automobiles in compliance with their warranty schedules. These are the types of
innovative programs that Monro has proactively implemented to remain competitive
in all types of environments. This acquisition will offer us a tremendous
opportunity to further capitalize on our strategy as we bring additional
products and services to these new locations."
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The Company noted that while the 205 Speedy stores are in the same general
markets in which Monro competes, Monro and Speedy locations are mainly situated
in non-overlapping areas. The Company expects to close less than 20
underperforming Speedy stores. Additionally, because of similarities in
management structures, Monro plans to retain all of Speedy's current store
personnel as well as "area" and "market" managers who function in similar
capacities as Monro's "regional" and "district" managers.
Monro Muffler Brake operates a chain of stores providing automotive undercar
repair services in the United States. The Company currently operates 350 stores
in New York, Pennsylvania, Ohio, Connecticut, Massachusetts, West Virginia,
Virginia, Maryland, Vermont, New Hampshire, New Jersey, North Carolina, South
Carolina and Indiana. Monro's stores provide a full range of services for
mufflers and exhaust systems, brake systems, steering and suspension systems and
many vehicle maintenance services.
Certain statements made above may be forward-looking and are made pursuant to
the Safe Harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements involve uncertainties which may cause the
Company's actual results in future periods to differ materially from those
expressed. These uncertainties include, but are not necessarily limited to,
uncertainties affecting retail generally (such as consumer confidence, and
national and local economic conditions); risks related to the level of demand
for auto repair; risks that the acquisition will not be accretive as soon as
anticipated by Monro or at all; risks that the acquisition will not result in
improved margins or overall operating performance, and in fact could negatively
impact Monro; risks relating to leverage and debt service (including sensitivity
to fluctuations in interest rates); dependence on, and competition within, the
primary markets in which the Company's stores are located; the need for, and
costs associated with, store renovations and other capital expenditures; and the
risks described from time to time in the Company's SEC reports which include the
report on Form 10K for the fiscal year ended March 31, 1997.
# # #
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Exhibit 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of April 13, 1998 (the
"Agreement"), is made and entered into by and among SPEEDY MUFFLER KING INC., an
Ontario corporation ("Parent"), SPEEDY (U.S.A.), INC., a Delaware corporation
("Speedy U.S.A."), BLOOR AUTOMOTIVE INC., a Delaware corporation ("Bloor"),
SPEEDY CAR-X INC., a Delaware corporation ("Car-X", and together with Bloor,
"Sellers"), SPEEDY HOLDING CORP., a Delaware corporation ("Purchaser"), and
MONRO MUFFLER BRAKE, INC., a New York corporation ("Monro").
WITNESSETH:
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WHEREAS, Bloor, a direct wholly-owned subsidiary of Speedy U.S.A. and
an indirect wholly-owned subsidiary of Parent, owns and operates a chain of
automotive repair shops under the "Speedy" name in the United States
specializing in the repair and replacement of automotive mufflers and exhaust
systems, shock absorbers and ride control products, brake systems and other
automotive products and services (the "Bloor Business", which for purposes of
this Agreement does not include automotive repair shops operated under the
"Car-X" name in the United States by Bloor's subsidiary Discoverer Services,
Inc. ("Discoverer"));
WHEREAS, Car-X, a direct wholly-owned subsidiary of Speedy U.S.A. and
an indirect wholly-owned subsidiary of Parent, franchises similar automotive
repair shops under the "Speedy" name in the United States specializing in the
repair and replacement of automotive mufflers and exhaust systems, shock
absorbers and ride control products, brake systems and other automotive products
and services (the "Car-X Business", which for purposes of this Agreement does
not include the automotive repair shops franchised by Car-X under the "Car-X"
name) (the "Bloor Business" and the "Car-X Business," together, the "Business");
WHEREAS, Bloor currently operates a total of 192 shops (excluding the
Webster Shop (as defined herein)) operated under the "Speedy" name (the
"Company-Owned Shops") and Car-X franchises 13 shops under the "Speedy" name
(the "Franchised Shops" and together with the Company-Owned Shops, the "Shops");
WHEREAS, Purchaser desires to purchase and acquire from Sellers and
Sellers desire to sell and convey to Purchaser, substantially all of Sellers'
respective assets relating to the Business, including, without limitation, all
of their respective right, title and interest in and to all land and buildings,
equipment, inventories, signage and improvements used in connection with, and
all contract rights relating to, the operation of the Shops and the Business,
and Purchaser desires to assume from Sellers and Sellers desire to assign to
Purchaser certain of Sellers' liabilities relating to the Business
(collectively, the "Acquisition"), all on the terms and conditions set forth
herein; and
WHEREAS, Parent agrees to guarantee the obligations of Sellers
hereunder, and Monro agrees to guarantee the obligations of Purchaser hereunder,
and each agrees to make certain undertakings, on the terms and conditions set
forth herein.
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NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1.
PURCHASE AND SALE
Section 1.1. PURCHASE AND SALE. Subject to the terms and conditions of
this Agreement, at the Closing (as hereinafter defined) and except as otherwise
specifically provided in this Article 1, Sellers shall grant, sell, assign,
transfer and deliver to Purchaser, and Purchaser will purchase and acquire from
Sellers, all right, title and interest of Sellers in and to all of the assets,
properties and rights of Sellers as of the Closing Date (as hereinafter defined)
constituting or relating to the Business or used or held for use therein, of
every kind and description, real, personal and mixed, tangible and intangible,
wherever situated (which Business, assets, properties and rights are hereinafter
collectively referred to as the "Assets").
Section 1.2. INCLUDED ASSETS. Except as otherwise expressly set forth
in Section 1.3 hereof, the Assets shall include, without limitation, the
following assets, properties and rights of Sellers as of the Closing Date:
(a) all notes receivable, prepaid expenses, security deposits,
other deposits and advances relating to the Business;
(b) all inventories, raw materials, spare parts, stores and
supplies, office supplies and other inventory items used in the
Business;
(c) all machinery, equipment, business machines, computer
hardware, vehicles, furniture, fixtures, tools, parts, leasehold and
building improvements and other tangible property owned and used in the
maintenance and operation of the Business;
(d) all of the signs and graphic inserts to any signage
packages, related components and peripherals, and any other materials
that have imprinted thereon any trademarks or service marks used by
Sellers and owned by Sellers, Parent or their Affiliates (as
hereinafter defined) used in connection with the Shops;
(e) all right, title and interest of Sellers in all leases
pursuant to which Sellers lease real property, buildings, structures,
improvements, fixtures and equipment (collectively, the "Leased Real
Property") used in the operation of the Shops (including those listed
on Schedule 3.5(b) attached hereto) and the Business (collectively, the
"Real Property Leases");
(f) all right, title and interest of Sellers in all contracts
(written or oral), agreements or other instruments relating to the
Business (including, but not limited to, those listed on SCHEDULE
1.2(f) attached hereto, but excluding those contracts, agreements or
other instruments listed on Schedule 1.3(n) hereto) (the "Assumed
Contracts"), including, without limitation, all purchase orders for
supplies and other raw materials, machinery, equipment, inventory and
other items, contracts with customers and suppliers,
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all leases of personal property and the Real Estate Purchase Agreement
dated October 17, 1998 between Bloor and TRZ Investments, Inc. relating
to the sale of the "Speedy" shop located in Macomb County, Michigan
(the "Detroit Contract");
(g) all of Car-X's right, title and interest in and to the
Franchise Agreements (as hereinafter defined) listed in Schedule 3.12
attached hereto;
(h) all of Sellers' prepaid expenses, credit memos and
deposits arising under the Assumed Contracts;
(i) (i) all of Sellers' right, title and interest in and to
all owned real property, including the buildings, structures, fixtures
and improvements located thereon, (ii) all licenses, permits,
approvals, qualifications, easements and other rights relating thereto,
other than those which are not transferable as indicated on Schedule
3.10(i), as supplemented, and (iii) all easements and similar rights of
Sellers that are utilized in or necessary to the Business,
(collectively, the "Real Property");
(j) (i) all right in the United States of the Sellers to
trademarks, trade names, and service marks owned or licensed by Sellers
and used in the Business other than the SPEEDY Marks (as defined
below), including, without limitation, those set forth on Schedules
3.19(ii)(a), (iv) and (v) attached hereto and including, where title in
a trademark, trade name or service mark is conveyed hereby, the
goodwill of the Business represented by said trademarks, trade names
and service marks, (ii) all right in the United States to any
trademarks, trade names and service marks owned or licensed by Sellers
having the formative SPEEDY (hereinafter, the "SPEEDY Marks"),
including, but not limited to the marks listed on Schedule 3.19(ii)(b),
together with the goodwill of the Business represented by the SPEEDY
Marks, provided that (x) Purchaser shall only use the SPEEDY Marks in
those markets listed on SCHEDULE 1.2(j), and shall not use the SPEEDY
Marks anywhere in the United States after the expiration of the
ten-year period commencing on the Closing Date, (y) neither Seller nor
their affiliates shall use the SPEEDY Marks in the United States after
the Closing Date, provided that franchisees under Franchise Agreements
(as defined in Section 3.12 hereof) and Franchise Reservation
Agreements in existence as of the Closing Date and assumed by
Purchaser, as the same may be extended or renewed, shall continue to be
able to use Speedy Marks in accordance with the terms and conditions of
such agreements, notwithstanding the expiration of such 10 year period,
and (z) Sellers' rights in the SPEEDY Marks in all regions outside of
the United States shall not be affected by this Agreement, (iii) an
undivided interest, as tenant in common with Sellers or one or more of
Sellers as the case may be, in and to all rights now owned by Sellers,
or one or more of Sellers as the case may be, in patents, know-how,
trade secrets, technical documentation and copyrights which are
necessary or useful to the operation of the Shops and the Business,
including without limitation the items listed on SCHEDULES 3.19(i) and
(iii) attached hereto but excluding those items which are indicated on
said Schedules as being non-transferrable (provided that Sellers use
commercially reasonably efforts to obtain consent to transfer), and
(iv) all general goodwill of the Business not represented by the
aforesaid trademarks and service marks;
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the rights conveyed by this Section 1.2(j) herein sometimes referred to
as the "Intellectual Property";
(k) all rights to causes of action, lawsuits, judgments,
claims and demands of any nature available to or being pursued by
Sellers with respect to the Business or the ownership, use, function or
value of any Asset, whether arising by way of counterclaim or
otherwise; provided, that, in the event any such causes of action,
lawsuits, judgments, claims and demands arise by way of counterclaim in
an action or proceeding involving either of Sellers, at such Seller's
option, Seller shall have the right to pursue such counterclaim, under
its direction and control, and upon recovery of any amount with respect
to such counterclaim, shall remit to Purchaser said amount net of the
reasonable costs of recovery (including attorneys' fees);
(l) all of Sellers' right, title and interest in and to all
guarantees, warranties, indemnities and similar rights, including all
related rights of recovery and set-off, in favor of Sellers or Parent,
and all proceeds under insurance policies other than as provided in
Section 1.3(m), each with respect to any Asset or the Business;
(m) all of Sellers' right, title and interest under, in and to
governmental permits, licenses concessions, authorizations or similar
rights relating to the Business, including, without limitation, those
listed on SCHEDULE 3.10(i) attached hereto other than those which are
not transferable as indicated on SCHEDULE 3.10(i), as supplemented;
(n) cash on hand in the Company-Owned Shops;
(o) all of Sellers right, title and interest in and to other
tangible and intangible assets of any kind or description, related to
the operation of the Company-Owned Shops or the Business wherever
located, which are owned or used by Sellers; and
(p) the customer data base and originals or duplicate copies
of all information, files, correspondence, records, data, plans,
contracts and recorded knowledge, including supplier lists and all
accounting books and records, relating to the Assets other than the
Excluded Assets and other than information of the type described on
SCHEDULE 1.2(p) (the "Records").
Section 1.3. EXCLUDED ASSETS. Notwithstanding anything to the contrary
set forth herein, the Assets shall not include the following assets, properties
and rights of Sellers as of the Closing Date (collectively, the "Excluded
Assets"):
(a) all cash, commercial paper, certificates of deposit (other
than any certificate of deposit that has been posted as a security
deposit) and other bank deposits, all other cash equivalents and
marketable securities and all checks, drafts and other similar writings
for the payment of money whether or not collected or available for use
or transfer by Sellers, in each case at or prior to 8:00 a.m. (New York
time) on the Closing Date (the "Cutoff Time"), other than cash on hand
in the Company-Owned Shops (collectively, "Cash");
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(b) the real property, including the buildings, structures,
fixtures and improvements located thereon and all easements and other
similar rights relating thereto, and the leasehold interests which
comprise the sites owned or leased by the Sellers and operated as Car-X
facilities (the "Excluded Real Property");
(c) all of the outstanding capital stock of Discoverer
Services, Inc., a Delaware corporation (the "Excluded Subsidiary");
(d) all rights as franchisor, under franchise agreements or
otherwise, with respect to Car-X franchises, and all rights under
agreements which relate solely to the Car-X business (collectively, the
"Excluded Agreements");
(e) all of the inventory, supplies and other personal property
located at the Car-X sites as of the date hereof with such changes
thereto as may occur in the ordinary course of business through the
Closing Date;
(f) the corporate seal, articles of incorporation, minute
books, stock books, tax returns and other constituent records relating
to the corporate organization of Sellers and Discoverer and all books
and records other than an original or duplicate set of the Records;
(g) all rights of Sellers under this Agreement and the Seller
Ancillary Documents (as hereafter defined);
(h) "Speedy" Shop #3145 located on Webster Avenue in the
Bronx, New York (the "Webster Shop"), including the fixed assets and
other improvements comprising the Webster Shop;
(i) Sellers' "Point of Sale and Host System" software
(provided that Purchaser shall have the right to use such software in
accordance with the Transition Services Agreement);
(j) all credits from suppliers or other third parties for the
benefit of the Sellers earned or accrued as of the Closing Date;
(k) accounts receivable and credits relating to the Business;
(l) all brake "cores" located at the Company-Owned Shops (the
"Brake Cores") and any related credits that may result upon their
return to any brake supplier;
(m) any proceeds of insurance to the extent such proceeds
reimburse Sellers for losses actually incurred by Sellers prior to the
Closing Date, regardless of when such proceeds may be received.
(n) the other assets, properties or rights set forth on
SCHEDULE 1.3(n) hereto.
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Section 1.4. ASSUMPTION OF ASSUMED LIABILITIES. Subject to the terms
and conditions of this Agreement, at the Closing and except as otherwise
specifically provided in Sections 1.5 and 2.7 hereof, Purchaser shall assume and
agrees to pay, discharge or perform, when due (subject to the Purchaser's right
to dispute any such liabilities or obligations in good faith and without any
recourse or liability to Sellers), all liabilities and obligations of Sellers
under the Assumed Contracts, the accounts payable, product warranty reserves,
capital lease obligations, and other accruals of the type identified on SCHEDULE
1.4(a), as of the Closing Date which relate solely to the Business and the
Assets and which arose in the ordinary course of business and all Environmental
Liability related to any Real Property or Leased Real Property validly
transferred or assigned to Purchaser pursuant to this Agreement to the extent
not indemnified by Seller pursuant to Section 9.6 (collectively, the "Assumed
Liabilities"); provided, however that Purchaser and Sellers shall share equally
in the cost of purchasing an Environmental Impairment and Liability and Cleanup
Policy issued by Steadfast Insurance Company intended to cover the Environmental
Liabilities assumed under this Section 1.4, up to an aggregate total one time
premium cost not to exceed $120,000; and provided further that with respect to
Shops 2030, 2072 and 3105 Sellers shall at their sole cost and expense and
without limitation as to time or amount undertake and complete the
responsibilities and/or actions as fully set forth on SCHEDULE 1.4(b).
Section 1.5. EXCLUDED LIABILITIES. Notwithstanding anything to the
contrary set forth herein, the Assumed Liabilities shall not include, and in no
event shall Purchaser assume, agree to pay, discharge or perform or incur any
liability or obligation under this Agreement or otherwise become responsible in
respect of any liabilities other than the Assumed Liabilities (collectively the
"Excluded Liabilities") including, without limitation, the following:
(a) any indebtedness (including principal, accrued interest
and fees) outstanding under any bank credit agreement or other
agreement or instrument for borrowed money or funded indebtedness to
which either Sellers or any of their Affiliates is a party (either as
debtor or guarantor), including, without limitation, under (i) the
credit facility entered into by and among Parent, Speedy (U.S.A.) Inc.,
Bloor, Car-X, Discoverer and Pit-Shop Auto Service GmbH, as borrowers,
and the Bank of Nova Scotia, as agent and certain financial
institutions as lenders thereunder (the "New Credit Facility") and (ii)
the guaranty by Bloor and Car-X ("Note Guarantees") of the 10 7/8%
Senior Notes due 2006 issued by Parent and Speedy (U.S.A) Inc. (the
"Senior Notes");
(b) any liability or obligation of Sellers that did not arise
solely out of the conduct of or relate to the Business and/or the
Assets;
(c) any liability or obligation arising under or relating to
any of the Excluded Assets;
(d) any liability or obligation, including, without
limitation, any accounts payable of Sellers, to the Excluded Subsidiary
or any other Affiliate of Sellers;
(e) any federal, state or local tax and any penalty, interest
or addition to tax relating thereto, including, without limitation, any
such taxes which (i) are payable by Sellers, Parent or any member of
any affiliated, combined, consolidated or unitary group
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of which Parent, either of the Sellers or any Excluded Subsidiary is or
has been a member (each, an "Affiliated Group"), (ii) are imposed upon
Sellers, Parent or any member of any Affiliated Group incident to or
arising as a consequence of the negotiation or consummation of this
Agreement and the transactions contemplated hereby, or (iii) are
related to any Seller Benefit Plan (as hereinafter defined);
(f) any liability or obligation of Sellers relating to or
arising from any fraudulent act of either of the Sellers or their
Affiliates;
(g) any liability or obligation of Sellers arising out of or
incurred in connection with the operation and administration of any
employee benefit plan or program sponsored by Sellers or an ERISA
Affiliate (as hereinafter defined) or to which Sellers or an ERISA
Affiliate is or was obligated to make contributions, including, without
limitation, any multiemployer plan or any other plan subject to Title
IV of ERISA (as hereinafter defined);
(h) any liability or obligation of Sellers arising or incurred
in connection with the negotiation, preparation and execution of this
Agreement and the transactions contemplated hereby and any fees and
expenses of counsel, accountants, brokers, financial advisors or other
experts of Sellers or any of its Affiliates;
(i) any Environmental Liability related to any real property
or leased property currently or formerly owned or leased by Sellers
which is not validly transferred or assigned to Purchaser pursuant to
this Agreement;
(j) any liability or obligation arising under a claim for
worker's compensation or insurance claims relating to the Business; or
(k) the lease with respect to the Webster Shop and any other
liability relating to, or arising from, the Webster Shop.
ARTICLE 2.
PURCHASE PRICE
Section 2.1. PURCHASE PRICE. The aggregate purchase price (the
"Purchase Price") for the Assets shall be (i) Fifty Two Million Dollars
($52,000,000), (ii) plus or minus any Adjusting Payment (as defined in Section
2.5), and (iii) if the closing under the Detroit Contract has occurred prior to
the Closing Date, minus the consideration received by Sellers or their
affiliates in such sale net of related transaction costs (including, without
limitation, legal fees, finders fees and environmental remediation
expenditures). All references to "$" or "Dollars" in this Agreement shall mean
U.S. Dollars unless otherwise specified.
Section 2.2. PAYMENT OF PURCHASE PRICE. The Purchase Price will be paid
as follows:
(a) Purchaser shall pay to Sellers on the Closing Date the
aggregate amount of $52 million less (x) the Environmental Holdback
Amount determined in accordance with
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Section 2.7 (such amount to be held in escrow and disbursed pursuant to
the Environmental Escrow Agreement), (y) the Real Estate Escrow Amount,
such amount to be held in escrow and disbursed pursuant to the Real
Estate Escrow Agreement and (z) the applicable amount, if any, under
Section 2.1(iii).
(b) If there is an Adjusting Payment (as determined pursuant
to Section 2.5), Sellers shall pay to Purchaser or Purchaser shall pay
to Sellers, as the case may be, on the date specified in Section 2.5,
an amount equal to the Adjusting Payment plus interest as calculated in
accordance with Section 2.6.
Any amounts payable pursuant to clauses (a) or (b) above shall be paid
by wire transfer to such account designated by the party receiving payment not
less than 48 hours prior to the date of payment. Any post-Closing payment
pursuant to Section 2.5 or any indemnity payments to or from Sellers or to or
from Purchaser (other than interest) shall be treated by Purchaser and Sellers
as purchase price adjustments for all tax purposes unless otherwise required by
applicable law.
In addition to the foregoing, Purchaser shall purchase from Sellers,
for an amount equal to the net book value thereof on the Closing Date, the
inventory (other than Non-Returnable Inventory), removable equipment and
removable fixtures of the Webster Shop, as set forth in SCHEDULE 2.2.
Section 2.3. STATEMENT OF NET ASSETS. As promptly as practicable after
the Closing Date, but in any case not later than 60 days thereafter, Sellers
shall cause to be prepared and delivered to Purchaser a statement of the Net
Assets (as hereinafter defined) (the "Statement of Net Assets") in accordance
with the following guidelines (the date on which such Statement of Net Assets is
delivered by Sellers to Purchaser is referred to herein as the "Delivery Date"):
(a) the Statement of Net Assets shall be in the form attached
as EXHIBIT B and shall set forth the net book values of the Assets and
Assumed Liabilities as of the Closing Date (the "Net Assets"), which
net book values shall be (i) derived from and in accordance with the
books and records of the Business, determined in accordance with United
States generally accepted accounting principles consistently applied
during the periods involved ("GAAP"), as modified by those principles
set forth on the Statement of Methods for Determining Net Assets,
attached hereto as EXHIBIT C, including without limitation, the
principle that Non-Returnable Inventory shall be excluded from the
Statement of Net Assets. Non-Returnable Inventory means inventory that
as of the Closing Date is not listed on any current vendor list;
(b) the Statement of Net Assets shall have been audited by
Price Waterhouse LLP utilizing its Toronto, Ontario office ("PW
Toronto") and shall be accompanied by their report thereon;
(c) all inventories reflected on the Statement of Net Assets
shall be valued at the lower of cost or market consistent with past
practice with cost determined under the first-in, first-out ("FIFO")
valuation method; and
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(d) Purchaser and the Rochester office of Price Waterhouse LLP
("PW Rochester") shall have the right to observe all steps (including
any physical inventory) taken by Sellers in connection with the
preparation of the Statement of Net Assets and to review all work
papers and procedures relating thereto and shall have complete access
to all books and records of the Business during normal business hours
relevant to the preparation of the Statement of Net Assets.
Upon receipt by Purchaser of the Statement of Net Assets, Purchaser and
PW Rochester shall have 30 days to review the Statement of Net Assets (the
"Review Period"). If Purchaser disputes the Statement of Net Assets so delivered
by Sellers, Purchaser shall, on or prior to the last day of the Review Period,
prepare and submit to Sellers a notice of dispute (a "Notice of Dispute") which
shall set forth Purchaser's proposed Statement of Net Assets and shall
specifically enumerate the items and calculations objected to in the Statement
of Net Assets prepared by Purchaser (the "Disputed Items"). If Purchaser fails
to deliver a Notice of Dispute prior to the last day of the Review Period, the
Statement of Net Assets delivered by Sellers to Purchaser pursuant to this
Section 2.3 shall be the final Statement of Net Assets for purposes of this
Agreement. Upon receipt of a Notice of Dispute, Sellers and Purchaser will, for
a period of 20 days following delivery of such Notice of Dispute, seek in good
faith to resolve all Disputed Items and agree on a Statement of Net Assets.
Section 2.4. ARBITRATION. After receipt of a Notice of Dispute, if
Sellers and Purchaser are unable to agree on a Statement of Net Assets within
the 20-day period referred to in the last sentence of Section 2.3, Arthur
Andersen LLP or in the event that Arthur Andersen LLP is unable or unwilling to
serve, another nationally recognized firm of independent public accountants
selected by PW Toronto and PW Rochester (the "Arbitrator"), and each of the
Sellers and PW Toronto, on the one hand, and Purchaser and PW Rochester on the
other hand, shall, within 20 days after the date on which the Notice of Dispute
was delivered by Purchaser to Sellers, prepare and submit to the other and to
the Arbitrator its respective proposed Statement of Net Assets together with a
statement of its position with respect to any unresolved Disputed Items. The
Arbitrator shall, after the submission of such information by Purchaser and
Sellers, review such Disputed Items only and submit its written decision to
Sellers and Purchaser within 20 days after receipt of such information by
Purchaser and Sellers, and the Statement of Net Assets as adjusted by the
Arbitrator shall be the final Statement of Net Assets for purposes of this
Agreement. In connection with such review, the Arbitrator shall have complete
access to representatives of PW Toronto and PW Rochester and all books and
records of the Business relevant to preparation of the Statement of Net Assets.
Any determination by the Arbitrator with respect to any disputes regarding the
Statement of Net Assets shall be final and binding on Sellers and Purchaser. The
costs of the Arbitrator shall be borne 50% by Sellers and 50% by Purchaser.
Section 2.5. POST-CLOSING ADJUSTMENT. On or before the fifth business
day following the final and conclusive determination of the Statement of Net
Assets pursuant to Sections 2.3 or 2.4, as the case may be, either: (a) Sellers
shall pay to Purchaser the amount, if any, by which the actual amount of Net
Assets shown on the final Statement of Net Assets is less than an amount equal
to $47,880,000 minus $200,000 for each month (prorated for any partial month)
between January 3, 1998 and the Closing Date; or (b) Purchaser shall pay to
Sellers the amount, if any, by which $47,880,000 is less than the actual amount
of Net Assets shown on the final Statement of
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Net Assets. A payment made pursuant to this Section 2.5 is herein referred to as
an "Adjusting Payment."
Section 2.6. INTEREST. The Adjusting Payment, if any, shall accrue
interest at the "Prime Rate" (as reported in the "Money Rates" table of THE WALL
STREET JOURNAL) from the Closing Date through and including the date on which
the Adjusting Payment is paid. The "Prime Rate" shall be adjusted as of the
first day of each month based on the rate reported in THE WALL STREET JOURNAL as
of the first business day of such month.
Section 2.7. THE ESCROW FUND. Purchaser shall deposit at the time of
Closing with the Escrow Agent pursuant to the terms of Section 9.6, and in
accordance with the provisions of the Escrow Agreement attached as Exhibit A
hereto, in partial satisfaction of the payment by the Purchaser of the Purchase
Price, to secure the Seller Surviving Environmental Obligations, the sum of
$2,000,000 in cash. All sums remaining in the Escrow Fund on the third
anniversary of the Closing Date shall be returned to Seller except, in the event
that Purchaser has given notice to Seller of an Environmental Liability pursuant
to Section 9.6 which Environmental Liability remains outstanding and unresolved
as of such third anniversary, an amount shall be retained in the Escrow Fund
reasonably necessary to satisfy any such outstanding claims.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant to Purchaser and Monro as follows:
Section 3.1. ORGANIZATION. Each Seller and Speedy U.S.A. is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Parent is a corporation duly organized, validly existing and in good standing
under the laws of Ontario and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Each Seller is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the character of
its activities with respect to the Business requires such qualification other
than in such jurisdictions where the failure to so qualify would not,
individually or in the aggregate, be reasonably likely to have a material
adverse effect on the assets, liabilities, results of operations, financial
condition, or business of the Business ("Material Adverse Effect"), and SCHEDULE
3.1 contains a complete and correct list of such jurisdictions. Each Seller,
Speedy U.S.A. and Parent has heretofore made available to Purchaser correct and
complete copies of its articles of incorporation and bylaws as in effect as of
the date of this Agreement and has permitted Purchaser to review the minute
books of Sellers and Speedy U.S.A. and, to the extent that such minute books
relate to the Business, of Parent.
Section 3.2. AUTHORIZATION. Each of the Sellers, Speedy U.S.A. and
Parent has the full corporate power and authority to execute and deliver this
Agreement and any other certificate,
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agreement, document or other instrument to be executed and delivered by it in
connection with the transactions contemplated hereby (collectively, the "Seller
Ancillary Documents"), to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and each of the Seller Ancillary Documents by
Sellers, Speedy U.S.A. or Parent, as applicable, the performance by Sellers,
Speedy U.S.A. and Parent of their respective obligations hereunder and
thereunder and the consummation of the transactions provided for herein and
therein have been duly and validly authorized by all necessary corporate action
on the part of Sellers, Speedy U.S.A. and Parent. The board of directors, and
Speedy U.S.A., the sole stockholder of the Sellers, and the board of directors
of Parent, have approved the execution, delivery and performance of this
Agreement and each of the Seller Ancillary Documents as applicable and the
consummation of the transactions contemplated hereby and thereby. This Agreement
has been, and each of the applicable Seller Ancillary Documents will be as of
the Closing Date, duly executed and delivered by Sellers, Speedy U.S.A. and
Parent, as applicable, and do or will, as the case may be, constitute the valid
and binding agreements of each of the Sellers, Speedy U.S.A. and Parent,
enforceable against it in accordance with their respective terms, except as
enforceability of such may be limited by bankruptcy, insolvency, reorganization
and other laws affecting creditors' rights generally, and by general equitable
principles.
Section 3.3. ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution,
delivery and performance of this Agreement and the Seller Ancillary Documents,
the consummation of the transactions contemplated by this Agreement and the
Seller Ancillary Documents and the fulfillment of and compliance with the terms
and conditions of this Agreement and the Seller Ancillary Documents do not or
will not (as the case may be), with the passing of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under or
permit the acceleration of any obligation under, (a) any term or provision of
the articles of incorporation or bylaws of Sellers, Speedy U.S.A. or Parent, (b)
except as set forth on SCHEDULE 3.3(i), any Sellers Contract, Franchise
Agreement, Real Property Lease or Personal Property Lease (all as hereinafter
defined), (c) any judgment, decree or order of any court or governmental
authority or agency to which either Seller, Speedy U.S.A. or Parent is a party
or by which Sellers, Speedy U.S.A. or Parent or any of their respective
properties are bound or (d) any statute, law, rule or regulation, including
Environmental Laws, applicable to Sellers, Speedy U.S.A. Parent or the Business.
Except (i) for compliance with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and state bulk sales laws, (ii) for the filing of UCC-3 termination statements
and documents with respect to the release of mortgages and (iii) as set forth in
SCHEDULE 3.3(ii), no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency or public or
regulatory unit, agency, body or authority with respect to either Seller, Speedy
U.S.A. or Parent is required in connection with the execution, delivery or
performance of this Agreement or the Seller Ancillary Documents by Sellers,
Speedy U.S.A. or Parent or the consummation of the transactions contemplated by
this Agreement or the Seller Ancillary Documents by Sellers, Speedy U.S.A. or
Parent.
Section 3.4. CAPITALIZATION OF SELLERS; SUBSIDIARIES. All issued and
outstanding shares of capital stock of Sellers are owned beneficially and of
record by Speedy U.S.A., all of the issued and outstanding capital stock of
which are owned beneficially and of record by Parent. Other
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than the Excluded Subsidiary and except as set forth in SCHEDULE 3.4, Sellers do
not own, directly or indirectly, any capital stock or any other equity
securities of any corporation, firm, partnership, joint venture, association or
other entity. The Excluded Subsidiary (i) as of the Closing Date will not own or
possess any assets that are utilized in or necessary to the operation of the
Business, (ii) is not material to the Business and (iii) is not, directly or
indirectly, engaged or involved in any business other than the ownership and
operation of the automotive repair shops operated under the "Car-X" name. Since
January 3, 1998, other than the Excluded Assets, no assets or properties have
been transferred from Sellers to any of its Affiliates.
Section 3.5. OWNERSHIP OF ASSETS AND RELATED MATTERS.
(a) REAL PROPERTY. SCHEDULE 3.5(a)(i) sets forth a correct and
complete list of all the Real Property. The legal description of each
parcel of Real Property attached to the deeds conveying such Real
Property on the Closing Date shall be consistent with the legal
description used upon such parcel's acquisition by Bloor and, if
requested by Purchaser, subject to change or correction on the Closing
Date as shall be necessary or appropriate to conform to the
descriptions used in the title insurance commitments referred to in
Section 5.15 to the extent obtained. At the Closing, Bloor shall convey
to Purchaser by recordable special or limited warranty deed Bloor's
right, title and interest in and to the Real Property and by recordable
assignment all of Bloor's right, title and interest as lessee in and to
the Real Property Leases. The Real Property and Real Property Leases
include all real property owned or leased by Bloor that is used or held
for use in the Business except the Webster Shop. Bloor's conveyance of
the Real Property and its assignment of the Real Property Leases shall
be subject only to the following matters and exceptions ("Permitted
Exceptions"): (i) with respect to the Real Property (A) liens for
taxes, assessments or governmental charges or levies which are neither
delinquent nor due and payable as of the Closing Date, and (B) zoning,
building or other restrictions, variances, covenants, rights-of-way,
encumbrances, easements and agreements, none of which, individually or
in the aggregate, shall, in Purchaser's reasonable judgment, interfere
in any material respect with the use or occupancy of any of the Real
Property or Real Property Leases in the manner any of such parcels is
currently being used and (ii) with respect to the Real Property Leases,
the terms and conditions of such leases. If, prior to the Closing Date,
Purchaser shall give Bloor notice of Unpermitted Exceptions, as defined
herein, pursuant to Section 5.17, Bloor shall clear and remove or
otherwise deal with such Unpermitted Exceptions as provided in Section
5.17.
Except as set forth in SCHEDULE 3.5(a)(iii), Bloor is in
possession of all of the Real Property and all buildings, structures,
fixtures and improvements located thereon. None of the Excluded Real
Property is used in the Business except the Webster Shop, and none of
the Excluded Real Property is contiguous (including by virtue of being
across a public right-of-way) to any of the Real Property.
Sellers have heretofore made available to Purchaser copies of
all deeds, deeds of trust, certificates of occupancy, title insurance
policies, title reports, surveys and similar documents (including all
amendments of any of the foregoing) in Seller's possession; provided,
however, that Purchaser's knowledge of the information set forth in
such
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<PAGE> 13
material shall not constitute a waiver of any representation or
warranty contained in this Agreement. Bloor shall permit Purchaser
prior to the Closing Date to make the inspections referred to in
Section 5.2 hereof. Except as set forth in SCHEDULE 3.5(a)(iv): (i) the
Real Property and Leased Real Property and the current use thereof by
the Sellers do not violate any building, zoning or similar land use law
or governmental regulation in any way which may interfere in any
material respect with the continued use or occupancy of such Real
Property and such Leased Real Property in the manner in which they are
currently being used, (ii) all buildings, structures and other
improvements located on the Real Property or Leased Real Property are
adequate and suitable for the purposes for which they are presently
being used, and located fully within the lines of record title, (iii)
Sellers have not received any notice, official or otherwise, that any
Real Property or Leased 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, (iv) Bloor has all
necessary occupancy certificates, licenses and permits which are
necessary for the use and occupancy of each Shop and other Business
location in the manner in which it is currently being used, and (v)
there are no condemnation proceedings pending or, to Sellers'
knowledge, threatened against any of the Real Property or the
improvements thereon.
(b) REAL PROPERTY LEASES. SCHEDULE 3.5(b)(i) sets forth a
correct and complete list of the Real Property Leases. Bloor has
heretofore made available to Purchaser correct and complete copies of
all the Real Property Leases set forth on SCHEDULE 3.5(b)(i), provided,
however, that Purchaser's knowledge of the information set forth in
such material shall not constitute a waiver of any representation or
warranty contained in this Agreement. Bloor shall permit the Purchaser
prior to the Closing Date to make the further inspections set forth in
Section 5.2 hereof. The Real Property Leases are valid and enforceable
in accordance with their respective terms with respect to Bloor and
each other party thereto, except as enforceability may be limited by
bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, and by general equitable principles and
are in full force and effect and have not been amended except as set
forth on SCHEDULE 3.5(b)(i). Bloor is not in default in any material
respect under such Real Property Leases and, to Seller's knowledge, no
lessor is in default in any material respect under such Real Property
Leases. There are no condemnation proceedings pending or, to Seller's
knowledge, threatened against any of the real property or improvements
subject to the Real Property Leases.
Bloor has physical possession of all parcels of real property
which are covered by the Real Property Leases. At the Closing, Bloor
shall assign its right, title and interest in and to the Real Property
Leases to Purchaser and shall use commercially reasonable efforts to
obtain and deliver such consents as shall be required to effect the
assignment of the Real Property Leases.
(c) PERSONAL PROPERTY. Sellers have delivered to Purchaser
certain lists (the "Personal Property Lists") detailing the following
assets included in the Assets: (i) shop repair equipment; (ii)
furniture and other fixed assets; (iii) computer equipment; and (iv)
automobiles and other registered motor vehicles (such assets herein
collectively referred to as the "Personal Property"). Each of the
assets listed on the Personal Property Lists
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having a book value of at least $100,000 is included in the Assets
(except for assets disposed of in the ordinary course of business
consistent with past practice since the date indicated on the
applicable Personal Property List), and each of the Personal Property
Lists is a substantially complete list of material assets of Sellers
used or held for use in connection with the Business within the
respective categories of assets purported to be listed thereon. The
fixed asset ledger of the Business at January 3, 1998 attached hereto
as SCHEDULE 3.5(c) is accurate and complete in all material respects.
(d) ASSETS. All assets owned, leased, licensed or otherwise
held by Sellers or their Affiliates that are used or held for use in
the Business are included in the Assets, and are all of the assets
heretofore used or held for use in the Business (other than the
Excluded Assets and other than those disposed of in the ordinary course
of business). Except as set forth in SCHEDULE 3.5(d)(i), Sellers have
good title to the Personal Property free and clear of all Liens other
than (i) Liens for current taxes not delinquent or for taxes being
contested in good faith and by appropriate proceedings and with respect
to which adequate reserves have been established and are being
maintained, (ii) Liens arising in the ordinary course of business for
sums being contested in good faith and by appropriate proceedings and
with respect to which adequate reserves have been established and are
being maintained, or for sums not due, or (iii) mechanic's, worker's,
materialmen's and other like Liens arising in the ordinary course of
business in respect of obligations which are not delinquent or which
are being contested in good faith and by appropriate proceedings and
with respect to which adequate reserves have been established and are
being maintained. Sellers will convey to Purchaser at Closing good
title to the Personal Property free and clear of all Liens. Since
January 3, 1998, Sellers have not transferred any assets from the
Assets to the Excluded Assets with a fair market value in excess of
$75,000 in the aggregate. Except as set forth in SCHEDULE 3.5(d)(ii),
the Assets, taken as a whole, have no material defects, and are in good
operating condition and repair and have been reasonably maintained
consistent with standards generally followed in the industry (giving
due account to the age and length of use of same, and ordinary wear and
tear excepted) and are suitable for their present uses. Except as set
forth on SCHEDULE 3.5(d)(iii), no person other than Sellers owns any
equipment or other tangible assets or properties situated on the
premises of Sellers which are necessary to the operation of the
Business, except for the leased items that are subject to the Personal
Property Leases. Set forth on SCHEDULE 3.5(d)(iv) is a detailed fixed
asset inventory as at January 3, 1998 by location.
(e) INVENTORIES. The inventories of Sellers included in the
Assets (i) have an average value, as reflected on the books and records
of the Business, of at least $50,000 per Company-Owned Shop, and (ii)
are valued on the books and records of the Business at the lower of
cost or market with the cost determined under the FIFO (as applied
consistent with past practice) inventory valuation method. To the
knowledge of Sellers, no previously sold inventory is subject to
returns in excess of those historically experienced by the Business in
the ordinary course of business consistent with past practice.
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<PAGE> 15
(f) NO THIRD PARTY OPTIONS. Except as set forth in SCHEDULE
3.5(f), there are no existing agreements granting any person the right
to acquire any of Sellers' assets, properties or rights or any interest
therein (other than the Excluded Assets and other than sales of assets
in the ordinary course of business consistent with past practice).
Section 3.6. FINANCIAL STATEMENTS. Sellers have delivered to Purchaser
the following: The unconsolidated balance sheet of Bloor as of December 31, 1996
and January 3, 1998 and the related unconsolidated statements of income for the
years ended December 31, 1995 and 1996 and January 3, 1998 (the "Seller's
Financial Statements"); the Seller's Financial Statements as adjusted on a pro
forma basis, in the case of the balance sheets, to reflect only the Net Assets
and the Assumed Liabilities and in the case of the statements of income, to
include only the revenues and expenses of the Business (the "Financial
Statements", with the pro forma balance sheet as of January 3, 1998 being
hereinafter referred to as the "Balance Sheet"); and the monthly statement of
revenues and expenses of the Business for each fiscal month subsequent to
January 3, 1998 (the "Monthly Financials"). The Financial Statements and the
Monthly Financials have been prepared from, and are in accordance with, the
books and records of Sellers, and such books and records have been maintained on
a basis consistent with the past practice of Sellers or the Business, as the
case may be. Each of the balance sheets included in the Financial Statements
(including the related notes and schedules) fairly presents in all material
respects the financial position of the Business, and each of the statements of
operating income included in the Financial Statements and the Monthly Financials
(including any related notes and schedules) fairly presents in all material
respects the results of operations of the Business for the periods set forth
therein, in each case in accordance with GAAP, except as may be noted therein or
as set forth in SCHEDULE 3.6 (subject, in the case of the balance sheets
included in the Monthly Financials, to the lack of footnotes and normal year-end
audit adjustments). The Monthly Financials have been prepared in all material
respects on a basis consistent with the principles used in the preparation of
the Balance Sheet and the Monthly Financials, including, without limitation,
with respect to the establishment of reserves for uncollectible receivables,
contingent liabilities and other items. The Financial Statements and the Monthly
Financials have been prepared in all material respects on a basis consistent
with the principles used in the preparation of the Bloor financial statements
for the year ended December 31, 1997. The Sellers have delivered to Buyer a
report on monthly sales by Shop for each month subsequent to January 3, 1998
through February.
Section 3.7. NO UNDISCLOSED LIABILITIES. Except as disclosed in
SCHEDULE 3.7, Sellers do not have any liabilities or obligations, contingent or
otherwise, relating to, involving or affecting the Business or the Assets that
are not adequately reflected or provided for in the Balance Sheet, except
liabilities and obligations incurred since the date of the Balance Sheet in the
ordinary course of business of the Business.
Section 3.8. ABSENCE OF CERTAIN CHANGES.
(a) Since January 3, 1998 (the "Balance Sheet Date"), whether
or not in the ordinary course of business, there has not (i) occurred
or arisen any change in or event affecting the Assets or the Business
(excluding matters relating to economic or industry conditions
generally), that has had or, to the knowledge of Sellers, is reasonably
likely to have, a Material Adverse Effect, or (ii) been any damage,
destruction, loss or casualty to
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property or assets of the Business, whether or not covered by
insurance, which property or assets had an aggregate book value in
excess of $250,000. Since January 3, 1998, Sellers have (v) maintained
cash on hand in the owned Shops at levels reasonably consistent with
past practice, (w) maintained such quantities of supplies and inventory
of the Business as have been maintained in the ordinary course of
business of the Business reasonably consistent with past practice, (x)
extended credit to customers, collected accounts receivable and paid
accounts payable and similar obligations in the ordinary course of
business of the Business reasonably consistent with past practice, (y)
funded obligations with respect to the Seller Benefit Plans on a timely
basis in the ordinary course of business of the Business reasonably
consistent with past practice and (z) conducted the Business in the
ordinary course on a basis reasonably consistent with past practice and
not engaged in any new line of business or entered into any agreement,
transaction or activity or made any commitment with respect to the
Business except those in the ordinary course of business.
(b) Except as set forth in SCHEDULE 3.8(b), since January 3,
1998, there has not been with respect to the Business (i) any liability
or obligation (absolute, accrued or contingent) incurred except in the
ordinary course of business, (ii) any guaranteed checks, notes or
accounts receivable which have been written off or reserved against as
uncollectible, except bad debt reserves established in the ordinary
course of business consistent with past practice, (iii) any write-down
of the value of any asset or investment on the books or records of the
Business in excess of $100,000 individually for any asset or investment
or $500,000 in the aggregate, except for depreciation and amortization
taken in the ordinary course of business consistent with past practice,
(iv) any cancellation of any debts or waiver of any claims or rights
(excluding credit memos issued in the ordinary course of business)
except in transactions in the ordinary course of business consistent
with past practice and which in any event are not in excess of $50,000
individually or $250,000 in the aggregate (other than Excluded
Liabilities), (v) any sale, transfer or other disposition of any
properties or assets (real, personal or mixed, tangible or intangible),
other than (A) Excluded Assets, (B) inventory held for sale in the
ordinary course of business consistent with past practice or (C) other
assets sold, transferred or otherwise disposed of in the ordinary
course of business consistent with past practice and which do not
exceed $50,000 in any single transaction or $250,000 in the aggregate,
(vi) any capital expenditures or commitments in excess of $100,000
individually or $500,000 in the aggregate, (vii) any increase in the
compensation of officers or employees listed on SCHEDULE 3.14 or hourly
employees other than increases to hourly employees granted on a case by
case basis which are immaterial in amount or nature, whether now or
hereafter payable, (viii) any increase of any reserves for contingent
liabilities, (ix) any termination or failure to renew any License; (x)
any termination, renewal or amendment to any Assumed Contracts; (xi)
any amendment to a Seller's charter or by-laws; or (xii) any agreements
to do any of the foregoing.
Section 3.9. LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 3.9,
there are no suits, actions, claims or proceedings, or investigations of which
Sellers have been notified pending or, to the knowledge of Sellers, threatened
against, relating to or involving Sellers, the Business or the Assets before any
court, arbitrator or administrative or governmental body, except for any suits,
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actions, claims, proceedings or investigations relating solely to the Excluded
Assets or the Excluded Liabilities. None of such suits, actions, claims,
proceedings or investigations are reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect. Neither Sellers nor the Business
are subject to any judgment, decree, injunction or order of any court which, in
any case, imposes any restriction on the Business or requires any payment. The
Business is not subject to any governmental restriction specific to Sellers and
its Affiliates which is reasonably likely (a) to have a Material Adverse Effect
or (b) to cause a material limitation on Purchaser's ability to operate the
Business after the Closing in the same manner as heretofore conducted by
Sellers.
Section 3.10. COMPLIANCE WITH LAW. Sellers have all material
authorizations, approvals, licenses, permits and orders of and from all
governmental and regulatory offices and bodies necessary to carry on the
Business as it is currently being conducted, to own or hold under lease the
properties and assets they own or hold under lease and to perform all of their
obligations under the agreements to which they are a party (collectively, the
"Licenses"). Sellers are in compliance in all material respects with all
applicable laws, regulations and administrative orders (including, without
limitation, laws relating to employment of labor or use or occupancy of
properties or any part thereof) of any country, state or municipality or of any
subdivision thereof to which the Business is subject. Schedule 3.10(i) sets
forth a correct and complete list of all Licenses known to Sellers. At least
twenty (20) days prior to the Closing Date, Sellers shall deliver to Purchaser a
supplemental SCHEDULE 3.10(i) setting forth a correct and complete list of all
Licenses, indicating which are not transferable to Purchaser. Sellers have made
available to Purchaser all reports and filings made or filed by Sellers pursuant
to the Occupational Safety and Health Act and related to the Business since
January 1, 1995. Except as set forth in Schedule 3.10(ii), since January 1,
1995, Sellers have not violated in any material respect or failed to comply in
any material respect with, or been the subject of any written allegation by the
Occupational Safety and Health Administration ("OSHA") that they have violated
or failed to comply with, the Occupational Health and Safety Act.
Section 3.11. SELLER CONTRACTS. SCHEDULE 3.11(i) sets forth a correct
and complete list or a copy of each of the contracts, agreements, commitments,
arrangements, understandings, or other instruments (in each case whether oral or
written) relating to the Business (including every amendment, modification or
supplement to the foregoing) (i) which involves an annual payment to or by
Seller in excess of $20,000, (ii) which requires more than 90 days' prior notice
by a Seller to terminate without any liability to a Seller, (iii) which limits
or restricts a Seller from engaging in any business in any jurisdiction, (iv)
which is material to the Business, or (v) which constitute a purchase order with
over $20,000 remaining to be paid with respect to such order (which, together
with the Seller Benefit Plans listed separately in SCHEDULE 3.15, but excluding
the Real Property Leases, are herein referred to as the "Seller Contracts").
Correct and complete copies of all written Seller Contracts listed on SCHEDULE
3.11(i), the Real Property Leases and the Franchise Agreements have been made
available to Purchaser. The Seller Contracts, the Personal Property Leases and
the Franchise Agreements are valid and enforceable in accordance with their
respective terms with respect to Sellers and, to the knowledge of Sellers, each
other party thereto, except as the enforceability of such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally, or by general equitable principles. Except as set forth on SCHEDULE
3.11(ii), there is no existing default of Sellers under any Seller Contract,
Real
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Property Lease, Franchise Agreement or, to the knowledge of Sellers, of any of
the other parties thereto (or events or conditions which with notice or lapse of
time or both would constitute a default), which default will result in a total
loss to Purchaser (including reasonable attorneys' fees and other out of pocket
expenses) of more than $20,000 individually for any single Seller Contract or
$150,000 in the aggregate for all Seller Contracts, Real Property Leases or
Franchise Agreements.
Section 3.12. FRANCHISE AGREEMENTS. Set forth on SCHEDULE 3.12 attached
hereto is a list of all franchise agreements to which Car-X is a party as
franchisor with respect to the Franchised Shops (the "Franchise Agreements").
The information set forth in Car-X's Uniform Franchise Offering Circular dated
May 31, 1997, as amended October 31, 1997, is correct and complete in all
material respects, does not omit any information required to make the statements
therein not misleading in any material respect, has been maintained current in
all material respects and fairly discloses in all material respects the
operations of Car-X in the manner required by applicable federal and state rules
and regulations. The Franchise Agreements were entered into with the franchisees
in accordance in all material respects with the statutes, rules and regulations
governing the sale of franchises in effect at the time of execution of such
Franchise Agreements. Car-X and Purchaser shall coordinate their efforts with
respect to any notification to the franchisees of the execution of this
Agreement and the consummation of the transactions contemplated herein. Except
as set forth on SCHEDULE 3.11(ii), there are no payment defaults or late
payments owed by any franchisees under any Franchise Agreement.
Section 3.13. TAX RETURNS; TAXES. Sellers and each Affiliated Group (i)
have paid or will pay all Taxes due with respect to the Pre-Closing Tax Period,
(ii) have filed or will file all Tax Returns required to be filed with respect
to the Pre-Closing Tax Period, (iii) have paid or will pay all Taxes due with
respect to the Pre-Closing Tax Period and (iv) have no liability for Taxes
imposed on any other person, as transferee or successor, by contract, by
operation of law or otherwise (other than liability of other members of an
Affiliated Group under Treasury Regulation Section 1.1502-6 or similar
provisions of state or local law). Except as set forth in SCHEDULE 3.13, no
audit of any Tax Return of either Seller is in progress, no deficiency has been
asserted with respect to any Pre-Closing Tax Period of either Seller or any
Affiliated Group that has not been paid in full and Sellers have no knowledge of
any unassessed Tax deficiency proposed or threatened against Sellers or any
Affiliated Group. No Tax liens have been filed with respect to any Asset. The
Seller has complied in all material respect with all applicable laws, rules and
regulations relating to the withholding and payment of Taxes in connection with
amounts paid to employees or other third parties. None of the Assets is subject
to any lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of
1986, as amended (the "Code") (as in effect immediately prior to the enactment
of the Tax Reform Act of 1986). For purposes of this Agreement, (x) "Pre-Closing
Tax Period" means all taxable periods ending prior to the Closing Date and the
portion ending on and including the Closing Date of any taxable period that
includes, but does not end on, the Closing Date, (y) "Tax" means all foreign,
federal, state, county and local net income, gross income, gross receipts,
sales, use, ad valorem, unincorporated business, employment, payroll, social
security, unemployment, withholding, disability, excise, severance, occupation,
premium, windfall profits, alternative minimum, franchise, license, profit, real
and personal property, capital, recording, transfer, customs, stamp or other
taxes, fees, charges, duties or assessments of any kind whatsoever, together
with any interest and any penalties, fines
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additions to tax or additional amounts imposed with respect thereto and (z) "Tax
Return" means any return, report or form required to be filed with respect to
any Tax.
Section 3.14. OFFICERS AND EMPLOYEES. SCHEDULE 3.14 contains a correct
and complete list of (i) all salaried employees of Sellers as of March 31, 1998
to be offered employment by Purchaser as of the Closing Date (including a
notation indicating which employees are managers or officers) and (ii) the
approximate number of current hourly employees. Sellers have (or will have as of
the Closing Date) paid to employees any bonuses earned in respect of any period
ending on or prior to January 3, 1998 and all amounts in respect of salary and
accrued but unused vacation time by any employee of the Business and, within
thirty (30) days after the Closing Date, will have paid to employees any bonuses
earned or accrued by any employee of the Business (whether or not yet due and
payable) in respect of any portion of 1998 ending on or prior to the Closing
Date.
Section 3.15. SELLER EMPLOYEE BENEFIT PLANS.
(a) All "employee benefit plans," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), of the Sellers relating to employees involved in the conduct
of the Business or any trade or business conducting the Business under
common control with the Sellers (an "ERISA Affiliate"), within the
meaning of Section 414 of the Code and all material bonus, stock
option, stock purchase, stock appreciation right, incentive, deferred
compensation, supplemental retirement, severance and other similar
material fringe or employee benefit plans, programs, policies or
arrangements, any material employment, consulting or executive
compensation agreements for the benefit of, or relating to, any
employee, former employee or retiree of the Business, and written
descriptions or any material oral arrangements or agreements with
respect to the foregoing, currently maintained or maintained within the
last three years by Parent, the Sellers or any ERISA Affiliate or under
which Parent, the Sellers or any ERISA Affiliate has any liability in
respect or current or former employees involved in the conduct of the
Businesses are collectively, for purposes of this Section, referred to
as the "Benefit Plans." All Benefit Plans are described on SCHEDULE
3.15.
(b) With respect to any Benefit Plan, except as set forth on
SCHEDULE 3.15, (a) such Benefit Plan has been maintained in material
compliance with ERISA, the Code, the terms of such Benefit Plan and
other applicable Laws, Regulations, Rulings, and other guidance issued
by the Internal Revenue Service, Department of Labor and Pension
Benefit Guaranty Corporation, (b) a favorable determination letter has
been obtained from the IRS, and a copy thereof delivered to the
Purchaser, for any such Benefit Plan that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and which is
intended to be qualified within the meaning of Section 401(a) of the
Code, and since such determination letter, no event has occurred that
would disqualify such Benefit Plan. No event has occurred that will or
could subject such plan or arrangement to a Tax under Section 511 of
the Code. Neither Parent, the Sellers nor any ERISA Affiliate
maintains, has ever maintained or is obligated, or has ever been
obligated, to contribute to any employee benefit plan subject to Title
IV of ERISA or Section 412 of the Code or any multiemployer plan
(within the meaning of Section 4001 of ERISA).
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(c) The Sellers have previously delivered to the Purchaser,
with respect to each Benefit Plan, correct and complete copies of (a)
the legal plan document (including, without limitation, all amendments
thereto) and any trust agreements related thereto; (b) the most recent
annual report (Form 5500 Series); and (c) the most recent summary plan
description, as described in Section 102(a)(1) of ERISA.
(d) Each Benefit Plan or other arrangement which is a "group
health plan" (as defined in Code Section 5000(b)(1)) has been operated
and will continue to be operated in material compliance with the group
health plan continuation coverage requirements of Section 4980B of the
Code and Sections 601 through 608 of ERISA, to the extent such
requirements are applicable. Each Benefit Plan or other arrangement
that is subject to Section 1862(b)(1) of the Social Security Act has
been operated and will continue to be operated in material compliance
with the secondary payor requirements of Section 1862(b)(1) of such
Act.
(e) No Benefit Plan by or to which the Sellers or any ERISA
Affiliate is a party, is bound or is otherwise liable, by its terms
requires any payment or transfer of money, property or other
consideration on account of or in connection with the sale, lease,
exchange or transfer of either any shares of stock or any of the assets
of Sellers or any ERISA Affiliate (whether or not any such payment
would constitute a "parachute payment" or "excess parachute payment"
within the meaning of Section 280G of the Code).
(f) Neither Sellers nor any ERISA Affiliate has incurred (nor
has any event occurred which reasonably can be anticipated to result in
Seller or any ERISA Affiliate incurring) any material loss in
connection with any existing or previously existing Benefit Plan or
other existing or previously existing arrangement (or any existing or
previously existing plan that would be a Benefit Plan but for not
covering any employee of the Business or natural person formerly
employed in Business) that could become, on or after the Closing Date,
an obligation or liability of Purchaser or give rise to any liens on
any of the Assets.
Section 3.16. LABOR RELATIONS. Since January 1, 1993, except as set
forth in SCHEDULE 3.9 or SCHEDULE 3.16, (a) employees of Sellers have not been
and are not represented by a labor organization which was either National Labor
Relations Board ("NLRB") certified or voluntarily recognized or recognized under
foreign law; (b) Sellers have not been and are not a signatory to a collective
bargaining agreement with any labor organization; (c) no representation election
petition has been filed by employees of Sellers or is pending with the NLRB and
no union organizing campaign involving employees of Sellers have occurred or is
in progress; (d) no NLRB unfair labor practice claims have been filed and/or are
presently pending against Sellers or any labor organization representing their
employees; (e) to the knowledge of Sellers, no handbilling, picketing, work
stoppage (sympathetic or otherwise), or other "concerted action" involving the
employees of Sellers has occurred or is in progress; (f) no written claim for
unpaid wages or overtime or for child labor or recordkeeping violations has been
filed or is pending under the Fair Labor Standards Act, the Davis-Bacon Act, the
Walsh-Healey Act, the Service Contract Act or any other Federal, state, local or
foreign law, regulation, or ordinance, in each case relating to the
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Business; (g) no citation has been issued by OSHA against Sellers and no notice
of contest or OSHA administrative enforcement proceeding involving Sellers has
been filed or is pending; (h) no citation of Sellers has occurred and no
enforcement proceeding has been initiated or is pending under Federal or foreign
immigration law; and/or (i) except as may result from Purchaser's failure to
hire any current employees of Sellers, Sellers have not taken any action that
would constitute a "mass layoff" or "plant closing" within the meaning of the
Worker Adjustment and Retraining Notification Act of 1988, as amended, or any
similar state or local law ("WARN") or otherwise trigger notice requirements or
liability under any local or state plant closing notice law. Sellers are in
compliance in all material respects with all federal, state and local laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours.
Section 3.17. INSURANCE. SCHEDULE 3.17, to be furnished within 10 days
of this Agreement, shall set forth a correct and complete list of Sellers'
current insurance policies and coverages relating to the Assets and/or the
Business, including names of carriers, amounts of coverage and premiums
therefor. Sellers have made available to Purchaser correct and complete copies
of all such insurance policies. The Assets and the Business have been and are
insured by financially sound and reputable insurers in such amounts and against
such risks as are reasonable in relation to the Business, and Sellers will use
commercially reasonable efforts to maintain such insurance or its equivalent at
least through the Closing Date.
Section 3.18. ENVIRONMENTAL MATTERS
(a) Definitions:
"Environmental Claims" refers to any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation,
judicial or administrative proceeding, judgment, letter or other
communication confirmed in writing from any governmental agency,
department, bureau, office or other authority, or any third party
involving violations of Environmental Laws at or Releases of Hazardous
Materials from, to or at (i) any assets, properties or businesses of
the Sellers or any predecessor in interest; or (ii) onto any facilities
which received Hazardous Materials generated by the Sellers or any
predecessor in interest.
"Environmental Laws" includes the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et
seq., as amended; the Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. 6901 et seq., as amended; the Clean Air Act ("CAA"), 42
U.S.C. 7401 et seq., as amended; the Clean Water Act ("CWA"), 33 U.S.C.
1251 et seq., as amended; and any other federal, state, local or
municipal laws, statutes, regulations, rules or ordinances imposing
liability or establishing standards of conduct for protection of the
environment or for regulation of Hazardous Materials.
"Environmental Liabilities" means any monetary obligations,
losses, liabilities (including strict liability), damages, punitive
damages, consequential damages, treble damages, where such punitive
damages consequential damages or treble damages arise from or are
alleged to arise from the acts of Seller, costs and expenses (including
all
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reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result
of any Environmental Claim filed by any Governmental Authority or any
third party which relate to any violation of Environmental Law,
Remedial Action, Release or threatened Release of Hazardous Materials
from or onto (i) any property presently or formerly owned, occupied or
operated by Sellers or any of its subsidiaries or a predecessor in
interest, or (ii) any facility which received Hazardous Materials
generated by Sellers or any of their subsidiaries or a predecessor in
interest.
"Hazardous Materials" shall include (a) any element, compound,
or chemical that is defined, listed or otherwise classified as a
contaminant, pollutant, toxic pollutant, toxic or hazardous substance,
extremely hazardous substance or chemical, hazardous waste, medical
waste, biohazardous or infectious waste, special waste, or solid waste
under Environmental Laws; (b) petroleum, petroleum-based or
petroleum-derived products; (c) polychlorinated biphenyls; (d) any
radioactive or explosive materials and (e) friable asbestos.
"Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating,
dumping, or disposing of Hazardous Materials (including the abandonment
or discarding of barrels, containers or other closed receptacles
containing Hazardous Materials) into the environment.
"Remedial Action" means all actions required by Environmental
Laws to be taken to (i) clean up, remove, remediate, contain, treat,
monitor, assess, evaluate or in any other way address Hazardous
Materials in the indoor or outdoor environment; (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials so they
do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; (iii) perform
pre-remedial studies and investigations and post-remedial operation and
maintenance activities; or (iv) any other actions authorized by 42
U.S.C. 9601.
(b) Except as set forth in SCHEDULE 3.18(b) or as to any
matters relating solely to the Excluded Assets or Excluded Liabilities:
(i) The operations of the Sellers are in full
compliance with Environmental Laws;
(ii) The Sellers have obtained and are in compliance
with all necessary permits or authorizations that are required
under Environmental Laws to operate the facilities, assets and
business of the Sellers;
(iii) There has been no Release at any of the
properties presently or previously owned, occupied or operated
by the Sellers or a predecessor in interest or to Sellers'
knowledge, at any disposal or treatment facility which
received
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Hazardous Materials generated by the Sellers or any
predecessor in interest which has or is reasonably likely to
result in Environmental Liabilities;
(iv) No Environmental Claims have been asserted
against the Sellers or any predecessor in interest, nor do the
Sellers have knowledge or notice of any threatened or pending
Environmental Claim against the Sellers or any predecessor in
interest which is reasonably likely to result in Environmental
Liabilities;
(v) To Sellers' knowledge, no Environmental Claims
have been asserted against any facilities that may have
received Hazardous Materials generated by the Sellers or any
predecessor in interest which are reasonably likely to result
in Environmental Liabilities; and
(vi) To Sellers' knowledge, Sellers further represent
that they have delivered to the Purchaser correct and complete
copies of all material environmental reports, studies,
investigations or correspondence regarding any material
Environmental Liabilities of Sellers or any environmental
conditions at any of the real estate owned, occupied or
operated by Seller.
(c) Except as set forth in SCHEDULE 3.18(c) or as to matters
relating solely to the Excluded Assets or Excluded Liabilities:
(i) Sellers have never used, operated or otherwise
maintained any underground storage tanks or associated piping
(collectively "USTs") for the purpose of storing, dispersing
or dispensing of gasoline, gasoline by-products or diesel fuel
at any of the properties presently or previously owned,
occupied or operated by Sellers. The term USTs does not
include reservoirs associated with hydraulic lifts or hoists
or any structure associated with an active oil-water separator
that was not previously operated as an underground storage
tank; and
(ii) There are no USTs located at any of the
properties presently or previously owned, occupied or operated
by Sellers.
Section 3.19. INTELLECTUAL PROPERTY. SCHEDULE 3.19(i) sets forth a
correct and complete list of all patents and all copyright registrations owned
by Sellers or their Affiliates and used or held for use in the Business
(together with all software owned by Sellers, collectively, the "Seller-Owned
Patents and Copyrights"). SCHEDULE 3.19(ii)(a) sets forth a correct and complete
list of all trademarks, trade names, service marks and any and all registrations
therefor owned by Sellers or their Affiliates used in connection with the
Business other than the SPEEDY Marks (collectively, the "Seller-Owned Marks").
SCHEDULE 3.19(ii)(b) sets forth a correct and complete list of all the SPEEDY
Marks. SCHEDULE 3.19(iii) sets forth a correct and complete list of all patents,
copyrights, software, technology and processes used by Sellers in the Business
pursuant to a license or other right granted by a third party (collectively, the
"Licensed Patents and Copyrights"), provided that SCHEDULE 3.19(iii) does not
require the listing of any "shrink wrap" software that Seller uses pursuant to a
standard form license of the software licensor. SCHEDULE 3.19(iv) sets forth a
correct and complete list of all trademarks, trade names, service
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marks and any and all registrations therefor used by Sellers in connection with
the Business pursuant to a license or other right granted by a third party
(collectively, the "Licensed Marks"). The items on SCHEDULES 3.19(i), (ii)(a),
(ii)(b), (iii) and (iv) shall be referred to as the "Intellectual Property."
Sellers own each of the SPEEDY Marks and Seller-Owned Patents and Copyrights and
each of the Seller-Owned Marks. Sellers have a license to use each of the
Licensed Patents and Copyrights and each of the Licensed Marks. To the knowledge
of Sellers, Sellers are not infringing the patent of any third party, but
Sellers make no warranty that they are not infringing one or more patents of
which they are not aware. Sellers shall use their commercially reasonable
efforts to obtain consent to assignment or replacement of licenses to the
Licensed Marks and the Licensed Patents and Copyrights, the need for which is
indicated on SCHEDULE 3.19(iii) or (iv), as applicable (none of which are
material to the Business). No written, or, to the knowledge of Sellers, oral
claims are pending against or have been delivered to Sellers or any of their
Affiliates by any person with respect to the use of any Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement relating to the same, and the current use by Sellers of the
Intellectual Property does not infringe in any material respect on any
trademark, service mark, trade name, copyright, trade secret, right of privacy
or right of publicity of any third party. SCHEDULE 3.19(v) sets forth a list of
all states in which Sellers are operating the Business under a trade name, and
each jurisdiction in which any such trade name is registered.
Section 3.20. TRANSACTIONS WITH AFFILIATES. Except as set forth in
SCHEDULE 3.20, and other than Excluded Liabilities, (i) no shareholder, officer
or director of Sellers or of any Affiliate of Sellers (including Speedy U.S.A.
and Parent), (ii) to the knowledge of Sellers, Speedy U.S.A. or Parent, no
person with whom any such shareholder, officer or director has any direct or
indirect relation by blood, marriage or adoption, and no entity in which any
such person owns any beneficial interest (other than a publicly held corporation
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 5% of the stock of which is beneficially
owned by all such persons), (iii) to the knowledge of Sellers, Speedy U.S.A. or
Parent, no Affiliate of any of the foregoing or (iv) neither Parent nor any
other Affiliate of Sellers, has any interest in: (a) any contract, arrangement
or understanding with, or relating to, the Business, the Assets or the Assumed
Liabilities; (b) any loan, arrangement, understanding, agreement or contract for
or relating to the Business or the Assets; or (c) any property (real, personal
or mixed), tangible or intangible, used or currently intended to be used in the
Business. For purposes of this Agreement, "Affiliate" of any specified Person
means any other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person. For purposes
of this definition, "control", when used with respect to any specified Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. In addition, for purposes of this definition,
"Person" means any individual, corporation, partnership, joint venture, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Section 3.21. BROKERS, FINDERS AND INVESTMENT BANKERS. Neither Parent,
Speedy U.S.A., Sellers nor any of their officers, directors or employees, has
employed any broker, finder or investment banker or incurred any liability for
any investment banking fees, financial advisory fees, brokerage fees or finders'
fees in connection with the transactions contemplated herein, except
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that Parent has retained, and is solely responsible for the fees and expenses of
Capital Canada Limited as its financial advisors.
Section 3.22. BANK ACCOUNTS. SCHEDULE 3.22 sets forth a correct and
complete description of each of Sellers' bank accounts, lock box accounts and
other accounts in which it holds the assets described in Section 1.3(a) (the
"Bank Accounts").
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers and Parent as
follows:
Section 4.1. ORGANIZATION. Monro and Purchaser are corporations duly
organized, validly existing and in good standing under the laws of the State of
New York and Delaware, respectively, and each has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
Section 4.2. AUTHORIZATION. Each of Monro and Purchaser has the full
corporate power and authority to execute and deliver this Agreement and any
other certificate, agreement, document or other instrument to be executed and
delivered by it in connection with the transactions contemplated hereby
(collectively, the "Purchaser Ancillary Documents"), to perform its respective
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and each of the Purchaser Ancillary Documents by Monro or Purchaser, as
applicable, the performance by Monro and Purchaser of its respective obligations
hereunder and thereunder and the consummation of the transactions provided for
herein and therein have been duly and validly authorized by all necessary
corporate action on the part of Monro and Purchaser. The boards of directors of
Monro and Purchaser, and Monro as sole shareholder of Purchaser, have approved
the execution, delivery and performance of this Agreement and each of the
Purchaser Ancillary Documents, as applicable, and the consummation of the
transactions contemplated hereby and thereby. This Agreement has been, and each
of the Purchaser Ancillary Documents will be as of the Closing Date, duly
executed and delivered by Monro and Purchaser, as applicable, and do or will, as
the case may be, constitute the valid and binding agreements of Monro and
Purchaser, enforceable against it in accordance with their respective terms,
except as the enforceability of such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and by
general equitable principles.
Section 4.3. ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution,
delivery and performance of this Agreement and the Purchaser Ancillary
Documents, the consummation of the transactions contemplated by this Agreement
and the Purchaser Ancillary Documents and the fulfillment of and compliance with
the terms and conditions of this Agreement and the Purchaser Ancillary Documents
do not or will not (as the case may be), with the passing of time or the giving
of notice or both, violate or conflict with, constitute a breach of or default
under or permit the acceleration of any obligation under, (a) any term or
provision of the articles of incorporation or bylaws of Monro or Purchaser, (b)
any contract, agreement, commitment, arrangement,
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understanding or other instrument (in each case whether oral or written) to
which Monro or Purchaser is a party or to which Monro or Purchaser or any of
their respective properties are subject, (c) any judgment, decree or order of
any court or governmental authority or agency to which Monro or Purchaser is a
party or by which Monro or Purchaser or any of their respective properties are
bound or (d) any material statute, law, rule or regulation applicable to Monro
or Purchaser. Except for compliance with the applicable requirements of (i) the
HSR Act, (ii) state bulk sales laws, (iii) filing of UCC-3 termination
statements and documents with respect to release of mortgages and (iv) as set
forth in SCHEDULE 4.3, no consent, approval, order or authorization of, or
registration, declaration or filing with, any government agency or public or
regulatory unit, agency, body or authority with respect to Monro or Purchaser is
required in connection with the execution, delivery or performance of this
Agreement and the Purchaser Ancillary Documents by Monro or Purchaser or the
consummation of the transactions contemplated by this Agreement and the
Purchaser Ancillary Documents by Monro or Purchaser.
Section 4.4. LEGAL PROCEEDINGS. There are no actions or proceedings
pending or, to the knowledge of Monro or Purchaser, threatened in writing
against, relating to or involving Monro or Purchaser, or any of their assets or
properties which are reasonably likely to result in the issuance of an order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated herein.
Section 4.5. BROKERS, FINDERS AND INVESTMENT BANKERS. Neither Monro or
Purchaser nor any of their officers, directors or employees has employed any
broker, finder or investment banker or incurred any liability for any investment
banking fees, financial advisory fees, brokerage fees or finders' fees in
connection with the transactions contemplated herein, except that Monro has
retained, and is solely responsible for, the fees and expenses of Peter J.
Solomon Company Limited and Peter J. Solomon Securities Company Limited as its
financial advisor.
Section 4.6 FINANCING. Monro and Purchaser have obtained a letter dated
April 7, 1998 from The Chase Manhattan Bank ("Lender"), a copy of which has been
delivered to the Sellers (the "Lender's Letter"). Prior to the Closing Date,
Monro and Purchaser will furnish to Sellers copies of financing commitments
promptly following execution thereof. By not later than the Closing, Monro shall
have caused sufficient capital to have been contributed to Purchaser so that,
with such capital and the net proceeds of any financing (if obtained), following
the payment of the Purchase Price and all other necessary payments of fees and
expenses and its other obligations in connection with the transactions
contemplated by this Agreement, Purchaser will be solvent, adequately
capitalized to conduct its business and capable of satisfying its obligations as
they come due.
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1 CONDUCT OF BUSINESS BY SELLERS. From the date hereof until
the Closing Date, Sellers will with respect to the conduct of Business, except
as required in connection with the transactions contemplated by this Agreement
and except as otherwise consented to in writing by Purchaser:
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(a) conduct the Business in the ordinary course on a basis
consistent with past practice and not engage in any new line of
business or enter into any agreement, transaction or activity or make
any commitment with respect to the Business except those in the
ordinary course of business and not otherwise prohibited under this
Section 5.1;
(b) use their commercially reasonable efforts to preserve the
goodwill of the Business in all material respects, keep the officers
and employees of Sellers available to Purchaser (except to the extent
of voluntary terminations of employment or termination for cause) and
preserve the relationships of Sellers with customers, suppliers and
other having business relations with the Business, except for the
termination of relationships in the ordinary course of business;
(c) not create any new subsidiary except to hold Excluded
Assets or Excluded Liabilities, acquire any capital stock or other
equity securities of any corporation or acquire any equity or ownership
interest in any business;
(d) not dispose of or, to the extent practicable, permit to
lapse any rights to the use of any material patent, trademark, trade
name, license or copyright relating to the Assets or the Business,
including, without limitation, any material Intellectual Property, or
dispose of or disclose to any person, any trade secret, formula,
process, technology or know-how material to the Assets or the Business
not heretofore a matter of public knowledge;
(e) not (i) sell any assets other than Excluded Assets, the
property contemplated by the Detroit Contract or inventory heretofore
held for sale and sold in the ordinary course of business, (ii)
contractually incur any liability or obligation (absolute, accrued or
contingent) except in the ordinary course of business consistent with
past practice; (iii) write-off (or establish reserves against
uncollectibility for) any guaranteed checks, notes or accounts
receivable except in the ordinary course of business consistent with
past practice, (iv) writedown the value of any asset or investment
(including, without limitation, any of the Assets) on the books or
records of the Business, except for depreciation and amortization in
the ordinary course of business consistent with past practice, (v)
cancel any debt or waive any claims or rights except in the ordinary
course of business consistent with past practice, (vi) make any
commitment for any capital expenditure relating to the Business, in
excess of $100,000 in the case of any single expenditure or $500,000 in
the case of all capital expenditures, or (vii) establish any new
reserves or increase any reserves already existing on Sellers' books
other than in the ordinary course of business consistent with past
practice based on information of which Sellers first become aware
following the date hereof;
(f) not enter into, modify or extend (i) in any material
respect the terms of any employment, severance or similar agreements
with employees (provided that the Sellers will not make any changes
applicable to employees generally except those required by law or
favorable to the Sellers), (ii) in any manner the terms of any
employment, severance or similar agreements with officers or directors,
nor grant any increase in the compensation of officers, directors or
employees involved in the Business, whether now or hereafter
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payable, including any such increase pursuant to any option, bonus,
stock purchase, pension, profit-sharing, deferred compensation,
retirement or other plan, arrangement, contract or commitment; provided
that Sellers may grant increases to hourly employees on a case by case
which are immaterial in amount or nature;
(g) not transfer or reassign any employee of the Business to a
position with Parent or any Affiliate, and not transfer or reassign any
employee of Parent or any Affiliate to a position with Sellers, without
the prior written consent of Purchaser, which consent may be withheld
in the sole discretion of Purchaser (and no such transfer or
reassignment has occurred since December 15, 1997);
(h) maintain supplies and inventory of the Business in the
ordinary course of business consistent with past practice;
(i) continue to extend customers credit, collect accounts
receivable and pay accounts payable and similar obligations in the
ordinary course of business consistent with past practice;
(j) perform in all material respects all of its obligations
under all, and not default in any material respect or suffer to exist
any event or condition which with notice or lapse of time or both would
constitute a default in any material respect under any, Seller
Contracts, Real Property Leases, Personal Property Leases and Franchise
Agreements and not amend any contract or commitment that is or would be
a Seller Contract, Real Property Lease, Personal Property Lease or
Franchise Agreement;
(k) use commercially reasonable efforts to maintain in full
force and effect and in the same amounts policies of insurance
comparable in amount and scope of coverage to that now maintained with
respect to the Business;
(l) prepare and file all federal, state, local and foreign
returns for taxes and other tax reports, filings and amendments thereto
required to be filed by it with respect to the Business, and allow
Purchaser, at its reasonable request, to review all such returns,
reports, filings and amendments, other than with respect to Excluded
Assets or Excluded Liabilities, at Sellers' offices during normal
business hours upon prior request prior to the filing thereof, which
review shall not interfere with the timely filing of such returns;
(m) continue to maintain and service the Assets used in the
conduct of the Business in all material respects consistent with past
practice;
(n) continue to maintain the books and records of the Business
in accordance with generally accepted accounting principles,
consistently applied (to the extent applicable), and on a basis
consistent with the past practice of the Business;
(o) continue the cash management practices of the Business in
the ordinary course of business consistent with past practice,
including maintenance of an average of not less than $175 in cash per
Company-Owned Shop at the time of Closing;
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(p) continue to fund their obligations, if any, with respect
to the Seller Benefit Plans on a timely basis;
(q) preserve or renew any material Licenses relating to the
Business;
(r) promptly notify Purchaser of any event or occurrence that
has had or may reasonably be expected to have a Material Adverse
Effect; and
(s) comply with all of the requirements of any Environmental
Law affecting the transfer of any property from the Seller to the
Purchaser, including, but not limited to preparing and filing the
necessary documentation in a timely manner.
In connection with the continued operation of the Business between the
date of this Agreement and the Closing Date, Sellers shall advise and confer on
a regular basis with the chief executive officer of Purchaser and his designees
with respect to material matters affecting or impacting the operations of the
Business and will advise and consult in general with respect to the ongoing
operations of the Business, including, without limitation, material matters
regarding litigation (including, without limitation, any proposed settlement
thereof), capital expenditures, credit approvals, environmental matters and
Sellers' general business plans and strategies. Sellers acknowledge that if the
Acquisition is not consummated Monro or Purchaser shall not be responsible for
any decisions made by the officers or directors of Sellers with respect to
matters which are the subject of such consultation.
Section 5.2. INSPECTION AND ACCESS TO INFORMATION. From the date of
this Agreement to the Closing Date or until this Agreement is terminated as
provided in Article 8, Sellers shall (and shall cause their subsidiaries and
officers, directors, employees, auditors and agents to) provide Purchaser and
its accountants, investment bankers, counsel, environmental consultants and
other authorized representatives, as often as may be reasonably requested,
reasonable access (including any reasonable requests for copies), upon prior
notice, during normal business hours and under reasonable circumstances, to any
and all of the premises, employees (including executive officers), properties,
contracts, commitments, books, records and other information relating to the
Business (excluding tax returns filed and those in preparation) and shall cause
their officers to furnish to Purchaser and its authorized representatives,
promptly upon reasonable request therefor, any and all financial, technical and
operating data and other information pertaining to the Business, and otherwise
fully cooperate with Purchaser's conduct of its due diligence. Until the
Closing, all information provided or caused to be provided by Parent and Sellers
pursuant to this Section 5.2 or otherwise disclosed to Purchaser in connection
with the transactions contemplated by this Agreement shall be subject to that
certain Confidentiality Agreement between Parent and Monro dated October, 1997.
Without limiting the generality of the foregoing, Sellers and Parent
shall reasonably cooperate with Purchaser's obtaining the financing required to
consummate the transactions contemplated hereby, including, without limitation,
providing such access and information as Purchaser and its accountants may
reasonably require to audit, at Purchaser's expense, the Financial Statements of
the Business for the year ended January 3, 1998.
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Section 5.3. NO SOLICITATION OF TRANSACTIONS. Neither of the Sellers
nor Parent nor any of their Affiliates shall directly or indirectly, through any
officer, director, agent or otherwise, initiate, solicit or encourage (including
by way of furnishing non-public information or assistance), or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing Transaction
(as hereinafter defined), or enter into discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain a Competing Transaction,
or agree to or endorse any Competing Transaction, or authorize or permit any of
the officers, directors or employees of Sellers, Parent or any of their
Affiliates or any investment banker, financial advisor, attorney, accountant or
other representative retained by such entities to take any such action. Sellers
shall notify Purchaser orally (within one business day) and in writing (as
promptly as practicable) of all relevant terms of any such inquiries and
proposals which Sellers, Parent or any of their Affiliates or any such offer,
director, employee, investment banker, financial advisor, attorney, accountant
or other representative may receive relating to any of such matters, and if such
inquiry or proposal is in writing, Sellers shall deliver to Purchaser a copy of
such inquiry or proposal. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following with regard to or which includes
all or any portion of the Business or the Assets: (a) any merger, consolidation,
share exchange, business combination, stock sale or other similar transaction
involving Sellers or Parent; (b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of any material portion of the Assets or Business
in a single transaction or series of transactions (other than the sale of Assets
contemplated by this Agreement); or (c) any public announcement of a proposal,
plan or intention to do any of the foregoing or any agreement to engage in any
of the foregoing.
Section 5.4. REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION. The
parties hereto shall each use commercially reasonable efforts to perform their
obligations herein and to take, or cause to be taken, or do, or cause to be
done, all things necessary, proper or advisable under applicable law to obtain
all regulatory approvals and satisfy all conditions to the obligations of the
parties under this Agreement and to cause the transactions contemplated herein
to be effected on or prior to the applicable Termination Date pursuant to
Section 8.1(d) in accordance with the terms hereof and shall cooperate fully
with each other and their respective officers, directors, employees, agents,
counsel, accountants and other designees to take with any steps required to be
taken as a part of their respective obligations under this Agreement, including,
without limitation:
(a) Sellers and Purchaser shall promptly make their respective
filings and submissions and shall take all actions necessary, proper or
advisable under applicable laws and regulations to consummate the
transfer or assignment of any material Assets to be transferred in
accordance with the terms of this Agreement, and obtain any required
approval of any foreign, federal, state or local governmental agency or
regulatory body with jurisdiction over the transactions contemplated by
this Agreement. Sellers and Purchaser shall furnish all information
required for any application or other filing to be made pursuant to the
rules and regulations of any applicable law, including, without
limitation, under the HSR Act, in connection with the transactions
contemplated by this Agreement;
(b) Each of the Sellers and Purchaser will use their good
faith commercially reasonable efforts vigorously to contest and resist
any action, including legislative,
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administrative or judicial action and to have vacated, lifted, reversed
or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an "Order") that is in effect and
that restricts, prevents or prohibits the consummation of the
transactions contemplated by this Agreement, including, without
limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal and all available legislative
action. Each of the Sellers and Purchaser also agrees to discuss and
consider in good faith any and all actions, including without
limitation the disposition of assets or the withdrawal from doing
business in particular jurisdictions, required by regulatory
authorities as a condition to the granting of any approvals required in
order to permit the consummation of the transactions contemplated by
this Agreement or as may be required to avoid, lift, vacate or reverse
any legislative or judicial action which would otherwise cause any
condition to Closing not to be satisfied;
(c) (i) Each of the Sellers and Parent shall give any notices
to third parties, and each of the Sellers and Parent shall each use its
commercially reasonable efforts (in consultation with each other) to
obtain any third party consents (A) necessary or proper to consummate
the transactions contemplated in this Agreement, (B) disclosed or
required to be disclosed in the Schedules to this Agreement, (C)
required, as listed on SCHEDULE 3.3(i), to avoid a violation of,
conflict with, breach of, default under or acceleration of any
obligation under any Seller Contracts, Real Property Leases Personal
Property Leases or Franchise Agreements in connection with the
consummation of the transactions contemplated in this Agreement or (D)
required to prevent a Material Adverse Effect from occurring prior to
the Closing Date or a material adverse effect on the Business as
currently conducted after the Closing Date;
(ii) In the event that Sellers shall fail to obtain
any third party consent described in subsection (c)(i) above, Sellers
shall use commercially reasonable efforts both prior to and subsequent
to the Closing Date, and shall take any commercially reasonable actions
reasonably requested by Purchaser, including, without limitation, the
use of commercially reasonable efforts to obtain those consents to
assignment listed on SCHEDULE 3.3(i) which have not yet been obtained
and delivered as of the Closing Date, to minimize any adverse effect
upon the Business as currently conducted resulting, or which could
reasonably be expected to result after the Closing Date, from the
failure to obtain such consent. Subject to the immediately preceding
sentence, such actions shall include, without limitation, if reasonably
requested by Purchaser and if such action would not constitute a
violation of applicable law or a breach of the applicable contract, the
entering into of a management, sublease, license or other agreement
with Purchaser or the granting of a power of attorney by Sellers to
Purchaser to permit Purchaser to act on Sellers' behalf under the
applicable contracts and agreements in order as nearly possible to put
Purchaser in the same economic and operating position as if such
consent had been obtained;
(d) Each party shall give prompt notice to the other of (i)
the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of
Sellers or Purchaser, as the case may be, contained in this Agreement
to be untrue or inaccurate in any material respect at any time from the
date hereof to the Closing Date or that will or may result in the
failure to satisfy any of the
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conditions specified in Article 6 hereof and (ii) any failure of
Sellers or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement in any material respect to be complied
with or satisfied by any of them hereunder; and
(e) Without the prior written consent of Purchaser, Sellers
will not terminate any employee of the Business except for cause if
such termination would result in the payment of any amounts pursuant to
"change in control" provisions of any employment agreement or
arrangement.
(f) Sellers shall use their commercially reasonable efforts to
obtain and deliver estoppels from landlords under all Real Property
Leases and, to the extent reasonably requested by Buyer,
non-disturbance agreements from prime landlords where a Real Property
Lease is a sublease and from the lender to the owner of any property
which is the subject of a Real Property Lease, in each case, in a form
reasonably satisfactory to Purchaser.
Section 5.5. PUBLIC ANNOUNCEMENTS. The timing and content of all
announcements regarding any aspect of this Agreement or the transactions
contemplated hereby to the financial community, government agencies, employees
or the general public shall be mutually agreed upon in advance by Parent and
Monro, unless Parent or Monro are advised by counsel that any such announcement
or other disclosure not mutually agreed upon in advance is required to be made
by law or applicable stock exchange rule and then only after making a reasonable
attempt to comply with the provisions of this Section.
Section 5.6. SUPPLEMENTS TO SCHEDULES. From time to time up to the
Closing Date, Sellers will promptly supplement or amend the Schedules which it
has delivered pursuant to this Agreement with respect to any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in such Schedules or which is
necessary to correct any information in such Schedules which has been rendered
inaccurate thereby. No supplement or amendment to any Schedule the substance of
which, taken together with all other supplements and amendments, discloses
matters which would reasonably be expected to have a Material Adverse Effect
prior to the Closing or a Material Adverse Effect on the Business as currently
conducted after the Closing shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Section 6.2 or 6.3 of this Agreement
unless such supplement or amendment is accepted by Purchaser in writing in its
sole discretion; PROVIDED, HOWEVER, that if the Closing occurs, all Schedules
hereto shall be deemed amended to reflect any supplements or amendments
delivered to Purchaser pursuant to this Section 5.6.
Section 5.7. OFFER OF EMPLOYMENT. Purchaser shall offer employment as
of the Closing Date to each of the employees of the Business listed on Schedule
3.14, and those shop employees hired in the ordinary course of business through
the Closing Date. Employees that are offered and accept employment with the
Purchaser shall be referred to as "Transferred Employees." All Transferred
Employees shall be eligible from and after the Closing Date to participate
fully, to the extent they participate in Sellers' group health plan immediately
prior to the Closing Date, in all comparable group health plans of Purchaser,
subject to pre-existing condition limitations of Purchaser's group health plans.
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Section 5.8. EMPLOYEE BENEFIT PLANS. Sellers shall cause employees of
the Business who are participants in the Speedy Car-X Retirement Savings Plan
(the "Seller Plan") to be fully vested as of the Closing Date. As of the Closing
Date, Seller Plan shall be liable for payment of such account balances in
accordance with the terms of Seller Plan.
Section 5.9. TRANSFER TAXES. Purchaser and Sellers shall cooperate in
the preparation, execution, filing and audit of all returns, questionnaires,
applications, or other documents with respect to any transfer or gains, sales,
use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes (including any
interest and penalties) (collectively, "Transfer Taxes") which are imposed as a
result of the transactions contemplated hereby. Purchaser and Sellers shall each
pay 50% of any and all Transfer Taxes that may be imposed with respect to the
transactions contemplated by this Agreement regardless of the identity of the
party having liability for any such Taxes under applicable law.
Section 5.10. FINANCIAL STATEMENTS. Prior to the Closing, Sellers shall
deliver to Purchaser within 15 business days following the end of each month,
(i) a regularly prepared statement of operating income of the Business for such
month which statement shall have been prepared (A) from and shall be in
accordance with the books and records of Sellers and shall fairly present in all
material respects the results of operations for the periods set forth therein
and (B) in accordance with GAAP applied during the periods involved (subject to
lack of footnotes and normal year-end audit adjustments and the exceptions to
GAAP disclosed in SCHEDULE 5.10), (ii) a certificate of the chief financial
officer of each Seller certifying that such financial statements delivered
pursuant to clause (i) have been prepared in accordance with the requirements of
this Section 5.10, and (iii) a report as to the monthly sales by Shop with
comparable sales data by Shop for the same month in the prior year.
Section 5.11. ENVIRONMENTAL INFORMATION AND DOCUMENTATION.
(a) Prior to Closing, Sellers shall comply with all
Environmental Laws governing the transfer of the Assets from Sellers to
Purchaser and provide Purchaser all necessary documentation
demonstrating satisfactory compliance with those Environmental Laws.
(b) Prior to the Closing, Sellers shall provide to Purchaser
all of the information and documentation more fully set forth on
SCHEDULE 5.11. In the event Sellers are unable to provide Purchaser
information and documentation set forth on SCHEDULE 5.11 prior to
Closing, Sellers shall demonstrate to Purchaser's reasonable
satisfaction that Sellers have used their best efforts to obtain such
information and documentation.
Section 5.12. ACCESS TO BOOKS AND RECORDS. Following the Closing,
Purchaser shall provide Sellers with reasonable access to all books and records
and provide Sellers with such cooperation, assistance and access to personnel as
Sellers may reasonably request with respect to the tax basis of the Assets and
the filing of all transfer tax returns during normal business hours upon prior
notice, provided that such access shall be subject to the execution of a
mutually agreeable confidentiality agreement (which agreement shall not be
unreasonably withheld).
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Section 5.13. NONSOLICITATION. Sellers and Parent hereby agree that
neither of the Sellers, nor any of their respective Affiliates shall, during the
period ending two years after the date hereof, in any manner, directly or by
assisting others, employ or attempt to employ, on their behalf or on behalf of
any other person, firm or corporation, any employee of the Business who is
offered employment by Purchaser except, in the case of shop-level employees,
where the employment of such employee with the Business has been terminated.
Section 5.14. Restrictions on Competitive Activities.
(a) In consideration of the transactions contemplated
hereunder and other valuable consideration, including the payment
referred to in Section 2.2, Sellers, Speedy U.S.A. and Parent agree
that, for a period expiring ten years from the Closing Date, none of
Sellers, Parent or any of their Affiliates will (i) engage, either
directly or indirectly, as a principal or for its own account or solely
or jointly with others, or as stockholder or equity owner in any
corporation or other entity, in any business that markets or offers
services or products relating to the repair and replacement of
automotive parts or servicing of automobiles and other vehicles,
including, without limitation, under the "Car-X" name, in the markets
listed on Schedule 5.14(a)(i); PROVIDED, HOWEVER, that nothing in this
Section 5.14(a) shall prohibit (A) the granting of a Car-X franchise in
the markets listed on SCHEDULE 5.14(a)(i), and the operation, sale or
transfer thereof by the franchisee (except to Sellers or their
Affiliates), (B) the operations by Seller of any leased shop listed on
SCHEDULE 6.1(c)(i) as to which consent to assignment has not been
obtained within 90 days following closing and, accordingly, as to which
the Store Management Agreement (referred to in Section 6.2(n)) has
terminated and the amount escrowed in respect thereof pursuant to
Section 6.2(m) has been returned to Purchaser or (C) the ownership of
shares of capital stock representing less than 5.0% of the outstanding
shares of any class of equity securities listed on a national
securities exchange or quoted on NASDAQ National Market System; (ii) in
any way use the name "Speedy" or any derivative thereof in the United
States of America, except to the extent necessary for Parent to comply
with statutory or regulatory requirements or to the extent specifically
permitted in Section 5.19 hereof; provided that such exception shall
not permit the operation of any business by the Sellers or their
Affiliates in the United States which is not otherwise permitted by
this Section 5.14, or (iii) in any way use any proprietary information
of Purchaser or Monro.
(b) If any provision contained in this Section 5.14 shall for
any reason be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any
other provision of this Section 5.14, but this Section 5.14 shall be
construed as if such invalid, illegal or unenforceable provision had
never been contained herein. It is the intention of the parties that if
any of the restrictions or covenants contained herein is held to cover
a geographic area or to be for a length of time which is not permitted
by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void
and of no effect, but to the extent such provision would be valid or
enforceable under applicable law, a court of competent jurisdiction
shall construe and interpret or reform this Section 5.14 to provide for
a covenant having the maximum enforceable geographic area, time period
and other provisions (not greater than those contained herein) as shall
be valid and enforceable under
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such applicable law. Parent and Sellers acknowledge that Purchaser and
Monro would be irreparably harmed by any breach of this Section 5.14
and that there would be no adequate remedy at law or in damages to
compensate Purchaser and Monro for any such breach and that, in
addition to any relief at law which may be available to Purchaser for
such violation or breach or regardless of any other provision in this
Agreement, Purchaser shall be entitled to injunctive and other
equitable relief as the court may grant after considering the intent of
this Section 5.14.
Section 5.15. TITLE INSURANCE. Purchaser shall use its commercially
reasonable efforts to obtain (within 45 days of the date hereof) title insurance
commitments, issued by a title insurance company or companies reasonably
satisfactory to Purchaser, agreeing to issue to Purchaser standard form owner's
(or lessee's, as the case may be) policies of title insurance with respect to
all Real Property and Leased Real Property, together with a copy of each
document to which reference is made in such commitments. In the case of Real
Property, such policies shall be standard ALTA 1992 Form B owner's policies in
the full amount of that portion of the Purchase Price reasonably allocated
respectively to each subject parcel of Real Property, insuring good and
marketable title thereto (expressly including any and all easements and other
appurtenances). In the case of Leased Property, such policies shall be standard
ALTA Form 1992 leasehold owner's policies and in such amounts as shall be
reasonably acceptable to Purchaser. If the ALTA 1992 Form B owner's policy or
ALTA form 1992 leasehold policy is not available for issue in the jurisdiction
where a parcel of Real Property or Leased property is located, Purchaser may
substitute the then current form of owner's or leasehold owner's policy then in
use in that jurisdiction. Purchaser shall, within 12 business days after receipt
of any of such title insurance commitments, deliver a copy thereof to the
Sellers, together with written notice of any exceptions to title and matters
relating to title other than Permitted Exceptions ("Unpermitted Exceptions"),
and the Sellers shall deal with such Unpermitted Exceptions as provided in
Section 5.17 hereof. Such notice from Purchaser shall also specify special
endorsements which Purchaser may reasonably request with respect to any such
parcel of Real Property or Leased Real Property (including, but not limited to,
an endorsement deleting the standard creditor's rights exclusion, if requested
by Purchaser or Purchaser's lender). The cost of such title insurance shall be
shared equally by Purchaser and Sellers; provided that Sellers shall bear the
cost of any of the corrective actions required under Section 5.17. Purchaser
shall notify Sellers of the estimated cost of such title insurance and allow
Sellers the opportunity to comment thereon, within 2 business days of receipt of
such estimate, prior to entering into any binding commitment to obtain such
title insurance.
Section 5.16. SURVEYS. Prior to the Closing, Purchaser, at its option,
may obtain surveys of all Real Property and all Leased Real Property prepared in
accordance with ALTA/ASCM Standards, and each detailing the legal description,
the perimeter boundaries, all improvements located thereon, all easements and
encroachments affecting each such parcel of Real Property and such other matters
as may be reasonably requested by Purchaser or the title insurance companies and
customary for transactions or properties of this type, each prepared by a
registered land surveyor to Purchaser. The cost of such surveys shall be shall
be shared equally by Purchaser and Sellers. Purchaser shall notify Sellers of
the estimated cost of such surveys and allow Sellers the opportunity to comment
thereon, within 2 business days of receipt of such estimate, prior to entering
into any binding commitment to obtain such surveys.
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Section 5.17. CORRECTION OF TITLE MATTERS. Sellers shall use
commercially reasonable efforts to have such Unpermitted Exceptions cleared and
removed from the respective title commitment or to have the title insurer commit
to Purchaser's reasonable satisfaction to insure against loss or damage that may
be occasioned by such Unpermitted Exceptions. Sellers shall be obligated to
remove mortgages, deeds of trust or other liens or encumbrances of a definite
and ascertainable amount, which the parties agree may be removed by the use of
the proceeds of sale at the Closing; provided, that with respect to any such
lien or encumbrance that Sellers are contesting or wish to contest, Sellers may
deposit in escrow with the title insurer funds sufficient in amount to cause
such liens or encumbrances to be insured over by the title insurer.
Section 5.18. COLLECTION OF RECEIVABLES. Following the Closing, in the
event that an account debtor under accounts receivable relating to the Business
and arising both before and after the Closing Date tenders payment to either
Sellers or Purchaser without identifying the specific receivable to which such
payment relates, such payment shall be applied to the outstanding receivables in
the order of creation, and Purchaser shall reasonably cooperate with Sellers,
but without expense or loss to Purchaser, in Sellers' collection of such
receivables from such account debtors. Sellers and Purchaser shall promptly
deliver to the other any payments received from account debtors following the
Closing Date which are properly payable to the other under the terms of this
Agreement.
Section 5.19. CLOSED SHOPS. In the event that, during the 90-day period
following the Closing, Sellers fail to obtain consent to assignment to Purchaser
of any Real Property Lease listed on Schedule 6.1(c)(i) as contemplated by
Section 6.1(c), the related shop shall revert to Sellers and the escrowed
allocated value shall revert to Purchaser, as provided in the Real Escrow
Agreement referred to in Section 6.2(m), and the Store Management Agreement
referred to in Section 6.2(n) shall terminate. Upon such termination, Sellers
shall operate such Shops, at Sellers' option, (i) under a name other than
"Speedy" or (ii) as a franchise of Purchaser pursuant the standard form Speedy
franchise agreement in the United States in use as of the date hereof, provided
that no royalties or other franchise fees shall be paid by Purchaser in
connection with any such franchise arrangement. Sellers, however, shall pay,
with respect to any Shops operated as franchises, a proportionate share (based
on each such Shop's gross sales relative to the other shops of the Purchaser in
the market area) of the cost of the formulation, development, production, media
and all other cost of any advertising and promotion prepared for and conducted
in or benefiting each such Shop's market area, and Sellers may terminate any
such franchise arrangements at any time without penalty; provided that upon
termination of such franchise arrangement, Sellers may not operate such shops
under the "Speedy" name or any derivation thereof. If Sellers notify Purchaser
during such 90-day period that they are closing such Shop, at Sellers' option
Sellers may elect to sell to Purchaser, and Purchaser shall purchase from
Sellers, at a closing within 15 days of such notice for an amount equal to the
net book value thereof on such closing date, the inventory (other than
Non-Returnable Inventory), removable equipment and removable fixtures at such
Shop
Section 5.20. REVIEW OF OFFERING MEMORANDUM. At Seller's option, prior
to the time of any offering of securities to be issued by Purchaser or Monro in
connection with the financing contemplated by Section 6.2(i), Sellers and their
representatives shall have the opportunity to
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review and comment on a prompt basis on drafts of any offering memorandum and
other offering documents to be used by Purchaser or Monro in connection with
such offering.
Section 5.21 RETURN OF BRAKE CORES. Purchaser shall cooperate with
Sellers in returning for Sellers' credit to one or more brake suppliers promptly
following the Closing the Brake Cores located on the Closing Date at the
Company-Owned Stores; provided that the Sellers shall use their reasonable best
efforts to return any Brake Cores located on the Company-Owned Stores to such
suppliers prior to the Closing Date.
ARTICLE 6.
CONDITIONS
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the fulfillment at or prior to the Closing of each of the
following conditions:
(a) INJUNCTION. As of the Closing, there shall be no effective
injunction, writ or preliminary restraining order or any order of any
nature issued by a court or governmental or regulatory agency of
competent jurisdiction to the effect that the purchase and sale of the
Business and the Assets may not be consummated as herein provided, no
proceeding or lawsuit shall have been commenced by any court,
governmental or regulatory agency for the purpose of obtaining any such
injunction, writ or preliminary restraining order and no written notice
shall have been received from any such court or agency indicating an
intent to restrain, prevent, materially delay or restructure the
transactions contemplated by this Agreement.
(b) CONSENTS. All consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any
governmental agency or public or regulatory unit, agency, body or
authority required in connection with the execution, delivery or
performance of this Agreement shall have been obtained or made, except
where the failure to have obtained or made any such consent, approval,
order, authorization, declaration or filing would not have a Material
Adverse Effect prior to the Closing or a Material Adverse Effect on the
Business as currently conducted after the Closing.
(c) REAL PROPERTY CONSENTS. Sellers shall have obtained and
delivered to Purchaser on or prior to the Closing Date consents to the
assignment to Purchaser of Real Property Leases listed on SCHEDULE
6.1(c)(i) and SCHEDULE 6.1(c)(ii), other than Real Property Leases
relating to properties having an aggregate allocated value of not more
than $2,000,000, based on the values allocated to each such property as
reflected on Schedule 6.1(c)(ii), in a form satisfactory to Purchaser.
(d) TITLE INSURANCE. Purchaser shall have obtained good and
valid title insurance policies or, in final form, irrevocable title
insurance binders, dated as of the Closing Date, conforming to the
specifications set forth in Section 5.15, with respect to all Real
Property and Leased Real Property, other than Unpermitted Exceptions
having a cost
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to cure of $500,000 or less, provided that if a title policy with
respect to a parcel of Real Property or Leased Real Property is unable
to be issued, the allocated value of such property shall be used in
lieu of the cost to cure.
Section 6.2. CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing of each of the following
additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sellers set forth in Article 3 of this Agreement shall be
true and correct as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (except for those
representations or warranties made as of a specific date which shall be
true and correct as of such date), except where the breaches of such
representations and warranties, in the aggregate, would not have a
Material Adverse Effect prior to the Closing or a Material Adverse
Effect on the Business as currently conducted after the Closing.
(b) PERFORMANCE OF OBLIGATIONS OF SELLERS AND PARENT. Sellers
and Parent shall have performed in all material respects all covenants
and agreements required to be performed by them under this Agreement on
or prior to the Closing Date.
(c) No Material Adverse Change. Between the date of this
Agreement and the Closing, there shall not have been (nor shall
Purchaser have become aware of) any material adverse change, or any
extraordinary event which could reasonably be expected to result in a
material adverse change (which shall not include any adverse change in
general economic, business or industry conditions), in or affecting the
assets, liabilities, results or operations, financial condition or
business of the Business.
(d) CERTIFICATE. Parent shall have delivered to Purchaser a
certificate of its chief executive and chief financial officers as to
compliance with the conditions set forth in Sections 6.2(a), (b) and
(c).
(e) OPINION OF SELLERS' COUNSEL. Purchaser and, at Purchaser's
request, any person providing financing to Purchaser in connection with
the Acquisition, shall have received an opinion of Foley & Lardner
dated the Closing Date, in the form attached hereto as EXHIBITS F.
(f) MATERIAL CONTRACTS. Purchaser shall have received written
consents to the assignment of the Seller Contracts or written waivers
of the provisions of the Seller Contracts requiring the consents of
third parties as set forth in SCHEDULE 6.2(f).
(g) BILL OF SALE. Sellers shall have executed and delivered to
Purchaser the Bill of Sale, Assignment and Assumption Agreement in the
form attached hereto as EXHIBIT D and, if requested by Purchaser,
separate leasehold and other assignments.
(h) DEEDS. Sellers shall have executed and delivered to
Purchaser deeds in the form required by Section 3.5(a).
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(i) FINANCING. Purchaser shall have obtained all financing
required to pay the Purchase Price and to make all other necessary
payments of fees and expenses in connection with the transactions
contemplated by this Agreement and the Purchaser Ancillary Documents.
Purchaser shall have received the Financial Statements as at January 3,
1998 and for the year then ended audited by Price Waterhouse LLP as
contemplated by the last sentence of Section 5.2.
(j) TRANSFER OF SPEEDY NAME. Sellers shall have caused the
exclusive right, title and interest in the use of the name "Speedy
Muffler King" and all variants thereof in the United States to have
been duly and validly transferred to Purchaser.
(k) TRANSITION SERVICES AGREEMENT. Sellers and Parent shall
have executed and delivered to Purchaser a Transition Services
Agreement embodying the terms described on Exhibit G.
(l) FINANCIAL CONDITIONS. For the fiscal period from January
4, 1998 to the earlier of May 30, 1998 and the Closing Date, the
aggregate sales from the "Speedy" shops open for at least a 53 week
period as of the Closing Date ("Comparable Shops") shall be no less
than 90% of the aggregate sales from the Comparable Shops for the
fiscal period from December 29, 1996 to May 24, 1997; and, if the
Closing has not occurred by May 31, 1998, for the period from May 31,
1998 to the Closing Date, the aggregate sales of the Comparable Shops
shall be no less than 85% of the aggregate sales from the Comparable
Shops during the comparable period in 1997.
(m) REAL ESTATE ESCROW. Sellers shall have executed and
delivered to Purchaser a Real Estate Escrow Agreement in the form
attached hereto as Exhibit H funded by Purchaser in an amount equal to
the aggregate allocated value of the properties listed on Schedule
6.1(c)(i) as to which consents have not been obtained by Closing (the
"Real Estate Escrow Amount").
(n) STORE MANAGEMENT AGREEMENT. Sellers shall have executed
and delivered to Purchaser a Store Management Agreement, in mutually
agreeable form, with respect to the properties listed on Schedule
6.1(c)(i) and 6.2(c)(ii) as to which consents have not been obtained by
Closing, providing for the management of such stores by, at the expense
of, and for the account of, Purchaser, during the 90-day period
following the Closing Date.
Section 6.3. CONDITIONS TO OBLIGATIONS OF SELLERS. The obligations of
Sellers and Parent to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment at or prior to the Closing of each of the
following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser and Monro set forth in Article 4 of this
Agreement shall be true and correct as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date
(except for those representations or warranties made as of a specific
date which shall be true and correct as of such date), except where the
breaches of such
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representations and warranties, in the aggregate, would not have a
material adverse effect on the Purchaser or Monro or on their ability
to perform their obligations hereunder.
(b) PERFORMANCE OF OBLIGATIONS BY PURCHASER AND MONRO.
Purchaser and Monro shall have performed in all material respects all
covenants and agreements required to be performed by them under this
Agreement on or prior to the Closing Date.
(c) CERTIFICATE. Monro shall have delivered to Sellers a
certificate of its chief executive and chief financial officers as to
compliance with the conditions set forth in Sections 6.3(a) and (b).
(d) OPINIONS OF PURCHASER COUNSEL. Sellers shall have received
the opinion of Schulte Roth & Zabel LLP dated the Closing Date, to the
effect set forth on EXHIBIT E.
(e) BILL OF SALE. Purchasers shall have executed and delivered
to Sellers the Bill of Sale, Assignment and Assumption Agreement in the
form attached hereto as EXHIBIT D.
(f) REAL ESTATE ESCROW. Purchaser shall have executed and
delivered to Seller the Real Estate Escrow Agreement and funded the
same as contemplated in Section 6.2(m).
(g) STORE MANAGEMENT AGREEMENT. Purchaser shall have executed
and delivered to Sellers a Store Management Agreement, in mutually
agreeable form, with respect to the properties listed on Schedule
6.1(c)(i) and 6.1(c)(ii) as to which consents have not been obtained by
Closing, providing for the management of such stores by, at the expense
of, and for the account of, Purchaser, during the 90-day period
following the Closing Date.
ARTICLE 7.
CLOSING
Section 7.1. CLOSING. The consummation of the transactions contemplated
by this Agreement are herein referred to as the "Closing." The "Closing Date"
shall be the date on which the Closing occurs. The Closing shall occur at 10:00
a.m. on a date mutually agreeable to Parent and Monro not later than the fifth
business day following satisfaction or waiver of each of the closing conditions
specified in Article 6 hereof. The Closing shall take place at the offices of
Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York, or at such other
place as Parent and Monro shall agree.
Section 7.2. ITEMS TO BE DELIVERED AT CLOSING. At the Closing and
subject to the terms and conditions herein contained:
(a) Sellers shall deliver to Purchaser (i) such bills of sale,
assignments, endorsements, certificates of title, special or limited
warranty deeds with respect to the Real Property, and other good and
sufficient instruments and documents of conveyance
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and transfer (including, without limitation, the Bill of Sale and
Assignment), in form reasonably satisfactory to Purchaser and its
counsel, as shall be necessary and effective to transfer and assign to,
and vest in Purchaser all of Sellers' right, title and interest in and
to the Assets, including, without limitation, (A) good and valid title
in and to all of the Assets (including, without limitation, the Real
Property and motor vehicles) owned by Seller on the Closing Date, (B)
good and valid leasehold interests in and to all of the Assets leased
by Sellers as lessee on the Closing Date and (C) all of Sellers' rights
under all agreements, contracts, commitments, leases, instruments and
other documents included in the Assets to which Sellers are a party or
by which they have rights on the Closing Date, and simultaneously with
such delivery, all such reasonable steps will be taken as may be
required to place Purchaser in actual possession and operating control
of the Assets and (ii) certificates satisfying the requirements of
Section 1445 of the Code and Section 1.1445-2(b) of the Treasury
Regulations thereunder (certifying as to the non-foreign status of the
Sellers); and
(b) Purchaser shall deliver to Sellers the following:
(i) the Purchase Price deliverable pursuant to
Section 2.1 hereof; and
(ii) the Assumption Agreement.
(c) The parties hereto also shall deliver to each other the
documents and instruments referred to in Article 6 hereof and such
other documents and instruments as Sellers and Purchaser (or their
respective counsel) shall reasonably request.
Section 7.3. FURTHER ASSURANCES. Sellers and Parent from time to time
shall, at or after the Closing, at Purchaser's request, execute, acknowledge and
deliver to Purchaser such other instruments of conveyance and transfer and will
take such other actions and execute and deliver such other documents,
certifications and further assurances as Purchaser may reasonably request in
order to vest more effectively in Purchaser, or to put Purchaser more fully in
possession of, any of the Assets (including, without limitation, the Real
Property), or to better enable Purchaser to complete, perform or discharge any
of the Assumed Liabilities. Each of the parties hereto will cooperate with the
other and execute and deliver to the other such other instruments and documents
and take such other actions as may be reasonably requested from time to time by
any party hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
ARTICLE 8.
TERMINATION
Section 8.1. TERMINATION. This Agreement may be terminated at any time
at or prior to the Closing (the "Termination Date"):
(a) in writing by mutual consent of Parent and Monro;
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(b) by notice from Parent to Monro if one or more of the
conditions set forth in Sections 6.1 and 6.3 hereof shall become
impossible of fulfillment;
(c) by notice from Monro to Parent if one or more of the
conditions set forth in Sections 6.1 and 6.2 hereof shall become
impossible of fulfillment; or
(d) by notice from either Monro or Parent to the other if the
Acquisition shall not have been consummated on or before (i) July 13,
1998, if the Sellers have caused the condition set forth in Section
6.1(c) to be satisfied on or before June 22, 1998, and otherwise (ii)
20 days after the Sellers have caused the condition set forth in
Section 6.1(c) to be satisfied, but in no event later than August 11,
1998 (unless in any case the failure to consummate the Acquisition by
such date shall be due to the action or failure to act of the party or
its Affiliate seeking to terminate this Agreement, including, without
limitation, any breach of its obligations under Section 5.4).
Section 8.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to this Article 8, this Agreement shall forthwith become void
and there shall be no liability on the part of any party or its respective
officers, directors or stockholders, except for obligations under Section 5.5,
Article 10 (other than Sections 10.11 and 10.14) and this Section, all of which
shall survive the Termination Date; provided, however, that if (i) Purchaser
fails to consummate the transactions contemplated hereby by the date set forth
in Section 8.1(d) by reason solely of a failure of the condition set forth in
the first sentence of Section 6.2(i), where each of the other conditions to its
obligation to close set forth in Sections 6.1 and 6.2 have been satisfied, or
(ii) Monro terminates the Agreement pursuant to Section 8.1(c) on the basis that
the condition in the first sentence of Section 6.2(i) will not be fulfilled
other than by reason of Sellers' being in breach of this Agreement, then
Purchaser shall pay to Sellers as liquidated damages for Sellers' costs and lost
opportunity damages and not as a penalty, the sum of $1,000,000 by wire transfer
of immediately available funds to an account designated by Sellers, such payment
to be Sellers' exclusive remedy for such failure and to be made within three (3)
days of such event. Notwithstanding the foregoing, nothing contained herein
shall relieve any party from liability for any breach of this Agreement.
ARTICLE 9.
INDEMNIFICATION
Section 9.1. INDEMNIFICATION OBLIGATIONS OF SELLERS. Subject to the
provisions of Sections 9.3, 9.4 and 9.5, Sellers, Speedy U.S.A. and Parent,
jointly and severally shall indemnify, defend and hold harmless Purchaser, Monro
and their subsidiaries and Affiliates, each of their respective officers,
directors, employees, agents and representatives and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Purchaser Indemnified Parties") from, against and in respect of any and all
claims, liabilities, Environmental Liabilities, obligations, losses, costs,
expenses, penalties, fines and other judgments (at equity or at law) and damages
whenever arising or incurred (including, without limitation, amounts paid in
settlement in accordance with Section 9.3, costs of investigation and reasonable
attorneys' fees and expenses) (collectively, "Losses") arising out of or
relating to:
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(a) any Excluded Asset or Excluded Liability;
(b) all or any portion of any Assumed Liability (other than
(i) liabilities arising after the Closing Date under Real Property
Leases and Assumed Contracts and (ii) Environmental Liability) that is
not included as a liability on the Statement of Net Assets;
(c) all or any portion of any Assumed Liability of a nature
reflected on the Statement of Net Assets that is in excess of the
amount of such Assumed Liability included as a liability on the
Statement of Net Assets;
(d) any breach or inaccuracy of any representation or warranty
made by Sellers in this Agreement or in any Seller Ancillary Document
(except for any breach or inaccuracy of any representation or warranty
under Section 3.18, which shall be governed by Section 9.1(k));
(e) any breach of any covenant, agreement or undertaking made
by Sellers in this Agreement or in any Seller Ancillary Document;
(f) except for any matters related to Excluded Assets or
Excluded Liabilities (which shall be governed by Section 9.1(a)), (i)
any Releases or threatened Releases of Hazardous Materials at or from
the property owned or operated, or formerly owned or operated, by the
Sellers or a predecessor in interest to the extent such Releases or
threatened Releases result from conditions in existence on or prior to
the Closing Date; (ii) any violations of Environmental Laws in
existence at, or prior to, the Closing Date; (iii) any Environmental
Claims related to conditions in existence at or prior to the Closing
Date; and (iv) any personal injury (including wrongful death) or
property damage (real or personal) arising out of exposure to Hazardous
Materials used, handled, generated, transported, or disposed by the
Sellers or a predecessor in interest;
(g) any fraud by Sellers or any of their Affiliates in
connection with the transactions contemplated hereby;
(h) any failure or inability of Sellers to obtain consents to
the assignment of the Seller Contracts listed on SCHEDULE 3.3(i);
(i) any breach or inaccuracy of the representation of Sellers
in Section 3.3(b) as to Real Property Leases or any claim by a landlord
that its consent to assignment of any real property lease was required
and was not obtained;
(j) the costs or expenses of obtaining consents to the
assignment of any Real Property Leases;
(k) any breach or inaccuracy of the representation or warranty
made by Sellers in Section 3.18 in this Agreement; or
(l) any failure to Sellers to have completed any of the
matters referred to in Schedule 1.4(b) and Section 5.11(a) by the
Closing Date.
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The Losses of the Purchaser Indemnified Parties described in this Section 9.1 as
to which the Purchaser Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Purchaser Losses"; PROVIDED, HOWEVER,
that Purchaser shall not be entitled to indemnification for any type of Loss to
the extent that there is a reserve for such type of Loss on the Statement of Net
Assets, in which case Purchaser Losses shall only include the Losses of that
type in excess of such reserve.
Section 9.2. INDEMNIFICATION OBLIGATIONS OF PURCHASER. Subject to the
provisions of Sections 9.3, 9.4 and 9.5, Purchaser and Monro, jointly and
severally shall indemnify and hold harmless Sellers, Parent and their
subsidiaries and affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Seller
Indemnified Parties") from, against and in respect of any and all Losses arising
out of or relating to:
(a) any of the Assumed Liabilities, except to the extent such
Assumed Liabilities constitute Purchaser Losses pursuant to Section
9.1(b) or 9.1(c);
(b) any breach or inaccuracy of any representation or warranty
in this Agreement or in any Purchaser Ancillary Document;
(c) any breach of any covenant, agreement or undertaking made
by Purchaser or Monro in this Agreement or in any Purchaser Ancillary
Document;
(d) Purchaser's failure to (i) offer employment to those
employees of the Business to whom it has agreed to offer employment as
of the Closing Date in accordance with Section 5.7 hereto or (ii) make
available the health plan benefits required by this Agreement;
(e) the conduct of the Business after the Closing Date, except
to the extent that any Loss of the Seller Indemnified Parties arising
therefrom (i) is an Excluded Liability or (ii) results directly from
facts or circumstances for which the Purchaser Indemnified Parties are
entitled to indemnification from Sellers under Section 9.1; and
(f) any third-party claims against Seller Indemnified Parties
arising out of any securities offering by Monro or Purchaser undertaken
in connection with the financing contemplated by Section 6.2(i);
provided, however, that this shall not include any claims by Sellers or
their Affiliates hereunder or otherwise based on a failure or a delay
in the financing contemplated in Section 6.2(i).
The Losses of the Seller Indemnified Parties described in this Section 9.2 as to
which the Seller Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Seller Losses."
Section 9.3. INDEMNIFICATION PROCEDURE.
(a) Promptly after receipt by a Purchaser Indemnified Party or
a Seller Indemnified Party (hereinafter collectively referred to as an
"Indemnified Party") of notice
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by a third party of any complaint or the commencement of any action or
proceeding with respect to which such Indemnified Party may be entitled
to receive payment from the other party for any Purchaser Losses or
Seller Losses (as the case may be), such Indemnified Party shall notify
Purchaser or Sellers within 30 days, whoever is the appropriate
indemnifying party hereunder (the "Indemnifying Party"), of such
complaint or of the commencement of such action or proceeding;
PROVIDED, HOWEVER, that the failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party from liability for such claim
arising otherwise than under this Agreement and such failure to so
notify the Indemnifying Party shall relieve the Indemnifying Party from
liability under this Agreement with respect to such claim only if, and
only to the extent that, such failure to notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of rights and
defenses otherwise available to the Indemnifying Party with respect to
such claim. The Indemnifying Party shall have the right, upon written
notice delivered to the Indemnified Party within 20 days thereafter, to
assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the Indemnified Party
and the payment of the fees and disbursements of such counsel. In the
event, however, that the Indemnifying Party declines or fails to assume
the defense of the action or proceeding within such 20-day period, then
such Indemnified Party may employ counsel to represent or defend it in
any such action or proceeding and the Indemnifying Party shall pay the
reasonable fees and disbursements of such counsel as incurred;
PROVIDED, HOWEVER, that the Indemnifying Party shall not be required to
pay the fees and disbursements of more than one counsel for all
Indemnified Parties in any jurisdiction in any single action or
proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such
action, shall have the right to participate in such litigation and to
retain its own counsel at such party's own expense. The Indemnifying
Party or the Indemnified Party, as the case may be, shall at all times
use reasonable efforts to keep the Indemnifying Party or the
Indemnified Party, as the case may be, reasonably apprised of the
status of the defense of any action the defense of which they are
maintaining and to cooperate in good faith with each other with respect
to the defense of any such action.
(b) If the Indemnifying Party assumes the defense of a claim
pursuant to Section 9.3(a), no Indemnified Party may settle or
compromise such claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder without the
prior written consent of the Indemnifying Party, unless such
settlement, compromise or consent includes an unconditional release of
the Indemnifying Party from all liability arising out of such claim at
no cost to the Indemnifying Party. An Indemnifying Party may not,
without the prior written consent of the Indemnified Party, settle or
compromise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of
the Indemnified Party from all liability arising out of such claim and
does not contain any equitable order, judgment or term which in any
manner affects, restrains or interferes with the business of the
Indemnified Party or any of the Indemnified Party's respective
Affiliates.
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(c) In the event an Indemnified Party shall claim a right to
payment pursuant to this Agreement, such Indemnified Party shall send
written notice of such claim to the appropriate Indemnifying Party.
Such notice shall specify in reasonable detail the basis for such
claim. As promptly as possible after the Indemnified Party has given
such notice, such Indemnified Party and the appropriate Indemnifying
Party shall establish the merits and amount of such claim (by mutual
agreement, litigation, arbitration or otherwise) and, within five
business days of the agreement or the final judgment (with respect to
litigation and arbitration not subject to further appeal) of the merits
and amount of such claim, the Indemnifying Party shall pay to the
Indemnified Party immediately available funds in an amount equal to
such claim as determined hereunder.
Section 9.4. CLAIMS PERIOD. For purposes of this Agreement, a "Claims
Period" shall be the period after the earlier of the Closing Date or the date of
any termination of this Agreement pursuant to Article 8 during which a claim for
indemnification may be asserted under this Agreement by an Indemnified Party.
The Claims Periods under this Agreement shall terminate as follows:
(a) with respect to Purchaser Losses arising under Section
9.1(d) with respect to any breach or inaccuracy of any representation
or warranty in Section 3.2, the third sentence of Section 3.5(a), the
third sentence of Section 3.5(d), Sections 3.20 and 3.21 (collectively,
the "Seller Surviving Representations") or under Sections 9.1(a),
9.1(e) (as to the covenants in Section 5.13 and 5.14), 9.1(g), 9.l(h),
9.1(i) and 9.1(j) (collectively, the "Seller Surviving Obligations"),
the Claims Period shall continue indefinitely, except as limited by law
(including by applicable statutes of limitation);
(b) with respect to Seller Losses arising under Section 9.2(b)
with respect to any breach or inaccuracy of any representation or
warranty under Section 4.2 or Section 4.5 (collectively, the "Purchaser
Surviving Representations"), or under Sections 9.2(a), (d), (e) or (f)
(collectively, the "Purchaser Surviving Obligations") the Claims Period
shall continue indefinitely, except as limited by law (including any
applicable statutes of limitation);
(c) with respect to Purchaser Losses arising under Section
9.1(f) or Section 9.1(k) (collectively the "Seller Surviving
Environmental Obligations), the Claims Period shall terminate on the
third anniversary of the Closing Date; and
(d) with respect to all other Purchaser Losses or Seller
Losses arising under this Agreement, the Claims Period shall terminate
on the date that is eighteen months after the Closing Date.
Notwithstanding the foregoing, if prior to the close of business on the
last day of the applicable Claims Period, an Indemnifying Party shall have been
properly notified of a claim for indemnity hereunder and such claim shall not
have been finally resolved or disposed of at such date, such claim shall
continue to survive and shall remain a basis for indemnity hereunder until such
claim is finally resolved or disposed of in accordance with the terms hereof.
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Section 9.5. LIABILITY LIMITS.
(a) Except with respect to Purchaser Losses arising under
Sections 9.1(i) and 9.1(j), which shall be recoverable to the extent
such Losses in the aggregate exceed $10,000, none of the Purchaser
Indemnified Parties shall be entitled to recover from the Seller
Indemnifying Parties and none of the Seller Indemnified Parties shall
be entitled to recover from the Purchaser Indemnifying Parties unless
and until the total of all Seller Losses or Purchaser Losses, as the
case may be, with respect to any inaccuracy or breach of any such
representations or warranties or breach of or default in the
performance of any covenants, undertakings or other agreements, whether
such claims are brought under this Section 9 or otherwise, exceed, in
the aggregate, $250,000 (the "Deductible Amount") and then only to the
extent of such excess. In no event shall the aggregate liability of the
Seller Indemnified Parties with respect to Purchaser Losses or the
Purchaser Indemnified Parties with respect to Seller Losses exceed
$10,000,000 (the "Cap Amount"). Notwithstanding the foregoing, the
provisions of the immediately preceding sentence shall not apply to:
(i) Purchaser Losses arising under or pursuant to any Seller Surviving
Representations and/or Seller Surviving Obligations, Sellers Losses
arising under or pursuant to any Purchaser Surviving Representations
and/or Purchaser Surviving Obligations, or as a result of fraud or (ii)
the Assumed Liabilities, the Excluded Assets and the Excluded
Liabilities, (iii) any Purchaser Losses or Seller Losses arising out of
any intentional breach of any covenant contained in this Agreement or
any Purchaser Ancillary Document or Seller Ancillary Document, (iv) the
payment of the Adjustment, or (v) any Purchaser Losses arising out of
breach of the representations and warranties set forth in Sections
3.13, 3.15 and 3.16.
(b) The amount which an Indemnifying Party is required to pay
to, for, or on behalf of any other party pursuant to this Section 9
shall be reduced (including, without limitation, retroactively) by any
insurance proceeds actually recovered by or on behalf of such
Indemnified Party and other amounts paid by any other person in
reduction of the related indemnifiable loss (the "Indemnifiable Loss").
Amounts required to be paid, as so reduced, are hereafter sometimes
called an "Indemnity Payment". If an Indemnified Party shall have
received or shall have paid on its behalf an Indemnity Payment in
respect of an Indemnifiable Loss and shall subsequently receive
directly or indirectly insurance proceeds or other amounts in respect
of such Indemnifiable Loss, then such Indemnified Party shall promptly
pay to the Indemnifying Party a sum equal to the amount of such
insurance proceeds or other amounts provided the same does not exceed
an amount equal to the payment actually made by the Indemnifying Party.
Without limiting the generality of the foregoing, the Sellers'
indemnification obligations with respect to breaches of the
representations and warranties contained in Section 3.5 hereof shall be
reduced or eliminated to the extent that Purchaser recovers under the
title insurance policies referred to in Section 6.1(d) for the facts
giving rise to such breach, and Purchaser shall, diligently pursue such
recovery prior to requiring an indemnification payment by Sellers in
respect thereof.
(c) Notwithstanding anything to the contrary contained herein,
(i) the Sellers' indemnification obligations with respect to a breach
of a representation and warranty
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contained in Section 3.5(a) relating to title to a particular parcel of
Real Property shall be limited to an amount equal to the maximum amount
of title insurance coverage obtained on such parcel as contemplated by
Section 6.1(d) regardless of whether such indemnification obligations
relate to a matter covered under such title insurance, as contemplated
by Section 9.5(b) above and (ii) the Sellers' indemnification
obligations with respect to Purchaser Losses arising under Section
3.18, Section 9.1(f) and 9.1(k) shall be governed solely and
exclusively by Section 9.6 and Purchaser shall have no other right of
indemnification against Sellers with respect to such Purchaser Losses
regardless whether such other rights may exist.
Section 9.6. SELLER SURVIVING ENVIRONMENTAL OBLIGATIONS. All Purchaser
actions or inactions resulting in a Seller Surviving Environmental Obligation
("Purchaser Environmental Actions") shall be subject to the following and
secured by the Environmental Escrow Amount which will be placed in escrow in
accordance with the provisions of the Environmental Escrow Agreement attached as
Exhibit A hereto. Sellers' liability for Seller Surviving Environmental
Obligations shall be limited solely to the Environmental Escrow Amount and
Environmental Liabilities arising from Shops 2030, 2072 and 3105, as fully set
forth on SCHEDULE 1.4:
(a) Within 30 days of Purchaser's receipt of a notice of or
information regarding Sellers' Surviving Environmental Obligations or
an Environmental Claim that could lead to a Purchaser Environmental
Action, Purchaser shall provide notice to Sellers of any Purchaser
Environmental Actions, as well as any Environmental Liability. As soon
as practicable Purchaser shall provide Sellers with a preliminary
estimate of the cost and timing that may be necessary to address the
issue.
(b) Purchaser shall conduct all Purchaser Environmental
Actions in a cost effective and commercially reasonable manner
consistent with the industry custom and practice or as otherwise
required by Environmental Law or a governmental authority.
(c) Purchaser shall use its best efforts to keep Sellers
informed of the status of all Purchaser Environmental Actions.
(d) Purchaser shall as soon as practicable provide Sellers
with copies of written correspondence received from any regulatory
agency with jurisdiction over any Purchaser Environmental Action, or
any third party related to a Purchaser Environmental Action.
(e) Purchaser shall as soon as practicable provide notice to
Sellers of any oral communications with any regulatory agency with
jurisdiction over any Purchaser Environmental Action, where such
communications are initiated by such agencies.
(f) Intrusive investigations for the presence of USTs of the
subsurface at any Real Property or Leased Property shall be conducted
in a commercially reasonable manner according to industry custom and
practice. Purchaser agrees to refrain from such intrusive
investigations unless necessitated by site conditions, Environmental
Law or the operational requirements of the Assets and the Business.
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(g) Sellers shall retain the right to pursue any other
indemnification, reimbursement or cost recovery claims that they may
have arising out of any Purchaser Environmental Action, including but
not limited to, claims for reimbursement under any applicable state
petroleum tank reimbursement fund, lease, contract or applicable law.
Purchaser shall provide Sellers with reasonable assistance to secure
such retained rights including allowing Sellers to seek such
indemnification, reimbursement or cost recovery in Purchaser's name;
provided, however, that in no event shall Purchaser have to bear the
cost of pursuing and such recovery or reimbursement which shall be
undertaken at the sole expense of Sellers. Any amounts recovered from
such sources shall be remitted to Seller.
Section 9.7. COMPLIANCE WITH BULK SALES LAWS. Purchaser and Sellers
hereby agree and acknowledge that neither Purchaser nor Sellers shall be
required to comply with the bulk transfer laws of any jurisdiction. The Sellers
shall, jointly and severally, indemnify the Purchaser and hold the Purchaser
harmless from and against any and all claims, costs, losses and damages which
may be incurred by the Purchaser with respect to any claim made by any creditors
of either Seller against or in respect of the Purchaser or any of the Assets
arising out of the failure to comply with any such bulk transfer or bulk sales
laws.
Section 9.8. INVESTIGATIONS. The respective representations and
warranties of Purchaser and Sellers contained herein or in any certificate or
other document delivered by any party prior to the Closing and the rights to
indemnification set forth in Section 9 shall not be deemed waived or otherwise
affected by any investigation made by or knowledge of a party hereto.
Section 9.9. EXCLUSIVE REMEDY. The parties hereto agree that the
remedies provided by this Article 9 shall be the sole and exclusive remedy of
Purchaser, Sellers and Parent for any claim or cause of action arising out of or
related to the negotiation, execution, delivery and performance or breach of
this Agreement (whether such claim or cause of action is based on breach of
contract, misrepresentation, tort, violation of statute or otherwise including,
but not limited to, Environmental Laws), other than claims for injunctive relief
as provided herein or to enforce the provisions of this Agreement.
ARTICLE 10.
MISCELLANEOUS PROVISIONS
Section 10.1. NOTICES. All notices, communications and deliveries
hereunder shall be made in writing signed by or on behalf of the party making
the same, shall specify the Section hereunder pursuant to which it is given or
being made, and shall be deemed given or made (a) on the date delivered if
delivered in person, (b) on the date after delivery to a reputable overnight
courier, fees prepaid, (c) upon transmission by facsimile if receipt is
confirmed by telephone or (d) on the fifth business day after it is mailed if
mailed by registered or certified mail (return receipt requested) (with postage
and other fees prepaid), if addressed or transmitted as follows:
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To Monro or Purchaser:
Monro Muffler Brake, Inc.
200 Holleder Parkway
Rochester, New York 14615
Attn.: Jack M. Gallagher
Facsimile: 716-647-0945
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attn.: Marc Weingarten, Esq.
Facsimile: (212) 593-5955
To Sellers or Parent:
Speedy Muffler King Inc.
365 Bloor Street East
Suite 1200
Toronto, Ontario Canada
M4W3M7
Attn.: Martin Goldfarb
Facsimile: (416) 221-2214
with a copy to:
Foley & Lardner
One IBM Plaza
Suite 3300
330 N. Wabash Avenue
Chicago, Illinois 60611
Attn.: Stephen M. Slavin
Facsimile: (312) 755-1925
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing.
Section 10.2. SCHEDULES AND EXHIBITS. The Schedules and Exhibits hereto
are hereby incorporated into this Agreement and are hereby made a part hereof as
if set out in full in this Agreement.
Section 10.3. ASSIGNMENT; SUCCESSORS IN INTEREST. No assignment or
transfer by Monro, Purchaser, Parent or Sellers of their respective rights and
obligations hereunder shall be made except with the prior written consent of the
other parties hereto; PROVIDED, that Monro or Purchaser may assign the right to
acquire Assets or Assumed Liabilities to one or more of their
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Affiliates or to a financing source to facilitate a financing; PROVIDED FURTHER
that no such assignment shall relieve Purchaser or Monro of its obligations
hereunder. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their permitted successors and assigns, and any
reference to a party hereto shall also be a reference to a permitted successor
or assign.
Section 10.4. NUMBER; GENDER. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
Section 10.5. CAPTIONS. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise specified
to the contrary, all references to Articles and Sections are references to
Articles and Sections of this Agreement and all references to Schedules or
Exhibits are references to Schedules and Exhibits, respectively, to this
Agreement.
Section 10.6. CONTROLLING LAW; INTEGRATION; AMENDMENT. This Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York without reference to New York's choice of law
rules. This Agreement and the documents executed pursuant hereto supersede all
negotiations, agreements and understandings among the parties with respect to
the subject matter hereof (including, without limitation, that certain letter
agreement between Parent, Speedy (U.S.A.) Inc., Bloor, Car-X and Monro, dated as
of December 15, 1997, but excluding that certain Confidentiality Agreement
between Parent and Monro dated as of October, 1997 which confidentiality
agreement shall survive until the Closing, or if this Agreement is terminated,
indefinitely) and constitutes the entire agreement among the parties hereto.
This Agreement may be amended, modified or supplemented only by written
agreement of the parties hereto.
Section 10.7. SEVERABILITY. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law which renders any such provision prohibited or unenforceable in
any respect.
Section 10.8. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.
Section 10.9. ENFORCEMENT OF CERTAIN RIGHTS. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm or corporation other than the parties hereto, and their
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, or result in such person, firm or corporation being
deemed a third party beneficiary of this Agreement.
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Section 10.10. WAIVER. Any agreement on the part of a party hereto to
any extension or waiver of any provision of this Agreement shall be valid only
if set forth in an instrument in writing signed on behalf of such party. A
waiver by a party of the performance of any covenant, agreement, obligation,
condition, representation or warranty shall not be construed as a waiver of any
other covenant, agreement, obligation, condition, representation or warranty. A
waiver by any party of the performance of any act shall not constitute a waiver
of the performance of any other act or an identical act required to be performed
at a later time.
Section 10.11. VALUATION FOR TAX REPORTING PURPOSES. Prior to the
Closing Date, Sellers and Purchasers shall agree as to the allocation of the
Purchase Price among the Assets and to the covenant not to compete set forth in
Section 5.14, which allocation shall be made in accordance with Section 1060 of
the Code. Sellers, Parent, Monro and Purchaser agree (i) to jointly complete and
separately file Form 8594 with their respective Federal income tax returns for
the tax year in which the Closing Date occurs in a manner consistent with such
agreed allocation and (ii) not to take any position on any Tax Return before any
governmental agency charged with the collection of any Tax or in any judicial
proceeding that is inconsistent with such agreed allocation.
Section 10.12. FEES AND EXPENSES.
(a) Each of the Sellers, Parent, Purchaser and Monro shall pay
its own fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including the fees,
costs and expenses of its financial advisors, accountants and counsel.
Without limiting the generality of the preceding sentence, Purchaser
shall pay all required filing fees under the HSR Act.
(b) All fees, costs and expenses of any judicial, arbitrated
or other official proceedings (other than those contemplated in Section
2.4) brought relating to any controversy or claim arising out of or
relating to this Agreement and the transactions contemplated hereby
shall be paid by the non-prevailing party (as determined by the
judge(s), jury, arbitrator(s) or the fact finder which rendered a
decision in the proceeding) to such proceeding. Such fees, costs and
expenses shall include court costs and other fees and expenses of the
fact finder that heard the proceeding and the reasonable attorneys',
accountants', experts and other out-of-pocket fees and expenses of the
prevailing party incurred in connection with such proceeding. The
parties shall instruct the fact finder in any such proceeding to make
the determination contemplated by this paragraph. If the fact finder
determines that neither party is the prevailing party, each party will
bear its own costs of such proceeding.
Section 10.13. GUARANTEE. Monro hereby unconditionally and irrevocably
guarantees to Sellers the due and punctual payment by Purchaser of (a) any
amounts that are due and payable to Sellers pursuant to Sections 2.1, 2.2, 2.5
and Section 10.12 and (b) any amounts that are due and payable in respect of
Purchaser's indemnification obligations under Article 9. Parent hereby
unconditionally and irrevocably guarantees to Purchaser the due and punctual
payment by Sellers of (a) any amounts that are due and payable to Purchaser
under Section 2.2, Section 2.5, Section 2.6 and Section 10.12 and (b) any
amounts that are due and payable in respect of Seller's indemnification
obligations under Article 9. Each of Monro and Parent agrees that its respective
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obligations hereunder are absolute and unconditional, irrespective of the
validity or enforceability of or any change and/or amendment to this Agreement,
the institution or absence of any action to enforce the same, or any other
circumstance which might otherwise constitute a legal or equitable discharge of,
or defense to, a guarantor. Each of Monro and Parent hereby unconditionally
waives (x) protest, presentment, filing of claims with the court in the event of
bankruptcy, liquidation, reorganization or similar case or proceeding of
Purchaser or Sellers, respectively, (y) any right to require that a Seller or
Purchaser proceed first against the Purchaser or a Seller, respectively, or any
other person or pursue any other remedy available to Seller or Purchaser,
respectively, and (z) the right to consent to any act, omission or delay which
might in any manner or to any extent vary the risk, reduce the liability or
otherwise operate as a discharge of Monro or Parent. If a Seller or Purchaser,
respectively, elects not to pursue Purchaser or a Seller, respectively, or any
other person or pursue any or all remedies available, then upon receipt of
payment from Monro or Parent, a Seller or Purchaser, respectively, will, to the
extent permitted by applicable law, assign, transfer or otherwise convey all
rights and remedies a Seller or Purchaser, respectively, may have relating to
such circumstance or claim forthwith to Monro or Parent, respectively.
Section 10.14. COOPERATION ON TAXES. Purchaser and Sellers will provide
each other with such cooperation and information as either of them reasonably
may request of the other in filing any tax return, amended tax return or claim
for refund, determining a liability for taxes or a right to a refund of taxes or
conducting any audit or any other proceeding in respect of taxes. Each party
shall use its reasonable efforts to make its employees and agents (including its
attorneys, accountants and other professionals) available to the other on a
mutually convenient basis to provide explanations of any documents or
information provided hereunder. Purchaser and Sellers will provide such
cooperation and assistance at their own expense, PROVIDED, HOWEVER, that all
out-of-pocket fees and expenses, including fees and expenses of outside
accountants and lawyers, shall be paid by the party requesting such cooperation
and assistance. Notwithstanding the preceding sentence, if in connection with an
examination by any taxing authority, Purchaser or Sellers must expend
extraordinary employee time or other resources to provide such assistance, the
reasonable costs of such extraordinary employee time or other resources,
including a pro rata portion of salaries and benefits, shall be paid by the
party requesting such assistance. Purchaser will retain all material records or
other documents relating to tax matters of Sellers for taxable periods through
the Closing Date until six months after the expiration of the statute of
limitations (including any extensions) applicable to such returns and other
documents. Any information pertaining to Sellers' taxes shall be kept
confidential by Purchaser.
Upon the expiration of any statute of limitations (including any
extensions), with respect to a taxable period, Purchaser shall offer to provide
to Sellers all records with respect to such period before destroying such
records.
Section 10.15. KNOWLEDGE. For purposes of this Agreement, "knowledge"
as of any date that a representation and warranty is given by any party hereto
shall mean the actual knowledge after due inquiry (i) with respect to Seller, of
the management of Sellers and Parent at the level of vice president and above
and all of the regional managers of Sellers as of such date, and (ii) with
respect to Purchaser, the management of Purchaser or Parent at the level of vice
president and above as of such date, and "knows" has a correlative meaning.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.
SPEEDY MUFFLER KING INC.
By: /s/ Mary Jane Allen
--------------------------------------
Title: Treasurer
----------------------------------
BLOOR AUTOMOTIVE INC.
By: /s/ Mary Jane Allen
--------------------------------------
Title: Controller
----------------------------------
SPEEDY CAR-X INC.
By: /s/ Mary Jane Allen
--------------------------------------
Title: Controller
----------------------------------
SPEEDY (U.S.A.), INC.
By: /s/ Mary Jane Allen
--------------------------------------
Title: Controller
----------------------------------
SPEEDY HOLDING CORP.
By: /s/ Jack M. Gallagher
--------------------------------------
Title: President
-----------------------------------
MONRO MUFFLER BRAKE, INC.
By: /s/ Jack M. Gallagher
--------------------------------------
Title: President
-----------------------------------
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<PAGE> 55
CONFIDENTIAL
ASSET PURCHASE AGREEMENT
by and among
SPEEDY MUFFLER KING INC.,
BLOOR AUTOMOTIVE INC.,
SPEEDY CAR-X INC.,
SPEEDY (U.S.A.), INC.,
SPEEDY HOLDING CORP.
and
MONRO MUFFLER BRAKE, INC.
As of April 13, 1998
<PAGE> 56
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE 1. PURCHASE AND SALE...............................................................................2
Section 1.1. Purchase and Sale....................................................................2
Section 1.2. Included Assets......................................................................2
Section 1.3. Excluded Assets......................................................................4
Section 1.4. Assumption of Assumed Liabilities....................................................6
Section 1.5. Excluded Liabilities.................................................................6
ARTICLE 2. PURCHASE PRICE..................................................................................7
Section 2.1. Purchase Price.......................................................................7
Section 2.2. Payment of Purchase Price............................................................8
Section 2.3. Statement of Net Assets..............................................................8
Section 2.4. Arbitration..........................................................................9
Section 2.5. Post-Closing Adjustment.............................................................10
Section 2.6. Interest............................................................................10
Section 2.7. The Escrow Fund.....................................................................10
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLERS......................................................10
Section 3.1. Organization........................................................................10
Section 3.2. Authorization.......................................................................11
Section 3.3. Absence of Restrictions and Conflicts...............................................11
Section 3.4. Capitalization of Sellers; Subsidiaries.............................................12
Section 3.5. Ownership of Assets and Related Matters.............................................12
Section 3.6. Financial Statements................................................................15
Section 3.7. No Undisclosed Liabilities..........................................................16
Section 3.8. Absence of Certain Changes..........................................................16
Section 3.9. Legal Proceedings...................................................................17
Section 3.10. Compliance with Law.................................................................17
Section 3.11. Seller Contracts....................................................................18
Section 3.12. Franchise Agreements................................................................18
Section 3.13. Tax Returns; Taxes..................................................................18
</TABLE>
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<TABLE>
<S> <C>
Section 3.14. Officers and Employees.............................................................19
Section 3.15. Seller Employee Benefit Plans......................................................19
Section 3.16. Labor Relations....................................................................21
Section 3.17. Insurance..........................................................................21
Section 3.18. Environmental Matters..............................................................22
Section 3.19. Intellectual Property..............................................................24
Section 3.20. Transactions with Affiliates.......................................................25
Section 3.21. Brokers, Finders and Investment Bankers............................................25
Section 3.22. Bank Accounts......................................................................25
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER....................................................25
Section 4.1. Organization.......................................................................25
Section 4.2. Authorization......................................................................26
Section 4.3. Absence of Restrictions and Conflicts..............................................26
Section 4.4. Legal Proceedings..................................................................27
Section 4.5. Brokers, Finders and Investment Bankers............................................27
Section 4.6 Financing..........................................................................27
ARTICLE 5. CERTAIN COVENANTS AND AGREEMENTS...............................................................27
Section 5.1 Conduct of Business by Sellers.....................................................27
Section 5.2. Inspection and Access to Information...............................................30
Section 5.3. No Solicitation of Transactions....................................................30
Section 5.4. Reasonable Efforts; Further Assurances; Cooperation................................31
Section 5.5. Public Announcements...............................................................33
Section 5.6. Supplements to Schedules...........................................................33
Section 5.7. Offer of Employment................................................................33
Section 5.8. Employee Benefit Plans.............................................................33
Section 5.9. Transfer Taxes.....................................................................34
Section 5.10. Financial Statements...............................................................34
Section 5.11. Environmental Information and Documentation........................................34
Section 5.12. Access to Books and Records........................................................34
Section 5.13. Nonsolicitation....................................................................35
Section 5.14. Restrictions on Competitive Activities.............................................35
</TABLE>
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<TABLE>
<S> <C>
Section 5.15. Title Insurance....................................................................36
Section 5.16. Surveys............................................................................36
Section 5.17. Correction of Title Matters........................................................37
Section 5.18. Collection of Receivables..........................................................37
Section 5.19. Closed Shops.......................................................................37
Section 5.20. Review of Offering Memorandum......................................................38
Section 5.21 Return of Brake Cores..............................................................38
ARTICLE 6. CONDITIONS.....................................................................................38
Section 6.1. Conditions to Each Party's Obligations.............................................38
Section 6.2. Conditions to Obligations of Purchaser.............................................39
Section 6.3. Conditions to Obligations of Sellers...............................................41
ARTICLE 7. CLOSING........................................................................................42
Section 7.1. Closing............................................................................42
Section 7.2. Items to be Delivered at Closing...................................................42
Section 7.3. Further Assurances.................................................................42
ARTICLE 8. TERMINATION....................................................................................43
Section 8.1. Termination........................................................................43
Section 8.2. Effect of Termination..............................................................43
ARTICLE 9. INDEMNIFICATION................................................................................44
Section 9.1. Indemnification Obligations of Sellers.............................................44
Section 9.2. Indemnification Obligations of Purchaser...........................................45
Section 9.3. Indemnification Procedure..........................................................46
Section 9.4. Claims Period......................................................................47
Section 9.5. Liability Limits...................................................................48
Section 9.6. Seller Surviving Environmental Obligations.........................................49
Section 9.7. Compliance with Bulk Sales Laws....................................................50
Section 9.8. Investigations.....................................................................50
Section 9.9. Exclusive Remedy...................................................................51
ARTICLE 10. MISCELLANEOUS PROVISIONS......................................................................51
Section 10.1. Notices............................................................................51
</TABLE>
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<TABLE>
<S> <C>
Section 10.2. Schedules and Exhibits.............................................................52
Section 10.3. Assignment; Successors in Interest.................................................52
Section 10.4. Number; Gender.....................................................................52
Section 10.5. Captions...........................................................................52
Section 10.6. Controlling Law; Integration; Amendment............................................53
Section 10.7. Severability.......................................................................53
Section 10.8. Counterparts.......................................................................53
Section 10.9. Enforcement of Certain Rights......................................................53
Section 10.10. Waiver.............................................................................53
Section 10.11. Valuation For Tax Reporting Purposes...............................................53
Section 10.13. Guarantee..........................................................................54
Section 10.14. Cooperation on Taxes...............................................................55
Section 10.15. Knowledge..........................................................................55
</TABLE>
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<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 1.2(f) - List of Material Assumed Contracts
Schedule 1.2(j) - List of Markets for use of SPEEDY Marks
Schedule 1.2(p) - List of Excluded Records
Schedule 1.3(n) - List of other Excluded Assets
Schedule 1.4(a) - List of types of Other Accruals
Schedule 1.4(b) - List of Sites to be Remediated or Delisted
Schedule 2.2 - List of Webster Shop Assets
Schedule 3.1 - List of jurisdictions in which Sellers are qualified to do business
Schedule 3.3(i) - Third Party Consents
Schedule 3.3(ii) - Other governmental and regulatory consents
Schedule 3.4 - Ownership interests held by Sellers
Schedule 3.5(a)(i) - List of Real Property and related matters
Schedule 3.5(a)(iii) - List of exceptions to possession of Real Property
Schedule 3.5(a)(iv) - List of structural defects of buildings on Real Property
Schedule 3.5(b)(i) - List of Real Property Leases
Schedule 3.5(c) - Fixed Asset Ledger of the Business
Schedule 3.5(d)(i) - Exceptions to title of Assets
Schedule 3.5(d)(ii) - List of material defects in production equipment
Schedule 3. 5(d)(iii) - Assets owned by third parties which are located on premises of Sellers
Schedule 3.5(d)(iv) - Detailed Fixed Asset Inventory by Location
Schedule 3.5(f) - List of third party options
Schedule 3.6 - Exceptions to GAAP
Schedule 3.7 - List of certain liabilities and obligations of Sellers involving or affecting
the Business or the Assets
Schedule 3.8(b) - List of material changes since the Balance Sheet Date
Schedule 3.9 - List of legal proceedings
Schedule 3.10(i) - List of Licenses
Schedule 3.10(ii) - List of OSHA violations since January 1, 1995
Schedule 3.11(i) - List of certain Seller Contracts
Schedule 3.11(ii) - List of Material Defaults
Schedule 3.12 - List of Franchise Agreements
Schedule 3.13 - List of Tax Audits and Deficiencies
Schedule 3.14 - List of (i) all employees of Sellers to be offered Employment, and (ii) the
approximate number of current hourly employees
Schedule 3.15 - List of Benefit Plans
Schedule 3.16 - List of certain labor relations matters
Schedule 3.17 - List of Sellers' insurance policies and coverages relating to the Assets
and/or the Business
Schedule 3.18(b) - List of certain environmental matters
Schedule 3.18(c) List of USTs and gasoline USTs
Schedule 3.19(i) - List of Seller-Owned Patents and Copyrights
</TABLE>
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Schedule 3.19(ii)(a) - List of certain Seller-Owned Marks other than SPEEDY Marks
Schedule 3.19(ii)(b) - List of SPEEDY Marks
Schedule 3.19(iii) - List of all Licensed Patents and Copyrights
Schedule 3.19(iv) - List of all Seller Licensed Marks
Schedule 3.19(v) - List of all jurisdictions in which Sellers are operating the Business under a
tradename and jurisdictions in which any such tradenames are registered
Schedule 3.20 - List of transactions with Affiliates
Schedule 3.22 - List of Bank Accounts
Schedule 4.3 - Other governmental and regulatory consents
Schedule 5.10 - Exceptions to GAAP
Schedule 5.11 - List of Sites Requiring Additional Environmental Documentation
Schedule 5.14(a)(i) - List of Speedy Markets
Schedule 6.1(c)(i) - Schedule of Real Property Leases where consent may be withheld by landlord in
its discretion
Schedule 6.1(c)(ii) - Schedule of Real Property Leases where consents may not be unreasonably
withheld by landlord
Schedule 6.2(f) - List of Non-Lease Consents required to be delivered at Closing
EXHIBITS
Exhibit A Form of Environmental Escrow Agreement
Exhibit B Form of Statement of Net Assets
Exhibit C Statement of Methods for Determining Net Assets
Exhibit D Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit E Form of Opinion of Schulte Roth & Zabel LLP
Exhibit F Form of Opinion of Foley & Lardner
Exhibit G Transition Services Outline
Exhibit H Form of Real Estate Escrow Agreement
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DEFINED TERMS
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The following is a list of the defined terms used in this Agreement:
Defined Terms Section
- ------------- -------
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Acquisition.................................................................................. Recitals
Adjusting Payment............................................................................ 2.5
Affiliate.................................................................................... 3.20
Affiliated Group............................................................................. 1.5(e)
Agreement.................................................................................... Recitals
Applicable Benefit Plan...................................................................... 3.15
Arbitrator................................................................................... 2.4
Assets....................................................................................... 1.1
Assumed Contracts............................................................................ 1.2(g)
Assumed Liabilities.......................................................................... 1.4
Balance Sheet ............................................................................... 3.6
Balance Sheet Date........................................................................... 3.8(a)
Bank Accounts................................................................................ 3.22
Benefit Plan................................................................................. 3.15
Bloor........................................................................................ Recitals
Bloor Business............................................................................... Recitals
Brake Cores.................................................................................. 1.2(l)
Business..................................................................................... Recitals
Car-X........................................................................................ Recitals
Car-X Business............................................................................... Recitals
Cash......................................................................................... 1.3(a)
CCA.......................................................................................... 3.18
CERCLA....................................................................................... 3.18
Claims Period................................................................................ 9.4
Closing...................................................................................... 7.1
Closing Date................................................................................. 7.1
Code......................................................................................... 3.13
Comparable Shops............................................................................. 6.2(l)
Company-Owned Shops.......................................................................... Recitals
Competing Transaction........................................................................ 5.3
control...................................................................................... 3.20
Cutoff Time.................................................................................. 1.3(a)
CWA.......................................................................................... 3.18
Deductible Amount............................................................................ 9.5(a)
Delivery Date................................................................................ 2.3
Detroit Contract............................................................................. 1.2(f)
Discoverer................................................................................... Recitals
Disputed Items............................................................................... 2.3
Environmental Claims......................................................................... 3.18
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Environmental Holdback Amount................................................................ 2.2
Environmental Laws........................................................................... 3.18
Environmental Liabilities.................................................................... 3.18
ERISA........................................................................................ 3.15
ERISA Affiliate.............................................................................. 3.15
Excluded Agreements.......................................................................... 1.3(d)
Excluded Assets.............................................................................. 1.3
Excluded Liabilities......................................................................... 1.5
Excluded Real Property....................................................................... 1.3(b)
Excluded Subsidiary.......................................................................... 1.3(c)
FIFO......................................................................................... 2.3(c)
Financial Statements......................................................................... 3.6
Franchise Agreements......................................................................... 3.12
Franchised Shops............................................................................. Recitals
GAAP......................................................................................... 2.3
Hazardous Materials.......................................................................... 3.18
HSR Act...................................................................................... 3.3
Indemnifiable Loss........................................................................... 9.5(b)
Indemnified Party............................................................................ 9.3(a)
Indemnifying Party........................................................................... 9 3(a)
Indemnity Payment............................................................................ 9.5(b)
Intellectual Property........................................................................ 1.2(j)
knowledge.................................................................................... 10.15
knows........................................................................................ 10.15
Leased Real Property......................................................................... 1.2(e)
Lender....................................................................................... 4.6
Lender's Letter.............................................................................. 4.6
Licensed Marks............................................................................... 3.19
Licensed Patents and Copyrights.............................................................. 3.19
Licenses..................................................................................... 3.10
Liens........................................................................................ 3.5(a)
LIFO......................................................................................... 2.3(c)
Losses....................................................................................... 9.1
Material Adverse Effect...................................................................... 3.1
Monro........................................................................................ Recitals
Monthly Financials........................................................................... 3.6
Net Assets................................................................................... 2.3(a)
New Credit Facility.......................................................................... 1.5(a)
NLRB......................................................................................... 3.16
Note Guarantees.............................................................................. 1.5(a)
Notice of Dispute............................................................................ 2.3
Order........................................................................................ 5.4(b)
OSHA......................................................................................... 3.10
Parent....................................................................................... Recitals
Permitted Liens.............................................................................. 3.5(a)
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Person....................................................................................... 3.20
Personal Property............................................................................ 3.5(c)
Personal Property Lists...................................................................... 3.5(c)
Pre-Closing Tax Period....................................................................... 3.13
Prime Rate................................................................................... 2.6
Proprietary Intellectual Property............................................................ 3.19
Purchase Price............................................................................... 2.1
Purchaser.................................................................................... Recitals
Purchaser Ancillary Documents................................................................ 4.2
Purchaser Environmental Actions.............................................................. 9.6
Purchaser Indemnified Parties................................................................ 9.1
Purchaser Losses............................................................................. 9.1
Purchaser Surviving Obligations.............................................................. 9.4(b)
Purchaser Surviving Representations.......................................................... 9.4(b)
PW Rochester................................................................................. 2.3(c)
PW Toronto................................................................................... 2.3(d)
RCRA......................................................................................... 3.18
Real Estate Escrow Amount.................................................................... 6.2(m)
Real Property................................................................................ 1.2(i)
Real Property Leases......................................................................... 1.2(e)
Release...................................................................................... 3.18
Remedial Action.............................................................................. 3.18
Review Period................................................................................ 2.3
Sellers...................................................................................... Recitals
Seller Ancillary Documents................................................................... 3.2
Seller Contracts............................................................................. 3.11
Seller Indemnified Parties................................................................... 9.2
Seller Losses................................................................................ 9.2
Seller-Owned Marks........................................................................... 3.19
Seller-Owned Patents and Copyrights.......................................................... 3.19
Seller Plan.................................................................................. 5.8
Seller Surviving Environmental Obligations................................................... 9.4(c)
Seller Surviving Obligations................................................................. 9.4(a)
Seller Surviving Representations............................................................. 9.4(a)
Seller's Financial Statements................................................................ 3.6
Senior Notes................................................................................. 1.5(a)
Shops........................................................................................ Recitals
Speedy....................................................................................... Recitals
SPEEDY Marks................................................................................. 1.2(j)
Statement of Net Assets...................................................................... 2.3
Tax.......................................................................................... 3.13
Tax Return................................................................................... 3.13
Termination Date............................................................................. 8.1
Transfer Taxes............................................................................... 5.10
Transferred Employees........................................................................ 5.7
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Unpermitted Exceptions....................................................................... 5.15
Webster Shop................................................................................. 1.3(h)
WARN......................................................................................... 3.16
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