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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For Fiscal Year Ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 0-19357
MONRO MUFFLER BRAKE, INC.
(Exact name of registrant as specified in its charter)
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
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark if the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of June 1, 1999, the aggregate market value of voting stock held by
non-affiliates of the registrant was $50,996,000.
As of June 1, 1999, 8,321,701 shares of the registrant's Common Stock,
par value $.01 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement (to be filed
pursuant to Regulation 14A) for the 1999 Annual Meeting of Shareholders (the
"Proxy Statement") are incorporated by reference into Part III hereof.
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PART I
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ITEM 1. BUSINESS
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GENERAL
Monro Muffler Brake, Inc. ("Monro" or the "Company") is a chain of
Company-operated stores providing automotive undercar repair services in the
United States. At March 31, 1999, Monro operated 524 stores in New York,
Pennsylvania, Ohio, Connecticut, Massachusetts, West Virginia, Virginia,
Maryland, Vermont, New Hampshire, New Jersey, North Carolina, South Carolina,
Indiana, Rhode Island, Delaware and Michigan under the name "Monro Muffler Brake
& Service" and "Speedy Auto Service by Monro" (together, the "Company Stores").
The Company's stores typically are situated in high-visibility locations in
suburban areas and small towns, as well as major metropolitan areas. The Company
Stores which do not include the 14 franchised Speedy stores acquired as part of
the Acquisition (defined below), serviced approximately 1,877,000 vehicles in
fiscal 1999. *
The predecessor to the Company was founded by Charles J. August in 1957
as a Midas Muffler franchise in Rochester, New York, specializing in mufflers
and exhaust systems. In 1966, the Company discontinued its affiliation with
Midas Muffler, and began to diversify into a full line of undercar repair
services. An investor group led by Peter J. Solomon and Donald Glickman
purchased a controlling interest in the Company in July 1984. At that time,
Monro operated 59 stores, located primarily in upstate New York, with
approximately $21 million in sales in fiscal 1984. Since 1984, Monro has
continued its growth and has expanded its marketing area to include sixteen
additional states. Recent expansion includes the September 1998 acquisition of
189 company-owned and 14 franchised Speedy stores, all located in the United
States, from SMK Speedy International Inc. of Toronto Canada (the
"Acquisition"). (See additional discussion under "Expansion Strategy.")
In December 1998, the Company appointed Robert G. Gross as President
and Chief Executive Officer, replacing Jack M. Gallagher who returned as interim
President and Chief Executive Officer in February 1998. Mr. Gross began
full-time responsibilities on January 1, 1999.
The Company was incorporated in the State of New York in 1959. The
Company's principal executive offices are located at 200 Holleder Parkway,
Rochester, New York 14615, and its telephone number is (716) 647-6400.
The Company provides a broad range of services on passenger cars, light
trucks and vans for mufflers and exhaust systems (estimated at 27% of fiscal
1999 sales); brakes (35%); and steering, drive train, suspension and wheel
alignment (18%). The Company also provides other products and services including
tires, scheduled maintenance and state inspections (20%). Monro specializes in
the repair and replacement of parts which must be periodically replaced as they
wear out. Normal wear on these parts generally is not covered by new car
warranties. The Company typically does not perform under-the-hood repair
services except for oil change services, a heating and cooling system "flush and
fill" service and some minor tune-up services. The Company does not sell parts
or accessories to the do-it-yourself market.
The Company has two wholly-owned subsidiaries, Monro Service
Corporation and Monro Leasing, LLC, both of which are Delaware corporations
qualified to do business in the State of New York.
Monro Service Corporation holds all assets, rights, responsibilities
and liabilities associated with the Company's warehousing, purchasing,
advertising, accounting, office services, payroll, cash management and certain
other operations which are wholly performed within New York State. The Company
believes that this structure has enhanced, and will continue to enhance,
operational efficiency and provide cost savings.
Monro Leasing, LLC was established primarily to act as lessee in real
estate transactions for store locations. Currently, the sole member of the
entity is the Company.
* References herein to fiscal years are to the Company's fiscal years ending
or ended March 31 of each year (e.g., references to "fiscal 1999" are to
the Company's fiscal year ended March 31, 1999).
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INDUSTRY OVERVIEW
According to industry reports, demand for automotive repair services,
including undercar repair services, has increased due to the general increase in
the number of vehicles registered, the growth in vehicle miles driven, the
increase in the average age of vehicles and the increased complexity of
vehicles, which makes it more difficult for a vehicle owner to perform
do-it-yourself repairs.
At the same time as demand for automotive repair services has grown,
the Company believes that the number of general repair outlets has decreased,
principally because fewer gas stations now perform repairs, and because there
are fewer new car dealers. Monro believes that these factors present
opportunities for increased sales by the Company, even though the number of
specialized repair outlets (such as those operated by the Company and its direct
competitors) has increased to meet the growth in demand.
EXPANSION STRATEGY
Monro has experienced significant growth due to acquisitions, the
opening of new stores and, to a lesser degree, increases in comparable store
sales. Management believes that the continued growth in sales and profits of the
Company is dependent, in large part, upon its continued ability to open and
operate new stores on a profitable basis. In addition, overall profitability of
the Company could be reduced if new stores do not attain profitability.
Monro believes that there are expansion opportunities in new as well as
existing market areas which will result from a combination of constructing
stores on vacant land and acquiring existing store locations. The Company
believes that, as the industry consolidates due to the increasingly complex
nature of automotive repair and the expanded capital requirements for
state-of-the art equipment, there will be more opportunities for acquisitions of
existing businesses or store structures.
In that regard, in September 1998, the Company completed the
acquisition of 189 Company-operated and 14 franchised Speedy stores (the
"Acquired Speedy stores"), from SMK Speedy International Inc. of Toronto
Canada. The Acquired Speedy stores are located primarily in complementary areas
in Monro's existing markets in the Northeast, Mid-Atlantic and Midwest regions
of the United States. Through May 31, 1999, the Company had closed, sold or
subleased 34 of the Acquired Speedy stores due to geographic conflicts or
substandard performance, with plans to close approximately 10 additional Speedy
locations early in fiscal 2000. Four Monro locations were also closed due to
geographic conflicts with Acquired Speedy locations during fiscal 1999. Five
other Monro stores were closed during the fourteen months ended May 31, 1999 due
to their failure to meet return-on-investment goals.
In connection with the Acquisition, the arrangement with the
franchisees was renegotiated such that they became "dealers" of the Company. No
franchise fees are paid by the dealers, and no services are required to be
performed by the Company. Dealers reimburse the Company for shared advertising
costs and may purchase inventory from the Company.
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As of March 31, 1999, Monro had 524 Company-operated stores and 14
dealer locations located in 17 states. The following table shows the growth in
the number of Company-operated stores over the last five fiscal years:
STORE OPENINGS AND CLOSINGS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
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1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C>
Stores open at beginning of year.......... 202 232 274 313 350
Stores opened during year................. 30 43 40 39 210 (a)
Stores closed during year (b)............. 0 (1) (1) (2) (36)
--- --- --- --- ---
Stores open at end of year................ 232 274 313 350 524
=== === === === ===
</TABLE>
(a) Includes 189 Acquired Speedy stores.
(b) These stores were closed because they failed to achieve an
acceptable level of profitability or because a new Monro store was
opened in the same market at a more favorable location. Fiscal
1999 closures primarily relate to underperforming or redundant
Speedy locations.
The Company plans to open approximately 10 to 15 new stores in fiscal
2000.
The Company has developed a systematic method for selecting new store
locations and a more targeted approach to marketing new stores. Key factors in
market and site selection include population, demographic characteristics,
vehicle population and the intensity of competition. These factors are evaluated
through the use of a proprietary computer model developed for the Company. The
characteristics of each potential site are compared by the model to the profiles
of existing stores, and the model then projects sales for that site. Monro
attempts to cluster stores in market areas in order to achieve economies of
scale in advertising, supervision and distribution costs. All new sites
presently under consideration are within Monro's established marketing areas.
In fiscal year 1998, the Company performed a comprehensive analysis of
its historical and projected store opening strategy. As a result of this
analysis, the Company established major market profiles, as defined by market
awareness: mature, existing and new markets. Over the next several years, the
Company expects to build a greater percentage of stores in mature and existing
markets in order to capitalize on the Company's market presence and consumer
awareness. Fifteen of the 21 stores opened in fiscal 1999 were in mature or
existing markets.
The Company believes that management and operating improvements
implemented over the last several fiscal years will enhance its ability to
sustain its growth. The Company (including the Company-operated Acquired Speedy
stores) has a chain-wide computerized inventory control and electronic
point-of-sale (POS) management information system, which has increased
management's ability to monitor operations as the number of stores has grown.
The system includes electronic cataloging which allows store managers to
electronically research the specific parts needed for the make and model of car
being serviced. In fiscal 1997, the Company upgraded its electronic credit card
processing and added electronic mail to its stores. Late in fiscal 1998, the
Company added software which contains data that mirrors the scheduled
maintenance requirements in vehicle owner's manuals, specifically by make,
model, year and mileage for every automobile. (This scheduled maintenance
software will be added to the Acquired Speedy stores in fiscal 2000.) Management
believes that this software will facilitate the presentation and sale of
Scheduled Maintenance services to customers. Enhancements continue to be made to
the POS system annually which increase efficiency, improve the quality and
timeliness of store reporting and enable the Company to better serve its
customers.
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The financing to open a new store location may be accomplished in one
of three ways: a store lease for the land and building (in which case, land and
building costs will be financed primarily by the lessor), a land lease with the
building constructed by the Company (with building costs paid by the Company),
or a land purchase with the building constructed by the Company. In all three
cases, each new store also will require approximately $136,000 for equipment
(including a point-of-sale system and a truck), and approximately $64,000 in
inventory. Because Monro generally does not extend credit to its customers,
stores generate almost no receivables and a new store's actual net working
capital investment is nominal. Total capital required to open a new store
ranges, on average (based upon the last three fiscal years' openings, excluding
the Acquired Speedy locations), from $278,000 to $881,000 depending on the
location and which of the three financing methods is used. In instances where
Monro acquires an existing business, it may pay additional amounts for
intangible assets such as customer lists, covenants not-to-compete and goodwill.
At March 31, 1999, the Company leased the land and/or the building at
approximately 80% of its store locations and owned the land and building at the
remaining locations. Monro's policy is to situate new stores in the best
locations, without regard to the form of ownership required to develop the
locations.
New stores, excluding the Acquired Speedy stores, have average sales of
approximately $360,000 in their first twelve months of operation, or $60,000 per
bay. The Acquired Speedy stores, which on average are five bay stores, had
average, annualized sales per bay of $75,000 in their first six months under
Monro ownership.
OPERATING STRATEGY
Monro's operating strategy is to provide its customers with dependable,
high-quality automotive service at a competitive price by emphasizing the
following key elements.
Products and Services
All stores provide a full range of undercar repair services for brakes,
steering, mufflers and exhaust systems, drive train, suspension and wheel
alignment. These services apply to all makes and models of domestic and foreign
cars, light trucks and vans. In addition, both Monro stores and the Acquired
Speedy stores provide many of the routine maintenance services (except engine
diagnostic and major transmission repair) which automobile manufacturers suggest
or require in the vehicle owners' manuals, and which fulfill manufacturers'
requirements for new car warranty compliance. At the end of fiscal 1998, the
Company introduced "Scheduled Maintenance" services in all of its Monro stores
whereby the aforementioned services are formally packaged and offered to
consumers based upon the year, make, model, and mileage of each specific
vehicle. ("Scheduled Maintenance" will be offered in the Acquired Speedy
locations later in fiscal 2000.) Management believes that the Company is able to
offer this service in a more convenient and cost competitive fashion than auto
dealers can provide.
Substantially all of the stores provide oil change services as well as
tire sales and installation. All stores perform a heating and cooling system
"flush and fill" service, a transmission "flush and fill" service, and belt and
hose installation. Stores in New York, West Virginia, New Hampshire,
Pennsylvania, North Carolina, Rhode Island and Vermont also perform annual state
inspections.
Customer Satisfaction
The Company has developed "The Monro Doctrine", a set of customer
satisfaction principles, which is displayed in each Monro store so that
customers and employees will understand the Company's customer service
philosophy. These principles are: free inspection of brakes, shocks, front end
and exhaust systems; item-by-item review with customers of problem areas; free
written estimates; written guarantees; drive-in service without an appointment;
fair and reasonable prices as advertised; and repairs by professionally trained
undercar specialists, many of whom are Automotive Service Excellence (ASE)
certified in brakes and suspension. (See additional discussion under "Store
Operations: Quality Control and Warranties.")
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Competitive Pricing, Advertising and Co-branding Initiatives
The Company seeks to set competitive prices for quality services and
products. The Company supports its pricing strategy by advertising through
direct mail coupon inserts and in-store promotional signage and displays. In
addition, the Company advertises through radio, yellow pages, newspapers and
television to increase consumer awareness of the services offered.
In fiscal 1997, the Company began testing co-branding initiatives to
more quickly increase consumer awareness in certain markets. The Company
believes that, especially in newer markets, customers may more readily be drawn
into its stores because of their familiarity with national brand names. Some of
these initiatives have included cross-promotional offers with national fast food
chains, video rental stores and gasoline chains, as well as with regional
supermarkets. Additionally, the Company introduced Bridgestone/Firestone tires
into most of its stores in late fiscal 1997, where it had previously carried a
private label tire. Through this initiative, the Company believes that it
attracts some brand-loyal tire customers who otherwise might not have visited
Monro. This gives the Company the opportunity to introduce itself to this new
customer, and sell other needed services. The increased tire sales resulting
from adding this branded product have exceeded the Company's expectations thus
far. (However, the sales still remain less than 10% of the Company's total
sales.)
In fiscal 1997, the Company signed a joint venture agreement with
Q-Lube, Inc., a subsidiary of Quaker State Corporation. The agreement called for
the two companies to jointly develop retail locations which offer both fast lube
and undercar services. The centers were located adjacent to either existing or
newly-developed Monro stores. After testing the concept in several locations,
Company management decided, in fiscal 1999, to terminate the arrangement with
Q-Lube. All anticipated costs of liquidating the joint venture were accrued in
fiscal 1999 and did not have a material impact on results of operations.
Centralized Control
Unlike many of its competitors, the Company operates, rather than
franchises, all of its stores (except for the 14 dealer locations). Monro
believes that direct operation of stores enhances its ability to compete by
providing centralized control of such areas of operations as service quality,
store appearance, promotional activity and pricing. A high level of technical
competence is maintained throughout the Company as Monro requires, as a
condition of employment, that employees participate in comprehensive training
programs to keep pace with technology changes. Additionally, purchasing,
distribution, merchandising, advertising, accounting and other store support
functions are centralized in the Company's corporate headquarters in Rochester,
New York, and are provided through the Company's subsidiary, Monro Service
Corporation. The centralization of these functions results in efficiencies and
gives management the ability to closely monitor and control costs.
Comprehensive Training
The Company provides ongoing, comprehensive training to its store
employees. Monro believes that such training provides a competitive advantage by
enabling its technicians to provide quality service to its customers in all
areas of undercar repair. (See additional discussion under "Store Operations:
Store Personnel and Training.")
STORE OPERATIONS
Store Format
The typical format for a Monro repair store is a free-standing building
of approximately 4,500 square feet consisting of a sales area, six
fully-equipped service bays and a parts storage area, with a parking lot with
space for approximately 17 cars. Acquired Speedy stores average five bays per
location with approximately 4,200 square feet. Most service bays are equipped
with aboveground electric vehicle lifts. The typical Company store carries
approximately $60,000 of inventory and approximately 3,000 stock keeping units
("SKUS"). Generally, each store is located within 35 miles of a "key" store
which carries approximately 30% more inventory than a typical store and serves
as a mini-distribution point of slower moving inventory for other stores in its
area.
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The stores generally are situated in high-visibility locations in
suburban areas, major metroplitan areas or small towns and offer easy customer
access. The typical store is open from 7:30 a.m. to 7:00 p.m. on Monday through
Friday and from 7:30 a.m. to 5:00 p.m. on Saturday.
In fiscal 1996, the Company opened its first "small town" concept store
in Saranac Lake, New York. The prototypical "small town" concept store is a
four, five or six bay store located in a town with a population of 15,000 people
or less. In the past, the Company generally did not enter this type of market
because it could not support the typical six bay store. However, with few or no
major competitors and a lower cost of entry, the small markets represent an
attractive new growth avenue for the Company.
Inventory Control and Management Information System
All Monro and Acquired Speedy stores are linked to the central office
and warehouse by a computerized inventory control and electronic POS management
information system, which enables the Company to collect sales and operational
data on a daily basis, to adjust store pricing to reflect local conditions and
to control inventory on a "real-time" basis. Additionally, each store has access
through the POS system to the inventory carried by the seven stores nearest to
it. Management believes that this feature improves customer satisfaction and
store productivity by reducing the time required to locate out-of-stock parts.
Quality Control and Warranties
To maintain quality control, the Company conducts audits to rate its
employees' telephone sales manner and the accuracy of pricing information given.
All headquarters management personnel participate in the Company's
day-in-the-store program by working in a store under the direction of the store
manager, to better understand the latest developments at the store level.
The Company has a customer survey program to monitor customer attitudes
toward service quality, friendliness, speed of service, and several other
factors for each store. This program includes four survey mailings per store
annually. (Each mailing consists of approximately 90 surveys.) Customer concerns
are addressed via letter and personal follow-up by field management.
The Company uses a "Double Check for Accuracy Program" as part of its
routine store procedures. This quality assurance program requires that a
technician and supervisory-level employee independently inspect a customer's
vehicle, diagnose and document the necessary repairs, and agree on an estimate
before presenting it to a customer. This process is formally documented on the
written estimate by store personnel.
The Company is an active member of the Motorist Assurance Program
(MAP). MAP is an organization of automotive retailers, wholesalers and
manufacturers which was established as part of an industry-wide effort to
address the ethics and business practices of companies in the automotive repair
industry. Participating companies are committed to improving consumer confidence
and trust in the automotive repair industry by adopting "Uniform Inspection
Guidelines" and "Standards of Service" established by MAP. These "Standards of
Service" are posted in Monro and Speedy stores and serve to provide consistent
recommendations to customers in the diagnosis and repair of a vehicle. Monro was
the first major automotive chain to apply for MAP accreditation for all of its
stores.
Monro offers limited warranties on substantially all of the products
and services that it provides. The Company believes that these warranties are
competitive with industry practices, and serve as a marketing tool to increase
repeat business at the stores.
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Store Personnel and Training
The Company supervises store operations primarily through its
divisional vice presidents who oversee zone managers who, in turn, oversee
market managers. The typical store is staffed by a store manager and four to six
technicians, one of whom serves as the assistant manager. All store managers
receive a base salary, and assistant managers receive hourly compensation. In
addition, store managers and assistant managers may receive other compensation
based on their store's customer relations, gross profit, labor cost controls,
safety, sales volume and other factors via a quarterly bonus based on
performance in these areas.
Monro believes that the ability to recruit and retain qualified
technicians is an important competitive factor in the automotive repair
industry, which has historically experienced a high turnover rate. Monro makes a
concerted effort to recruit individuals who will have a long-term commitment to
the Company and offers an hourly rate structure and additional compensation
based on productivity; a competitive benefits package, including health, life
and disability insurance; profit-sharing and pension plans; as well as the
opportunity to advance within the Company. Most of the Company's managers and
market managers started with Monro or Speedy as technicians.
Most of the Company's new technicians join the Company in their early
twenties as trainees or apprentices. As they progress, they are promoted to
technician and eventually master technician, the latter requiring ASE
certification in both brakes and suspension. The Company offers a tool purchase
program through which trainee technicians can acquire their own set of tools.
The Company also will reimburse technicians for the cost of ASE certification
registration fees and test fees and encourages all technicians to become
certified by providing a higher hourly wage rate following their certification.
The Company's training department conducts in-house technical clinics
for store personnel and management training programs for new store managers, and
coordinates attendance at technical clinics offered by the Company's vendors.
Each Monro store maintains a library of 20 to 25 instructional videos. The
Company issues technical bulletins to all stores on innovative or complex repair
processes, and maintains a centralized data base for technical repair problems.
In addition, the Company has established a telephone technical hotline to
provide assistance to store personnel in resolving problems encountered while
diagnosing and repairing vehicles. The help line is available during all hours
of store operation.
In fiscal 1997, the Company established Monro University to provide
comprehensive training and development of current and prospective store
managers. Training is accomplished through an intensive one-week instructional
program at a separate facility in Rochester, New York. Topics covered include
sales training, customer service, time management, human resources (counseling,
recruiting, interviewing, etc.), leadership, inventory control and financial
management. The courses employ a variety of instructional techniques including
video taping, role playing, and testing. Several of the courses are conducted by
officers of the Company, whose first priority is instilling the Company's
culture, philosophies and values into the individuals who hold these important
positions. The one week class follows a field training segment which ranges from
two to six weeks depending upon the individual's level of experience. Monro
management is closely tracking the performance of the managers who have
completed the class. Early indications are that the program will lead to
increased store profitability as well as longer retention of the store managers.
PURCHASING AND DISTRIBUTION
The Company, through its wholly-owned subsidiary Monro Service
Corporation, selects and purchases parts and supplies for all (both Monro and
the Acquired Speedy) Company-operated stores on a centralized basis through an
automatic replenishment system. Although purchases outside the centralized
system ("outside purchases") are made when needed at the store level, these
purchases are low by industry standards, and accounted for approximately 14% of
all parts used in fiscal 1999. This includes the impact of the Acquired Speedy
stores which historically have had higher outside purchases than Monro stores.
In fiscal 1998, Monro stores purchased approximately 12% of their parts outside
their centralized distribution system.
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The Company's ten largest vendors accounted for approximately 44% of
its parts purchases, with the largest vendor accounting for approximately 15% of
total purchases in fiscal 1999. The Company purchases parts from over 100
vendors and has no significant long-term contracts with any vendor. Management
believes that the Company's relationships with vendors are excellent and that
alternative sources of supply exist, at comparable cost, for substantially all
parts used in the Company's business. The Company routinely obtains bids from
vendors to ensure it is receiving competitive pricing and terms.
Most parts are shipped by vendors to the Company's warehouse facility
in Rochester, New York, and are distributed to stores through the
Company-operated tractor/trailer fleet. Most stores are replenished once every
week from the warehouse, and such replenishment fills, on the average, 97% of
all items ordered by the stores' automatic POS-driven replenishment system. The
warehouse stocks approximately 6,700 SKUs.
In February 1999, the Company signed a purchasing agreement with the
National Automotive Parts Association ("NAPA") of Atlanta, Georgia. Effective
March 1, 1999, NAPA became the Company's primary outside purchases vendor for
auto parts at 90% of its locations. The agreement will enable the Company to
reduce costs on outside purchases through uniform and competitive pricing on all
purchases made at NAPA's 530 locations participating in the program. In
addition, the arrangement will streamline the Company's billing process on
outside purchases with electronic data interface and will provide the Company's
automotive technicians with access to NAPA's extensive "in-field" training
courses.
COMPETITION
The Company competes in the retail automotive service industry. This
industry is generally highly competitive and fragmented, and the number, size
and strength of competitors varies widely from region to region. The Company
believes that competition in this industry is based on customer service and
reputation, store location, name awareness and price. Monro's primary
competitors include national and regional undercar specialty and general
automotive service chains, both franchised and company-operated; car
dealerships; and, to a lesser extent, gas stations and independent garages.
Monro considers Midas International Corp., Meineke Discount Mufflers Inc. and
CarX to be direct competitors. In most of the new markets that the Company has
entered, at least one competitor was already present. In identifying new
markets, the Company analyzes, among other factors, the intensity of
competition. (See "Expansion Strategy" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations.")
EMPLOYEES
As of March 31, 1999, Monro had 2,811 employees, of whom 2,603 were
employed in the field organization, 63 were employed at the warehouse and 145
were employed at the Company's corporate headquarters. Monro's employees are not
members of any union. The Company believes that its relations with its employees
are good.
REGULATION
The Company stores new oil and generates and handles used automotive
oils and certain solvents, which are disposed of by licensed third-party
contractors. Thus, the Company is subject to a number of federal, state and
local environmental laws including the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"). In addition, the United States
Environmental Protection Agency (the "EPA"), under the Resource Conservation and
Recovery Act ("RCRA"), and various state and local environmental protection
agencies regulate the Company's handling and disposal of waste. The EPA, under
the Clean Air Act, also regulates the installation of catalytic converters by
the Company and all other repair stores by periodically spot checking jobs and
has the power to fine businesses that use improper procedures or materials. The
EPA has the authority to impose sanctions, including civil penalties up to
$25,000 per violation (or up to $25,000 per day for certain willful violations
or failures to cooperate with authorities), for violations of RCRA and the Clean
Air Act. The Company is subject to various laws and regulations concerning
workplace safety, zoning and other matters relating to its business. The Company
believes that it is in substantial compliance with all applicable environmental
and other laws and regulations, and that the cost of such compliance is not
material to the Company.
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The Company is environmentally conscious, and takes advantage of
recycling opportunities both at its headquarters and at its stores. Cardboard,
plastic shrink wrap and parts' cores are returned to the warehouse by the stores
on the weekly stock truck. There, they are accumulated for sale to recycling
companies or returned to parts manufacturers for credit.
SEASONALITY
Although the Company's business is not highly seasonal, customers do
require more undercar service during the period of March through October than
the period of November through February, when miles driven tend to be lower. As
a result, sales and profitability are lower during the latter period.
ITEM 2. PROPERTIES
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The Company, through Monro Service Corporation, owns its
office/warehouse facility of approximately 95,000 square feet, which is located
on 12.7 acres of land in Holleder Industrial Park, in Rochester, New York.
In connection with the Speedy Acquisition, the Company financed most of
the real estate formerly owned by SMK Speedy International Inc. via a synthetic
lease (off-balance sheet) agreement. This lease was part of a new $135 million
secured credit facility from a syndication of lenders. (See additional
discussion under "Capital Resources and Liquidity.") Of the total number of
Company-operated Acquired Speedy locations, 26 buildings on land-leased sites
and 83 parcels of land and buildings on formerly owned locations are currently
leased under this arrangement.
Of Monro's 524 Company-operated stores at March 31, 1999, 107 were
owned, 309 were leased and for 108, the land only was leased, including stores
under the synthetic lease arrangement. In general, the Company leases store
sites for a ten-year period with several five-year renewal options. Giving
effect to all renewal options, over 85% of the operating leases (333 stores)
expire after 2007. Certain of the leases provide for contingent rental payments
if a percentage of annual gross sales exceeds the base fixed rental amount. The
highest contingent percentage rent of any lease is 7%, and no such lease has
adversely affected profitability of the store subject thereto. Certain officers
and directors of the Company or members of their families are the lessors, or
have interests in entities that are the lessors, with respect to 41 of the
leases. No related party leases, other than renewals or modifications of leases
on existing stores, have been entered into since May 1989, and no new related
party leases are contemplated.
The office and warehouse facility and 31 of the owned stores are
subject to mortgages held by commercial banks or private investors. As of March
31, 1999, the outstanding amount under the mortgage on the headquarters office
and warehouse facility was $2.5 million and the aggregate outstanding amount
under the permanent mortgages on 31 of the owned stores was $8.8 million. There
was also $.7 million outstanding under a mortgage held by the City of Rochester,
New York, secured by the land on which the headquarters office and warehouse is
located, and a term loan of $.4 million secured by the headquarters facility.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
The Company is not a party or subject to any legal proceedings other
than certain routine claims and lawsuits that arise in the normal course of its
business. The Company does not believe that such routine claims or lawsuits,
individually or in the aggregate, will have a material adverse effect on its
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1999.
10
<PAGE> 11
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY AS OF JUNE 1, 1999
- --------------------------------------------------------------
The following persons are the executive officers of the Company, having
been elected by and serving at the discretion of the Board of Directors of the
Company:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Robert G. Gross 41 President and Chief Executive Officer
G. Michael Cox 46 Executive Vice President-Store Operations
Robert W. August 47 Sr. Vice President-Store Support, and Secretary
Catherine D'Amico 43 Sr. Vice President-Finance, Chief Financial Officer
and Treasurer
Thomas J. Budreau 42 Divisional Vice President-Eastern Operations
Christopher R. Hoornbeck 48 Divisional Vice President-Western Operations
</TABLE>
The following is a brief account of the business experience of each
of the executive officers of the Company:
Robert G. Gross has been President and Chief Executive Officer since
January 1999. Prior to joining the Company, Mr. Gross served as Chairman and
Chief Executive Officer of Tops Appliance City, Inc. from 1995 to December 1998.
From 1992 to 1994, Mr. Gross served as President and Chief Operating Officer of
Eye Care Centers of America, Inc. From 1990 to 1992, Mr. Gross held other
executive positions with Eye Care Centers of America, Inc. Prior to 1990, he
held various other senior level and management positions. Mr. Gross has an
M.B.A. from the State University of New York at Buffalo, and is a certified
public accountant.
G. Michael Cox has been Executive Vice President-Store Operations
since March 1997 and Senior Vice President-Store Operations from January 1995
to March 1997. Prior to joining the Company, Mr. Cox was Director of Affiliated
Dealer Operations for Bridgestone/Firestone, Inc. from 1993 to January 1995,
Director of Corporate Accounts for Bridgestone/Firestone, Inc. from 1992 to 1993
and a Zone Manager for Bridgestone/Firestone, Inc. from 1990 to 1992. Mr. Cox
held various other management positions for Bridgestone/Firestone, Inc. from
1976 to 1990.
Robert W. August has been Senior Vice President-Store Support since
October 1996, Secretary since July 1984 and a director since June 1982. Mr.
August was Senior Vice President-Marketing from May 1992 to October 1996, Vice
President-Marketing from July 1989 to May 1992, Executive Vice President from
1984 to July 1989, and has worked for Monro in various other capacities since
1968.
Catherine D'Amico has been Senior Vice President-Finance, Chief
Financial Officer and Treasurer since August 1993. Ms. D'Amico, a certified
public accountant, was previously a Senior Audit Manager with Price Waterhouse
LLP in Rochester, New York and was affiliated with such firm from 1978 to 1993.
11
<PAGE> 12
Thomas J. Budreau has been Divisional Vice President-Eastern
Operations since December 1998. From October 1995 to November 1998, Mr. Budreau
was Vice President-Eastern Operations. Prior to joining the Company, Mr. Budreau
was the National Auto Express Service Manager for Montgomery Ward & Co.,
Incorporated from March 1994 to October 1995. From November 1990 to March 1994,
Mr. Budreau was a Regional Auto Express Manager and from March 1988 to November
1990, a District Manager for Montgomery Ward & Co., Incorporated. From 1975 to
March 1988, Mr. Budreau held various other management positions with Montgomery
Ward & Co., Incorporated.
Christopher R. Hoornbeck has been Divisional Vice President-Western
Operations since December 1998. From October 1996 to November 1998, Mr.
Hoornbeck was a Zone Manager and has worked for Monro in various other
capacities since 1973.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
- -----------------------------------------------------------
STOCKHOLDER MATTERS
-------------------
Market Information
The Common Stock is traded on the over-the-counter market and is quoted
on the NASDAQ National Market System under the symbol "MNRO." The following
table sets forth, for the Company's last two fiscal years, the range of high and
low sales prices on the NASDAQ National Market System for the Common Stock:
<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998
----------- -----------
QUARTER ENDED HIGH LOW HIGH LOW
------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
June 30, 16 7/8 13 1/4 17 11/16 14 5/8
September 30, 15 3/4 9 1/2 17 3/8 13 9/16
December 31, 10 3/8 5 5/8 15 13
March 31, 9 3/16 6 3/4 15 15/16 13 1/4
</TABLE>
Amounts in these tables have been adjusted to reflect the five percent
stock dividends paid in June 1998 and August 1997. No stock dividend was
declared for fiscal 1999.
Holders
At June 1, 1999, the Company's Common Stock was held by approximately
2,500 shareholders of record or through nominee or street name accounts with
brokers.
Dividends
While the Company has not paid any cash dividends on the Common Stock
since its inception, any future determination as to the payment of dividends
will be at the discretion of the Board of Directors and will depend on the
Company's financial condition, results of operations, capital requirements,
compliance with charter and contractual restrictions, and such other factors as
the Board of Directors deems relevant.
13
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
The following table sets forth selected financial and operating data of the
Company for each year in the five-year period ended March 31, 1999. The
financial data and certain operating data have been derived from the Company's
financial statements which have been examined by PricewaterhouseCoopers LLP,
independent accountants. This data should be read in conjunction with the
Financial Statements and related notes included under Item 8 of this report and
in conjunction with other financial information included elsewhere in this Form
10-K.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Sales ...................................... $ 193,458 $ 154,294 $ 141,169 $ 117,104 $ 109,098
Cost of sales including distribution
and occupancy costs ..................... 115,117 87,510 78,792 66,236 59,725
--------- --------- --------- --------- ---------
Gross profit ............................... 78,341 66,784 62,377 50,868 49,373
Operating, selling, general and
administrative expenses ................. 64,062 46,120 41,749 35,299 32,304
--------- --------- --------- --------- ---------
Operating income ........................... 14,279 20,664 20,628 15,569 17,069
Interest expense - net ..................... 5,600 3,829 3,224 2,637 1,939
Other expense - net ........................ 730 331 475 330 22
--------- --------- --------- --------- ---------
Income before provision for income taxes ... 7,949 16,504 16,929 12,602 15,108
Provision for income taxes ................. 3,203 6,650 6,738 4,988 6,024
--------- --------- --------- --------- ---------
Net income ................................. $ 4,746 $ 9,854 $ 10,191 $ 7,614 $ 9,084
========= ========= ========= ========= =========
Earnings per share (a) Basic .............. $ .57 $ 1.19 $ 1.24 $ .96 $ 1.16
========= ========= ========= ========= =========
Diluted $ .53 $ 1.09 $ 1.13 $ .85 $ 1.02
========= ========= ========= ========= =========
Weighted average number of Common Stock
Shares and equivalents (a) Basic ....... 8,317 8,256 8,187 7,949 7,808
Diluted...... 8,997 9,016 9,009 8,906 8,913
SELECTED OPERATING DATA (c):
Sales growth:
Total ................................... 25.4% 9.3% 20.5% 7.3% 16.5%
Comparable store (b) .................... (1.3%) (0.2%) 7.9% (3.9%) 6.1%
Stores open at beginning of year ........... 350 313 274 232 202
Stores open at end of year ................. 524 350 313 274 232
Capital expenditures ....................... $ 23,310 (d) $ 25,391 $ 27,562 $ 25,581 $ 20,299
BALANCE SHEET DATA (AT PERIOD END):
Net working capital ........................ $ 18,168 $ 13,517 $ 9,579 $ 8,891 $ 6,863
Total assets ............................... 202,934 159,088 146,267 120,055 93,042
Long-term debt ............................. 78,672 54,102 54,850 45,459 28,749
Shareholders' equity ....................... 80,951 76,558 66,625 55,887 48,169
</TABLE>
(a) Earnings per share for each fiscal year was computed by dividing net
income by the weighted average number of shares of Common Stock and
Common Stock equivalents outstanding during the respective year. All
share and per share information has been adjusted to give retroactive
effect to the five percent stock dividends paid in June 1998, August
1997 and in August 1996.
(b) Comparable store sales data is calculated based on the change in sales
of only those stores open as of the beginning of the preceding fiscal
year.
(c) Includes Company-operated stores only--no dealer locations.
(d) Amount does not include the funding of the Speedy acquisition.
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
The following table sets forth income statement data of the Company expressed as
a percentage of sales for the fiscal years indicated:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Sales .................................................. 100.0% 100.0% 100.0%
Cost of sales including distribution and occupancy costs 59.5 56.7 55.8
----- ----- -----
Gross profit ........................................... 40.5 43.3 44.2
Operating, selling, general and administrative expenses 33.1 29.9 29.6
----- ----- -----
Operating income ....................................... 7.4 13.4 14.6
Interest expense - net ................................. 2.9 2.5 2.3
Other expense - net .................................... 0.4 0.2 0.3
----- ----- -----
Income before provision for income taxes ............... 4.1 10.7 12.0
Provision for income taxes ............................. 1.6 4.3 4.8
----- ----- -----
Net income ............................................. 2.5% 6.4% 7.2%
===== ===== =====
</TABLE>
FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K which are
not historical facts, including (without limitation) in particular, statements
made in this Item and in "Item 1 - Business," may contain forward-looking
statements that are subject to important factors that could cause actual results
to differ materially from those in the forward-looking statement, including
(without limitation) product demand, the effect of economic conditions, the
impact of competitive services, products and pricing, product development, parts
supply restraints or difficulties, industry regulation and the continued
availability of capital resources and financing and other risks set forth or
incorporated herein and in the Company's Securities and Exchange Commission
filings. The Company does not undertake to update any forward-looking statement
that may be made from time to time by or on behalf of the Company.
FISCAL 1999 AS COMPARED TO FISCAL 1998
On September 17, 1998, the Company completed the acquisition of 189
Company-operated and 14 dealer-operated Speedy stores, all located in the United
States. Sales for the Speedy fiscal year ended January 3, 1998 for the 189
Company-operated stores, some of which were opened only part of the year, were
approximately $86 million.
Although the 203 Speedy stores are in the same general markets in which
the Company competes, the Monro and Speedy locations are mainly situated in
non-overlapping areas. While Monro has tended to open stores in suburban and
small town locations, Speedy has tended to locate in major metropolitan areas.
Therefore, the combination represents an excellent geographic fit.
Prior to the acquisition, the Speedy stores were experiencing
significant declining comparable store sales and EBITDA margins. The Company
believes that the attention of Speedy's management was diverted to the expansion
of its European operations. In addition, Speedy's management did not respond to
the declining exhaust business by offering other services, as had Monro.
15
<PAGE> 16
The acquisition had a dilutive effect on earnings in the 1999 fiscal
year. The weakness in Speedy's sales from September 1998 through March 1999
represents a continuation of a decline which was most pronounced prior to the
Acquisition in September 1998. The conversion of systems and inventory during
the third quarter at all Company-operated Acquired Speedy stores also impacted
the performance of these locations. These conversions involved the installation
of new point-of-sale systems in the Acquired Speedy stores, as well as the
return of slow moving items to manufacturers and restocking with more popular
parts, representing approximately half of the inventory in the Speedy stores.
The new point-of-sale systems put all of the Company-operated Acquired Speedy
stores on Monro's centralized distribution and automatic replenishment system,
whereas, previously, each store received parts directly from the various
manufacturers. Although essential to margin improvement in future periods, this
conversion process was very disruptive to the operations of the Acquired Speedy
stores in the third quarter. The Company did experience a substantial reduction
in cost of goods in the Acquired Speedy stores between the third and fourth
quarters, through reduced outside purchases and lower acquisition costs from
vendors as parts were distributed through the Company's centralized distribution
system.
With moderately improved sales and further cost reductions, management
believes the acquired operations should begin to contribute to earnings per
share during fiscal 2000, and should be increasingly accretive in subsequent
years.
Sales for fiscal 1999 increased $39.2 million, or 25.4% over sales for
fiscal 1998. The increase was due to an increase of approximately $42.5 million
for stores opened since April 1, 1997, including $31.6 million from the
newly-acquired Speedy stores, partially offset by a comparable store sales
decrease of 1.3%. During the year, 210 stores were opened and 36 were closed. At
March 31, 1999, the Company had 524 stores in operation.
Management believes that the comparable store sales decrease resulted
in part, from a decline in vehicle population in the five to nine year old
segment, reflecting the early 1990's recession in new car sales. This segment
represents the prime repair age of vehicles and is the target market for the
Company's services. (As a result of increased car sales in the mid-to-late
1990s, the 5 to 9 year old segment will begin to increase in calendar 2000.) In
addition, the manufacturers' use of stainless steel mufflers on almost all new
cars has resulted in a longer muffler life and declining exhaust sales. However,
management believes that these declines were offset, in part, by positive
industry factors including an increase in the average age of vehicles, a
decrease in the number of service bays, an increase in the number of registered
vehicles, and a shift in the consumer mentality from "do-it-yourself" to
"do-it-for-me" caused by the increased complexity of cars and aging population.
Additionally, management believes that its strategy of product diversification
and expanded manager training assisted in minimizing the comparable store sales
decline vis-a-vis its competitors.
The Company introduced "Scheduled Maintenance" services in its stores
late in the fourth quarter of fiscal 1998. These services are required by
vehicle manufacturers to comply with warranty schedules, and are offered by
Monro in a more convenient and cost competitive fashion than auto dealers can
provide. Management believes that these services will make a positive
contribution to comparable store sales in future years, and help to mitigate the
aforementioned challenges to comparable store sales which negatively impacted
fiscal 1998 and 1999.
16
<PAGE> 17
Gross profit for fiscal 1999 was $78.3 million or 40.5% of sales, as
compared with $66.8 million or 43.3% of sales for fiscal 1998. The reduction in
gross profit as a percentage of sales is primarily attributable to an increase
in occupancy costs as a percent of sales reflecting the impact of fixed costs
(such as rent and depreciation) against a decline in comparable store sales.
Additionally, labor costs increased over the prior year. During periods of
slower sales when technicians may not be fully productive, they receive a
minimum base-level wage which increases labor cost as a percent of sales.
Outside purchases also increased as a percent of sales due to continued
parts proliferation and the tendency of store personnel to reach for business
outside of the normal, recurring work for which the stores stock parts.
Operating, selling, general and administrative expenses for fiscal 1999
increased by $17.9 million to $64.1 million and, as a percentage of sales,
increased by 3.2% as compared to fiscal 1998. Approximately 1.4 percentage
points of the increase can be attributed to direct costs associated with the
Acquired Speedy stores as well as acquisition-related activities. The remainder
is primarily due to increases in fixed, store-related operating and support
costs (such as store supervision and utilities) and indirect costs associated
with the Acquired Speedy stores against negative comparable store sales.
The Company has taken proactive steps to reduce corporate overhead and
field supervision. Additionally, the Company is on target, and in some cases
ahead of schedule, with regard to its planned reduction in store level costs at
the Acquired Speedy stores from their previous operating levels. For example,
the Company eliminated coffee service; cable TV service; lawn service (supplying
lawn mowers to the stores instead); and cleaning service (which is now done by
store personnel). Additionally, the Company's uniform contract has been
renegotiated, lowering costs chain-wide; supply purchases have been reduced
through better controls; and waste costs have been reduced through recycling.
Since the Company did not attain the minimum required percentage of
targeted profit performance, employee bonus payments and profit sharing
contributions were significantly reduced from previous, more profitable years.
Operating income in fiscal 1999 of $14.3 million, or 7.4% of sales,
decreased by $6.4 million over the fiscal 1998 level of $20.7 million due to the
factors discussed above.
Interest expense, net of interest income, increased as a percent of
sales from 2.5% in fiscal 1998 to 2.9% in fiscal 1999. The weighted average debt
outstanding for the year ended March 31, 1999 was approximately $18 million
greater than the amount outstanding for the year ended March 31, 1998.
Other expense, net, at .4% of sales for the year ended March 31, 1999
increased from .2% of sales for the year ended March 31, 1998. This increase was
primarily due to amortization of goodwill from the Speedy acquisition.
The Company's effective tax rate was 40.3% of pre-tax income in fiscal
1999 and fiscal 1998.
Net income for fiscal 1999 decreased by $5.1 million or 51.8% as
compared to fiscal 1998 due to the factors discussed above.
17
<PAGE> 18
FISCAL 1998 AS COMPARED TO FISCAL 1997
Sales for fiscal 1998 increased $13.1 million, or 9.3% over sales for
fiscal 1997. The increase was due to an increase of approximately $13.6 million
for stores opened since April 1, 1996, partially offset by a comparable store
sales decrease of .2%. During the year, 39 stores were opened and two were
closed. At March 31, 1998, the Company had 350 stores in operation.
Management believes that the comparable store sales decrease resulted
in part, from a decline in vehicle population in the five to nine year old
segment, reflecting the early 1990's recession, as well as the continuing effect
of declining exhaust sales related to manufacturers' use of stainless steel
mufflers on almost all new cars. However, management believes that these
declines were offset, in part, by positive industry factors including an
increase in the average age of vehicles, a decrease in the number of service
bays, an increase in the number of registered vehicles, and a shift in the
consumer mentality from "do-it-yourself" to "do-it-for-me" caused by the
increased complexity of cars. Additionally, management believes that its
strategy of product diversification and expanded manager training assisted in
minimizing the comparable store sales decline vis-a-vis its competitors.
Gross profit for fiscal 1998 was $66.8 million or 43.3% of sales, as
compared with $62.4 million or 44.2% of sales for fiscal 1997. The reduction in
gross profit as a percentage of sales is primarily attributable to an increase
in occupancy costs as a percent of sales reflecting the impact of fixed costs
(such as rent and depreciation) against a decline in comparable store sales.
Additionally, labor costs increased over the prior year. During periods of
slower sales when technicians may not be fully productive, they receive a
minimum base-level wage which increases labor cost as a percent of sales.
Operating, selling, general and administrative expenses for fiscal 1998
increased by $4.4 million to $46.1 million and, as a percentage of sales,
increased by .3% as compared to fiscal 1997. The increase in total dollars
expended is due, among other things, to additional supervision and advertising
expenses in newly added stores and regions, greater costs related to the
Company's continuing investment in training, and additional store expenses
related to the growth in the number of stores. Although expenses increased
during fiscal 1998 as compared to fiscal 1997, the growth rate of these expenses
(10.5%) was lower than the percentage increase in the number of stores (12.5%)
due to ongoing, concerted efforts by management to control costs and operate
within budgetary constraints. Accounting for a portion of the cost reductions
were decreases in bonus and profit sharing expenses. Since the Company did not
attain the minimum required percentage of targeted profit performance, employee
bonus payments were significantly reduced and were eliminated for executive
officers, and profit sharing contributions were reduced. In addition, there was
an increase, as a percent of sales, in the amount of cooperative advertising
credits which the Company received during fiscal 1998 as compared to the
previous year. Management was effective in improving various programs negotiated
with vendors.
Operating income in fiscal 1998 of $20.7 million, or 13.4% of sales,
increased by $.1 million over the fiscal 1997 level of $20.6 million due to the
factors discussed above.
Interest expense, net of interest income, increased as a percent of
sales from 2.3% in fiscal 1997 to 2.5% in fiscal 1998. The weighted average debt
outstanding for the year ended March 31, 1998 was approximately $8.0 million
greater than the amount outstanding for the year ended March 31, 1997. This was
partially offset by a decrease in the weighted average interest rate of .3 of a
percentage point.
Other expense, net, at .2% of sales for the year ended March 31, 1998
decreased from .3% of sales for the year ended March 31, 1997. In the prior
year, this line included carrying costs for the Company's former warehouse
facility which was sold in the fourth quarter of fiscal 1997.
18
<PAGE> 19
The Company's effective tax rate was 40.3% of pre-tax income in fiscal
1998, as compared to 39.8% for fiscal 1997.
Net income for fiscal 1998 decreased by $.3 million or 3.3% as compared
to fiscal 1997 due to the factors discussed above.
CAPITAL RESOURCES AND LIQUIDITY
Capital Resources
Other than the funding of the Speedy acquisition, the Company's primary
capital requirements for fiscal 1999 were the funding of its new store expansion
program and the upgrading of facilities and systems in existing stores, totaling
$24.5 million, and principal payments on long-term debt and capital leases of
$119.7 million.
In both fiscal years 1999 and 1998, these capital requirements were
primarily met by cash flow from operations and through the use of a Revolving
Credit facility. In fiscal years 1999 and 1998, the Company also completed
sale/leaseback transactions totaling $8.0 and $10.3 million, respectively.
In fiscal 2000, the Company intends to open between 10 and 15 new
stores. Total capital required to open a new store ranges, on average (based
upon the last three fiscal years' openings - excluding the Acquired Speedy
stores), from $278,000 to $881,000 depending on whether the store is leased,
owned or land leased. Management believes that the Company has sufficient
resources available (including cash and equivalents, cash flow from operations
and bank financing) to expand its business as currently planned for the next
several years.
Liquidity
Concurrent with the closing of the Speedy acquisition in September
1998, the Company obtained a new $135 million secured credit facility from a
syndication of lenders led by The Chase Manhattan Bank. Approximately $55
million was borrowed under this facility to pay the all-cash purchase price,
including transaction expenses of approximately $4 million. In addition, the
Company refinanced approximately $35 million of indebtedness through the new
credit facility, with the balance of the facility available for future working
capital needs. More specifically, the new financing structure consists of a $25
million term loan (all of which was outstanding at March 31, 1999), a $75
million Revolving Credit facility (of which approximately $42 million was
outstanding at March 31, 1999), and synthetic lease (off-balance sheet)
financing for a significant portion of the Speedy real estate, totaling $35
million. The loans bear interest at the prime rate or other LIBOR-based rate
options tied to the Company's financial performance. The Company must also pay a
facility fee on the unused portion of the commitment.
The credit facility has a five-year term. Interest only is payable
monthly on the Revolving Credit and synthetic lease borrowings throughout the
term. In addition to monthly interest payments, the $25 million term loan
requires quarterly principal payments beginning September 30, 1999.
The term loan and Revolving Credit Facility are secured by all accounts
receivable, inventory and other personal property. The Company has also entered
into a negative pledge agreement not to encumber any real property, with certain
permissible exceptions. The synthetic lease is secured by the real property to
which it relates.
19
<PAGE> 20
Within the aforementioned $75 million Revolving Credit facility, the
Company has available a subfacility of $7 million for the purpose of issuing
stand-by letters of credit. The line requires fees aggregating 2.25% annually of
the face amount of each stand-by-letter of credit, payable quarterly in advance.
A total of $1.7 million of letters of credit were outstanding under this line at
March 31, 1999.
At March 31, 1999, the Company had outstanding $1.8 million in
principal amount of its 10.65% Senior Notes due 2000 (the "Senior Notes") with
Massachusetts Mutual Life Insurance Company pursuant to a Senior Note Agreement.
The sixth and final annual installment of principal of $1.8 million was paid on
April 1, 1999.
During fiscal 1995, the Company purchased 12.7 acres of land for $.7
million from the City of Rochester, New York, on which its office/warehouse
facility is located. The City has provided financing for 100 percent of the cost
of the land via a 20-year non-interest bearing mortgage, all due and payable in
2015.
To finance its office/warehouse building, the Company obtained
permanent mortgage financing consisting of a 10-year mortgage for $2.9 million
and an eight-year term loan in the amount of $.7 million. Both obligations
require monthly interest payments, and each may be converted from a floating
rate to a fixed rate loan before the last two years of their respective terms.
The mortgage requires equal monthly installments of principal based on a 20-year
amortization period, and the term loan requires constant monthly payments of
principal to fully amortize the debt over the eight-year term. The Company
entered into an interest rate swap agreement with a major financial institution
which effectively fixes the interest rate over the terms of the aforementioned
agreements at 7.15%.
Any of the Mortgage Notes Payable, secured by store properties, may be
converted from a floating rate to a fixed rate loan during the first five years
of its seven-year term. Interest is payable monthly. Equal monthly installments
of principal are required based on 20-year amortization periods.
Certain of the Company's long-term debt agreements require, among other
things, the maintenance of specified interest and rent coverage ratios and
minimum amounts of tangible net worth. They also contain requirements concerning
Y2K compliance and restrictions on dividend payments. The Company is in
compliance with these requirements at March 31, 1999. These agreements permit
mortgages and specific financing lease arrangements with other parties with
certain limitations.
As of March 31, 1999, the Company had cash and equivalents of $5.6
million.
20
<PAGE> 21
YEAR 2000
As the year 2000 approaches, the Company, along with other companies,
could experience potentially serious operational problems, since many computer
programs that were developed in the past may not properly recognize calendar
dates beginning with the year 2000. Further, there are embedded chips contained
within equipment that may be date sensitive.
Plans:
The Company's overall plan for dealing with the Year 2000 problem
covers Information Technology ("IT") systems, non-IT systems, and third party
providers. The Company has established a dedicated Year 2000 team to lead the
Company's activities relating to its Year 2000 issues. The team regularly
updates senior management, including the Company's Chief Executive and Chief
Financial Officers, as well as the Board of Directors, as to the progress under
the Year 2000 Remediation Plan. The Company's current state of readiness with
respect to each of these elements is discussed below.
1.) All IT Systems that the Company considers to be critical at this
time have been evaluated for Year 2000 problems. In connection with this
process, the Company has developed detailed plans that establish the following
phases of work to be done for each major area:
1.) An assessment of all systems and equipment,
2.) Development of detailed workplans and timelines
for remediation,
3.) Remediation/modification,
4.) Testing and validation,
5.) Acceptance and deployment,
6.) Independent validation and
7.) Contingency planning.
Although the Company has identified seven different phases of the
project, in some cases the phases are done concurrently. For example, certain
component systems may be completely tested and redeployed, while others are
still being remediated. Management of the Company believes these systems will
have been diagnosed, modified, tested and deployed by September 1, 1999.
2.) NON-IT SYSTEMS typically include embedded technology such as
microcontrollers. The Company's non-IT systems include machinery and equipment
in its buildings such as elevators, telephone equipment, HVAC, security and
alarm systems, copiers, fax machines and computerized alignment equipment. The
Company is reviewing these systems for Year 2000 compliance with third party
providers, and believes that full compliance will be achieved by September 1,
1999.
21
<PAGE> 22
3.) The Company uses a variety of third party providers and vendors in
the normal course of conducting its day-to-day operations. Year 2000 problems
may result in a loss of service from these providers/vendors. The Company
believes that loss of electric power, phone, banking or certain outsourced
processing services, as well as a vendor's inability to deliver product on a
timely basis, could have an immediate and critical adverse material impact on
the Company's operations. The Company is contacting each of its major third
party providers and vendors to determine if the provider/vendor is Year 2000
compliant. If a provider is not currently Year 2000 compliant, and its plans to
become Year 2000 compliant are uncertain, then the Company intends to seek other
providers/vendors.
Contingency Plans:
The Company's Year 2000 plans also include the development and
implementation of contingency plans in the event of Year 2000 failures, both
within the Company and by third parties. The plans will identify the specific
actions which will be taken if a critical system or third party service provider
were not Year 2000 compliant. The Company expects to have these plans completed
by December 1, 1999 for all major systems. As discussed above with regard to
third party providers/vendors, if a provider is not currently Year 2000
compliant, and its plans to become Year 2000 compliant are uncertain, then the
Company intends to seek other providers/vendors.
Costs:
The Company estimates that the total costs associated with the Year
2000 effort will be approximately $600,000, the majority of which was expensed
in fiscal 1999. The Company's Year 2000 costs have been, and are expected to be,
funded out of cash flows from operating activities.
Risks:
The failure to correct for Year 2000 problems, either by the Company or
third parties, could result in significant disruptions of the Company's
operations. At this point in time, based upon the progress to date and
information received from third parties, the Company is unable to determine its
most likely worst case scenario. The Company, however, continues to monitor its
internal progress and the progress of third parties in order to efficiently
implement its contingency plans, if necessary.
Certain statements included in this discussion regarding Year 2000
compliance are forward-looking statements as defined in Section 21E of the
Securities Exchange Act of 1934. These statements include management's best
estimates for completion dates for the various phases and testing to be
performed, costs to be spent for compliance, and the risks associated with
non-compliance either by the Company or third parties. These forward-looking
statements are subject to various factors, which may materially affect the
Company's efforts with Year 2000 compliance. Specific factors that might cause
such material differences include, but are not limited to, the availability and
cost of personnel trained in this area, which could cause a change in the
estimated completion date of a particular phase, the ability to locate and
correct all relevant software and embedded components, the compliance of
critical vendors, and similar uncertainties. The Company's assessments of the
effects of Year 2000 on the Company are based, in part, upon information
received from third parties, and the Company's reasonable reliance on that
information. Therefore, the risk that inaccurate information is supplied by
third parties upon which the Company reasonably relied must be considered as a
risk factor that might affect the Company's Year 2000 efforts. The Company is
attempting to reduce the risks by utilizing an organized approach, extensive
testing and allowance of contingency time to address issues identified by tests.
Despite the Company's efforts to address its Year 2000 issues, there can be no
assurances that Year 2000 related failures of the Company's software, or that
Year 2000 related failures by third parties with which the Company interacts,
will not have a material adverse affect on the Company.
22
<PAGE> 23
INFLATION
The Company does not believe its operations have been materially
affected by inflation. The Company has been successful, in many cases, in
mitigating the effects of merchandise cost increases principally through the use
of volume discounts and alternative vendors.
FINANCIAL ACCOUNTING STANDARDS
Effective in fiscal 1997, the Company adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation". As permitted under SFAS 123,
the Company will continue to measure stock-based compensation cost as the excess
of the quoted market price of the Company's common stock at the grant date over
the amount the employee must pay for the stock.
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings Per Share", was issued in February 1997. This Statement establishes
standards for computing and presenting earnings per share ("EPS"), and
simplifies the standards previously found in APB Opinion No. 15 ("APB 15"). It
replaces the presentation of primary EPS with a presentation of basic EPS, and
also requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures. The Company
adopted the Statement in fiscal 1998. Prior periods have been restated to
reflect the new standard.
Effective April 1, 1998, the Company adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 130 ("SFAS
130"), "Reporting Comprehensive Income". This statement establishes standards
for the reporting and displaying of comprehensive income and its components.
This statement requires reporting, by major components and as a single total,
the change in net assets during the period from nonshareholder sources. Adoption
of this standard had an immaterial effect on financial position.
On June 17, 1998 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities" effective for fiscal years
beginning after June 15, 2000. This statement standardizes the accounting for
derivatives and hedging activities and requires that all derivatives be
recognized in the statement of financial position as either assets or
liabilities at fair value. Changes in the fair value of derivatives that do not
meet the hedge accounting criteria are to be reported in earnings. Adoption of
this standard is not expected to have a material effect on the Company's
financial position, results of operations or cash flows.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
- --------------------------------------------------------------------
The Company is exposed to market risk from potential changes in
interest rates. The Company regularly evaluates these risks and has entered into
five interest rate swap agreements, expiring from 2000 to 2003, with an
aggregate notional amount of $50.4 million. The agreements limit the interest
rate exposure on the Company's floating rate debt via the exchange of fixed and
floating rate interest payments periodically over the life of the agreement
without the exchange of the underlying principal amounts. Fixed rates under
these agreements range from 5.21% to 7.15%.
Approximately 1% of the Company's long-term debt, excluding capital
leases, is at fixed interest rates and therefore, the fair value is affected by
changes in market interest rates. Long-term debt, including current portion, had
a carrying amount of $80.8 million and a fair value of $79.4 million as of March
31, 1999, as compared to a carrying amount of $52.5 million and a fair value of
$52.2 million as of March 31, 1998. The Company's cash flow exposure on floating
rate debt, which is not supported by interest rate swap agreements, would have
resulted in interest expense fluctuating approximately $.3 million as of March
31, 1999 and 1998 given a 1% change in LIBOR.
The Company believes the amount of risk and the use of derivative
financial instruments described above are not material to the Company's
financial condition or results of operations.
23
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
PAGE
Report of Independent Accountants ............................... 25
Audited Financial Statements:
Consolidated Balance Sheet at March 31, 1999 and 1998 .. 26
Consolidated Statement of Income for the three
years ended March 31, 1999 .................... 27
Consolidated Statement of Changes in Shareholders'
Equity for the three years ended March 31, 1999 28
Consolidated Statement of Cash Flows for the three
years ended March 31, 1999 .................... 29
Notes to Consolidated Financial Statements ............. 30
Selected Quarterly Financial Information (Unaudited) ............ 47
24
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of
Monro Muffler Brake, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Monro
Muffler Brake, Inc. and its subsidiaries at March 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1999, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Rochester, New York
May 27, 1999
25
<PAGE> 26
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
1999 1998
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents, including interest-bearing accounts of $5,599
in 1999 and $5,315 in 1998 $ 5,599 $ 5,315
Trade receivables 1,291 841
Inventories 38,656 27,492
Federal and state income taxes receivable 1,090
Deferred income tax asset 1,709 1,725
Other current assets 5,002 4,115
--------- ---------
Total current assets 53,347 39,488
--------- ---------
Property, plant and equipment 194,808 165,839
Less - Accumulated depreciation and amortization (59,021) (49,429)
--------- ---------
Net property, plant and equipment 135,787 116,410
Other noncurrent assets 13,800 3,190
--------- ---------
Total assets $ 202,934 $ 159,088
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 8,373 $ 3,582
Trade payables 9,745 11,633
Accrued interest 268 233
Accrued payroll, payroll taxes and other payroll benefits 5,269 3,764
Accrued insurance 1,700 2,441
Accrued restructuring costs 1,825
Other current liabilities 7,999 4,318
--------- ---------
Total current liabilities 35,179 25,971
Long-term debt 78,672 54,102
Other long-term liabilities 669 576
Accrued long-term restructuring costs 5,100
Deferred income tax liability 2,363 1,881
--------- ---------
Total liabilities 121,983 82,530
--------- ---------
Commitments
Shareholders' equity:
Class C Convertible Preferred Stock, $1.50 par value, $.216 and $.227 conversion
value at March 31, 1999 and 1998, respectively; 150,000 shares authorized;
91,727 shares issued and outstanding in 1999 and 1998 138 138
Common Stock, $.01 par value, 15,000,000 shares authorized; 8,321,701 shares
and 7,876,901 shares issued and outstanding in 1999 and 1998, respectively 83 79
Additional paid-in capital 35,873 29,284
Retained earnings 44,857 47,057
--------- ---------
Total shareholders' equity 80,951 76,558
--------- ---------
Total liabilities and shareholders' equity $ 202,934 $ 159,088
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 27
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1999 1998 1997
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Sales $193,458 $154,294 $141,169
Cost of sales, including distribution and occupancy costs (a) 115,117 87,510 78,792
-------- -------- --------
Gross profit 78,341 66,784 62,377
Operating, selling, general and administrative expenses 64,062 46,120 41,749
-------- -------- --------
Operating income 14,279 20,664 20,628
Interest expense, net of interest income of $27 in 1999, $87 in 1998
and $23 in 1997 (a) 5,600 3,829 3,224
Other expense, net 730 331 475
-------- -------- --------
Income before provision for income taxes 7,949 16,504 16,929
Provision for income taxes 3,203 6,650 6,738
-------- -------- --------
Net income $ 4,746 $ 9,854 $ 10,191
======== ======== ========
Earnings per share:
Basic $ .57 $ 1.19 $ 1.24
======== ======== ========
Diluted $ .53 $ 1.09 $ 1.13
======== ======== ========
Weighted average number of shares of common stock and
common stock equivalents used in computing earnings per share:
Basic 8,317 8,256 8,187
======== ======== ========
Diluted 8,997 9,016 9,009
======== ======== ========
</TABLE>
(a) Costs and expenses include charges for payments under operating and
capital leases with affiliated parties totaling $1,783, $1,786 and
$1,828 for the years ended March 31, 1999, 1998 and 1997, respectively.
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 28
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
CONVERTIBLE ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
----- ----- ------- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1996 $ 138 $ 69 $ 17,061 $ 38,619 $ 55,887
Net income 10,191 10,191
Exercise of stock options 2 545 547
Stock dividend 4 4,584 (4,588)
-------- -------- -------- -------- --------
Balance at March 31, 1997 138 75 22,190 44,222 66,625
Net income 9,854 9,854
Exercise of stock options 79 79
Stock dividend 4 7,015 (7,019)
-------- -------- -------- -------- --------
Balance at March 31, 1998 138 79 29,284 47,057 76,558
Net income 4,746 4,746
Other comprehensive income (1):
Minimum pension liability adjustment (317) (317)
Exercise of stock options 462 462
Stock dividend 4 6,624 (6,629) (1)
Note receivable from shareholder (497) (497)
-------- -------- -------- -------- --------
Balance at March 31, 1999 $ 138 $ 83 $ 35,873 $ 44,857 $ 80,951
======== ======== ======== ======== ========
</TABLE>
(1) Components of comprehensive income are reported net of related taxes of
$210.
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 29
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1999 1998 1997
---- ---- ----
(DOLLARS IN THOUSANDS)
INCREASE (DECREASE) IN CASH
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,746 $ 9,854 $ 10,191
--------- --------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities -
Depreciation and amortization 11,751 9,259 8,099
Net change in deferred income taxes 708 186 192
(Gain) loss on disposal of property, plant and equipment (191) 42 (100)
(Increase) decrease in trade receivables (450) 287 102
Increase in inventories (4,385) (7,482) (3,472)
Decrease (increase) in other current assets 1,101 (217) (717)
Increase in other noncurrent assets (1,780) (441) (63)
(Decrease) increase in trade payables (2,892) 2,905 1,858
Increase (decrease) in accrued expenses 1,134 (524) 3,541
(Decrease) increase in income taxes payable (1,090) 298 (278)
(Decrease) increase in other long-term liabilities (1) 17 7
--------- --------- ---------
Total adjustments 3,905 4,330 9,169
--------- --------- ---------
Net cash provided by operating activities 8,651 14,184 19,360
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (23,310) (25,391) (27,562)
Proceeds from the sale of property, plant and
equipment 8,114 10,552 97
Payment for purchase of Speedy stores (20,632)
--------- --------- ---------
Net cash used for investing activities (35,828) (14,839) (27,465)
--------- --------- ---------
Cash flows from financing activities:
Exercise of stock options 462 79 547
Proceeds from borrowings 147,155 60,099 58,220
Principal payments on long-term debt and capital
lease obligations (119,659) (60,646) (49,504)
Loan to shareholder (497)
--------- --------- ---------
Net cash provided by (used for) financing activities 27,461 (468) 9,263
Increase (decrease) in cash 284 (1,123) 1,158
Cash at beginning of year 5,315 6,438 5,280
--------- --------- ---------
Cash at end of year $ 5,599 $ 5,315 $ 6,438
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 30
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND
Monro Muffler Brake, Inc. and its wholly owned subsidiaries, Monro Service
Corporation and Monro Leasing, LLC (the "Company"), had 524 Company-operated and
14 dealer-operated automotive repair centers located primarily in the northeast
region of the United States as of March 31, 1999.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with such principles requires the use of
estimates by management during the reporting period. Actual results could differ
from those estimates.
A description of the Company's major accounting policies follows.
FISCAL YEAR
The Company's fiscal year ends on March 31.
CONSOLIDATION
The consolidated financial statements include the Company and its wholly owned
subsidiaries, Monro Service Corporation and Monro Leasing, LLC, after the
elimination of intercompany transactions and balances.
REVENUE RECOGNITION
Sales are recorded upon completion of automotive undercar repair services
provided to customers or upon the sale of incidental products and services to
customers.
COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS
130"), "Reporting Comprehensive Income", at the beginning of fiscal 1999. As it
relates to the Company, comprehensive income is defined as net earnings less
minimum pension liability and is reported net of related taxes.
WARRANTY
The Company provides an accrual for estimated future warranty costs based upon
the historical relationship of warranty costs to sales. Actual expenses have not
materially differed from the accruals estimated in prior periods.
INVENTORIES
The Company's inventories consist of automotive parts and tires.
Substantially all merchandise inventories are valued under the last-in,
first-out (LIFO) method. Under the first-in, first-out (FIFO) method, these
inventories would have been $170,000, $426,000 and $544,000 higher at March 31,
1999, 1998 and 1997, respectively. The FIFO value of inventory approximates the
current replacement cost.
PROPERTY, PLANT AND EQUIPMENT
All property, plant and equipment are stated at cost. Depreciation of property,
plant and equipment is provided on the straight-line basis. Buildings and
improvements are depreciated over lives varying from 10 to 39 years; machinery,
fixtures and equipment over lives varying from 5 to 15 years; and vehicles over
lives varying from 5 to 7 years.
Certain leases have been capitalized and are classified on the balance sheet as
fixed assets. These assets are being amortized on a straight-line basis over
their estimated lives, which coincide with the terms of the leases (Note 3).
30
<PAGE> 31
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GOODWILL
Goodwill is amortized on a straight-line basis over periods ranging from 7 to 20
years. The Company evaluates goodwill for impairment at least annually or
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
ADVERTISING
The Company expenses the production costs of advertising the first time the
advertising takes place, except for direct response advertising which is
capitalized and amortized over its expected period of future benefits.
Direct response advertising consists primarily of coupons for the Company's
services. The capitalized costs of this advertising are amortized over the
period of the coupon's validity, which typically is a six-week period.
Prepaid advertising at March 31, 1999 and 1998 and advertising expense for the
years ended March 31, 1999, 1998 and 1997 were not material to these financial
statements.
INTEREST RATE HEDGE AGREEMENTS
The Company enters into interest rate hedge agreements which involve the
exchange of fixed and floating rate interest payments periodically over the life
of the agreement without the exchange of the underlying principal amounts. The
differential to be paid or received is accrued as interest rates change and is
recognized over the life of the agreements as an adjustment to interest expense.
The Company does not utilize financial instruments for trading or other
speculative purposes.
EARNINGS PER SHARE
In fiscal 1998, the Company adopted Statement of Financial Accounting Standards
No. 128 that requires the reporting of both basic and diluted earnings per
share. Basic earnings per share is computed by dividing net income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Prior periods have been restated to
reflect the new standard. All share and per share amounts have also been
restated to reflect the five percent stock dividends paid in June 1998, August
1997 and August 1996 (Note 8).
STOCK-BASED COMPENSATION
The Company measures stock-based compensation cost as the excess of the quoted
market price of the Company's common stock at the grant date over the amount the
employee must pay for the stock. The Company's policy generally is to grant
stock options at fair market value at the date of grant.
STATEMENT OF CASH FLOWS
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid instruments with original maturities of three months or less to be cash
equivalents.
RECLASSIFICATIONS
Certain amounts in the Consolidated Balance Sheet and the Consolidated Statement
of Cash Flows have been reclassified to improve reporting and maintain
comparability among the periods presented.
31
<PAGE> 32
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 - ACQUISITION OF SPEEDY U.S.A. STORES
In September 1998, the Company completed the acquisition of 189 Company-operated
and 14 dealer-operated Speedy stores, all located in the United States, from SMK
Speedy International Inc. of Toronto Canada ("the Speedy acquisition"). Speedy
stores provide automotive repair services, specializing in undercar care, in 11
states located primarily in the northeast. The acquisition was accounted for as
a purchase, and accordingly, the operating results of Speedy have been included
in the Company's consolidated financial statements since the date of the
acquisition.
Approximately $51 million was initially borrowed under a new $135 million
secured credit facility to pay the all-cash purchase price, with additional
amounts to be borrowed under the facility for the closing of underperforming or
redundant Speedy stores, capital expenditures at remaining Speedy stores and
transaction expenses (Note 5).
In connection with the acquisition, the Company recorded a reserve for accrued
restructuring costs of approximately $7.8 million. This reserve relates to costs
associated with the closing of approximately 45 duplicative or poorly performing
Speedy stores, and includes charges for rent and real estate taxes (net of
anticipated sublease income), the write down of assets to their fair market
value, and net losses experienced by these stores through their closure date.
Through May 31, 1999, the Company had closed, sold or subleased 34 of the
Acquired Speedy stores, with plans to close the remainder early in fiscal 2000.
The excess of the aggregate purchase price over the fair value of net assets
acquired of approximately $9.3 million is being amortized on a straight-line
basis over 20 years.
The following unaudited pro forma consolidated results of operations for the
years ended March 31, 1999 and 1998 assume the Speedy acquisition occurred as of
April 1, 1997 (in thousands, except per share data):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net sales $ 228,500 $226,300
Net earnings $ 2,100 $ 2,700
Earnings per share
Basic $ .25 $ .33
Diluted $ .23 $ .30
</TABLE>
These amounts included Speedy's actual results in fiscal 1998 and for the first
five and a half months in fiscal 1999 prior to the acquisition, and the actual
results for the six and a half months in fiscal 1999 after the acquisition. The
amounts are based upon certain assumptions and estimates, and do not reflect any
benefit from economies which might be achieved from combined operations. The
unaudited pro forma results do not necessarily represent results which would
have occurred had the acquisition been consummated at the beginning of fiscal
1998 or 1999, nor are they indicative of the results of future combined
operations under the ownership and management of the Company.
An investment banking firm associated with a principal shareholder/director of
the Company served as consultant to the Company in connection with the
acquisition and related financing (Note 11).
32
<PAGE> 33
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
The major classifications of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
OWNED LEASED TOTAL OWNED LEASED TOTAL
----- ------ ----- ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Land $ 25,034 $ 25,034 $ 23,772 $ 23,772
Buildings and
improvements 85,891 $ 7,422 93,313 76,062 $ 6,838 82,900
Equipment, signage
and fixtures 61,485 82 61,567 47,379 82 47,461
Vehicles 10,917 1,214 12,131 7,184 620 7,804
Construction-in-
progress 2,763 2,763 3,902 3,902
-------- -------- -------- -------- -------- --------
186,090 8,718 194,808 158,299 7,540 165,839
Less - Accumulated
depreciation and
amortization 54,251 4,770 59,021 45,129 4,300 49,429
-------- -------- -------- -------- -------- --------
$131,839 $ 3,948 $135,787 $113,170 $ 3,240 $116,410
======== ======== ======== ======== ======== ========
</TABLE>
Interest costs capitalized aggregated $276,000 in 1999 and $448,000 in 1998.
Amortization expense recorded under capital leases totaled $470,000, $434,000
and $398,000 for the years ended March 31, 1999, 1998 and 1997, respectively.
NOTE 4 - OTHER NONCURRENT ASSETS
Other noncurrent assets consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
--------------
1999 1998
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred debt issuance costs $ 2,279 $ 374
Non-compete agreements 381 485
Investment in limited partnership 323 326
Goodwill 10,477 1,454
Acquisition-related costs 223
Other 340 328
------- -------
$13,800 $ 3,190
======= =======
</TABLE>
Accumulated amortization associated with noncurrent assets at March 31, 1999 and
1998 amounted to $2,355,000 and $1,837,000, respectively. Amortization expense
totaled $510,000, $292,000 and $317,000 for the years ended March 31, 1999, 1998
and 1997, respectively.
33
<PAGE> 34
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
---------
1999 1998
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revolving Credit Facility $41,675 $34,800
Term loan financing, LIBOR-based,
due in installments through fiscal year 2004 (a) 25,000
10.65% Senior Notes, due in installments through fiscal year 2000 1,833 3,667
Mortgage Notes Payable, LIBOR plus 1.0%, secured by store properties, due
in installments through 2003 (a) 8,457 9,018
Mortgage Note Payable, LIBOR plus .8%, secured by warehouse and
office building, due in installments through 2006 (a) 2,458 2,607
Term loan financing, LIBOR plus .8%, secured by warehouse and
office building, due in installments through 2004 (a) 425 517
Mortgage Note Payable, non-interest bearing, secured by warehouse and office
land, due in one installment in 2015 660 660
Other mortgages and notes, 8.0% to prime plus .75%, partially secured by store
properties and equipment, due in installments through 2008 (a) 328 1,225
Obligations under capital leases, 6.0% to 16.8%, secured by store properties and
certain equipment, due in installments through 2012 6,209 5,190
------- -------
87,045 57,684
Less - Current portion 8,373 3,582
------- -------
$78,672 $54,102
======= =======
</TABLE>
(a) The prime rate at March 31, 1999 was 7.75%. The London Interbank Offered
Rate (LIBOR) at March 31, 1999 was 4.94%.
34
<PAGE> 35
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Concurrent with the closing of the Speedy acquisition in September 1998, the
Company obtained a new $135 million secured credit facility from a syndication
of lenders led by The Chase Manhattan Bank. Approximately $55 million was
borrowed under this facility to pay the all-cash purchase price, including
transaction expenses of approximately $4 million. In addition, the Company
refinanced approximately $35 million of indebtedness through the new credit
facility, with the balance of the facility available for future working capital
needs. More specifically, the new financing structure consists of a $25 million
term loan (all of which was outstanding at March 31, 1999), a $75 million
Revolving Credit facility (of which approximately $42 million was outstanding at
March 31, 1999), and synthetic lease (off-balance sheet) financing for a
significant portion of the Speedy real estate, totaling $35 million. The loans
bear interest at the prime rate or other LIBOR-based rate options tied to the
Company's financial performance. The Company must also pay a facility fee on the
unused portion of the commitment.
The credit facility has a five-year term. Interest only is payable monthly on
the Revolving Credit and synthetic lease borrowings throughout the term. In
addition to monthly interest payments, the $25 million term loan requires
quarterly principal payments beginning September 30, 1999.
The term loan and Revolving Credit Facility are secured by all accounts
receivable, inventory and other personal property. The Company has also entered
into a negative pledge agreement not to encumber any real property, with certain
permissible exceptions. The synthetic lease is secured by the real property to
which it relates.
Within the aforementioned $75 million Revolving Credit facility, the Company has
available a subfacility of $7 million for the purpose of issuing stand-by
letters of credit. The line requires fees aggregating 2.25% annually of the face
amount of each stand-by-letter of credit, payable quarterly in advance. A total
of $1.7 million of letters of credit were outstanding under this line at March
31, 1999.
At March 31, 1999, the Company had outstanding $1.8 million in principal amount
of its 10.65% Senior Notes due 2000 (the "Senior Notes") with Massachusetts
Mutual Life Insurance Company pursuant to a Senior Note Agreement. The sixth and
final annual installment of principal of $1.8 million was paid on April 1, 1999.
During fiscal 1995, the Company purchased 12.7 acres of land for $.7 million
from the City of Rochester, New York, on which its office/warehouse facility is
located. The City has provided financing for 100 percent of the cost of the land
via a 20-year non-interest bearing mortgage, all due and payable in 2015.
To finance its office/warehouse building, the Company obtained permanent
mortgage financing consisting of a 10-year mortgage for $2.9 million and an
eight-year term loan in the amount of $.7 million. Both obligations require
monthly interest payments, and each may be converted from a floating rate to a
fixed rate loan before the last two years of their respective terms. The
mortgage requires equal monthly installments of principal based on a 20-year
amortization period, and the term loan requires constant monthly payments of
principal to fully amortize the debt over the eight-year term. The Company
entered into an interest rate swap agreement with a major financial institution
which effectively fixes the interest rate over the terms of the aforementioned
agreements at 7.15%.
Any of the Mortgage Notes Payable, secured by store properties, may be converted
from a floating rate to a fixed rate loan during the first five years of its
seven-year term. Interest is payable monthly. Equal monthly installments of
principal are required based on 20-year amortization periods.
The Company is a party to four additional interest rate swap agreements,
expiring from 2000 to 2003, with an aggregate notional amount of $47.5 million.
The purpose of these agreements is to limit the interest rate exposure on the
Company's floating rate debt. Fixed rates under these agreements range from
5.21% to 6.35%.
Certain of the Company's long-term debt agreements require, among other things,
the maintenance of specified interest and rent coverage ratios and amounts of
tangible net worth. They also contain requirements concerning Y2K compliance and
restrictions on dividend payments. The Company is in compliance with these
requirements at March 31, 1999. These agreements permit mortgages and specific
financing lease arrangements with other parties with certain limitations.
35
<PAGE> 36
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Aggregate debt maturities over the next five years and thereafter are as
follows:
<TABLE>
<CAPTION>
CAPITAL LEASES
-------------------------
AGGREGATE IMPUTED ALL OTHER
YEAR ENDED MARCH 31, AMOUNT INTEREST DEBT TOTAL
-------------------- ------ -------- ---- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
2000 $1,619 $(843) $7,597 $ 8,373
2001 1,373 (773) 7,858 8,458
2002 1,343 (690) 8,809 9,462
2003 1,087 (612) 10,361 10,836
2004 987 (566) 43,766 44,187
Thereafter 5,374 (2,090) 2,445 5,729
---------
Total $87,045
=========
</TABLE>
The interest amounts and balloon payment due under the synthetic lease financing
are treated as operating rent commitments, and are excluded from this table of
aggregate debt maturities (Note 9).
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term debt, including current portion $80,836 $79,387 $52,494 $52,224
</TABLE>
The carrying amount of cash and cash equivalents approximates fair value because
their maturity is generally less than one year in duration. Fair value of
long-term debt was estimated using either quoted market prices for the same or
similar issues, or the current rates offered to the Company for debt with
similar maturities.
36
<PAGE> 37
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1999 1998 1997
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Currently payable -
Federal $2,075 $5,435 $5,418
State 630 1,029 1,128
------ ------ ------
2,705 6,464 6,546
Deferred -
Federal 423 154 159
State 75 32 33
------ ------ ------
498 186 192
------ ------ ------
Total $3,203 $6,650 $6,738
====== ====== ======
</TABLE>
Deferred tax (liabilities) assets are comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------
1999 1998 1997
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Property and equipment basis differences $(2,591) $(2,232) $(2,014)
Prepaid expenses (417) (486) (397)
Tax shelter investment (389) (302) (287)
Installment sale (180) (265)
Other (242) (193) (79)
------- ------- -------
Gross deferred tax liabilities (3,639) (3,393) (3,042)
------- ------- -------
Capital leases 548 780 755
Insurance accruals 748 959 798
Inventory reserves 234 93 43
Vacation accrual 330 210 174
Warranty and other reserves 790 864 1,034
Other 335 331 268
------- ------- -------
Gross deferred tax assets 2,985 3,237 3,072
------- ------- -------
Net deferred tax (liability) asset $ (654) $ (156) $ 30
======= ======= =======
</TABLE>
37
<PAGE> 38
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A reconciliation between the U. S. Federal statutory tax rate and the effective
tax rate reflected in the accompanying financial statements is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1999 1998 1997
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Federal income tax based on
statutory tax rate applied
to income before taxes $2,703 34.0 $5,722 34.7 $5,883 34.8
State income tax, net of
federal income tax benefit 465 5.9 693 4.2 758 4.5
Other 35 .4 235 1.4 97 .5
------ ---- ------ ---- ------ ----
$3,203 40.3 $6,650 40.3 $6,738 39.8
====== ==== ====== ==== ====== ====
</TABLE>
NOTE 8 - CONVERTIBLE PREFERRED STOCK AND COMMON STOCK
A summary of the changes in the number of shares of Class C preferred stock and
common stock is as follows:
<TABLE>
<CAPTION>
COMMON CLASS C
STOCK CONVERTIBLE PREFERRED
SHARES STOCK
--------- ---------------------
<S> <C> <C>
Balance at March 31, 1996 6,914,835 91,727
Stock options exercised 209,826
Stock dividend 345,665
--------- ---------
Balance at March 31, 1997 7,470,326 91,727
Stock options exercised 33,151
Stock dividend 373,424
--------- ---------
Balance at March 31, 1998 7,876,901 91,727
Stock options exercised 51,030
Stock dividend 393,770
--------- ---------
Balance at March 31, 1999 8,321,701 91,727
========= =========
</TABLE>
On May 13, 1998, the Board of Directors declared a five percent stock dividend
on the Company's common stock, paid June 18, 1998, to shareholders of record as
of June 8, 1998. The Company also paid a five percent stock dividend on August
4, 1997, to shareholders of record as of June 20, 1997, and on August 5, 1996,
to shareholders of record as of June 21, 1996. All share and per share
information included in the accompanying financial statements and notes have
been adjusted to give retroactive effect to these dividends.
Additionally, in accordance with antidilution provisions of the Class C
convertible preferred stock, the conversion value of the preferred stock was
restated to $.216 per share.
38
<PAGE> 39
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Holders of at least 60% of the Class C preferred stock must approve any action
authorized by the holders of common stock. In addition, there are certain
restrictions on the transferability of shares of Class C preferred stock.
Under the 1984 and 1987 Incentive Stock Option Plans, 727,672 shares (as
retroactively adjusted for the five percent stock dividends) of the common stock
were reserved for issuance to officers and key employees. The 1989 Incentive
Stock Option Plan authorized an additional 173,255 shares (as retroactively
adjusted for the five percent stock dividends) for issuance.
In January 1994, May 1995 and May 1997, the Board of Directors authorized an
additional 257,809, 109,974 and 210,000 shares, respectively (as retroactively
adjusted for the stock dividends), for issuance under the 1989 Plan. These
amounts were approved by shareholders in August 1994, August 1995 and August
1997, respectively.
In November 1998, subject to the approval of shareholders in August 1999, the
Board of Directors authorized the 1998 Incentive Stock Option Plan, reserving
750,000 shares of common stock for issuance to officers and key employees.
Generally, options vest within the first five years of their term, and have a
duration of ten years. Outstanding options are exercisable for various periods
through February 2009.
A summary of changes in outstanding stock options (as retroactively adjusted for
the five percent stock dividends) is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE AVAILABLE
EXERCISE PRICE OUTSTANDING EXERCISABLE FOR GRANT
-------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
AT MARCH 31, 1996 $ 7.94 670,447 366,853 143,107
Granted $ 14.00 124,151 (124,151)
Became exercisable 56,926
Exercised $ 2.37 (231,333) (231,333)
Canceled $ 13.51 (23,176) 23,176
Rounding for stock dividend 1 (4)
-------- --------- ---------
AT MARCH 31, 1997 $ 11.50 540,090 192,446 42,128
Authorized 210,000
Granted $ 13.50 130,384 (130,384)
Became exercisable 53,657
Exercised $ 2.30 (34,809) (34,809)
Canceled $ 13.56 (216,797) (9,393) 216,797
Rounding for stock dividend 5
-------- --------- ---------
AT MARCH 31, 1998 $ 11.81 418,873 201,901 338,541
Authorized 750,000
Granted $ 9.01 547,888 (547,888)
Became exercisable 66,464
Exercised $ 9.06 (51,030) (51,030)
Canceled $ 12.38 (9,153) (4,018) 9,153
Rounding for stock dividend (1) (3)
-------- --------- ---------
AT MARCH 31, 1999 906,577 213,314 549,806
======== ========= =========
</TABLE>
39
<PAGE> 40
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes information about fixed stock options outstanding
at March 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF SHARES REMAINING EXERCISE SHARES EXERCISE
EXERCISE PRICES UNDER OPTION LIFE PRICE UNDER OPTION PRICE
--------------- ------------ ---- ----- ------------ -----
<S> <C> <C> <C> <C> <C>
$ 1.00 - $10.00 520,477 8.89 $ 7.60 69,781 $ 5.65
$10.01 - $15.00 250,917 6.86 $12.90 110,048 $12.50
$15.01 - $19.75 135,183 6.70 $15.61 33,485 $15.01
</TABLE>
In August 1994, the Board of Directors authorized a non-employee directors'
stock option plan which was approved by shareholders in August 1995. The plan
initially reserved 66,852 shares of common stock (as retroactively adjusted for
the five percent stock dividends), and provides for (i) the grant to each
non-employee director as of August 1, 1994 of an option to purchase 3,039 shares
of the Company's common stock (as retroactively adjusted for the five percent
stock dividends) and (ii) the annual grant to each non-employee director of an
option to purchase 3,039 shares (as retroactively adjusted for the five percent
stock dividends) on the date of the annual meeting of shareholders beginning in
1995. The options expire ten years from the date of grant and have an exercise
price equal to the fair market value of the Company's common stock on the date
of grant. Options vest immediately upon issuance.
In May 1997, the Board of Directors authorized an additional 68,250 shares (as
retroactively adjusted for the five percent stock dividends) for issuance under
the Plan, which were approved by shareholders in August 1997. Also, in May 1999,
subject to the approval of shareholders in August 1999, the Board of Directors
authorized an additional 65,000 shares for issuance under the Plan.
A summary of changes in these stock options is as follows:
<TABLE>
<CAPTION>
OPTION PRICE AVAILABLE
PER SHARE OUTSTANDING EXERCISABLE FOR GRANT
--------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
AT MARCH 31, 1996 $12.74 - $14.14 42,542 42,542 24,310
Granted $17.01 21,271 21,271 (21,271)
------- ------- -------
AT MARCH 31, 1997 $12.74 - $17.01 63,813 63,813 3,039
Authorized 68,250
Granted $16.08 21,271 21,271 (21,271)
------- ------- -------
AT MARCH 31, 1998 $12.74 - $17.01 85,084 85,084 50,018
Granted $12.63 21,273 21,273 (21,273)
------- ------- -------
AT MARCH 31, 1999 $12.63 - $17.01 106,357 106,357 28,745
======= ======= =======
</TABLE>
Effective in fiscal 1997, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation." As permitted under SFAS 123, the Company will
continue to measure stock-based compensation cost as the excess of the quoted
market price of the Company's common stock at the grant date over the amount the
employee must pay for the stock.
40
<PAGE> 41
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SFAS 123 requires disclosure of pro forma net income and pro forma net income
per share as if the fair value-based method had been applied in measuring
compensation cost for the stock-based awards granted subsequent to fiscal year
1995. Management believes that 1999, 1998 and 1997 pro forma amounts are not
representative of the effects of stock-based awards on future pro forma net
income and pro forma earnings per share because those pro forma amounts exclude
the pro forma compensation expense related to unvested stock options granted
before fiscal 1996.
Reported and pro forma net income and earnings per share amounts are set forth
below:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1999 1998 1997
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income
As reported $4,746 $9,854 $10,191
Pro forma 3,978 9,602 10,000
Earnings per share - diluted
As reported $ .53 $ 1.09 $ 1.13
Pro forma .44 1.06 1.11
</TABLE>
The weighted average fair value per option at the date of grant for options
granted during fiscal 1999, 1998 and 1997 was $4.40, $6.70 and $8.20,
respectively.
The fair values of the options granted were estimated on the date of their grant
using the Black-Scholes option-pricing model based on the following weighted
average assumptions:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk free interest rate 4.83% 5.85% 6.38%
Expected life 9 years 9 years 9 years
Expected volatility 30.5% 25.0% 26.0%
Expected dividend yield 0% 0% 0%
</TABLE>
Forfeitures are recognized as they occur.
NOTE 9 - OPERATING LEASES AND OTHER COMMITMENTS
The Company leases retail facilities and store equipment under noncancellable
lease agreements which expire at various dates through fiscal year 2014. In
addition to stated minimum payments, certain real estate leases have provisions
for contingent rentals when retail sales exceed specified levels. Generally, the
leases provide for renewal for various periods at stipulated rates. Most of the
facilities' leases require payment of property taxes, insurance and maintenance
costs in addition to rental payments, and several provide an option to purchase
the property at the end of the lease term.
During fiscal 1999 and 1998, the Company entered into agreements for the
sale/leaseback of certain stores, and into agreements for the sale/leaseback of
store equipment. The Company has lease renewal options under the real estate
agreements at projected future fair market values, and has both purchase and
renewal options under the equipment lease agreements.
At March 31, 1999 and 1998, real estate with net book values totaling $5.1
million and $5.8 million, respectively, and equipment with net book values
totaling $2.7 million and $3.9 million, respectively, have been removed from the
balance sheet. Gains realized of $.3 million and $.5 million for the
sale/leasebacks for 1999 and 1998, respectively, have been deferred and are
being credited to income as rent expense adjustments over the lease terms.
41
<PAGE> 42
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Future minimum payments required under noncancellable leases are as follows:
<TABLE>
<CAPTION>
SYNTHETIC LEASE OTHER OPERATING LEASES TOTAL
--------------- ---------------------- -----
(DOLLARS IN THOUSANDS)
YEAR ENDED MARCH 31,
- --------------------
<S> <C> <C> <C>
2000 $ 2,776 $ 15,337 $ 18,113
2001 2,776 13,946 16,722
2002 2,777 12,266 15,043
2003 2,777 10,856 13,633
2004 30,381 8,827 39,208
Thereafter 35,748 35,748
-------- -------- ---------
Total $ 41,487 $ 96,980 $ 138,467
======== ======== =========
</TABLE>
Rent expense under operating leases totaled $13,247,000, $7,944,000 and
$6,965,000 in 1999, 1998 and 1997, respectively, including contingent rentals of
$508,000, $589,000 and $649,000 in each respective year.
Future minimum lease commitments include amounts payable under the synthetic
lease agreement structured to finance most of the real estate in the Speedy
acquisition (Notes 2 and 5). Should the Company or the lessor choose not to
renew the lease at the end of its initial five year term, the Company may buy
the property for its original acquisition cost of $34.8 million. Alternatively,
the property will be sold, and the Company has guaranteed a residual value of
81.5% of the acquisition cost. Of the $30,381,000 commitment for fiscal year
2004, approximately $28,376,000 represents the minimum principal amount
(i.e. the guaranteed residual) due on September 15, 2003, should the synthetic
lease not be renewed. Renewal options provide for one five year renewal term and
30 additional renewal terms of one year each.
The Company has an employment agreement with its Chief Executive Officer. The
agreement is for a five-year term ending December 1, 2003. The agreement
includes a covenant against competition with the Company for two years after
termination, and provides the Executive with a minimum of one year's salary and
certain additional rights in the event of a termination without cause (as
defined), or a termination in the event of change in control (as defined).
42
<PAGE> 43
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10 - EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS
The Company has a noncontributory defined benefit plan covering most employees.
Coverage under the plan begins after completing one year of service and
attainment of age 21. Benefits are based primarily on years of service and
employees' pay near retirement. The Company's funding policy is consistent with
the funding requirements of Federal law and regulations. Plan assets are
invested in fixed income funds.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1999 1998*
---- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year $ 4,381 $ 3,566
Actual return on plan assets 281 488
Employer contribution 441 680
Expenses (111) (113)
Transfer to adjust reserve on
allocated annuity contract (6) (4)
Benefits paid (231) (236)
------- -------
Fair value of plan assets at end of year 4,755 4,381
------- -------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year 5,314 4,326
Service cost 474 373
Interest cost 379 316
Actuarial loss 535
Benefits paid (231) (236)
------- -------
Benefit obligation at end of year 5,936 5,314
------- -------
Projected benefit obligation in excess of plan assets (1,181) (933)
Unrecognized net loss 1,309 1,179
Unrecognized prior service cost 17 21
Unrecognized net transition asset (87) (116)
------- -------
Pension asset at March 31 $ 58 $ 151
======= =======
</TABLE>
43
<PAGE> 44
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Pension cost included the following components:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1999 1998* 1997
---- ----- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during the period $474 $373 $259
Interest cost on projected benefit obligation 379 316 293
Expected return on plan assets (365) (297) (271)
Amortization of net transition asset (29) (29) (29)
Amortization of prior service cost 3 3 3
Recognized actuarial loss 72 17 30
---- ---- ----
Net pension cost $534 $383 $285
==== ==== ====
</TABLE>
* Certain amounts have been restated to reflect the final actuarial report.
The projected benefit obligation at March 31, 1999 and 1998 assumed a discount
rate of 7.25%. Increase in future compensation levels was assumed to be 4% in
1999 and 1998. The assumed long-term rate of return on plan assets at March 31,
1999 and 1998 was 8%.
The unrecognized transition asset is being amortized over 15 years
beginning April 1, 1988. The unrecognized prior service cost is being amortized
over 15 years beginning April 1, 1990.
During fiscal 1999, the Board approved a plan whereby the benefits of the
defined benefit plan would be frozen in fiscal 2000.
The Company also has a profit sharing plan which covers full-time employees who
meet the age and service requirements of the plan. The annual contribution to
the plan is at the discretion of the Compensation and Benefits Committee of the
Board of Directors and, before annual forfeitures which reduce the annual
contribution, totaled $100,000, $398,000 and $500,000 for the years ended March
31, 1999, 1998 and 1997, respectively. During fiscal 2000, the Company plans to
amend the profit sharing plan to add a 401(K) salary deferral option.
The Company's management bonus plan provides for the payment of annual cash
bonus awards to participating employees, as selected by the Board of Directors,
based primarily on the Company's attaining pre-tax income targets established by
the Board of Directors. Charges to expense applicable to the management bonus
plan totaled $127,000, $210,000 and $779,000 for the years ended March 31, 1999,
1998 and 1997, respectively. In addition, in August 1998, during the search for
a permanent Chief Executive Officer, the Company's Board of Directors voted to
award a $100,000 retention bonus to its Executive Vice President of Store
Operations. The bonus was paid in April 1999. The Company also paid a $150,000
signing bonus to its new Chief Executive Officer in January 1999 upon his
joining the Company. Because the Company did not attain a minimum required
percentage of targeted profit performance in fiscal 1998, expense for those
years does not include any bonus amounts for executive officers.
44
<PAGE> 45
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11 - RELATED PARTY TRANSACTIONS
In December 1998, the Company loaned $523,000 to its newly-appointed Chief
Executive Officer to purchase 75,000 shares of the Company's common stock at the
then fair market value. (This loan was made subsequent to the Executive's
purchase of 25,000 shares using his own funds.) The loan, which bears an
interest rate of 5.50% per annum, matures on December 1, 2003, and requires five
equal annual installments of principal beginning on the first anniversary of the
loan. If the Executive is employed with the Company when a principal payment is
due, that installment will be forgiven by the Company. All interest is due on
the fifth anniversary of the loan, and shall also be forgiven if the Executive
is employed with the Company at that time. The loan is secured by the common
stock.
Certain (a) principal shareholders/directors of the Company, (b) partnerships in
which such persons have interests or (c) trusts of which members of their
families are beneficiaries are lessors of certain facilities to the Company.
Payments under such operating and capital leases amounted to $1,783,000,
$1,786,000 and $1,828,000 for the years ended March 31, 1999, 1998 and 1997,
respectively. Amounts payable under these lease agreements totaled $62,000 and
$82,000, respectively, at March 31, 1999 and 1998.
No related party leases, other than renewals or modifications of leases on
existing stores, have been entered into since May 1989, and no new leases are
contemplated.
Effective July 1991, the Company entered into a management agreement with an
investment banking firm associated with a principal shareholder/director of the
Company to provide financial advice. The agreement provides for an annual fee of
$160,000, plus reimbursement of out-of-pocket expenses. During fiscal 1999, 1998
and 1997, the Company incurred fees of $160,000 annually under this agreement.
In addition, this investment banking firm, from time to time, provides
additional investment banking services to the Company for customary fees. This
firm provided financial advisory services to the Company in connection with the
acquisition of and financing for Speedy Muffler King Inc., for fees of
approximately $1 million (Note 2).
NOTE 12 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following transactions represent noncash investing and financing activities
during the periods indicated:
YEAR ENDED MARCH 31, 1999
In connection with the acquisition of Speedy stores (Note 2), liabilities were
assumed as follows:
(Dollars in Thousands)
Fair value of assets acquired $31,985
Cash paid 20,632
-------
Liabilities assumed $11,353
=======
These amounts do not include real property assets financed under the synthetic
lease arrangement. These assets were purchased at their fair market value of
$34.8 million in September 1998 by a third party lessor on behalf of the Company
(Note 5).
Capital lease obligations of $1,179,000 were incurred under various lease
agreements.
In connection with the declaration of a five percent stock dividend (Note 8),
the Company increased accrued expenses, common stock and additional paid-in
capital by $1,000, $4,000 and $6,624,000, respectively, and decreased retained
earnings by $6,629,000.
YEAR ENDED MARCH 31, 1998
In connection with the declaration of a five percent stock dividend (Note 8),
the Company increased common stock and additional paid-in capital by $4,000 and
$7,015,000, respectively, and decreased retained earnings by $7,019,000.
Capital lease obligations of $236,000 were incurred under various lease
agreements.
In anticipation of payment-in-full from a mortgagor for its former headquarters
property, the Company reclassified $963,000 from other noncurrent assets to
other current assets.
45
<PAGE> 46
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1997
In connection with the declaration of a five percent stock dividend (Note 8),
the Company increased common stock and additional paid-in capital by $4,000 and
$4,584,000, respectively, and decreased retained earnings by $4,588,000.
Capital lease obligations of $722,000 were incurred under various lease
agreements.
In connection with the sale of its former headquarters building, the Company
reduced fixed assets and increased other assets (mortgage receivable) by
$989,000.
In connection with the termination of a capital lease, the Company reduced debt
and fixed assets by $112,000.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1999 1998 1997
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the year:
Interest, net $5,602 $4,247 $3,867
Income taxes, net $3,589 $6,166 $6,823
</TABLE>
NOTE 13 - LITIGATION
The Company and its subsidiaries are involved in legal proceedings, claims and
litigation arising in the ordinary course of business. In management's opinion,
the outcome of such current legal proceedings is not expected to have a material
effect on future operating results or on the Company's consolidated financial
position.
46
<PAGE> 47
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth income statement data by quarter for the fiscal
years ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
JUNE 30, SEPT.30, DEC.31, MARCH 31,
1998 1998 1998 1999
---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales .................................... $ 44,113 $ 46,385 $ 53,672 $ 49,288
Cost of sales including distribution
and occupancy costs .................... 24,320 26,770 33,844 30,183
-------- -------- -------- --------
Gross profit ............................. 19,793 19,615 19,828 19,105
Operating, selling, general
and administrative expenses ............ 12,389 14,330 19,449 17,894
-------- -------- -------- --------
Operating income ......................... 7,404 5,285 379 1,211
Interest expense - net ................... 905 1,077 1,598 2,020
Other expense ............................ 109 194 322 105
-------- -------- -------- --------
Income (loss) before provision for
income taxes ........................... 6,390 4,014 (1,541) (914)
Provision for (recovery of) income
taxes .................................. 2,533 1,603 (618) (315)
-------- -------- -------- --------
Net income (loss)......................... $ 3,857 $ 2,411 $ (923) $ (599)
======== ======== ======== ========
Basic earnings (loss) per share (b) ...... $ .46 $ .29 $ (.11) $ (.07)
======= ======= ======= =======
Diluted earnings (loss) per
share (a)(b) ........................... $ .43 $ .27 $ (.11) $ (.07)
======= ======= ======= =======
Weighted average number of shares of
common stock and common stock
equivalents used in computing earnings
per share (b): Basic......... 8,306 8,277 8,322 8,322
Diluted ...... 9,039 8,947 8,322 8,322
1997 1997 1997 1998
---- ---- ---- ----
Sales..................................... $40,773 $41,540 $36,336 $35,645
Cost of sales including distribution
and occupancy costs..................... 22,631 23,231 20,996 20,652
------- ------- ------- -------
Gross profit.............................. 18,142 18,309 15,340 14,993
Operating, selling, general
and administrative expenses............. 11,492 11,735 11,409 11,484
------- ------- ------- -------
Operating income.......................... 6,650 6,574 3,931 3,509
Interest expense - net.................... 868 903 1,005 1,053
Other expense............................. 85 86 95 65
------- ------- ------- -------
Income before provision for income taxes.. 5,697 5,585 2,831 2,391
Provision for income taxes................ 2,280 2,233 1,131 1,006
------- ------- ------- -------
Net income................................ $ 3,417 $ 3,352 $ 1,700 $ 1,385
======= ======= ======= =======
Basic earnings per share (b).............. $ .41 $ .41 $ .21 $ .17
======= ======= ======= =======
Diluted earnings per share (a)(b)......... $ .38 $ .37 $ .19 $ .15
======= ======= ======= =======
Weighted average number of shares of
common stock and common stock
equivalents used in computing earnings
per share (b): Basic............. 8,242 8,260 8,260 8,260
Diluted........... 9,036 9,038 8,984 9,004
</TABLE>
47
<PAGE> 48
(a) Earnings per share for each period was computed by dividing net income by
the weighted average number of shares of common stock and common stock
equivalents outstanding during the respective quarters.
(b) All share and per share information has been adjusted to give retroactive
effect to the five percent stock dividends paid in June 1998, August 1997
and in August 1996.
48
<PAGE> 49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------------------------------
Information concerning the directors of the Company is incorporated herein by
reference to the section captioned "Election of Directors" in the Proxy
Statement.
Information concerning the executive officers of the Company is set forth in
Item 4A of Part I hereof.
Information concerning required Section 16(a) disclosure is incorporated
herein by reference to the section captioned "Compliance with Section 16(a) of
the Exchange Act" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
Information concerning executive compensation is incorporated herein by
reference to the section captioned "Executive Compensation" in the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference to the sections captioned
"Security Ownership of Principal Shareholders, Directors and Executive
Officers" and "Election of Directors" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Information concerning certain relationships and related transactions is
incorporated herein by reference to the sections captioned "Compensation
Committee Interlocks and Insider Participation" and "Certain Transactions"
in the Proxy Statement.
49
<PAGE> 50
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
- -----------------------------------------------------------------
FORM 8-K
--------
FINANCIAL STATEMENTS
--------------------
Reference is made to Item 8 of Part II hereof.
FINANCIAL STATEMENT SCHEDULES
-----------------------------
Schedules have been omitted because they are inapplicable, not
required, or the information is included elsewhere in the Financial
Statements or the notes thereto.
EXHIBITS
--------
Reference is made to the Index to Exhibits accompanying this Form 10-K
as filed with the Securities and Exchange Commission. The Company will
furnish to any shareholder, upon written request, any exhibit listed
in such Index to Exhibits upon payment by such shareholder of the
Company's reasonable expenses in furnishing any such exhibit.
REPORTS ON FORM 8-K
-------------------
No reports on Form 8-K were filed during the last quarter of fiscal
1999.
50
<PAGE> 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MONRO MUFFLER BRAKE, INC.
(Registrant)
By /s/ Robert G. Gross
--------------------------------------
Robert G. Gross
President and Chief Executive Officer
Date: June 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of June 29, 1999.
Signature Title
- --------- -----
/s/ Catherine D'Amico Senior Vice President-Finance, Chief
- ---------------------- Financial Officer and Treasurer
Catherine D'Amico (Principal Financial and Accounting Officer)
Burton S. August* Director
Charles J. August* Director
Robert W. August* Director
Frederick M. Danziger* Director
Jack M. Gallagher* Director
Donald Glickman* Director
Peter J. Solomon Director
Lionel B. Spiro* Director
W. Gary Wood* Director
*By /s/ Robert G. Gross
----------------------------
Robert G. Gross
Chief Executive Officer,
Director and as Attorney-in-Fact
51
<PAGE> 52
INDEX TO EXHIBITS
The following is a list of all exhibits filed herewith or
incorporated by reference herein:
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE DOCUMENT
<S> <C> <C>
3.01* Restated Certificate of Incorporation of the Company, dated July 23, 1991, with Certificate of
Amendment, dated November 1, 1991. (1992 Form 10-K, Exhibit No. 3.01)
3.02* Restated By-Laws of the Company, dated July 23, 1991. (Amendment No. 1, Exhibit No. 3.04)
4.02* Senior Note Agreement, dated March 1, 1989, between the Company and Massachusetts Mutual Life
Insurance Company. (Form S-1, Exhibit No. 4.02)
4.02a* Amendment No. 1, dated June 17, 1991, to Senior Note Agreement, between the Company and Massachusetts
Mutual Life Insurance Company. (Amendment No. 1, Exhibit No. 4.02a)
4.03* 10.65% Senior Notes Due April 1, 1999, dated March 22, 1989, issued by the Company to Massachusetts
Mutual Life Insurance Company. (Form S-1, Exhibit No. 4.03)
10.01* 1984 Employees' Incentive Stock Option Plan, as amended through December 23, 1992. (Form S-8,
Exhibit No. 4-1)**
10.02* 1987 Employees' Incentive Stock Option Plan, as amended through December 23, 1992. (Form S-8,
Exhibit No. 4-2)**
10.03* 1989 Employees' Incentive Stock Option Plan, as amended through December 23, 1992. (Form S-8,
Exhibit No. 4-3)**
10.03a* Amendment, dated as of January 25, 1994, to 1989 Employees' Incentive Stock Option Plan. (1994
Form 10-K, Exhibit No. 10.03a)**
10.03b* Amendment, dated as of May 17, 1995 to the 1989 Employees' Incentive Stock Option Plan (1995
Form 10-K, Exhibit No. 10.03) **
10.03c* Amendment, dated as of May 14, 1997 to the 1989 Employees' Incentive Stock Option Plan (1997 Form
10-K, Exhibit No. 10.03c)**
10.03d* Amendment, dated as of January 29, 1998 to the 1989 Employees' Incentive Stock Option Plan (1998
Form 10-K, Exhibit No. 10.03d)**
10.04* Retirement Plan of the Company, as amended and restated effective as of April 1, 1989. (September
1993 Form 10-Q, Exhibit No. 10)**
10.05* Profit Sharing Plan, amended and restated as of April 1, 1993. (1995 Form 10-K, Exhibit No.
10.05) **
10.06* Amended and Restated Employment Agreement, dated February 16, 1999, by and between the Company and
Robert G. Gross. (December 1998 Form 10-Q, Exhibit No. 10.1)**
10.07* Amended and Restated Secured Loan Agreement, dated February 16, 1999, by and between the Company and
Robert G. Gross. (December 1998 Form 10-Q, Exhibit No. 10.2)**
10.08* Company's 1998 Stock Option Plan. (*Subject to the approval of the shareholders of the Company.)
(December 1998 Form 10-Q, Exhibit No. 10.3)**
10.09* Credit Agreement, dated as of September 15, 1998, by and among the Company, The Chase Manhattan Bank,
as agent, and certain lenders party thereto. (September 1998 Form 10-Q, Exhibit No. 10.1)**
10.10 Credit Agreement, dated as of September 15, 1998, executed by and among Brazos Automotive Properties,
L.P., The Chase Manhattan Bank, and certain lenders party thereto. (September 1998 Form 10-Q, Exhibit
No. 10.2)
10.11* Residual Guaranty, dated as of September 15, 1998, between the Company and The Chase Manhattan Bank.
(September 1998 Form 10-Q, Exhibit No. 10.3)
10.12* Agreement for Facilities Lease, dated as of September 15, 1998, between Brazos Automotive Properties,
L.P. and Monro Leasing LLC. (September 1998 Form 10-Q, Exhibit No. 10.4)
10.13* Facilities Lease Agreement, dated as of September 15, 1998, between Brazos Automotive Properties, L.P.
and Monro Leasing LLC. (September 1998 Form 10-Q, Exhibit No. 10.5)
</TABLE>
- ---------------------
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE DOCUMENT
<S> <C> <C>
10.14* Agreement for Ground Lease, dated as of September 15, 1998, between Brazos
Automotive Properties, L.P. and Monro Leasing LLC. (September 1998 Form 10-Q,
Exhibit No. 10.6)
10.15* Ground Lease Agreement, dated as of September 15, 1998, between Brazos
Automotive Properties, L.P. and Monro Leasing LLC. (September 1998 Form 10-Q,
Exhibit No. 10.7)
10.16* Guaranty, dated as of September 15, 1998, between the Company and Brazos
Automotive Properties, L.P. (September 1998 Form 10-Q, Exhibit No. 10.8)
10.17* Agreement of Sublease, dated as of September 15, 1998, by and among Monro
Leasing LLC, the Company and Brazos Automotive Properties, L.P. (September 1998
Form 10-Q, Exhibit No. 10.9)
10.18* Modification and Extension Agreement, dated August 12, 1991, between AA & L
Associates, L.P. and the Company, with respect to Store No. 1. (1992 Form 10-K,
Exhibit No. 10.18)
10.19* Sublease, dated June 1, 1980, among August, August and Lane Co-venture and the
Company, with Amendment of Lease, dated July 11, 1984, and assigned by August,
August and Lane Co-venture to AA & L Associates, L.P., effective January 2, 1996
with respect to Store No. 3. (Form S-1, Exhibit No. 10.19)
10.19a Assignment of Lease, effective January 2, 1996, among August, August and Lane
Co-Venture and AA & L Associates, L.P. and August, August and Lane of Rochester
LLC, with respect to Store Nos. 3, 12, 17, 44, 49, 51, 52, 54, 58, 31, 33 and
34.
10.20* Lease, dated March 8, 1972, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984,
with respect to Store No. 7. (Form S-1, Exhibit No. 10.20)
10.20a* Confirmation of Assignment of Lease, dated December 31, 1991, among Charles J.
August, Burton S. August and Sheldon A. Lane and Stoneridge 7 Realty
Partnership, with respect to Store No. 7. (1992 Form 10-K, Exhibit No. 10.20a)
10.21* Lease, effective December 1, 1985, among Chase Lincoln First Bank, N.A. and
Burton S. August, as Trustees and the Company, with Assignment of Lease, dated
June 7, 1991, among Chase Lincoln First Bank, N.A. and Burton S. August, as
Trustees, and August, Eastwood & August, with respect to Store No. 8. (Form S-1,
Exhibit No. 10.21)
10.22* Lease, dated February 10, 1972, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company as amended July 11, 1984 and assigned to Lane,
August, August Trust on June 7, 1991, and assigned to Lane, August, August LLC
effective January 2, 1996, with respect to Store No. 9. (Form S-1, Exhibit No.
10.22)
10.22a Modification and Extension Agreement, dated November 19, 1998, between AA & L
Associates, L.P., and the Company, with respect to Store No. 9.
10.23* Lease, dated May 1, 1973, among Charles J. August, Burton S. August and Sheldon
A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and
Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S.
August and Sheldon A. Lane and 35 Howard Road Joint Venture, with respect to
Store No. 10. (Form S-1, Exhibit No. 10.23)
</TABLE>
- --------------------
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE DOCUMENT
<S> <C> <C>
10.24* Lease, dated May 7, 1973, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company,
with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane to AA &
L Associates, L.P., effective January 2, 1996, with respect to Store No. 12. (Form S-1, Exhibit No.
10.24)
10.25* Lease, dated July 25, 1974, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company,
with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among
Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to
Store No. 14. (Form S-1, Exhibit No. 10.25)
10.26* Lease, effective April 1, 1975, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991,
among Charles J. August, Burton S. August and Sheldon A. Lane and Lane, August, August Trust and
assigned by Lane, August, August Trust to Lane, August, August LLC, effective January 2, 1996, with
respect to Store No. 15. (Form S-1, Exhibit No. 10.26)
10.26a Modification and Extension Agreement, dated November 19, 1998, between AA & L Associates, L.P., and
the Company, with respect to Store No. 15.
10.27* Lease, dated as of September 25, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and
the Company, with respect to Store No. 17. (1992 Form 10-K, Exhibit No. 10.27)
10.28* Lease, effective May 1, 1979, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among
Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to
Store No. 23. (Form S-1, Exhibit No. 10.28)
10.29* Lease, effective May 1, 1980, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company,
with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among
Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to
Store No. 25. (Form S-1, Exhibit No. 10.29)
10.30* Lease, effective March 1, 1980, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991,
among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 27. (Form S-1, Exhibit No. 10.30)
10.31* Lease, effective July 1, 1980, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991,
among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 28. (Form S-1, Exhibit No. 10.31)
10.32* Lease, effective November 1, 1980, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991,
among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 29. (Form S-1, Exhibit No. 10.32)
10.33* Lease, effective August 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991,
among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 30. (Form S-1, Exhibit No. 10.33)
</TABLE>
- --------------------
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE DOCUMENT
<S> <C> <C>
10.33a Modification and Extension Agreement, dated February 25, 1998, between AA & L Associates, L.P., and the
Company, with respect to Store Nos. 30, 36 and 43.
10.34 Lease, effective March 1, 1997, between August, August and Lane of Rochester, LLC, and the Company,
dated March 3, 1997 with respect to Store No. 31.
10.35* Modification and Extension Agreement, dated August 12, 1991, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, and assigned by Mssrs. August, August and Lane to August, August and
Lane of Rochester, LLC, effective January 2, 1996, with respect to Store No. 33. (1992 Form 10-K,
Exhibit No. 10.35)
10.36* Lease, effective December 1, 1981, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane
to August, August and Lane of Rochester, LLC, effective January 2, 1996, with respect to Store No.
34. (Form S-1, Exhibit No. 10.36)
10.37* Lease, dated April 10, 1984, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company,
with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among
Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to
Store No. 35. (Form S-1, Exhibit No. 10.37)
10.38* Lease, effective October 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, with respect to Store No. 36. (Form S-1,
Exhibit No. 10.38)
10.38a* Assignment of Lease, dated October 1, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane
and AA & L Associates, L.P., with respect to Store No. 36. (1992 Form 10-K, Exhibit No. 10.38a)
10.39* Lease, effective July 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991,
among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 43. (Form S-1, Exhibit No. 10.39)
10.40* Lease, dated as of February 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane
to AA & L Associates, L.P., effective January 2, 1996, with respect to Store No. 44. (Form S-1,
Exhibit No. 10.40)
10.41* Sublease, dated as of May 1, 1979, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991,
among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 45. (Form S-1, Exhibit No. 10.41)
10.42 Lease, effective October 1, 1985, among Charles J. August, Burton S. August and Sheldon A. Lane and
the Company, with Amendment of Lease, dated as of July 11, 1984, and Assignment of Lease, dated
June 7, 1991, among Burton S. August, as Trustee, and Lane, August, August Trust, and assigned by
Lane, August, August Trust to Lane, August, August LLC, effective January 2, 1996, with respect to
Store No. 48. (Form S-1, Exhibit No. 10.42)
10.43* Lease, dated as of January 1, 1984, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane
to AA & L Associates, L.P., effective January 2, 1996, with respect to Store No. 49. (Form S-1,
Exhibit No. 10.43)
</TABLE>
- --------------------
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE DOCUMENT
<S> <C> <C>
10.44* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company,
with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane to AA &
L Associates, L.P., effective January 2, 1996, with respect to Store No. 51. (Form S-1, Exhibit No.
10.44)
10.45* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company,
with Amendment of Lease, dated July 11, 1984, with respect to Store No. 52. (Form S-1, Exhibit No.
10.45)
10.46* Lease, dated May 1, 1979, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company,
with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among
Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to
Store No. 53. (Form S-1, Exhibit No. 10.46)
10.47* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company,
with Amendment of Lease, dated July 11, 1984, with respect to Store No. 54. (Form S-1, Exhibit No.
10.47)
10.47a Modification Agreement, effective January 1988, among Charles J. August, Burton S. August and Shelden A. Lane,
and the Company, with respect to Store No. 54.
10.48* Lease, effective September 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991,
among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 55. (Form S-1, Exhibit No. 10.48)
10.49* Lease, dated as of July 1, 1984, among Charles J. August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991,
among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 57. (Form S-1, Exhibit No. 10.49)
10.50* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company,
with Amendment of Lease, dated July 11, 1984, with respect to Store No. 58. (Form S-1, Exhibit No.
10.50)
10.50a* Modification and Extension Agreement, dated August 12, 1991, between AA & L Associates, L.P. and the
Company, with respect to Store No. 60. (1992 Form 10-K, Exhibit No. 10.51)
10.52* Lease, signed October 22, 1986, between the Company and Conifer Johnstown Associates, with respect to Store
No. 63. (Form S-1, Exhibit No. 10.52)
10.52a Lease Addendum, effective February 18, 1996, between Conifer Johnstown Associates and the Company,
with respect to Store No. 63.
10.53* Lease, effective October 20, 1986, between the Company and Conifer Wappingers Falls Associates, with
respect to Store No. 79. (Form S-1, Exhibit No. 10.53)
10.53a Lease Addendum, effective July 1996, between Conifer Wappinger Falls Associates and the Company,
with respect to Store No. 79.
10.54* Lease, dated January 25, 1988, between the Company and Conifer Northeast Associates, with Letter
Agreement, dated February 3, 1988, amending Lease and Amendment Agreement, dated January 6, 1989,
with respect to Store No. 107. (Form S-1, Exhibit No. 10.54)
</TABLE>
- --------------------
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE DOCUMENT
<S> <C> <C>
10.54a Lease Addendum, effective February 18, 1996, between Conifer Northeast Associates and the Company,
with respect to Store No. 107.
10.55* Lease, dated March 16, 1988, between the Company and Conifer Northeast Associates, with Letter
Agreement, dated February 3, 1988, amending Lease and Amendment Agreement, dated January 6, 1989,
with respect to Store No. 109. (Form S-1, Exhibit No. 10.55)
10.55a Lease Addendum, effective February 18, 1996, between Conifer Northeast Associates and the Company,
with respect to Store No. 109.
10.56* Lease, dated February 11, 1988, between the Company and Conifer Northeast Associates, with Letter
Agreement, dated February 3, 1988, amending Lease and Amendment Agreement, dated January 6, 1989, and
Non-Disturbance and Attornment Agreement, dated February 11, 1988, between the Company and Central
Trust Company, with respect to Store No. 114. (Form S-1, Exhibit No. 10.56)
10.56a Lease Addendum, effective February 18, 1996, between Conifer Northeast Associates and the Company,
with respect to Store No. 114.
10.57* Purchase Agreement, dated December 1, 1987, between the Company and Conifer Northeast Associates,
with Lease, dated February 25, 1988, between the Company and Conifer Northeast Associates, Letter
Agreement, dated February 3, 1988, amending Lease; Amendment Agreement, dated January 6, 1989; and
Non-Disturbance and Attornment Agreement, dated February 25, 1988, between the Company and Central
Trust Company, with respect to Store No. 116. (Form S-1, Exhibit No. 10.57)
10.57a Lease Addendum, effective February 18, 1996, between Conifer Northeast Associates and the Company,
with respect to Store No. 116.
10.58* Lease, dated May 12, 1989, between the Company and Conifer Penfield Associates (as successor to
Conifer Development, Inc.), with respect to Store No. 132. (Form S-1, Exhibit No. 10.58)
10.58a Amendment Agreement, dated June 30, 1993, between Conifer Penfield Associates, L.P. and the Company,
with respect to Store No. 132.
10.59* Modification and Extension Agreement, dated November 1, 1993, between AA & L Associates, L.P. and the
Company, with respect to Store Nos. 1, 23, 25, 27, 28, 29, 35, 53, 57 and 60. (1994 Form 10-K,
Exhibit No. 10.57)
10.60* Form of Mortgage and Security Agreement, between the Company and The Chase Manhattan Bank, N.A., with
Form of Mortgage Note and Form of Conditional Assignment of Leases and Rents, in connection with each
of fifteen mortgages on Store Nos. 137, 140, 143, 146, 162, 164, 168, 169, 172, 177, 179, 184, 185,
186 and 191 entered into since the filing of the 1992 Form 10-K. (1993 Form 10-K, Exhibit No. 10.57)
10.61* Form of Mortgage and Security Agreement, between the Company and The Chase Manhattan Bank, N.A., with
Form of Mortgage Note and Form of Conditional Assignment of Leases and Rents, in connection with each
of five mortgages on Store Nos. 160, 183, 190, 192 and 193 entered into since the filing of the 1993
Form 10-K. (1994 Form 10-K, Exhibit No. 10.59)
10.62* Mortgage Agreement, dated September 28, 1994, between the Company and the City of Rochester, New
York. (1995 Form 10-K, Exhibit No. 10.60)
</TABLE>
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<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE DOCUMENT
<S> <C> <C>
10.63* Lease Agreement, dated October 11, 1994, between the Company and the City of Rochester, New York.
(1995 Form 10-K, Exhibit No. 10.61)
10.64* Mortgage Notes, Collateral Security Mortgage and Security Agreement, Indemnification Agreement and
Guarantee, dated September 22, 1995 between Monro Service Corporation, County of Monroe Industrial
Development Agency, the Company and The Chase Manhattan Bank, N.A. (September 1995 Form 10-Q, Exhibit
No. 10.02)
10.65* Form of Mortgage and Security Agreement, between the Company and The Chase Manhattan Bank, N.A., with
Form of Mortgage Note and Form of Conditional Assignment of Leases and Rents, in connection with each
of nine mortgages on Store Nos. 205, 207, 210, 213, 216, 226, 229, 230 and 236 entered into September
14, 1995. (September 1995 Form 10-Q, Exhibit No. 10.01)
10.66* Amendment to Lease Agreement, dated September 19, 1995 between the Company and the County of Monroe
Industrial Development Agency. (September 1995 Form 10-Q, Exhibit No. 10.00)
10.67* Employment Agreement dated February 18, 1998, between the Company and Jack M. Gallagher. (1998 Form
10-K, Exhibit No. 10.65)**
10.68* Asset Purchase Agreement by and between Monro Muffler Brake, Inc. as the buyer and Xpress Automotive
Group, Inc. as the seller, as entered into July 25, 1995. (September 1995 Form 10-Q, Exhibit No.
10.03)
10.69* Mortgage Modification Agreement, dated October 11, 1996 between the Company and The Chase Manhattan
Bank, N.A., in connection with each of 33 mortgages for Store Nos. 78, 86, 87, 90, 137, 140, 143,
146, 160, 162, 164, 168, 169, 172, 177, 179, 183, 184, 185, 186, 190, 191, 192, 193, 205, 207, 210,
213, 216, 226, 229, 230 and 236. (September 1996 Form 10-Q, Exhibit No. 10)
10.69a* Amendment No. 2 to the Asset Purchase Agreement dated August 31, 1998. (September 1998 Form 8-K,
Exhibit No. 10.1)
10.70* Purchase Agreement between Walker Manufacturing Company, a division of Tenneco Automotive and Monro
Muffler Brake, Inc. dated as of November 5, 1996. (December 1996 Form 10-Q, Exhibit 10.1)
10.71* 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., dated as of April 13,
1998. (April 1998 Form 8-K, Exhibit 10.1)
10.72* Form of Agreement - "Purchase Agreement and Escrow Instructions" between Realty Income Corporation -
buyer and Monro Muffler Brake, Inc. - seller dated November 12, 1997. (1998 10-K, Exhibit No. 10.70)
10.73 "Purchase Agreement and Escrow Instructions" between Realty Income Corporation - buyer and Monro
Muffler Brake, Inc. - seller dated March 31, 1999.
10.73a Amendment to "Purchase Agreement and Escrow Instructions" between Realty Income Corporation - buyer
and Monro Muffler Brake, Inc. - seller dated May 6, 1999, with respect to Stores No. 372 and 368.
</TABLE>
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<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE DOCUMENT
<S> <C> <C>
11.01 Computation of Per Share Earnings.
21.01 Subsidiaries of the Company.
23.01 Consent of PricewaterhouseCoopers LLP.
24.01 Powers of Attorney.
</TABLE>
** Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) hereof.
* An asterisk "*" following an exhibit number indicates that the exhibit
is incorporated herein by reference to an exhibit to one of the
following documents: (1) the Company's Registration Statement on Form
S-1 (Registration No. 33-41290), filed with the Securities and Exchange
Commission on June 19, 1991 ("Form S-1"); (2) Amendment No. 1 thereto,
filed July 22, 1991 ("Amendment No. 1"); (3) the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992 ("1992
Form 10-K"); (4) the Company's Registration Statement on Form S-8,
filed with the Securities and Exchange Commission on December 24, 1992
("Form S-8"); (5) the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1993 ("1993 Form 10-K"); (6) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1993 ("September 1993 Form 10-Q"); (7) the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1994 ("1994 Form
10-K"); (8) the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1995 ("1995 Form 10-K"); (9) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1995 ("September 1995 Form 10-Q"); (10) the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1996
("September 1996 Form 10-Q"); (11) the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended December 31, 1996 ("December
1996 Form 10-Q"); (12) the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997 ("1997 Form 10-K"); (13) the Company's
Current Report on Form 8-K filed on April 28, 1998 ("April 1998 Form
8-K"); (14) the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1998 ("1998 Form 10-K"); (15) the Company's
Current Report on Form 8-K filed on September 23, 1998 ("September 1998
Form 8-K"); or (16) the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1998 ("September 1998 Form 10-Q).
The appropriate document and exhibit number are indicated in
parentheses.
<PAGE> 1
Exhibit 10.19a
August, August and Lane Co-Venturers
200 Holleder Parkway
Rochester, NY 14615
January 2, 1996
Catherine D'Amico CFO
Monro Muffler Brake, Inc.
200 Holleder Parkway
Rochester, NY 14615
Dear Cathy:
On January 2, 1996, the August, August and Lane Co-Venture was dissolved. You
are hereby notified that the leases listed below between Monro Muffler Brake,
Inc. and August, August and Lane Co-Venture are hereby assigned and modified
effective January 2, 1996. All rental payments per the underlying leases,
including any rental overages for the prior calendar, should be made payable to:
New landlord - A A & L Associates, L.P. for the following Monro Muffler Brake,
Inc. stores: 3, 12, 17, 44, 49, 51, 52, 54 and 58
New landlord - August, August and Lane of Rochester, LLC for the following Monro
Muffler Brake, Inc. stores 31, 33 and 34
Sincerely,
/s/ Burton August
Burton August
Co-Venturer
<PAGE> 1
Exhibit 10.22a
November 19, 1998
Mr. David M. Dworkin
LLD Enterprises
415 Park Avenue
Rochester, NY 14607
RE: Lease between August, August and Lane of Rochester, LLC (Landlord)
And Monro Muffler/Brake, Inc. (Tenant)
Webster, NY - Store#9
Dear Mr. Dworkin:
This letter is to serve as agreement for amending the above referenced Lease as
follows:
1. The Lease is amended for a term of ten (10) years, to December 31, 2008.
After the initial ten (10) year term Monro will have one (1) remaining ten
(10) year option period available to exercise. Written notice of exercise
must be received by July 1, 2008.
2. The Tenant will furnish the Landlord with a new Certificate of Occupancy,
upon completion of the renovation if required said C of O will be furnished
by April 1, 1999. Until then the existing rent terms will continue. The
first lease year will be adjusted to run from January 1st to December 31st.
3. The base rent for the amended term and options period shall be $48,000.00
per year ($4,000.00 per month) or 6 3/4 % overage rent, whichever is
greater (subject to offset per paragraph 4).
4. Tenant will remodel store for construction costs of at least $100,000.00.
The overage which would accrue to Landlord for all Monro Muffler/Brake
Store #9 sales in excess of ____________ (to be determined by January 10,
1999). This calculation shall be an average of two (2) years sales prior to
January 1, 1999, (calendar years 1997 and 1998 at 6 3/4 %). Said amount
shall be applied to Landlord's reimbursement to tenant for one half of the
construction costs not to exceed $65,000.00.
5. Tenant has the right to sublease the space located in the rear of the
store. All sales from sublease are exempt from the overage calculation. All
rent received shall be income to Tenant without obligation to Landlord.
6. At the inception of the ten (10) year term, Store #9 will become
"unbundled" forever in that Monro will have the ability to renew or
terminate this Lease without any other lease being affected.
<PAGE> 2
7. In the event the agreed upon renovations are not completed by April 15,
1999, then this Lease Addendum will be null and void and next option term
of current lease is deemed exercised and that Lease will continue in full
force until February 28, 2005.
8. THIS AGREEMENT IS SIGNED SUBJECT TO AND CONTINGENT ON BOTH PARTIES AGREEING
TO THE EXCESS OVERAGE CALCULATION DETERMINED IN PARAGRAPH 4.
Your signature below will indicate acknowledgement and acceptance on behalf of
Landlord for the above terms and conditions.
Very truly yours,
Monro Muffler/Brake, Inc.
/s/ Thomas M. Aspenleiter
---------------------------
Thomas M. Aspenleiter
The above terms and conditions are hereby acknowledged and accepted:
Landlord
August, August and Lane, LLC
By: /s/ Wendy Dworkin Date: December 1, 1998
----------------- ----------------
Wendy Dworkin
<PAGE> 1
Exhibit 10.26a
November 19, 1998
Mr. David M. Dworkin
LLD Enterprises
415 Park Avenue
Rochester, NY 14607
RE: Lease between August, August and Lane of Rochester, LLC (Landlord)
And Monro Muffler/Brake, Inc. (Tenant)
Geneva, NY - Store#15
Dear Mr. Dworkin:
This letter is to serve as agreement for amending the above referenced Lease as
follows:
1. The lease is amended for a term of ten (10) years to December 31, 2008.
After the initial ten (10) year term Monro will have one (1) remaining
ten (10) year option period available to exercise. Written notice of
exercise must be received by July 1, 2008.
2. The Tenant will furnish the Landlord with a new Certificate of Occupancy,
upon completion of the renovation if required said C of O will be furnished
by April 1, 1999. Until then the existing terms will continue. The first
lease year will be adjusted to run from January 1st to December 31st.
3. The base rent for the amended term and option period shall be $36,000.00
per year ($3,000.00 per month) or 6 3/4 % overage rent, whichever is
greater (subject to offset per paragraph 4).
4. Tenant will remodel store for construction costs of at least $25,000.00.
The overage which would accrue to Landlord for all Monro Muffler/Brake
Store #15 sales in the excess of _____________ (to be determined by January
10, 1999). This calculation shall be an average of two (2) years sales
prior to January 1, 1999, (calendar years 1997 and 1998 at 6 3/4 %). Said
amount shall be applied to Landlord's reimbursement to Tenant for one half
of the construction costs not to exceed $15,000.00.
5. At the inception of the ten (10) year term, Store #15 will become
"unbundled" forever in that Monro will have the ability to renew or
terminate this Lease without any other lease being affected.
<PAGE> 2
6. In the event the agreed upon renovations are not completed by April 15,
1999, then this Lease addendum will be null and void and the next option
term of current lease is deemed exercised and that Lease will continue in
full force until March 31, 2004.
7. THIS AGREEMENT IS SIGNED SUBJECT TO AND CONTINGENT ON BOTH PARTIES AGREEING
TO THE EXCESS OVERAGE CALCULATION DETERMINED IN PARAGRAPH 4.
Your signature below will indicate acknowledgement and acceptance on behalf of
Landlord for the above terms and conditions.
Very truly yours,
Monro Muffler/Brake, Inc.
/s/ Thomas M. Aspenleiter
---------------------------
Thomas M. Aspenleiter
The above terms and conditions are hereby acknowledged and accepted:
Landlord
August, August and Lane, LLC
By: /s/ Wendy Dworkin Date: December 1, 1998
----------------- ----------------
Wendy Dworkin
<PAGE> 1
Exhibit 10.33a
February 25, 1998
Mr. Burton August, Co-Venturer
AA&L Associates, LP
c/o Monro Muffler Brake, Inc.
200 Holleder Parkway
Rochester, New York 14615
Dear Mr. August:
RE: MONRO MUFFLER BRAKE, INC.
AUBURN, NY (MMB#30), BATH, NY (MMB#43) and
HUDSON, NY (MMB#36)
-------------------
Please accept this letter as confirmation that the above Monro Muffler Brake,
Inc. locations were renewed by J.W. August for an additional five year term.
As per clause 10 a) of our lease amendment dated July 11, 1984, Monro Muffler
Brake, Inc. has the right to extend these three leases upon the same terms and
conditions, save and except there shall only be one additional option to renew.
The renewal terms shall be:
Auburn, NY August 1, 1998 - July 31, 2003
Bath, NY September 1, 1998 - August 31, 2003
Hudson, NY October 1, 1998 - September 30, 2003
If you have any questions or comments regarding the above, please do not
hesitate to contact me at the above telephone number.
Yours truly,
Thomas M. Aspenleiter
Vice President, Real Estate
/cm
cc: M. Cox, Operations
AGREED and accepted this 2 day of March 1998.
By: /s/ Burton S. August
--------------------------------------------------
I have the authority to bind AA&L Associates, L.P.
<PAGE> 1
Exhibit 10.34
LEASE
THIS LEASE is made as of the 3rd day of March, 1997 between August, August and
Lane of Rochester, LLC, with an address of c/o Monro Muffler Brake, Inc., 200
Holleder Parkway, Rochester, New York 14615, ("Landlord") and Monro Muffler
Brake, Inc., a New York Corporation with its office at 200 Holleder Parkway,
Rochester, New York 14615 ("Tenant").
WITNESSETH:
In consideration of the terms, covenants and conditions contained in
this Lease, Landlord and Tenant agree as follows:
1. PREMISES
--------
Subject to the terms and conditions contained in this Lease, Landlord
leases to Tenant and Tenant takes from Landlord a parcel of land and
building known as 1268 Front Street, Chenango (Binghamton), New York as
shown and described on Exhibits "A" (Map) and "B" (metes and bounds
description) to be provided by Landlord prior to the full execution of this
Lease and attached hereto and made a part of this Lease (the "Leased
Premises").
2. TERM and RENT COMMENCEMENT
--------------------------
A. The term of this Lease shall be for ten (10) years and shall commence on
the first day of the first full month following the Rent Commencement Date as
defined below.
B. The obligation to pay rent shall commence upon the expiration of the
<PAGE> 2
existing Lease of the Leased Premises by and between Landlord and Tenant
presently in force ("Rent Commencement Date").
3. USE
---
Tenant shall use the Leased Premises for the operation of an auto
service center and, with Landlord's approval, which approval shall not be
unreasonably withheld or delayed, for any other lawful purpose, except Tenant
shall not use the Leased Premises for the display or sale of adult entertainment
services or products nor as a drinking establishment, nor for the display or
sale of tobacco products or alcohol products. Additionally, Tenant shall not use
the Leased Premises for any other purpose that would tend to devaluate the
Property, impair Landlord's reputation or the reputation of the Leased Premises.
Landlord's approval shall not be unreasonably withheld or delayed.
4. RENT
----
Tenant shall pay to Landlord, at the address above set forth or at such
other place as Landlord may from time to time designate by notice given to
Tenant in the manner provided in this Lease, annual rent as follows:
YEARS ANNUAL RENT
1 - 2.5 $37,800.00
2.5 - 5 $39,690.00
6 - 7.5 $41,580.00
7.5 - 10 $43,470.00
OPTION YEARS ANNUAL RENT
11 - 12.5 $45,360.00
12.5 - 15 $47,250.00
16 - 17.5 $49,140.00
17.5 - 20 $51,030.00
2
<PAGE> 3
Rent shall be paid in equal monthly payments in advance on the first day of each
month during the term of this Lease. If the Rent Commencement Date, is other
than the first day of a calendar month, the rent installment for the month in
which the Rent Commencement Date occurs, shall be prorated from the Rent
Commencement Date until the last day of that month and shall be payable on or
before the Rent Commencement Date.
In the event the Rent due hereunder is received after the tenth of the
month in which it is due, Tenant shall incur a late charge equivalent to two
percent (2%) of said amount due. Any outstanding balance due after thirty (30)
days will bear interest of prime plus two (2) percent.
If Rent is uncontested and remains unpaid on the tenth (10th) day
following Tenant's receipt of Landlord's second notice (which may not be sent
until the sixtieth (60th) day following Tenant's receipt of Landlord's first
notice), Landlord may terminate this lease upon written notice to Tenant
5. ADDITIONAL RENT
---------------
A. Impositions. Tenant shall pay as additional rent all taxes,
assessments, sewer charges, assessments for local, district and special district
improvements that may be assessed against or become a lien upon the Leased
Premises or any part thereof by virtue of any present or future law or
regulation of any governmental authority ("Impositions"). Tenant shall forward
to Landlord evidence of payment of all such taxes,
3
<PAGE> 4
assessments and other charges. Upon receipt of such evidence of payment,
Landlord shall reimburse Tenant for the proportionate share of taxes and other
charges levied against additional leasable space which will be twenty-five
percent (25%) unless further development by either party. Tenant shall also pay
all utility charges for water, gas, fuel oil and electricity consumed on the
Leased Premises. This Lease is a net Lease except that Tenant shall not be
obligated to make any payments on any mortgages now or hereafter encumbering the
Leased Premises, nor shall Tenant be obligated to pay any franchise,
corporation, capital stock, capital levies, transfer, estate, excise,
inheritance or income tax or excess profits tax which is or may become payable
by Landlord or which may be imposed against Landlord or against the rents
payable hereunder or upon the income or profits of Landlord by reason of any law
now in force or hereafter enacted, unless such taxes are a result of a shift of
the incidence of taxation now ordinarily imposed on realty.
B. Penalties. Tenant shall pay all interest and penalties imposed upon
the late payment of any Impositions caused by Tenant's late payment of same.
Impositions shall be apportioned and paid between Tenant and Landlord on the
dates of commencement and termination of this Lease; provided, however, that
Tenant shall not be entitled to receive any apportionment from Landlord if
Tenant shall be in default beyond the applicable cure period in the payment of
rent or in the performance of any of the terms, covenants, conditions or
agreements in this Lease provided.
C. Late Payment. If Tenant shall fail, for ten (10) days after written
notice
4
<PAGE> 5
and demand by Landlord to Tenant to pay any Imposition on or before the last day
upon which the same may be paid without interest or penalty, then Landlord may
pay the same with all interest and penalties lawfully imposed upon the late
payment thereof, and the amounts so paid by Landlord shall thereupon be and
become immediately due and payable by Tenant to Landlord as additional rent.
Any Imposition that remains unpaid after the aforementioned
ten (10) day notice period shall be subject to a Late Penalty of two percent
(2%) on the unpaid arrears. If Imposition remains unpaid after twenty (20) days,
additional Late Charge of prime plus two (2%) percent shall be incurred by
Tenant.
D. Contest. Tenant, at its own cost and expense,
shall have the right to contest the validity or amount of any Imposition, in
which event Tenant may defer the payment thereof for such period as such contest
shall be actively prosecuted and shall be pending undetermined; provided,
however, that Tenant shall not allow any such Imposition so contested to remain
unpaid for such length of time as shall permit the Leased Premises, or the lien
thereon created by such item to be contested, to be sold by federal, state,
county or municipal authority for the nonpayment thereof. Tenant may contest the
validity or amount of such Imposition in Landlord's name, by suit or otherwise,
in which event Tenant shall indemnify Landlord and save him harmless from all
costs, charges and liabilities in connection with such contest.
E. Assessments. With respect to assessments which may
be payable in installments, Tenant shall be required to pay only those
installments for those periods
5
<PAGE> 6
which fall wholly within the term of this Lease and a proportionate part of any
installments with respect to a period a portion of which falls within the term
of this Lease.
6. MAINTENANCE AND REPAIR
----------------------
Tenant assumes the sole responsibility for the operation and
maintenance of the Leased Premises. Landlord shall have no responsibility with
respect thereof and shall have no liability for damage to the property of Tenant
or any tenant, subtenant or other occupant of the Leased Premises or any portion
thereof on any account or for any reason whatsoever except as caused by the
negligent acts or omissions of the Landlord, its agents, employees or invitees.
Notwithstanding anything to the contrary stated in this Lease, Tenant
shall take good care of the Leased Premises and at its own expense make, as and
when needed, all necessary repairs of any nature to the Leased Premises,
including all mechanical systems located therein, windows, doors, the interior,
all paving, and all structural and non-structural components of the Leased
Premises. All repairs made by Tenant shall be done in a good and workmanlike
manner. If Tenant shall fail to make such repairs or if after commencing them
shall fail to complete them with reasonable diligence, then after written notice
and opportunity to cure or dispute the need for such repairs, such repairs may
be made or completed by Landlord in a good and workmanlike manner at Tenant's
expense. Any reasonable amounts spent by Landlord to make or complete such
repairs shall be repaid by Tenant as additional rent and shall be payable to
Landlord on the first
6
<PAGE> 7
day of the month following Tenant's receipt of a statement from Landlord for
such amounts expended.
A. Tenant shall keep its parking area free of debris, ice and snow and
shall be responsible for routine repairs and maintenance of its parking lot
surface including patching and sealing thereof and for the light bulbs for the
exterior lighting fixtures on the parking area.
B. Landlord shall be responsible for the cost of maintenance, repair
and replacement of any separate part of the building over other tenant space on
any new construction undertaken by Landlord:
Tenant shall have no right to create any lien against the property
and Tenant hereby completely and fully indemnifies Landlord against any
Mechanics Lien or other lien or claim in connection with the making of such
Tenant's repair. Landlord must satisfy and cause to be discharged within thirty
(30) days of notification any liens brought upon the property as a result of
Landlord's work.
7. ALTERATIONS
-----------
While Tenant is not in default under any provision of this Lease, it
may at any time and from time to time, make any alterations or additions to the
Building or equipment upon the Leased Premises, provided that:
A. such alterations or additions are made in a good and workmanlike
manner and comply in every way with all other provisions of this Lease;
B. such alterations or additions shall not reduce the rental income of
the
7
<PAGE> 8
Leased Premises; and
C. the fair value of the Building or equipment after such change shall
not be less than the fair value thereof prior to such change; and
D. Any such alterations or additions shall be done only with Landlord's
prior written approval (excepting equipment), which approval shall not be
unreasonably withheld or delayed. If approved, a depreciation schedule of
approved work will be provided to Landlord.
Any and all alterations or additions made to the Leased Premises by
Tenant, as well as any fixtures or articles or personal property (except movable
trade fixtures and other property installed at the expense of Tenant listed on
said Exhibit "C", all of which may be removed by Tenant) attached to the
Building shall be deemed attached to the fee and become the property of Landlord
without any payment or offset and shall not be detached or removed from the
Leased Premises.
8. EMINENT DOMAIN
--------------
If, during the initial term or any option term of this Lease,
condemnation proceedings affecting the Leased Premises result in the total
taking of the Leased Premises, or if as a result of a partial taking the Leased
Premises shall be unsuitable for the conduct of Tenant's business, this Lease
shall terminate, and Tenant shall be entitled to receive and shall receive that
portion of the award or payment in condemnation which represents the unamortized
value of its alterations and improvements, if any, value of its personal
property and fixtures so taken, and the value of any capital improvement made
8
<PAGE> 9
by Tenant after the date of this Lease. Landlord shall be entitled to receive
the balance of the award or payment. The rent shall be adjusted as of the time
of such termination, and any rent paid for a period thereafter shall be
adjusted.
If such condemnation proceedings result in a partial taking which does
not render the Leased Premises unsuitable for Tenant's business, Tenant shall
receive that portion of the award or payment that represents the value of its
personal property and fixtures so taken and the value of any capital
improvements made by Tenant after the date of this Lease and the rent payable
hereunder shall be diminished by an amount which shall bear the same ratio to
the rent as the area of the part of the Leased Premises taken bears to the area
of the Leased Premises before such taking. Tenant shall apply such award to the
prompt restoration of the Leased Premises.
Any additional design or building cost as a result of Landlord changing
design will be the full responsibility of Landlord. The Landlord shall receive
the value of the reverter interest in the land taken.
9. INSURANCE and DESTRUCTION
-------------------------
A. Tenant shall keep the Leased Premises and all attached building and
improvements thereon insured throughout the term of this Lease against the
following loss or damage by fire and such other risks as may be included in
extended coverage insurance from time to time available in amounts sufficient to
prevent the Landlord or the Tenant from becoming a coinsurer within the terms of
the applicable policies, and in any event, in an amount not less than one
hundred percent (100%) of replacement value.
9
<PAGE> 10
Tenant shall submit to Landlord invoices providing evidence of payment of such
premium(s). Landlord shall reimburse Tenant the proportionate share of the
insurance premium for coverage of additional leasable space located on the
Leased Premises.
All policies of insurance required to be maintained by Tenant
shall name Landlord, Tenant, and Landlord's Mortgagee as the insured as their
interests may appear. Landlord shall obtain any necessary consent from any
mortgagee to apply the proceeds of any claim to the repair or restoration of the
Building and not to the payment of the mortgage debt.
B. If the Building or other improvement upon the Leased Premises shall
be damaged or destroyed by fire or other casualty, then Tenant shall proceed
with reasonable diligence to carry out any necessary demolition and to restore,
repair, replace and rebuild the Building and improvements at Tenant's own cost
and expense; provided, however, that all insurance proceeds, if any, paid by
reason of such fire or other casualty shall be paid to Tenant for application to
the cost of such work.
C. In the event any such fire or casualty renders the Leased Premises
partially or totally untenantable, Tenant shall not be entitled to an abatement
of Rents except in the event that such fire or other casualty is both a result
of the acts or negligence or omissions of any other tenant located on the Leased
Premises and Tenant shall be unable to conduct business in materially the same
manner it did prior to casualty. In the event that the area surrounding the
Leased Premises is damaged by fire or casualty, but the Leased Premises itself
remains undamaged, Tenant will continue to pay rent without any
10
<PAGE> 11
abatement provided Tenant's ability to conduct business or its customer's access
to the Leased Premises is not materially affected.
10. DEFAULT
-------
This Lease is made upon the express condition that if Tenant shall
default in the payment of the rent reserved in this Lease, or fails or neglects
to perform any of Tenant's other obligations under this Lease; then Landlord at
any time thereafter, shall give twenty (20) days written notice to Tenant to
cure said default. In the event that Tenant does not cure the default within the
twenty (20) days aforesaid, then Landlord shall give Tenant an additional
written notice and an additional ten (10) days to cure the default or such
reasonable time for Tenant to cure any such non-monetary default which may
require more than ten (10) days to cure. After the notices and the continued
failure of Tenant to cure or to have commenced and diligently pursued such cure,
then the Landlord may, upon notice as required by New York State law, commence
legal action to end this Lease Agreement and/or retake possession of the Leased
Premises. Landlord may, after obtaining a final judgment in such legal action,
either terminate this Lease, or, without terminating this Lease, retake
possession, re-let the Leased Premises or any part thereof for such term or
terms (which maybe for a term extending beyond the term of this Lease) and at
such rent and upon such other terms and conditions which are the most favorable
terms obtaining. Upon each such reletting Tenant shall be immediately liable to
pay to Landlord, the necessary and reasonable costs and expenses of such
reletting incurred by Landlord, including but not limited to reasonable
applicable
11
<PAGE> 12
brokerage commissions (non which shall be paid to Landlord). Tenant shall remain
liable for repayment monthly as it accrues, of any deficiency if any, between
the rent due under this Lease and the amount to be paid under the new lease.
Landlord shall not be entitled to an acceleration of rent nor to any self-help
remedies notwithstanding any law to the contrary.
Landlord shall, at all times, have the obligation to mitigate
its damages.
11. TENANT'S RIGHT TO CURE LANDLORD'S DEFAULT
-----------------------------------------
If Landlord shall at any time fail to pay any installment of principal
or interest, or any other sum under any mortgage now or hereafter placed on the
Leased Premises to which this Lease may be subordinate, the failure to make such
payment constituting a default under such mortgage so as to permit foreclosure
thereof, Tenant, if not in default hereunder, shall have the right, but not
before the last ten (10) days of the period at the expiration of which the
failure to make such payment would constitute such default, to pay such
principal, interest and other sum, with respect to which Landlord may be in
default as aforesaid, and to deduct the amount of such payment and the cost and
expense attaching or incurred on account of such non-payment by Landlord, with
interest thereon from the date of payment, from the next succeeding installment
or installments of rent which shall become due and payable after such payment
until Tenant shall have been fully reimbursed for such payment, cost, expense
and interest as aforesaid. Landlord shall cause any mortgagee of the Leased
Premises to send copies of any default notice under Landlord's mortgage to
Tenant.
12
<PAGE> 13
12. INDEMNIFICATION
---------------
Tenant shall indemnify and hold Landlord harmless from and against any
loss or damage due to personal injury, death or property damage occurring on the
Leased Premises during the term of this Lease, unless such loss or damage shall
have been caused by the acts, omissions or negligence of Landlord, its
employees, agents, invitees or other tenants. To that end, Tenant shall maintain
at its sole expense policies of public liability insurance relating to the
Leased Premises with combined single limits of not less than $1,000,000 for
personal injury or death and for property damage. Such policies shall name
Landlord as an additional insured and shall provide for ten (10) days' notice to
Landlord prior to any cancellation of such policies. If Tenant shall fail to pay
the premiums for such policies as they come due, Landlord may pay such premiums
and charge the cost thereof to Tenant as additional rent, which shall be paid to
Landlord on the next rent day. Tenant shall furnish to Landlord certificates
evidencing such policies concerning the Leased Premises. All insurance policies
required by this paragraph shall be placed with companies qualified to do
business within the State of New York.
13. SIGNS
-----
Tenant may install and maintain on the exterior and within the interior
of the Building or elsewhere on the Leased Premises signs, advertising its
business. Tenant shall obtain at its expense all permits and any other approvals
from municipal or other authorities for the erection and maintenance of such
signs.
13
<PAGE> 14
14. ASSIGNMENT AND SUBLEASE
-----------------------
Landlord hereby gives consent to Tenant to assign this Lease or any
interest therein, or to sublease the Leased Premises or any part thereof,
provided the assignee/sublessee is subject to the same Use provision as
specified in section 3 hereof, but Tenant shall in no such event be released of
its duties, obligations or liabilities hereunder and the same shall continue in
full force and effect.
15. RENEWAL OPTIONS
---------------
Tenant shall have one (1) successive option to renew this Lease upon
expiration of the initial term hereof, provided that this Lease shall be in full
force and effect immediately prior to said expiration. This Lease shall
automatically renew unless Tenant shall give to Landlord no less than six (6)
months before the expiration of the initial term or each additional term,
written notice of its intention not to exercise each option. Said renewal term
shall be for a period of ten (10) years under the same terms and conditions as
under the initial term except for the rent as set forth in Paragraph 4.
16. SURRENDER OF LEASED PREMISES
----------------------------
Tenant shall surrender the Leased Premises on the last day of the term
hereof or any additional term or under any other provision for termination under
this Lease; provided, however, if Tenant shall not then be in default under the
terms of this Lease, any furniture, trade fixtures, business equipment,
carpeting, interior and exterior signs, millwork, counters and cabinets and any
items listed on Exhibit "C" may be removed by Tenant. Upon the removal of any
such items, Tenant shall cause the Building and
14
<PAGE> 15
Leased Premises to be restored to the condition prior to such removal subject to
use, reasonable wear and tear during the term of this Lease.
Roof to be turned over to Landlord in a water tight condition prior to
termination.
17. RIGHT TO SHOW LEASED PREMISES
-----------------------------
Provided Tenant has given its notice not to renew, Landlord shall have
the right to show the Leased Premises to prospective tenants or buyers during
the later of the last six (6) months of this Lease term or renewal thereof.
Landlord shall give reasonable notice to Tenant before showing the Leased
Premises.
18. GOVERNMENTAL COMPLIANCE
-----------------------
Tenant and Landlord shall comply with all laws, orders and regulations
of federal, state, county and municipal authorities, and with any direction of
any public officer and officers, pursuant to law, or any insurance company
carrying any insurance on the Leased Premises, which shall impose any duty upon
Landlord or Tenant with respect to the Leased Premises or the ownership use or
occupation thereof.
19. SUBORDINATION
-------------
Subject to the further provisions of this paragraph, Tenant agrees that
this Lease (and any option renewals thereof) is subordinate to the existing
mortgages, if any, or any and all mortgages, consolidated mortgages, or
renewals, modifications and extensions thereof, or to any other forms or methods
of financing of the Leased Premises, which are hereafter executed, delivered and
recorded. Tenant shall, upon
15
<PAGE> 16
demand at any time, execute, acknowledge and deliver any and all instruments
that may be necessary or proper to further evidence this subordination. Landlord
shall procure and deliver to Tenant an agreement in writing, duly executed by
any future mortgagee, which agreement shall provide that, for so long as Tenant
is not in default in its performance of the terms, conditions and provisions of
this Lease, Tenant's rights hereunder shall not be disturbed by an action or
suit on the debt or debts secured by such mortgages, deeds of trust or other
forms or methods of financing or refinancing, and that any sale at foreclosure
will be subject to this Lease. Tenant's agreement to subordinate its rights
under this Lease is conditioned upon Landlord obtaining a non-disturbance
agreement in the form attached hereto as Exhibit D. Landlord acknowledges that
there is an existing lien against the Leased Premises. Landlord shall be
obligated to obtain an agreement as aforementioned herein from the existing lien
holder only in the event said lien is modified, extended or spread after the
date of this Lease. Notwithstanding anything to the contrary a Non-Disturbance
Agreement must be in place on June 1, 1998 if a mortgage is still in place.
20. RIGHT TO INSPECT
----------------
Landlord shall have the right to inspect the Leased Premises during
operating hours upon reasonable notice to Tenant.
16
<PAGE> 17
21. MEMORANDUM OF LEASE
-------------------
The parties shall at any time, at the request of either one, promptly
execute duplicate originals of an instrument, in recordable form, which shall
constitute a memorandum of lease, setting forth any portions of this Lease,
excepting the rent provisions, as either party may request.
22. HEADINGS
--------
The headings are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope or intent of this
Lease, nor in any way affect this Lease.
23. BILL AND NOTICES
----------------
All notices required or permitted pursuant to any provisions of this
Contract shall be in writing, sent certified mail or overnight courier, and
shall be effective upon receipt if sent certified mail or the second business
day following delivery to an overnight courier. Copies shall be sent to each
party herein and to the attorney for the other party as follows.
If to Landlord: A.A.L of Rochester, L.L.C.
c/o Monro Muffler Brake, Inc.
200 Holleder Parkway
Rochester, New York 14615
Copy to: Underberg & Kessler
1600 Chase Square
Rochester, New York 14604
Attention: Irving Kessler, Esq.
17
<PAGE> 18
If to Tenant: Monro Muffler Brake, Inc.
200 Holleder Parkway
Rochester, New York 14615
ATTN: President
Copy to: Underberg & Kessler
1800 Chase Square
Rochester, New York 14604
Attention: Sr. Real Estate Partner
Either party may designate by notice a new or other address to which
notice or demand shall be thereafter so given.
24. CONDITIONS
----------
This Lease is conditioned upon Tenant conducting subsurface,
ground-penetrating tests on the Leased Premises. The costs of said tests shall
be split between Landlord and Tenant. If the results of said tests indicate the
presence of any underground entity, Landlord or Tenant shall have the right to
terminate this Lease with written notice to the other.
25. LANDLORD'S WARRANTIES
---------------------
Landlord warrants and agrees that:
A. Any future construction by Landlord or its successors shall be in
line with the Building and not closer to the fronting road than the present
location of the Building on the Leased Premises.
B. During the term of this Lease or any extension thereof Landlord
shall not operate or allow to be operated any business other than Monro Muffler
Brake, Inc.
18
<PAGE> 19
which directly or indirectly engages in the automotive service business on any
site owned by or under the control of Landlord within a radius of two (2) miles
from the Leased Premises providing Tenant shall not be in default under this
Lease. In addition, Tenant shall not be permitted to operate another Monro
Muffler Brake, Inc. shop within a radius of two (2) miles from the Leased
Premises prior to the final year of this lease or exercised options
C. During the term of this Lease or any extension thereof Landlord
shall not operate or allow to be operated any business relating to sale or
display of pornographic materials, alcohol and any other use that would damage
the reputation of Monro Muffler Brake, Inc.
26. ENVIRONMENTAL REPRESENTATIONS
-----------------------------
A. REPRESENTATIONS AND WARRANTIES.
Landlord and Tenant will comply with any and all federal,
state and local rules, laws, statutes, ordinances and orders regulating the
Environment which affect the ownership, use and occupation of the Leased
Premises. Furthermore, Tenant agrees that no Hazardous Substance shall be stored
and/or used on the Leased Premises except in strict compliance with such laws.
"Environment" means all air, water, or water vapor, including surface water and
groundwater, any land, including land surface or subsurface, and includes all
fish, wildlife, biota and all other natural resources. "Hazardous Substance"
means any materials or substances defined as or included in the definition of
"Hazardous Substances", "Hazardous Materials", "Hazardous Wastes", "Toxic
19
<PAGE> 20
Substances", or "Toxic Pollutants" under any applicable law regulating the
Environment, including any substance which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or which contains
polychlorinated biphenyls (PCBs), gasoline, diesel fuel, other petroleum
hydrocarbons, or asbestos.
Tenant indemnifies and holds Landlord harmless from and
against any and all claims, demands, judgments, awards, actions, penalties and
fines arising from the existence of Hazardous Substances which result from the
acts or omissions of Tenant during the term of this Lease or the previous Lease
by and between Landlord and Tenant on the Leased Premises.
Landlord indemnifies and holds Tenant harmless from and
against any and all claims, demands, judgments, awards, actions, penalties and
fines arising from existence of Hazardous Substances on or below the surface of
the Leased Premises which existence pre-dates Tenant's occupancy of the Leased
Premises.
27. QUIET ENJOYMENT
---------------
Landlord covenants and agrees with Tenant that, upon Tenant paying the
annual rent and performing all of the covenants and conditions contained in this
Lease on Tenant's part to be observed and performed, Tenant shall and may
peaceably and quietly have, hold and enjoy the Leased Premises for the term of
this Lease.
20
<PAGE> 21
28. ENTIRE AGREEMENT
----------------
It is understood and agreed by the parties hereto that this Lease shall
constitute the only agreement between them relative to the Leased Premises, and
that no oral statement or no prior written matter extrinsic to this instrument
shall have any force or effect. This Lease shall not be modified except by
writing, subscribed by both parties.
29. FORCE MAJEURE
-------------
In the event either Landlord or Tenant shall be delayed or hindered in
or prevented from the performance of any act required hereunder by reason of
fire, casualty, strikes, lockouts, labor trouble, inability to procure
materials, permits or supplies, failure of power, governmental authority, riots,
insurrections, war or other reason of like nature, where such delay, hindrance
or prevention of performance shall not be within the reasonable control of the
Landlord or the Tenant, and shall not be avoidable by diligence, then, the
Landlord or the Tenant shall thereupon be excused for such period of delay.
30. BROKER'S COMMISSION
-------------------
The parties hereto agree that no broker brought about this lease.
Landlord indemnifies and holds Tenant harmless from any costs or claims for
broker's commissions arising hereunder.
21
<PAGE> 22
31. PARTIES
-------
The conditions, covenants and agreement in this Lease shall be binding
and inure to the benefit of the respective parties to this Lease, their legal
representatives, successors and assigns.
32. EXECUTION
---------
If not executed by Landlord on or before March 3, 1997, then Tenant
shall have the right to cancel this Lease by giving written notice to Landlord.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
this 3rd day of March, 1997.
LANDLORD: /s/ Charles J. August
-------------------------
Charles J. August
/s/ Burton S. August
-------------------------
Burton S. August
STATE OF NEW YORK)
COUNTY OF MONROE) ss:
On this 3rd day of March, 1997; before me, the subscriber, personally
appeared Charles J. August to me personally known and to me to be the same
person described in and who executed the foregoing instrument, and duly
acknowledged to me that he executed the same.
/s/ Valerie Short
----------------------
NOTARY PUBLIC
STATE OF NEW YORK)
COUNTY OF MONROE) ss:
On this 3rd day of March, 1997, before me, the subscriber, personally
appeared Burton S. August, to me personally known and to me to be the same
person described in and who executed the foregoing instrument, and duly
acknowledged to me that he executed the same.
/s/ Valerie Short
----------------------
NOTARY PUBLIC
23
<PAGE> 24
LANDLORD (Continued)
/s/ Barbara S. Lane
-----------------------------
Estate of Sheldon A. Lane
STATE OF )
-----------------------------------
COUNTY OF ) ss:
-------------------------
On this __________ day of _____________________ ,199 , before me, the
subscriber, personally appeared ___________________, on behalf of the Estate of
Sheldon A. Lane to me personally known and to me to be the same person described
in and who executed the foregoing instrument, and duly acknowledged to me that
he executed the same.
------------------------
Notary Public
TENANT
/s/ Larry Day
------------------------
By: Larry Day
President
STATE OF NEW YORK)
COUNTY OF MONROE) ss:
On the 3rd day of March, 1997, before me personally came LARRY DAY to
me known, who being by me duly sworn did depose and say that he resides in
Victor, New York, that he is the President of Monro Muffler Brake, Inc., the
corporation described in and which executed the foregoing Instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.
/s/ Valerie Short
------------------------
Valerie Short
NOTARY PUBLIC
24
<PAGE> 25
EXHIBIT B
Description of Leased Premises
26
<PAGE> 26
EXHIBIT C
Personal Property of Tenant
All signage including facia, poles
All portable machinery (Alignment, tire machines, etc.)
All hoists
Entire torch system
Compressors
Air Conditioning Unit (waiting room)
Alarm system
Water cooler
Telephone system
Waste oil tank (if above ground)
Office equipment
Heating units
Shelving
All merchandise
All future removable equipment installed to facilitate Tenant's business
27
<PAGE> 1
Exhibit 10.47a
MODIFICATION OF LEASE
AGREEMENT made this day of January, 1988, by and between Charles J. August,
Burton S. August and Sheldon A. Lane all of 2340 Brighton-Henrietta Town Line
Road, Rochester, New York ("Lessors") and Monro Muffler Brake, Inc., a New York
corporation, with an office at 2340 Brighton-Henrietta Town Line Road,
Rochester, New York ("Lessee").
WITNESSETH:
-----------
WHEREAS, Tenant is now in possession of premises known as 7894 Pine
Avenue, Niagara Falls, New York ("Premises") under a certain Lease made between
Lessors and Monro Muffler Brake of Buffalo, Inc., a New York corporation which
subsequently merged into Lessee, dated as of July 1, 1982, a copy of which is
attached and made a part of this Modification of Lease as Exhibit A, for a term
ending on June 30, 1997 (the "Lease"); and
WHEREAS, Lessors and Lessee desire to clarify the description of the
Premises under paragraph 1 entitled "Demised Premises" in the Lease; and
WHEREAS, pursuant to paragraph 20 of said Lease entitled "Lessors'
Option to Lease", Lessors may lease portions of the Premises not required to be
used by Lessee in the operation of its business therein to others,
NOW, THEREFORE, in consideration of the mutual agreements herein, the
parties hereto do hereby covenant and agree with each other as follows:
1. The land beyond fifty (50) feet to the rear of the building used
by Lessee is hereby excluded from the description of the Demised
Premises as set forth in Schedule A attached to said Lease and the
right of egress to the land to said rear of the building used by
Lessee is reserved for the rear property user.
2. Except as modified herein or in any prior modification of the
Lease, the Lease shall remain as drawn.
3. This Modification of Lease contains the entire agreement of the
parties with respect to the matter hereinabove set forth and may
not be modified, amended or restated except by an instrument in
writing signed by both of the parties hereto.
4. This Modification of Lease shall bind and inure to the benefit of
the successors and assigns of the parties hereto.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have duly executed this
Modification of Lease as of the day and year first above written.
LESSORS:
/s/ Charles J. August
-------------------------
Charles J. August
/s/ Burton S. August
-------------------------
Burton S. August
/s/ Sheldon A. Lane
-------------------------
Sheldon A. Lane
LESSEE:
Monro Muffler Brake, Inc.
By: /s/ Robert W. August
-------------------------
<PAGE> 1
Exhibit 10.52a
ADDENDUM TO LEASE
This Addendum to Lease is made and entered into the 18th day of
February, 1996, between CONIFER JOHNSTOWN ASSOCIATES (Landlord) and MONRO
MUFFLER BRAKE, INC. (Tenant).
WITNESSETH: that Tenant currently leases and occupies a building
located at Route 30A and Townsend, Johnstown, New York, consisting of
approximately 4,560 square feet pursuant to a Lease Agreement dated October 22,
1986 (Lease).
WHEREAS, the Tenant has agreed to exercise its first renewal option;
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to
modify certain provisions of the lease as follows:
1. Tenant hereby agrees to extend the Term of the Lease Agreement for a five
year period. Accordingly, Tenant's Base Rent, effective upon the
commencement of the extension period shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
10/1/96-9/30/01 $36,600.00 $3,050.00
2. In addition to the provisions of Section 20, "Renewal Options" of the Lease
Agreement, Tenant shall have a successive option to renew this Lease upon
expiration of the second renewal option provided that this Lease shall be
in full force and effect. The additional renewal term shall be for a period
of five (5) years under the same terms and conditions as the initial term,
except that Minimum Rent shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
10/1/06-9/30/11 $42,941.00 $3,578.42
Except as modified above, all other terms and conditions of the Lease
Agreement dated October 22, 1986 shall remain unchanged and in full force and
effect.
Agreed To By: Agreed To By:
MONRO MUFFLER BRAKE, INC. CONIFER JOHNSTOWN ASSOCIATES
BY: BY:
------------------------- ----------------------
DATE: DATE:
------------------------- ----------------------
<PAGE> 1
Exhibit 10.53a
FIRST ADDENDUM TO LEASE
This First Addendum to Lease is made and entered into the day of July, 1996,
between CONIFER WAPPINGER FALLS ASSOCIATES (Landlord) and MONRO MUFFLER BRAKE,
INC. (Tenant).
WITNESSETH: that Tenant currently leases and occupies approximately 4,500
square feet at 1018 Route 9 Wappinger Falls, New York 12590 pursuant to a Lease
Agreement dated October 22, 1986 (Lease).
WHEREAS, Tenant desires to extend the Term of the Lease.
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to modify
certain provision of the lease as follows:
1. Upon full execution of this First Addendum To Lease, the Term shall be
extended from December 2, 1996 to December 1, 2001.
2. Per the provisions of Section 2, "Rental" of the Lease Agreement, Tenant's
Base Rent, effective upon the full execution of this First Addendum shall
be as follows:
Period Annual Rent Monthly Rent
------ ----------- ------------
12/2/96-12/1/2001 $48,000.00 $4,000.00
Except as modified above, all other terms and conditions of the Lease Agreement
dated October 22, 1986 shall remain unchanged and in full force and effect.
Agreed To By: Agreed To By:
MONRO MUFFLER BRAKE, INC. CONIFER WAPPINGER FALLS
ASSOCIATES
BY: BY:
---------------------- ----------------------
Date: Date:
---------------------- ----------------------
<PAGE> 1
Exhibit 10.54a
ADDENDUM TO LEASE
This Addendum to Lease is made and entered into the 18th day of
February, 1996, between CONIFER NORTHEAST ASSOCIATES (Landlord) and MONRO
MUFFLER BRAKE, INC. (Tenant).
WITNESSETH: that Tenant currently leases and occupies a building
located at East Greenbush, New York, consisting of approximately 4,450 square
feet pursuant to a Lease Agreement dated November 25, 1988, and Lease Addendums
dated January 6, 1989 and March 24, 1994 respectively (Lease).
WHEREAS, the Tenant has agreed to exercise its first option to renew;
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to
modify certain provisions of the lease as follows:
1. Notwithstanding the provisions of Section 2, "Rental" of the Lease
Agreement, Tenant's Base Rent, effective upon the full execution of this
addendum shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
2/1/98-1/31/03 $50,688.00 $4,224.00
2. In addition to the provisions of Section 20, "Renewal Options" of the Lease
Agreement, Tenant shall have a successive option to renew this Lease upon
expiration of the second renewal option provided that this Lease shall be
in full force and effect. The additional renewal term shall be for a period
of five (5) years under the same terms and conditions as the initial term,
except that Minimum Rent shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
2/1/08-1/31/13 $59,470.00 $4,956.00
Except as modified above, all other terms and conditions of the Lease
Agreement dated January 25, 1988 shall remain unchanged and in full force and
effect.
Agreed To By: Agreed To By:
MONRO MUFFLER BRAKE, INC. CONIFER NORTHEAST ASSOCIATES
BY: BY:
------------------------- ----------------------
DATE: DATE:
------------------------- ----------------------
<PAGE> 1
Exhibit 10.55a
ADDENDUM TO LEASE
This Addendum to Lease is made and entered into the 18th day of
February, 1996, between CONIFER NORTHEAST ASSOCIATES (Landlord) and MONRO
MUFFLER BRAKE, INC. (Tenant).
WITNESSETH: that Tenant currently leases and occupies a building
located at Potsdam, New York, consisting of approximately 4,450 square feet
pursuant to a Lease Agreement dated March 16, 1988. (Lease).
WHEREAS, the Tenant has agreed to exercise its first option to renew,
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to
modify certain provisions of the lease as follows:
1. Tenant hereby agrees to extend the Term of the Lease Agreement for a five
year period. Accordingly, Tenant's Base Rent, effective upon the
commencement of the extension period shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
3/1/98-2/28/03 $46,224.00 $3,852.00
2. In addition to the provisions of Section 20, "Renewal Options" of the Lease
Agreement, Tenant shall have a successive option to renew this Lease upon
expiration of the second renewal option provided that this Lease shall be
in full force and effect. The additional renewal term shall be for a period
of five (5) years under the same terms and conditions as the initial term,
except that Minimum Rent shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
3/1/08-2/28/13 $54,232.00 $4,519.00
Except as modified above, all other terms and conditions of the Lease
Agreement dated March 16, 1988 shall remain unchanged and in full force and
effect.
Agreed To By: Agreed To By:
MONRO MUFFLER BRAKE, INC. CONIFER NORTHEAST ASSOCIATES
BY: BY:
------------------------- ----------------------
DATE: DATE:
------------------------- ----------------------
<PAGE> 1
Exhibit 10.56a
ADDENDUM TO LEASE
This Addendum to Lease is made and entered into the 18th day of
February, 1996, between CONIFER NORTHEAST ASSOCIATES (Landlord) and MONRO
MUFFLER BRAKE, INC. (Tenant).
WITNESSETH: that Tenant currently leases and occupies a building
located at Ogdensburg, New York, consisting of approximately 4,450 square feet
pursuant to a Lease Agreement dated February 11, 1988 (Lease).
WHEREAS, the Tenant has agreed to exercise its first option to renew,
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to
modify certain provisions of the lease as follows:
1. Tenant hereby agrees to extend the Term of the Lease Agreement for a five
year period. Accordingly, Tenant's Base Rent, effective upon the
commencement of the extension period shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
3/1/98-2/28/03 $34,848.00 $2,904.00
2. In addition to the provisions of Section 20, "Renewal Options" of the Lease
Agreement, Tenant shall have a successive option to renew this Lease upon
expiration of the second renewal option provided that this Lease shall be
in full force and effect. The additional renewal term shall be for a period
of five (5) years under the same terms and conditions as the initial term,
except that Minimum Rent shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
3/1/08-2/28/13 $40,885.00 $3,407.00
Except as modified above, all other terms and conditions of the Lease
Agreement dated February 11, 1988 shall remain unchanged and in full force and
effect.
Agreed To By: Agreed To By:
MONRO MUFFLER BRAKE, INC. CONIFER NORTHEAST ASSOCIATES
BY: BY:
------------------------- ----------------------
DATE: DATE:
------------------------- ----------------------
<PAGE> 1
Exhibit 10.57a
ADDENDUM TO LEASE
This Addendum to Lease is made and entered into the 18th day of
February, 1996, between CONIFER NORTHEAST ASSOCIATES (Landlord) and MONRO
MUFFLER BRAKE, INC. (Tenant).
WITNESSETH: that Tenant currently leases and occupies a building
located at Plattsburg, New York, consisting of approximately 4,450 square feet
pursuant to a Lease Agreement dated February 25, 1988 (Lease).
WHEREAS, the Tenant has agreed to exercise its first option to renew,
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to
modify certain provisions of the lease as follows:
1. Tenant hereby agrees to extend the Term of the Lease Agreement for a five
year period. Accordingly, Tenant's Base Rent, effective upon the
commencement of the extension period shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
3/1/98-2/28/03 $51,120.00 $4,260.00
2. In addition to the provisions of Section 20, "Renewal Options" of the Lease
Agreement, Tenant shall have a successive option to renew this Lease upon
expiration of the second renewal option provided that this Lease shall be
in full force and effect. The additional renewal term shall be for a period
of five (5) years under the same terms and conditions as the initial term,
except that Minimum Rent shall be as follows:
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
3/1/08-2/28/13 $59,977.00 $4,998.08
Except as modified above, all other terms and conditions of the Lease
Agreement dated February 11, 1988 shall remain unchanged and in full force and
effect.
Agreed To By: Agreed To By:
MONRO MUFFLER BRAKE, INC. CONIFER NORTHEAST ASSOCIATES
BY: BY:
------------------------- ----------------------
DATE: DATE:
------------------------- ----------------------
<PAGE> 1
Exhibit 10.58a
LEASE AMENDMENT II
------------------
THIS AGREEMENT, made this 30th day of June, 1993 by and between CONIFER
PENFIELD ASSOCIATES, L.P., a New York State Limited Partnership, with offices at
205 St. Paul Street, Rochester, New York, 14604 ("Landlord") and MONRO MUFFLER
BRAKE, INC., a New York State Corporation, with offices at 2340 Brighton
Henrietta Townline Road, P.O. Box 2272, Rochester, New York, 14623 ("Tenant").
WITNESSETH:
-----------
WHEREAS, Tenant currently leases from the Landlord a parcel of
land heretofore designated the "Premises" which forms a portion of Parkside
Commons heretofore designated the "Plaza" pursuant to a Lease Agreement dated
May 12, 1989 as modified by a Lease Amendment dated December, 1992, (the
"Original Lease"), and;
WHEREAS, said Premises has situate thereon a building having
an approximate floor area of 4,470 square feet, and;
WHEREAS, Tenant desires Landlord to construct an additional
1,200 square feet of space ("Additional Space") to said building, and;
WHEREAS, the construction of the Additional Space is to be in
accordance with the provisions set forth in Paragraph "11" hereof, and;
WHEREAS, based upon the above, the parties desire to
amend/modify, as well as restate certain provisions of the Original Lease upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, upon and subject to the provisions, terms and
conditions herein set forth, the parties agree as follows:
1. Upon the "effective date" of this Amendment as set forth in
Paragraph "2 (b)" below, the Premises shall have situate thereon a building
having an approximate square footage of 5,670 square feet (the "Building"), all
as shown on Attachment "A".
2. (a) Upon the "effective date" of this Amendment, the
balance of the initial term of this Lease shall be seventeen (17) years
commencing on the effective date of this Amendment and terminating seventeen
(17) years thereafter;
<PAGE> 2
(b) The "effective date" of this Amendment shall be deemed
to be the date occurring ten (10) days after the substantial completion of
Landlord's Work required under this Amendment and the delivery of the Additional
Space to the Tenant. Substantial completion shall mean completion in accordance
with the provisions of Paragraph "11" hereof and other applicable requirements
except for punchlist items which are immaterial and which will not prevent the
Tenant from commencing the work required of it under this Amendment as set forth
in Paragraph "11". The parties agree to sign an acknowledgment which shall be
attached to this Amendment indicating the effective date thereof;
(c) In addition, provided that Tenant is not in default
hereunder beyond any applicable cure period, the Tenant shall have four (4)
successive options to renew this Lease, with each option period being five (5)
years in length. Said renewal (s) shall be upon the same terms and conditions as
set forth herein except that base rent shall be as set forth in Paragraph "3(a)"
below and except that the fourth option period shall contain no further renewal
terms. Tenant shall be required to give written notice to the Landlord of its
election to exercise an option no later than 180 days prior to the expiration of
its initial term or any option period. Notwithstanding, in the event Tenant does
not timely exercise an option as set forth above, the Landlord shall be required
to give the Tenant written notification that it has failed to exercise said
option. The notification of the Landlord shall require the Tenant to notify said
Landlord in writing within ten (10) days of its receipt of Landlord's
notification of its intention to exercise its option to renew this Lease and, if
Tenant fails to do so, said renewal rights shall be deemed to have then expired.
3. (a) Upon the effective date of this Amendment, Tenant
agrees to pay Landlord at its address indicated above or at such other place as
Landlord may designate by written notice the following base rent (FORMERLY
DESIGNATED "MINIMUM RENT") subject to exercise by Tenant of the applicable
renewal option in the case of option rent:
<TABLE>
<CAPTION>
INITIAL TERM ANNUAL BASE RENT MONTHLY BASE RENT
- ------------ ---------------- -----------------
<S> <C> <C>
Year 1 $72,000.00 $6,000.00
Year 2 72,000.00 6,000.00
Year 3 72,000.00 6,000.00
Year 4 72,000.00 6,000.00
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
INITIAL TERM ANNUAL BASE RENT MONTHLY BASE RENT
- ------------ ---------------- -----------------
<S> <C> <C>
Year 5 72,000.00 6,000.00
Year 6 79,200.00 6,600.00
Year 7 79,200.00 6,600.00
Year 8 79,200.00 6,600.00
Year 9 79,200.00 6,600.00
Year 10 79,200.00 6,600.00
Year 11 87,120.00 7,260.00
Year 12 87,120.00 7,260.00
Year 13 87,120.00 7,260.00
Year 14 87,120.00 7,260.00
Year 15 87,120.00 7,260.00
Year 16 95,832.00 7,986.00
Year 17 95,832.00 7,986.00
</TABLE>
<TABLE>
<CAPTION>
FIRST OPTION
TERM ANNUAL BASE RENT MONTHLY BASE RENT
- ------------ ---------------- -----------------
<S> <C> <C>
Year 18 95,832.00 7,986.00
Year 19 95,832.00 7,986.00
Year 20 95,832.00 7,986.00
Year 21 105,415.00 8,784.58
Year 22 105,415.00 8,784.58
</TABLE>
<TABLE>
<CAPTION>
SECOND OPTION
TERM ANNUAL BASE RENT MONTHLY BASE RENT
- ------------ ---------------- -----------------
<S> <C> <C>
Year 23 105,415.00 8,784.58
Year 24 105,415.00 8,784.58
Year 25 105,415.00 8,784.58
Year 26 115,957.00 9,663.08
Year 27 115,957.00 9,663.08
</TABLE>
<TABLE>
<CAPTION>
THIRD OPTION
TERM ANNUAL BASE RENT MONTHLY BASE RENT
- ------------ ---------------- -----------------
<S> <C> <C>
Year 28 115,957.00 9,663.08
Year 29 115,957.00 9,663.08
Year 30 115,957.00 9,663.08
Year 31 127,553.00 10,629.42
Year 32 127,553.00 10,629.42
</TABLE>
<TABLE>
<CAPTION>
FOURTH OPTION
TERM ANNUAL BASE RENT MONTHLY BASE RENT
- ------------ ---------------- -----------------
<S> <C> <C>
Year 33 127,553.00 10,629.42
Year 34 127,553.00 10,629.42
Year 35 127,553.00 10,629.42
Year 36 140,308.00 11,692.33
Year 37 140,308.00 11,692.33
</TABLE>
<PAGE> 4
The annual base rent (hereinafter referred to as the "Base
Rent") shall be paid in twelve (12) equal monthly installments in advance on the
first day of each and every month throughout the term or any renewal term of
this Lease without offset or demand.
Each lease year is defined to be a period of twelve (12)
consecutive calendar months with the first year beginning on the effective date
(as hereinbefore defined) and ending on the last day of the twelfth full month
thereafter and so on and so forth except as otherwise set forth herein.
(b) Notwithstanding the above, commencing on the first day
of the first month following the execution of this Amendment and continuing each
month thereafter until the effective date of this Lease (the "interim period"),
the monthly base rent of the Tenant shall be Five Thousand Ninety Seven and
50/100 Dollars ($5,097.50) due in advance on the first day of each month subject
to adjustment at the conclusion of the interim period as hereinafter set forth.
At the conclusion of the interim period, Tenant shall provide to Tenant a
written report of its gross sales (less sales tax collected from customers and
remitted to the taxing entity, tire sales, sales to vendors, parts returns,
service adjustments and vending machine sales) ("Sales") made in, upon or from
the Premises during said interim period: said report shall be signed/attested to
by the accountants for the Tenant. The Sales during the interim period shall be
compared to the Sales for the same period for the previous year(s). If Sales
during the interim period have increased over that same period for the previous
year(s), the amount of the increase shall be multiplied by 6.75% and the
resulting amount shall be paid as further additional rent to the Landlord within
thirty (30) days of the conclusion of the interim period. If Sales decrease
during the interim period as compared to the same period for the previous
year(s) the amount of the decrease shall again be multiplied by 6.75% and the
resulting amount shall be treated as a credit against future rent due by the
Tenant provided said credit shall not exceed a sum which would reduce Tenant's
monthly base rent during the interim period below an average of Four Thousand
Ninety Seven and 50/100 Dollars ($4,097.50).
EXAMPLE:
--------
If Tenant's Sales for December 1, 1992 to July 31, 1993
(interim period) were $700,000.00 as compared to $600,000.00 for December 1,
1991 to July 31, 1992 (the previous year(s)).
<PAGE> 5
Then in such event the excess sales of $100,000.00 during the interim period
would be multiplied by 6.75% and the resulting amount of $6,750.00 would be
deemed additional rent owed by Tenant.
(c) Any rent due by the Tenant to the Landlord prior to the
interim period shall be paid in full within thirty (30) days of the commencement
of the interim period.
4. Tenant's use of the premises is subject to the following:
(a) Tenant shall not obstruct sidewalk entrances, passages,
concourses, corridors, vestibules, halls, elevators, loading docks and stairways
in or about the Plaza. Tenant shall not commit any nuisance on or about the
Plaza;
(b) All exterior signage that the Tenant desires to be
placed on or about the Premises shall be subject to the prior written consent of
the Landlord as to location, size, style and content, which shall not be
unreasonably withheld or delayed. Notwithstanding Landlord hereto consents to
Tenant's current exterior signage. The cost of any signage shall be the sole
responsibility of the Tenant;
(c) Tenant shall comply with all applicable federal, state
or municipal laws, ordinances and regulations relating to the use of the
Premises and shall not directly or indirectly make any use of the Premises which
may be prohibited by any thereof or which shall be dangerous to person or
property or which shall increase the cost of insurance or require additional
coverage by the Landlord provided the Landlord represents that Tenant's
permitted use as specified herein complies with all such laws, ordinances and
regulations. It is understood between the parties that in no event will Tenant's
additional rent payment be increased as a result of an increase in the cost of
insurance to the Landlord as a sole result of another Tenant's use, except for
normal expansion of the Plaza.
(d) Nor shall Tenant conduct any auction or going out of
business or bankruptcy sale without Landlord's prior written consent;
(e) Tenant agrees that during the term of this Lease, it
will not allow its premises to become vacant for more than fourteen (14)
consecutive days and will continue to operate its business in the Plaza. If in
the event Tenant fails to operate an ongoing business in its premises except if
prevented from doing so by fire or other disaster or a taking or partial talking
by eminent domain or other
<PAGE> 6
cause reasonably beyond its control or otherwise excused hereunder, then in that
event the Tenant shall be deemed to have breached this Lease and shall be in
default thereof;
(f) Tenant shall be required to maintain all dumpsters in
an enclosed portion of the Building as required by the Town of Penfield and as
shown on attachment "B."
5. Landlord shall have the following rights:
(a) To temporarily close all or any portion of the common
areas of the Plaza including the parking area but only to the extent to prevent
a dedication thereof or the accrual of any right of any person or the public
therein;
(b) To temporarily close all or any portion of the common
areas to discourage non-customer use or to allow for performance of obligations
under this Lease including the Landlord's obligation to perform ROUTINE
MAINTENANCE to the Plaza or surrounding areas, PROVIDED THE COMMON AREAS ARE NOT
CLOSED AT ANY ONE TIME FOR GREATER THAN A 24-HOUR PERIOD. NOTWITHSTANDING THE
ABOVE, THE LANDLORD SHALL BE UNDER AN OBLIGATION TO GIVE THE TENANT REASONABLE
NOTICE IN ADVANCE OF ANY MAINTENANCE TO BE PERFORMED TO THE COMMON AREAS WHICH
WILL TEMPORARILY CLOSE ANY PORTION THEREOF. THE LANDLORD SHALL PERFORM SAID
ROUTINE MAINTENANCE TO THE COMMON AREAS IN A MANNER WHICH WILL NOT HAVE A
SUBSTANTIAL ADVERSE IMPACT UPON THE BUSINESS OF THE TENANT;
(c) To erect additional buildings on the common areas or
parking areas or to change locations of buildings or other structures at the
Plaza excluding Tenant's Building located thereon;
(d) To install and maintain any and all signs in the common
areas;
(e) To make repairs, alterations, additions or improvements
which are the obligations of the Landlord under this Lease in or about the Plaza
and to enter upon the Premises if necessary to accomplish the same and during
the continuance of the same, to temporarily close doors, entrances, public
spaces and corridors to the common areas and to interrupt or temporarily suspend
services or facilities all without abatement of rent or affecting any of
Tenant's obligations hereunder provided the Premises are reasonably accessible
and further provided the Landlord proceeds in a reasonable expeditious manner.
<PAGE> 7
The above-enumerated rights of the Landlord shall not be
construed to be limiting in nature and Landlord shall have all other rights and
remedies as set forth under this Lease or at law or in equity and said rights
shall be cumulative to the extent inconsistent with one another.
Notwithstanding the foregoing, the activities of Landlord in
this paragraph shall not interfere with Tenant's use and enjoyment of the
Premises and the common areas.
6. (a) Upon termination of this Lease by expiration or
otherwise, Tenant shall immediately vacate said Premises and surrender
possession thereof including all keys as herein required to Landlord; Tenant
shall surrender the Premises in broom clean and in as good condition as when
Tenant took possession except for reasonable wear and tear; Tenant grants to
Landlord full authority and license to enter the Premises to take possession in
the event of any termination of this Lease;
(b) Upon surrender of the Premises, provided Tenant is not
in default under this Lease, Tenant may remove its trade fixtures, business
equipment, carpeting, interior and exterior signs, millwork, counters and
cabinets provided that Tenant repairs any damage to the Premises caused by such
removal.
7. Each party agrees that from time to time upon not less than
ten (10) days' prior request by the other party it will deliver to the other
party a statement in writing certifying to the extent the same is true that the
Lease is unmodified and in full force and effect (or if there have been any
modifications, that the same is in full force and effect as modified and
identifying said modifications) as well as identifying the dates to which rent
and other charges have been paid, as well as stating that as far as the person
making this certificate knows the other party is not in default under the
provisions of this Lease if such is the case;
8. (a) Tenant shall comply with all applicable laws, rules and
regulations of all governmental authorities relating to environmental matters,
hazardous waste and hazardous substance in similar matters in the use and
occupancy of the Premises under this Lease. Tenant agrees to indemnify, defend
and hold Landlord and its officers, partners, employees and agents harmless from
any claims, judgments, damages, fines, penalties, costs, liabilities or loss
including attorneys' fees, consultant fees and
<PAGE> 8
experts' fees which arise during or after the term or any renewal term in
connection with Tenant's use and occupancy of the Premises;
(b) Landlord agrees to indemnify and hold Tenant harmless
from any and all claims, judgments, damages, fines, penalties, costs,
liabilities or loss including attorneys' fees, consultant fees and expert fees
arising from or in connection with any pollution or hazardous or toxic substance
in or about the Premises or the Plaza which violates any applicable federal,
state or other environmental laws and which is not caused by Tenant or persons
under Tenant's direction and control and all expenses in defending against any
such claims.
9. This Amendment and the performance hereunder by the
Landlord and Tenant is expressly contingent upon receipt of all necessary
governmental approvals for the Additional Space to the Building, which approvals
shall be satisfactory to Tenant and Landlord. It is understood between the
parties that the cost of obtaining said governmental approvals shall be the sole
responsibility and obligation of the Tenant. If the parties are not able to
acquire the necessary governmental approvals for said Additional Space, then it
is understood between the parties that the Original Lease shall remain in all
respects in full force and effect including the payment of rent as set forth
therein.
10. (a) The Landlord covenants and agrees to construct
Additional Space to the Building located on the Premises in accordance with the
drawings and specifications prepared for said Building and approved in writing
by Landlord and Tenant which working drawings and specifications are set forth
on Attachment "C". The Landlord will complete and be responsible for the
addition and improvements thereto in accordance with said working drawings and
specifications ("Landlord's Work"). Notwithstanding the cost of the working
drawings and specifications shall be the sole expense of the Tenant;
(b) Landlord's Work shall be placed for construction bid by
Landlord with two (2) contractors acceptable to Tenant. If the two (2) bids
secured are unacceptable to Tenant, it may elect within ten (10) days of its
receipt of said bid packages to terminate and cancel the provisions of this
Lease Amendment II, in which case the terms of the Original Lease shall remain
in full force and effect including the payment of rent as set forth therein. In
the event Landlord's Work is to exceed a cost of
<PAGE> 9
Sixty Thousand and 00/100 Dollars ($60,000.00) (and Tenant elects not to
terminate the provisions of this Lease Amendment II) the cost in excess of Sixty
Thousand and 00/100 Dollars ($60,000.00) shall be billed directly to the Tenant
who shall be required to reimburse and pay the Landlord for said excess cost in
cash or certified funds no later than thirty (30) days from the date of receipt
of Landlord's invoice/billing;
(c) Landlord will commence construction of Landlord's Work
immediately following receipt by Landlord of final waivers, approvals, consents
or permits from all governmental authorities or other parties as are necessary
for the commencement of Landlord's Work hereunder. It is understood that the
approval of Tenant's drawings/specifications by Tenant are subject to
modifications of the existing structure imposed by the Town of Penfield only to
the extent Tenant deems said modifications acceptable;
(d) Landlord agrees to perform Landlord's Work in a good
and workmanlike manner in accordance with all applicable laws, rules and
regulations and to utilize first quality new materials unless otherwise set
forth in the working drawings and specifications;
(e) All work in connection with said Additional Space other
than that to be so performed by the Landlord is to be done by Tenant as set
forth on Attachment "D" at Tenant's sole expense ("Tenant's Work");
(f) Landlord agrees, at Landlord's expense, to obtain and
maintain public liability insurance adequate to fully protect Tenant as well as
Landlord from and against any and all liability for death or injury to person,
or, damage to property by reason of the construction of Landlord's Work. Tenant
agrees, at Tenant's expense to obtain and maintain public liability insurance
and worker's compensation insurance adequate to fully protect Landlord as well
as Tenant from and against any and all liability for death or injury to person
or damage to property by reason of the construction of Tenant's Work;
(g) In the event Landlord's Work and Tenant's Work shall
progress simultaneously, Landlord shall not be liable for any injury to person
or damage to property of tenant, or of Tenant's employees, licensees or
invitees, from any cause whatsoever occurring upon or about the
<PAGE> 10
Premises, and Tenant shall indemnify and hold Landlord harmless from any and all
liability and claims arising out of or connected with any such injury or damage
provided that the liability or claim is not the result of the Landlord's ACTS OR
OMISSIONS. Likewise, Tenant shall not be liable for any injury to person or
damage to property of Landlord or of Landlord's employees, licensees or invitees
from any cause whatsoever occurring upon or about the Premises and Landlord
shall indemnify and hold Tenant harmless from any and all liabilities and claims
arising out of or connected with any such injury or damage provided that the
liability or claim is not a result of the Tenant's ACTS OR OMISSIONS;
(h) Upon the occurrence of substantial completion of the
addition by the Landlord, Tenant shall immediately take possession of the
Premises and commence to perform Tenant's Work and install Tenant's equipment
and fixtures. Tenant's Work shall be performed in accordance with the approved
plans and specifications for that work, good construction practices, applicable
legal requirements and insurance requirements;
(i) For a period of one (1) year from the date of
substantial completion of Landlord's Work (THE "WARRANTY PERIOD"), Landlord
shall warrant its work to be free from material defects due to a failure to have
been constructed in a skillful manner. IN ADDITION, DURING THE WARRANTY PERIOD
LANDLORD WARRANTS THAT ALL MATERIALS INSTALLED BY IT FOR THE ADDITIONAL SPACE
BEING CONSTRUCTED SHALL BE FREE OF DEFECTS BEYOND NORMAL WEAR AND TEAR AND
NORMAL DETERIORATION. Thereafter, all repairs relating to Landlord's Work shall
be the sole responsibility of the Tenant except as otherwise set forth in the
Original Lease.
11. Except for the amendments/modifications set forth herein,
all the remaining provisions of this Amendment and the Original Lease shall
remain in full force and effect. In the event of any inconsistencies or
conflicts between this Amendment and the Original Lease, the provisions of this
Amendment shall control in each instance.
IN WITNESS WHEREOF, the parties hereto have set their hands
and seal the day and year first above written.
CONIFER PENFIELD ASSOCIATES, L.P.
<PAGE> 11
By: /s/ Fred J. Rainaldi
-------------------------------
Fred J. Rainaldi, Managing
General Partner
MONRO MUFFLER BRAKE, INC.
By: /s/ Jack M. Gallagher
-------------------------------
<PAGE> 1
Exhibit 10.73
FORM OF AGREEMENT
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
------------------------------------------
MARCH 31, 1999
BUYER:
------
REALTY INCOME CORPORATION, A MARYLAND CORPORATION
SELLER:
-------
MONRO MUFFLER BRAKE, INC., A NEW YORK CORPORATION
PROPERTY LOCATION:
------------------
Monro Muffler/Brake #XXX
SPECIFIC ADDRESS 8 LOCATIONS AS FOLLOWS:
4950 North French Road, Amherst, NY
214 West Avenue, Albion, NY
514 Pittsfield Road, Lenox, MA
2865 Niagara Falls Blvd., Amherst, NY
111 Franklin Street, Dansville, NY
6477 Basile Rowe, Dewiit, NY
4240 Belivar Road, Wellsville, NY
173 Oakdale Road, Johnson City, NY
<PAGE> 2
<TABLE>
<CAPTION>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
TABLE OF CONTENTS
<S> <C>
RECITALS ....................................................1
1. PURCHASE PRICE ........................................1
2. OPENING OF ESCROW .....................................1
3. TITLE TO PROPERTY .....................................2
4. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE ..........2
4.1 Approvals by Buyer ...............................2
4.2 Utilities ........................................4
4.3 Physical Characteristics of the Property .........4
4.4 Accuracy of Representations ......................4
4.5 No Hazardous Materials ...........................4
4.6 Foreign Investments ..............................4
4.7 Failure of Conditions ............................5
4.8 Lease ............................................5
5. CONDITIONS TO SELLER'S OBLIGATION TO SELL .............5
5.1 Performance by Buyer .............................5
5.2 Accuracy of Representations ......................5
5.3 Payment of Purchase Price ........................5
6. BUYER'S DELIVERIES TO ESCROW AGENT and seller .........6
6.1 Purchase Price ...................................6
6.2 Lease ............................................6
6.3 Failure to Deliver ...............................6
7. SELLER'S DELIVERIES TO ESCROW AGENT AND BUYER .........6
7.1 Deed .............................................6
7.2 Lease ............................................6
7.3 Documents Needed to Close ........................6
7.4 Failure to Deliver ...............................6
8. THE CLOSING ..........................................7
8.1 Date and Manner of Closing .......................7
8.2 Delay in Closing; Authority to Close .............7
9. PRORATION, COSTS AND EXPENSES .........................8
9.1 Prorations and Apportionments ....................8
9.2 Payment of Adjustments to Proration ..............8
9.3 Seller's Costs and Expenses ......................8
9.4 Buyer's Costs and Expenses .......................8
10. DISTRIBUTION OF FUNDS AND DOCUMENTS ...................9
10.1 Form of Distributions ............................9
10.2 Recorded Documents ...............................9
10.3 Non-Recorded Documents ...........................9
10.4 Cash Disbursements ...............................9
10.5 Copies of Documents ..............................9
11. RETURN OF DOCUMENTS AND FUNDS UPON TERMINATION ........9
11.1 Return of Seller's Documents .....................9
11.2 Return of Buyer's Documents .....................10
11.3 No Effect on Rights of Parties ..................10
11.4 Payment of Termination Fee ......................10
12. DEFAULT ..............................................10
12.1 Seller's Remedy .................................10
12.2 Buyer's Remedies ................................11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
13. REPRESENTATIONS AND WARRANTIES OF SELLER .............11
13.1 Authority of Seller .............................11
13.2 Condition of Property ...........................11
13.3 Use and Operation ...............................11
13.4 Land Use Regulation .............................12
13.5 Reports, Contracts and Other Documents ..........12
13.6 Absence of Fraud and Misleading Statements ......12
13.7 Litigation ......................................12
13.8 Other Contracts to Convey .......................12
13.9 Environmental Compliance/Hazardous Materials ....13
13.10 Property Tax Assessment .........................13
13.11 Agreements Affecting the Property ...............13
13.12 Use Permits and Other Approvals .................14
13.13 Confidentiality .................................14
13.14 Survival.. ......................................14
13.15 No Broker .......................................14
14. REPRESENTATIONS & WARRANTIES OF BUYER .......~ .......15
14.1 Authority of Buyer..i ...........................15
14.2 Absence of Fraud and Misleading Statements ......15
14.3 Litigation ......................................15
14.4 Financial Condition .............................15
14.5 Survival ........................................15
14.6 No Broker .......................................15
15. COVENANTS ............................................16
15.1 Indemnification by Parties ......................16
15.2 Maintenance .....................................16
15.3 Other Agreements ................................17
16. LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION .........17
16.1 Damage or Destruction ...........................17
16.2 Condemnation ....................................17
17. POSSESSION ...........................................17
18. NOTICES ..............................................18
19. GENERAL PROVISIONS ...................................18
19.1 Manner of Taking Title ..........................18
19.2 Gender; Number ..................................19
19.3 Captions ........................................19
19.4 Exhibits ........................................19
19.5 Entire Agreement ................................19
19.6 Modification. ...................................19
19.7 Attorneys' Fees .................................19
19.8 Joint and Several Liability .....................19
19.9 Governing Law ...................................20
19.10 Severability ....................................20
19.11 Successors and Assigns ..........................20
19.12 Information Provided ............................20
19.13 Counterparts ....................................21
EXHIBIT "A" LEGAL DESCRIPTION
EXHIBIT "B" DEED (SAMPLE)
EXHIBIT "C" - DOCUMENTS NEEDED TO CLOSE CHECKLIST (SAMPLE)
EXHIBIT "D" - GUIDELINES FOR AS-BUILT SURVEYS
</TABLE>
<PAGE> 4
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
This Purchase Agreement and Escrow Instructions (the "Agreement"), dated
March 31, 1999 for reference purposes, is made by and between Monro Muffler
Brake, Inc., a New York corporation ("Seller"), and Realty Income Corporation, a
Maryland corporation ("Buyer"), and is made with reference to the recitals set
forth below, and constitutes (i) a contract of purchase and sale between the
parties and (ii) escrow instructions to Partners Title Company (the "Escrow
Agent").
RECITALS
A. REAL PROPERTY. Seller owns certain real property together with all
improvements located on the property (the "Property"), the legal description of
which is attached hereto and made a part hereof as Exhibit "A," and is also
known as:
Monro Muffler/Brake - SPECIFIC ADDRESS
B. PURCHASE AND Sale. Seller desires to sell and Buyer desires to purchase
all ~ Seller's right, title, and interest in and to the Property upon the terms
and conditions set forth below.
C. LEASEHOLD INTEREST. Concurrently with the Closing (as defined in Section
8), Buyer, as landlord, shall lease the Property to Seller, as tenant, under a
lease dated March 31, 1999 (the "Lease").
1. PURCHASE PRICE
In consideration of the covenants contained in this Agreement, Seller shall
sell and Buyer shall purchase the Property for a total purchase price of
SPECIFIC PRICE FOR THE LOCATION ( 8 PROPERTIES TOTALLED $5,017,894) (the
"Purchase Price") which shall be delivered by Buyer to Escrow Agent on or before
the Closing in Cash (defined as (i) United States currency, (ii) cashier's or
certified check(s) currently dated, payable to Escrow Agent, and honored upon
presentation for payment, (iii) an amount credited by wire transfer into Escrow
Agent's bank account, or (iv) if monies are deposited with Escrow Agent within
twenty (20) days prior to the Closing, funds in such form as Escrow Agent in its
sole discretion requires).
2. OPENING OF ESCROW
Within five (5) business days following the execution of this Agreement,
Buyer and Seller shall open an escrow (the "Escrow") with Escrow Agent for the
Property and shall deposit with Escrow Agent fully executed counterparts of this
Agreement for use as escrow instructions. Buyer and Seller shall execute
<PAGE> 5
Escrow Agent's usual form of supplemental escrow instructions for transactions
of this type; provided, however, that such escrow instructions shall be for the
purpose of implementing this Agreement, shall incorporate this Agreement by
reference, and shall specifically provide that no provisions shall have the
effect of modifying this Agreement unless it is so expressly stated and
initialed on behalf of Buyer and Seller.
3. TITLE TO PROPERTY
At Closing Seller shall convey to Buyer fee simple title to the Property by
execution and delivery of a warranty deed in the form customarily used in
connection with commercial real property transactions in the state in which the
Property is located (the "Deed"). A form of the Deed is attached hereto as
Exhibit "B." At the Closing Buyer shall receive from Commonwealth Land Title
Insurance Company (the "Title Company") an ALTA Owner's Extended Policy of Title
Insurance (the "Title Policy") with liability in the full amount of the Purchase
Price insuring fee simple title to the Property in Buyer, subject only to
exceptions approved by Buyer as provided in Section 4.1, deleting all standard
printed exceptions (as deemed customary in the state in which the Property is
located), together with such endorsements as may be reasonably requested by
Buyer. Indemnification of the Title Company to induce it to insure any otherwise
non-permitted exception to title shall not be allowed except with the prior
written consent of Buyer after full disclosure to Buyer of the nature and
substance of such exception and indemnity. The Title Policy shall provide for
survey coverage and full coverage against mechanics' and materialmen's liens
arising out of the construction, repair, or alteration of any of improvements
located on the Property.
4. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE
Buyer's obligation to purchase the Property is expressly conditioned upon
each of the following:
4.1 APPROVALS BV BUVER
Buyer's receipt and approval for the Property of the following prior to the
Closing:
4.1.1 ALTA COMMITMENT FOR POLICY OF TITLE INSURANCE. As
soon as reasonably possible after execution of this
Agreement, Seller shall cause the issuance of an
ALTA Commitment for Policy of Title Insurance,
including complete legible copies of all
encumbrances and liens of record (the
"Commitment"), with respect to the Property to be
forwarded to Buyer for approval. If no written
disapproval of any items in the Commitment is
received from Buyer on or before thirty (30) days
after the later of delivery of the Commitment to
Buyer or delivery of the Certified As-Built Survey
<PAGE> 6
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS EXHIBIT "D#
GUIDELINES FOE AS-BUILT SURVEYS
1. LABEL: The survey must be labeled as an ALTA/ACSM Land TITLE SURVEY.
2. BOUNDARY LINES: Boundary lines as described in the current title
commitment.
3. Legal Descriotion: Full legal description on the face of the survey
(including a metes and bounds description even if not a part of the
legal description used in the title commitment).
4. TITLE COMMITMENT EXCEOTIONS: Location and size of all easements and
other plotable matters of record, marked with book and page to
correspond with the title commitment exceptions. If unplotable,
statement indicating that such exceptions, if any, affect the fee
parcel (or appurtenant easement parcel, as the case may be).
5. EASEMENT PARCELS: Easement parcel(s), if any, appurtenant to the fee
parcel, if the same is/are part of the legal description to be insured
(to the extent the same can be shown on the survey).
6. ENCROACHMENTS: Statement identifying the existence and location of
encroachments, if any.
7. IMPROVEMENTS: Location of the building and surrounding improvements.
8. SAUARE FOOTAGE: Square footage of the building and land.
9. UTILITIES: Location of utilities (wires, cables, manholes, drains,
etc.).
10. ACCESS WAYS: Location of parking areas, curb cuts, and driveways.
11. VICINITY MAP: Vicinity map showing the subject site and surrounding
area.
12. FLOOD ZONE: FEMA flood information.
13. CERTIFICATION: Certification to insuring title company and Realty
Income Corporation.
14. ZONING: Zoning designation, including description if possible.
15. NO LOAN: No reference made as to "Loan Purposes."
16. SIGNATURE: Surveyor's signature, seal, and date.
<PAGE> 7
(as defined in Section 4.1.2), the Commitment shall be deemed approved
by Buyer.
4.1.2 AS-BUILT SURVEY. A survey of the Property (the "As-Built Survey")
prepared by a licensed surveyor or civil engineer in sufficient detail
to provide for the Title Policy, certified to Buyer and the Title
Company, and conforming to the guidelines set forth on Exhibit "D,"
attached hereto and incorporated herein, without material boundary,
encroachment, or survey exceptions.
4.1.3 PHASE I ENVIRONMENTAL SITE ASSESSMENT REPORT. AS soon as reasonably
possible after execution of this Agreement, Seller shall cause a
Phase I Environmental Site Assessment Report (the "Phase I") to be
prepared for the Property in accordance with ASTM guidelines and
certified to Buyer by an environmental consultant approved by Buyer.
4.1.4 PLANS AND SPECIFICATIONS. As soon as reasonably possible after the
execution of this Agreement, Seller shall submit complete plans and
specifications to Buyer, together with an itemized cost breakdown for
all improvements, including on- and off-site improvements, from the
contractor who has performed or is in the process of performing the
construction of said improvements in accordance with the plans and
specifications.
4.1.5 APPRAISAL. AS soon as reasonably possible after the execution of this
Agreement, Buyer shall cause a narrative appraisal (the "Appraisal") to
be prepared on a completed project basis, covering the land,
improvements, and the Lease by an independent appraiser who is a member
in good standing of a recognized professional appraisal association,
and shall cause said Appraisal to be delivered to Buyer on or before
fifteen (15) days prior to the Scheduled Closing Date (as defined in
Section 8).
4.1.6 CERTIFICATE OF OCCUPANCY. If available Seller shall cause a notice of
completion and/or certificate of occupancy or its equivalent certifying
that construction has been completed to be delivered to Buyer.
4.1.7 OTHER DOCUMENTS. All other documents listed on Exhibit "C" entitled
"Documents Needed to Close Checklist" for the Property.
4.1.8 STATEMENT OF MATTERS AFFECTINQ TITLE. A statement of (and, if
available, copies of) any other matters of any nature of which Seller
has knowledge and
<PAGE> 8
which affect title to any part of the Property, whether or not of
record, whether or not visible or ascertainable by inspection of
the Property, and whether or not otherwise known to Buyer.
4.2 UTILITIES
Buyer's receipt and approval of evidence that all water, sewer, gas,
electric, telephone, and drainage facilities and all other utilities required by
law or by the normal use and operation of the Property are and at the time of
Closing will be installed to the property lines of the Property, are and at the
time of Closing will be connected and operating pursuant to valid permits, and
are and at the time of Closing will be adequate to service the Property and to
permit full compliance with all requirements of law and normal usage of the
Property.
4.3 PHYSICAL CHARACTERISTICS OF THE PROPERTY
Buyer's review and approval, prior to the Closing, of the structural,
mechanical, electrical, and other physical characteristics of the Property.
4.4 ACCURACY OF REPRESENTATIONS
All of Seller's representations and warranties contained in or made
pursuant to this Agreement shall have been true and correct when made and shall
be true and correct as of the Closing, and Seller shall have complied with all
of Seller's covenants and agreements contained in or made pursuant to this
Agreement.
4.5 NO HAZARDOUS MATERIALS
Buyer's satisfaction that there are no Hazardous Materials (as defined in
Section 13.9) on the Property.
4.6 FORELAN INVESTMENTS
Buyer's receipt of the affidavit, certification, or notice required by
Section 1445 of the Internal Revenue Code of 1954, as amended and the
Regulations pursuant thereto, in a form sufficient to relieve Buyer of any
potential transferee withholding liability under such Section. If Seller fails
to deliver such affidavit, certification, or notice to Buyer prior to or at the
Closing, or Buyer has knowledge or receives notice of the falsity of such
document, then the transactions shall be completed at the Closing, but Buyer
shall withhold ten percent (10%) of the "amount realized" (as set forth in the
Regulations) by Seller and transmin it to the Internal Revenue Service Center,
Philadelphia, PA 19255, all in accordance with Section 1445 and the Regulations
pursuant thereto.
<PAGE> 9
4.7 Failure of Conditions
4.7.1 The foregoing conditions contained in this Section 4 are
intended solely for the benefit of Buyer. If any of the
foregoing conditions are not satisfied or approved by Buyer,
Buyer shall have the right at its sole election either (i) to
waive the condition in question and proceed with the purchase
of the Property pursuant to all of the other terms of this
Agreement, reserving all of its other rights and remedies
available to it under this Agreement or otherwise at law or in
equity by reason of such failure of condition or (ii) to
terminate this Agreement.
4.7.2 By written agreement, the Closing may be extended for a
reasonable time if required to allow the conditions contained
in this Section 4 to be satisfied, subject to Buyer's further
rights to terminate this Agreement upon the expiration of the
period of any extension if all such conditions have not then
been satisfied.
4.8 LEASE
Execution by Buyer and Seller of the Lease for the Property.
5. CONDITIONS TO SELLER'S OBLIGATION TO SELL
Seller's obligation to sell is expressly conditioned upon each of the
following:
5.1 PERFORMANCE BY BUYER
Timely performance of each obligation, covenant, and delivery required of
Buyer.
5.2 ACCURACY OF REPRESENTATIONS
Ail of Buyer's representations and warranties contained in or made pursuant
to this Agreement shall have been true and correct when made and shall be true
and correct at the Closing, and Buyer shall have complied with all of Buyer's
covenants and agreements contained in or made pursuant to this Agreement.
5.3 PAYMENT OF PURCHASE PRICE
Payment of the Purchase Price at the Closing in the manner provided in this
Agreement.
<PAGE> 10
6. BUYER'S DELIVERIES TO ESCROW AGENT AND SELLER
6.1 PURCHASE PRICE
Buyer shall deliver inCash to Escrow Agent the Purchase Price as set forth
in Section 1, less adjustments pursuant to Section 9. Escrow Agent shall deposit
the Purchase Price in an interest bearing account, the interest upon which shall
accrue to the benefit of Buyer.
6.2 LEASE
On or before the Closing, Buyer shall deliver to Escrow Agent the
Memorandum of Lease for the Property executed and acknowledged by Seller and
Buyer, which Memorandum of Lease shall be filed for record by Escrow Agent upon
the close of Escrow. On the Closing, Buyer shall deliver to Seller the Lease for
the Property executed by Buyer and Seller.
6.3 FAILURE TO DELIVER
The failure of Buyer to make any required delivery within the specified
time shall constitute a material breach by Buyer.
7. SELLER'S DELIVERIES TO ESCROW AGENT AND BUYER
7.1 DEED
On or before the Closing, Seller shall deliver to Escrow Agent the Deed
for the Property executed and acknowledged by Seller.
7.2 LEASE
Before the Closing, Seller shall deliver to Buyer the Lease for the
Property executed by Seller. In addition, before the Closing, Seller shall
deliver to Buyer the Memorandum of Lease for the Property executed and
acknowledged by Seller.
7.3 DOCUMENTS NEEDED TO CLOSE
On or before the Closing, Seller shall deliver to Buyer each and every
document described in Section 4, subject to Buyer's right to waive delivery.
7.4 FAILURE TO DELIVER
The failure of Seller to make any required delivery within the specified
time shall constitute a material breach by Seller.
<PAGE> 11
8. THE CLOSING
8.1 DATE AND MANNER OF CLOSING
Escrow Agent shall close the Escrow (the "Closing") on a date mutually
agreeable to Buyer and Seller but which is in no event later than sixty (60)
days following the date upon which this Agreement is last executed by Buyer or
Seller (the "Scheduled Closing Date"), provided that all of the conditions to
Buyer's obligation to purchase have been either satisfied Or waived. The Escrow
shall be deemed closed when (i) Title Company is irrevocably committed to
issuing the Title Policy and (ii) Escrow Agent delivers the funds and documents
for the Property as set forth in Section t0. Distribution of funds and documents
shall occur WHEN AND ONLY WHEN each of the following conditions has been
satisfied:
8.1.1 All documents required to be delivered to Buyer and Escrow
Agent pursuant to this Agreement have been delivered or
delivery of such document(s) has been waived.
8.1.2 The Title Company is prepared to issue the Title Policy for
the Property.
8.1.3 All funds for the Property required to be delivered to Seller
and Escrow Agent pursuant to this Agreement have been
delivered.
8.2 DELAY IN CLOSING: AUTHORITY TO CLOSE
If Escrow Agent cannot close the Escrow on or before the Scheduled Closing
Date, it will nevertheless close when all conditions have been satisfied or
waived, notwithstanding that one or more of such conditions was not timely
performed, unless after the Scheduled Closing Date and prior to the close of the
delayed Escrow, Escrow Agent receives a written notice to terminate the Escrow
and this Agreement from a party who, at the time such notice is delivered, is
not in default. Neither (i) the exercise of the right of termination, (ii) delay
in the exercise of the right of termination, nor (iii) the return of monies and
documents, shall affect the right of the party giving notice of termination to
pursue legal or equitable remedies for the other party's breach of this
Agreement. Nor shall (i) the giving of such notice, (ii) the failure to object
to termination of the Escrow, or (iii) the return of monies and documents affect
the right of the other party to pursue legal or equitable remedies for the
breach of the party who gives notice.
<PAGE> 12
9. PRORATION, COSTS AND EXPENSES
9.1 PRORATIONS AND ADDORTIONMENTS
Contemporaneously with the Closing, Seller intends to lease the Property
from Buyer. Therefore, the parties do not anticipate the need to prorate
revenues or expenses. However, in the event an item of expense or revenue must
be prorated, it shall be prorated and apportioned as of 12:01 a.m. on the date
of the Closing so that Seller shall bear all expenses with respect to the
Property and shall have the benefit of all income with respect to the Property
through and including the period preceding the date of the Closing. Any taxes or
other amounts which cannot be ascertained with certainty as of the Closing shall
be prorated on the basis of the parties' reasonable estimates of such amount(s)
and shall be the subject of a final proration thirty (30) days after the Closing
or as soon thereafter as the precise amounts can be ascertained.
9.2 PAYMENT OF ADJUSTMENTS TO PRORATION
Either party owing the other party a sum of money based on adjustments made
to prorations after the Closing shall promptly pay that sum to the other party,
together with interest thereon at the rate of twelve percent (12%) per annum to
the date of payment if payment is not made within ten (10) days after mutual
agreement of the amount due.
9.3 SELLER'S COSTS AND EXPENSES
Seller shall pay for: (i) the As-Built Survey, (ii} the Phase I, (iii) the
cost of procuring the Title Policy, {iv) the cost of any documentary or other
transfer taxes applicable to the sale, (v) all costs and charges of the Escrow,
including, without limitation, Escrow Agent's fee, and (vi) Seller's own
attorneys' fees.
9.4 BUYER'S COSTS AND EXPENSES
Buyer shall pay for: (i) brokerage commission in the amount of one percent
(1%) of the Purchase Price to Horn Capital Realty, 3303 Lee Parkway, Suite 335,
Dallas, TX 75219, (214) 522-4676; (ii) Eighteen Thousand Dollars ($18,000) to
Seller as and for reimbursement to Seller for its closing costs and expenses;
and (iii) Buyer's own attorneys'.
<PAGE> 13
10. DISTRIBUTION OF FUNDS AND DOCUMENTS
10.1 FORM OF DISTRIBUTIONS
All disbursements by Escrow Agent shall be made by checks of Escrow Agent
or by wire transfers to the account of, and as directed by, the receiving party.
10.2 RECORDED DOCUMENTS
Escrow Agent shall cause the County Recorder of the County in which the
Property is located to mail the Deed (and any other documents which are required
by this Agreement to be, or by general usage are, recorded) after recordation,
to the grantee, beneficiaries, or person (i) acquiring rights under the
documents or (ii) for whose benefit the documents were acquired.
10.3 NON-RECORDED DOCUMENTS
Escrow Agent shall, at the Closing, deliver by United States mail (or shall
hold for personal pickup, if requested), each non-recorded document received by
Escrow Agent to the payee or person (i) acquiring rights under the document or
(ii) for whose benefit the documents were acquired.
10.4 CASH DISBURSEMENTS
At the Closing, Escrow Agent shall hold for personal pickup or shall
arrange for wire transfer (i) to Seller, or order, the cash plus any proration
or other credits to which Seller shall be entitled for the Property and less any
appropriate proration or other charges and (ii) to Buyer, or order, any excess
funds previously delivered to Escrow Agent by Buyer.
10.5 COPIES OF DOCUMENTS
Following the Closing, Escrow Agent shall deliver to Buyer and to Seller a
copy of the Deed (conformed to show recording data) and each other recorded
document for the Property.
11. RETURN OF DOCUMENTS AND FUNDS UPON TERMINATION
11.1 RETURN OF SELLER'S DOCUMENTS
In the event the Escrow is terminated for any reason (other than the
default of Seller), Buyer shall, within fifteen (15) calendar days following the
termination, deliver to Seller all documents and materials, if any, relating to
the Property previously delivered to Buyer by Seller. Escrow Agent shall deliver
all documents and materials relating to the Property previously deposited by
Seller and then in Escrow Agent's possession to Seller.
<PAGE> 14
11.2 RETURN OF BUYER'S DOCUMENTS
In the event the Escrow is terminated for any reason (other than the
default of Buyer), Seller shall, within fifteen (15) calendar days following
termination, deliver to Buyer all funds and documents, if any, relating to the
Property, previously delivered to Seller by Buyer. Escrow Agent shall deliver
all documents, materials, and funds relating to the Property previously
deposited by Buyer and then in Escrow Agent's possession to Buyer. .~
11.3 NO EFFECT ON RIQHTS OF PARTIES
The return of documents and monies as set forth above shall not affect the
right of either party to seek the legal or equitable remedies that the party may
have with respect to the enforcement of this Agreement.
11.4 PAYMENT OF TERMINATION FEE
Escrow Agent may condition its deliveries upon payment of a termination fee
by the party requesting delivery. Notwithstanding the foregoing, any termination
fee shall be paid (or reimbursed) by the defaulting party, or paid equally if
neither party is then in default.
12. DEFAULT
12.1 SELLER'S REMEDY
If Buyer fails to complete the acquisition of the Property by reason of any
default by Buyer, Seller shall be released from any further obligations and
shall be entitled to the following:
INSOFAR AS IT WOULD BE EXTREMELY IMPRACTICABLE AND DIFFICULT TO
ESTIMATE THE DAMAGE AND HARM WHICH SELLER WOULD SUFFER IN THE EVENT
BUYER DEFAULTS AND FAILS TO COMPLETETHE SALE OR ACQUISITION OF
TREPROPERTY, ANDINSOFAR AS A REASONABLE ESTIMATEOF THE TOTALNET
DETRIMENT THAT SELLER WOULD SUFFER IN THE EVENT OF BUYER'S DEFAULT AND
FAILURE TO DULY COMPLETE THE SALE OR ACQUISITION OF THE PROPERTY IS THE
SUM OF TEN THOUSAND DOLLARS ($10,000), SELLER SHALL BE ENTITLED TO THE
SUM OF TEN THOUSAND DOLLARS ($10,000) AS AND FOR SELLER'S SOLE REMEDY
FOR DAMAGES ARISING FROM BUYER'S FAILURE TO COMPLETE THE SALE OR
ACQUISITION OF THE PROPERTY IN ACCORDANCE WITH THE TERMS OF THIS
AGREEMENT. BY PLACING TREIR INITIALS BELOW,
<PAGE> 15
THE PARTIES ARE CONFIRMING THE ACCURACY OF THE STATEMENTS SET FORTH ABOVE.
BUYER-INITIALS SELLER-INITIALS
12.2 BUYER'S REMEDIES
In the event that the transaction fails to close on account of Seller's
fault or Seller's breach of this Agreement, Buyer shall be entitled to such
remedies for breach of contract as may be available under applicable law,
including, without limitation, the remedy of specific performance.
13. REPRESENTATIONS AND WARRANTIES OF SELLER
The following representations and warranties by Seller are now and shall,
at the Clo~ing, be true and correct. If during the period between the execution
of this Agreement and the Closing, Seller learns of or has a reason to believe
that any of the following representations and warranties may cease to be true,
Seller covenants to give notice thereof to Buyer immediately.
13.1 AUTHORITY OF SELLER
Seller is a New York corporation duly organized and validly existing and in
good standing under the laws of the State of New York and has the authority to
own and convey the Property. This Agreement and all documents executed by Seller
which are to be delivered to Buyer are, or at the time of the Closing will be,
duly authorized, executed, and delivered by Seller and do not, and at the time
of the Closing will not, violate any provisions of any agreement or judicial
order to which Seller is a party or to which Seller or the Property are subject.
13.2 CONDITION OF PROPERTY
There are now, and at the Closing there will be, no material physical or
mechanical defects of the Property, including, without limitation, the plumbing,
heating, air conditioning, ventilating; emergency safety systems, and electrical
systems, and all such items are in good operating condition and repair and in
compliance with all applicable governmental laws, ordinances, regulations, and
requirements, including, but not limited to, the Americans with Disabilities
Act. In addition, there are no existing leases on the Property, other than N/A .
-----
13.3 USE AND OPERATION
The use and operation of the Property now is, and at the time of Closing
will be, in full compliance with applicable building codes, safety, fire,
environmental, zoning, and land use
<PAGE> 16
laws, and other applicable local, state, and federal laws, ordinances,
regulations, and requirements. Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact which would prevent Buyer from using and operating
the Property after the Closing in the manner in which the Property has been
used, leased, and operated prior to the date of this Agreement.
13.4 LAND USE REAULATION
There are no condemnation, environmental, zoning, or other land use
regulation proceedings instituted which could detrimentally affect the use or
operation of the Property or the value of the Property, nor has Seller received
notice of any special assessment proceedings affecting the Property.
13.5 REPORTS, CONTRACTS AND OTHER DOCUMENTS
Contracts or documents delivered to Buyer pursuant to this Agreement are,
and at the time of Closing will be, true and correct copies, are and at the time
of Closing will be in full force and effect, and contain no inaccuracies or
misstatements of fact. All documents which are required by this Agreement to be
delivered to Buyer have been or will be delivered to Buyer.
13.6 ABSENCE OF FRAUD AND MISLEADINA STATEMENTS
No representation, warranty, or statement of Seller in this Agreement or in
any document, certificate, or schedule furnished or to be furnished to Buyer
pursuant thereto, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements or facts not misleading. All representations, warranties, or
statements of Seller are based upon current, accurate, and complete information
as of the time of their making and there has been no subsequent material change
in the information.
13.7 LITIQATION
There is no litigation, pending or threatened, against Seller or any basis
therefor that arises out of the ownership of the Property, or that might
detrimentally affect the use or operation of the Property for its intended
purpose or the value of the Property, or adversely affect the ability of Seller
to perform its obligations under this Agreement.
13.8 OTHER CONTRACTS TO CONVEY
Seller has not committed nor obligated itself in any manner whatsoever to
sell the Property to any party other than Buyer. Seller has not hypothecated or
assigned any rents or income from the Property in any manner.
<PAGE> 17
13.9 ENVIRONMENTAL COMPLIANCE/HAZARDOUS MATERIALS
The Property is not, and as of the Closing will not be, in violation of any
federal, state, or local law, ordinance, or regulation relating to industrial
hygiene or to the environmental conditions on, under, or about the Property
including, but not limited to, soil and groundwater conditions. There are no
Hazardous Materials (as defined below) present on the Property, other than AS
DISCLOSED IN THAT CERTIAN PHASE ONE ENVIRONMENTAL SITE ASSESSMENT DATED DECEMBER
12, 1997 which is/are used in compliance with all applicable laws, ordinances,
and regulations. Seller further warrants and represents that during the time in
which Seller owned the Property, neither Seller nor, to the best of Seller's
knowledge, any third party has used, generated, manufactured, produced, stored,
or disposed of on, under, or about the Property or transported to or from the
Property any Hazardous Materials in violation of applicable laws, ordinances,
and regulations. Seller has not received notification of any proceeding or
inquiry by any governmental authority with respect to the presence of Hazardous
Materials on the Property or the migration of Hazardous Materials from or to the
Property. There are no storage tanks located in or under the Property. The term
"Hazardous Material" means, but is not limited to, any substance, material, or
waste which is toxic, ignitable, reactive, or corrosive; which is or can be
injurious to the health, safety, or welfare of the public or environment, and
which is or becomes regulated by any local or state governmental authority or
the United States Government. The term "Hazardous Material" includes, without
limitation, any material or substance which is (i) defined as a "hazardous
waste," "extremely hazardous waste," "restricted hazardous waste," "hazardous
substance," "pollutant or contaminant," or "hazardous material," by any local or
state law, (ii) oil and petroleum products and their byproducts, (iii) asbestos
or asbestos-containing materials, (iv) designated as a "hazardous substance"
pursuant to the Federal Water Pollution Control Act, (v) defined as a "hazardous
waste" pursuant to the Federal Resource Conservation and Recovery Act, or (vi)
defined as a "hazardous substance" pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act. Seller has disclosed to Buyer in
writing all information in Seller's possession or control which relates to the
environmental condition of the Property.
13.10 PROPERTY TAX ASSESSMENT
Notwithstanding any other provision of this Agreement to the contrary, if
Buyer shall become liable after the Closing for payment of any property taxes
assessed against the Property for any period of time prior to the Closing,
Seller shall immediately pay to Buyer on demand an amount equal to such tax
assessment.
13.11 AAREEMENTS AFFECTINA THE PROPERTY
At the Closing there will be no leases, easements, encumbrances, or other
agreements affecting the Property except as
<PAGE> 18
shown in the Commitment for the Property or as otherwise disclosed to Buyer by
Seller in writing and approved by Buyer.
13.12 USE PERMITS AND OTHER ADDROYALS
Seller has obtained all licenses, permits, approvals, easements, and rights
of way required from all governmental authorities having jurisdiction over the
Property or from private parties for the normal use and operation of the
Property and to ensure free and unimpeded vehicular and pedestrian.ingress to
and egress from the Property as required to permit the normal intended usage of
the Property. Seller has materially complied with all licenses and permits and
has not received any notice that any licenses or permits will not be renewed
upon expiration, or of any material conditions which will be imposed in order to
receive any renewal.
13.13 CONFIDENTIALITY
Seller shall hold as confidential all information concerning Buyer and this
transaction. Seller shall not release any such information to third parties
without Buyer's prior written consent, except pursuant to a court order
requiring such release or as otherwise may be required by law. Buyer shall hold
as confidential all information concerning Seller and this transaction. Buyer
shall not release any such information to third parties without Seller's prior
written consent, except pursuant to a court order requiring such release or as
otherwise may be required by law. Notwithstanding the foregoing, subsequent to
the Closing, either party publicly may announce (provided such announcement is
factually accurate): (i) Seller sold and Buyer purchased the Property; (ii) the
Property is subject to the Lease; (iii) the industry of Tenant; (iv) the total
number of properties Seller sold to Buyer and Buyer purchased from Seller,
including, without limitation, the Property; and (v) the total value of the
transaction, i.e., the Purchase Price.
13.14 SURVIVAL
The representations and warranties of Seller contained herein shall survive
the Closing.
13.15 NO BROKER
Seller warrants that except for brokerage commission due Horn Capital
Realty, which commission is payable by Buyer pursuant to Section 9.4, there are
no brokerage commissions payable as a result of the Closing herein. Seller shall
indemnify and hold harmless Buyer from any claims, costs, damages, or liability
based on any statement, representations, or agreement by Seller with respect to
the payment of any brokerage commissions or finders' fees.
<PAGE> 19
14. REPRESENTATIONS & WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
14.1 AUTHORITY OF BUYER
Buyer is a corporation duly organized and validly existing under the laws
of the State of Maryland. This Agreement and all documents executed by Buyer
which are to be delivered to Seller at the Closing are, or at the time of
Closing will be~. duly authorized, executed, and delivered by Buyer, and are, or
at the Closing will be, legal, valid, and binding obligations of Buyer, and do
not, and at the time of Closing will not, violate any provisions of any
agreement or judicial order to which Buyer is a party or to which it is subject.
14.2 ABSENCE OF FRAUD AND MISLEADINA STATEMENTS
No representation, warranty, or statement of Buyer in this Agreement or in
any document, certificate, or schedule furnished or to be furnished to Seller
pursuant thereto contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements or facts not misleading. Ail representations, warranties, or
statements of Buyer are based upon current, accurate, and complete information
as of the time of their making and there has been no subsequent material change
in the information.
14.3 LITIQATION
There is no litigation pending or, to Buyer's knowledge, threatened,
against Buyer or any basis therefor before any court or administrative agency
which might adversely affect the ability of Buyer to perform its obligations
under this Agreement.
14.4 FINANCIAL CONDITION
Buyer has adequate financial resources to make timely payment of all sums
due from Buyer hereunder and to perform all of its obligations hereunder.
14.5 SURVIVAL
The representations and warranties of Buyer contained herein shall survive
the Closing.
14.6 NO BROKER
Buyer warrants that except for brokerage commission due Horn Capital
Realty, which commission is payable by Buyer pursuant to Section 9.4, there are
no brokerage commissions payable as a result of the Closing herein. Buyer shall
indemnify and hold harmless Seller from any claims, costs, damages, or liability
based on any statement, representations, or agreement by Buyer
<PAGE> 20
with respect to the payment of any brokerage commissions or finders' fees.
15. COVENARTS
Matters as to which Escrow Agent need not be concerned, Seller and Buyer
covenant and agree with one another as follows:
15.1 INDEMNIFICATION BV PARTIES
Each party shall indemnify the other party and hold the
other party harmless from and against any and all claims, demands, liabilities,
liens, costs, expenses, penalties, damages, and losses, including, without
limitation, reasonable attorneys' fees and costs, suffered as a direct or
indirect result of:
15.1.1 Any misrepresentation, breach of warranty, or breach of
covenant made pursuant to this Agreement or in any document,
certificate, or exhibit given or delivered pursuant to or in
connection with this Agreement; and
15.1.2 Any and all obligations, liabilities, claims, liens, or
encumbrances, whether direct, contingent, or consequential and no
matter how arising or accruing, which are in any way related to or
arising from any act, conduct, omission, contract, or commitment
of a party (or any of its agents or employees) at any time or
times before the Closing, including indemnification by Seller of
Buyer, without limitation, of (i) all foreseeable and all
unforeseeable consequential damages, directly or indirectly
arising out of the use, generation, storage, or disposal of
Hazardous Materials by Seller and (ii) the cost of any required or
necessary repair, cleanup, remediation, removal, or detoxification
and the preparation of any closure or other required plans, or
actions, whether such action is required or necessary prior to or
following transfer of title to the Property, to the full extent
that such action is attributable, directly or indirectly, to the
presence, use, generation, storage, release, threatened release,
treatment, or disposal of Hazardous Materials bytitle to Buyer.
The provisions of this Section shall survive the execution and
delivery of this Agreement, the delivery of the Deed, and trmmmfmr
of tit~e.
15.2 MAINTENANCE
Closing, Seller shall, at Seller's sole cost and expense, maintain
<PAGE> 21
the Property in good order, condition, and repair, reasonable wear and tear
excepted, and shall operate the Property in the same manner as before the making
of this Agreement as though Seller were retaining the Property.
15.3 OTHER AQREEMENTS
Seller shall not enter into or terminate any contracts or agreements
pertaining to the Property without in each case obtaining Buyer's prior written
consent thereto. -~
16. LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION
16.1 DAMAAE OR DESTRUCTION
In the event that any of the improvements on the Property are damaged or
destroyed by fire or other casualty prior to the Closing, then Seller may
terminate this Agreement or may offer to restore and repair such damage.
Termination shall be by written notice to Buyer within five (5) days after the
occurrence of the damage or destruction. Buyer shall have no obligation to
accept Seller's offer to restore and repair such damage if such restoration and
repair would cause the Scheduled Closing Date to be extended. Seller shall pay
escrow and related costs, if any, that exist as a result of terminating this
Agreement under this Section.
16.2 CONDEMNATION
In the event that prior to the Closing a governmental entity shall commence
any eminent domain proceeding to take any portion of the Property, Buyer shall
have the option to make either of the following elections:
16.2.1 Terminate this Agreement by written notice to Seller within
five (5} days of its receiving notice of such action of
condemnation; or
16.2.2 Proceed with the transaction in which case the Purchase Price
shall not be reduced and Buyer shall be entitled to the net award
paid to Seller or Seller's mortgagee for the taking, if any, and
Seller shall assign and transfer to Buyer all right, title, and
interest in and to any awards.
17. POSSESSION
Possession of the Property shall be delivered to Buyer at the Closing.
<PAGE> 22
18. NOTICES
Ail notices, requests, or demands herein provided to be given or made, or
which may be given or made by either party to the other, shall be given or made
only in writing and shall be deemed to have been duly given: (1) when delivered
personally at the address set forth below, or to any agent of the party to whom
notice is being given, or (ii) on the date delivered when sent via Overnight
Mail, properly addressed and postage prepaid, or (iii) on the date sent via
facsimile transmission, or (iY~ seventy-two (72) hours after the time the same
is deposited in the United States mail, properly addressed and first class
postage prepaid, return receipt requested. The proper address to which notices,
requests, or demands may be given or made by either party shall be the address
set forth at the end of this Section or to such other address or to such other
person as any party shall designate. Such address may be changed by written
notice given to the other party in accordance to this Section.
If to Buyer:
Realty Income Corporation
Attn: Legal Department
220 West Crest Street Escondido, CA 92025-1707 {760) 741-2111
(760) 741-8674 (Pax number)
If to Seller:
Thomas M. Aspenleiter
Monro Muffler Brake, Inc.
200 Holleder Parkway
Rochester, NY 14615-3808
(716) 647-6400
(716) 647-0945 (Pax number)
If to Escrow:
P.J. Whitworth
Partners Title Company
712 Main Street, Suite 2000E
Houston, TX 77002-3218
(713) 238-9181
(713) 238-9180 (Fax number)
19. GENERAL PROVISIONS
19.1 MANNER OF TAKING TITLE
Buyer shall have the right to take title to the Property at the Closing in
a name other than Buyer's name.
<PAGE> 23
19.2 GENDER~ NUMBER
The use of (i) the neuter gender includes the masculine and feminine and
(ii) the singular number includes the plural whenever the context requires.
19.3 CAPTIONS
Captions in this Agreement are inserted for the convenience of reference
only and do not define, describe, or limit the scope or the intent of this
Agreement or any of its terms.
19.4 EXHIBITS
All attached exhibits are a part of this Agreement and are incorporated in
full by this reference.
19.5 ENTIRE A~REEMENT
This Agreement contains the entire agreement between the parties relating
to the transactions contemplated hereby and all prior or contemporaneous
agreements, understandings, representations, and statements, oral or written,
are merged into this Agreement.
19.6 MODIFICATION
No modification, waiver, amendment, discharge, or change of this Agreement
shall be valid unless it is in writing and signed by the party against which the
enforcement of the modification, waiver, amendment, discharge, or change is or
may be sought.
19.7 ATTORNEYS' FEES
Should any party employ an attorney for the purpose of enforcing or
construing this Agreement, or any judgment based on this Agreement, in any legal
proceeding whatsoever, including insolvency, bankruptcy, arbitration,
declaratory relief, or other litigation, the prevailing party shall be entitled
to receive from the other party or parties, reimbursement for all attorneys'
fees and all costs, including, but not limited to, service of process, filing
fees, court and court reporter costs, investigative costs, expert witness fees,
and the cost of any bonds, whether taxable or not, and that such reimbursement
shall be included in any judgment or final order issued in that proceeding.
19.8 JOINT AND SEVERAL LIABILITY
If any party consists of more than one person or entity, the liability of
each such person or entity signing this Agreement shall be joint and several.
<PAGE> 24
19.9 GOVERNINQ LAW
This Agreement shall be construed and enforced in accordance with the laws
of the state in which the Property is located.
19.10 SEVERABILITY
In the event any term, covenant, condition, or provision of this Agreement
is held to be invalid, void, or otherwise unenforceable by any court of
competent jurisdiction, the fact that such term, covenant, condition, or
provision is invalid, void, or otherwise unenforceable shall in no way affect
the validity or enforceability of any other term, covenant, condition, or
provision of this Agreement.
19.11 SUCCESSORS AND ASSIANS
All terms of this Agreement shall be binding upon, inure to the benefit of,
and be enforceable by the parties and their respective legal representatives,
successors, and assigns.
19.12 INFORMATION PROVIDED
Seller warrants and represents that all information Seller has provided to
Buyer is accurate and correct and Seller acknowledges that Buyer has relied upon
such information in entering into this Agreement.
Buyer warrants and represents that all information Buyer has provided to
Seller is accurate and correct and Buyer acknowledges that Seller has relied
upon such information in entering into this Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE> 25
19 . 13 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original. counterparts shall together constitute but one
agreement.
Monro Muffler Brake, Inc.,
a New York corporation
BUYER:RICHARD G. COLLINS (SIGNATURE)
Realty Income Corporation,
a Maryland corporation
~Senior Vice President,
Date: Dec 18,1997
December 18, 1997 Portfolio Acquisitions
ESCROW AGENT:PJ WHITWORTH
DEC 18,1997
Partners Title Company
Date: 12/19/97
<PAGE> 26
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS EXHIBIT "A"
LEGAL DESCRIPTION OF REAL PROPERTY
LOCATION: Monro Muffler/Brake #xxx
SPECIFIC ADDRESS
(To be taken from the Commitment for Policy of Title Insurance.)
<PAGE> 27
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
EXHIBIT "B" SAMPLE DEED
<PAGE> 28
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS EXHIBIT "C"
DOCUMENTS NEEDED TO CLOSE CHECKLIST
LOCATION: Monro Muffler/Brake #xxx
SPECIFIC ADDRESS
ITEM RECEIVED
1. Aerial Photograph
2. Certified Boundary Survey (1 f Available)
3. Area/Location Map
4. Area Demographics
5. Acceptable Commitraent Of Title Insurance
6. Copy OfThe Deed
7. Zoning Permits And Regulations
8. Insurance Certificates
9. Copy Of Tax Bill
10. Corporate Resolution Or Partnership Agreement
11. Standard Parcel Map Or Subdivision Plat
12. Site Plan
13. Soils Report
14. Phase l Envlroranental Site Assessment Report & Reliance Letter
15. Land Purchase Escrow Closing Statement
16. Project Pro Forma\Operating Profit & Loss Statement
17. Construction Contract (Including itemized Breakdown)
18. Plans and Specifications
19. Verification of Built-to Plans
20. Certified As-Built Survey (ALTA) Showing Land and Building
21. MAI Leased Fee Appraisal (Including Land Valuation)
22. Completion Notice/Certificate of Occupancy (If Available)
<PAGE> 1
Exhibit 10.73a
LEASE AMENDMENT NO. 1
This Lease Agreement No. 1 (this "Amendment") is dated for reference purposes
only as of May 6, 1999, and is by and between Realty Income Corporation, a
Maryland corporation ("Landlord") and Monro Muffler Brake, Inc., a New York
corporation ("Tenant") with reference to the following recitals:
RECITALS
A. Landlord and Tenant entered into that certain Lease dated March 29,
1999 (the "Lease"), in connection with that certain real property, the
legal description of which is attached to the Lease as Exhibit "A,"
commonly referred to as:
Monro Muffler Brake Shop #372
6477 Basile Rowe
East Syracuse, NY 13057
B. The Lease incorrectly stated the term of the Lease as eleven (11)
years and six (6) months.
C. Tenant (as "Seller") and Landlord (as "Buyer") contemporaneously with
the execution of this Amendment, are entering into a certain Amendment
to Purchase Agreement and Escrow Instructions of even date herewith
(the "Purchase Agreement Amendment") pursuant to which Seller shall
pay to Buyer the sum of Sixty-three Thousand Four Hundred Sixty-two
Dollars ($63,462), reflecting a refund due Buyer resulting from a
correction in the Purchase Price, all as more particularly set forth
in the Purchase Agreement Amendment. The parties hereto have agreed to
amend the rent payable by Tenant pursuant to the Lease to reflect said
refund.
NOW THEREFORE, in consideration of the mutual covenants contained herein
and other good valuable consideration the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
AMENDMENT
1. Section 2, Term and Rent Commencement, shall be deleted in its
entirety and shall be replaced with the following:
"The term of this Lease shall be for eleven (11) years and three (3) months
and shall commence the day the Landlord takes title to the Leased Premises
(the "Rent Commencement Date")."
1. "Monthly Rent: First Five (5) Lease Years" as set forth in Section 4,
Rent, shall be deleted and shall be replaced with the following:
<PAGE> 2
"During the first five (5) lease years (the "First Five Lease Years"),
Tenant shall pay Landlord monthly rent (the "Monthly Rent") as
follows:
MONTHS PER MONTH
1 through 60 $5,968.39"$4,326.83"
2. Except as specifically amended herein, all terms and conditions of the
Lease shall remain in full force and effect.
3. This Amendment may be executed in any number of counterparts, each of
which shall b deemed an original. The counterparts shall together
constitute but one agreement.
4. The effective date of this Amendment shall be the later of the date
upon which this Amendment or the Purchase Agreement Amendment is last
executed by Seller or Buyer.
LANDLORD: TENANT:
- -------- ------
Realty Income Corporation, Monro Muffler Brake, Inc.,
a Maryland corporation a New York corporation
By: By:
------------------------------- ------------------------------
Date: Date:
----------------------------- -----------------------------
<PAGE> 3
AMENDMENT TO PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
This Amendment to Purchase Agreement and Escrow Instructions (this
"Amendment") is dated for reference purposes only as of May 6, 1999, and is by
and between Monro Muffler Brake, Inc., a New York corporation ("Seller"), and
Realty Income Corporation, a Maryland corporation ("Buyer") with reference to
the following recitals:
RECITALS
A. Seller and Buyer entered into that certain Purchase Agreement and
Escrow Instructions dated March 24, 1999 (the "Purchase
Agreement"), in connection with that certain real property, the
legal description of which is attached to the Purchase Agreement
as Exhibit "A," commonly referred to as:
Monro Muffler Brake Shop #372
6477 Basile Rowe
East Syracuse, NY 13057
B. The Purchase Price (as such term is defined in Section 1 of the
Purchase Agreement) was incorrectly stated as Seven Hundred
Fifty-four Thousand Five Hundred Seventy-eight Dollars ($754,578).
C. Notwithstanding that the closing (as defined in Section 8.1 of the
Purchase Agreement) preceded this Amendment, Seller and Buyer
desire to amend the purchase Agreement as more particularly set
forth herein.
NOW THEREFORE, in consideration of mutual covenants contained herein
and other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
AMENDMENT
1. Section 1, Purchase Price, shall be deleted in its entirety and
shall be replaced with the following:
"In consideration of the covenants contained in this Agreement, Seller
shall sell and Buyer shall purchase the Property for a total purchase
price of Six Hundred Ninety-one Thousand One Hundred Sixteen Dollars
($691,116) (the "Purchase Price") which shall be delivered by Buyer to
Escrow Agent on or before the Closing in Cash (defined as (I) United
States currency, (ii) cashier's or certified check(s) currently dated,
payable to Escrow Agent, and honored upon presentation for payment,
(iii) an amount credited by wire transfer into Escrow Agent's bank
account, or (iv) if monies are deposited with Escrow Agent within
twenty (20) days prior to the Closing, funds in such form as Escrow
Agent in its sole discretion requires)."
<PAGE> 4
2. Seller and Buyer acknowledge Buyer paid the sum of Seven Hundred
Seventy-two Thousand Five Hundred Seventy-eight Dollars ($772,578)
on March 31, 1999 in accordance with the terms of the Purchase
Agreement. Notwithstanding anything contained in the Purchase
Agreement to the contrary, Seller shall pay to the Buyer the sum
of Sixty-three Thousand Four Hundred Sixty-two Dollars ($63,462)
as soon as reasonably possible following the date upon which this
Amendment is last executed by Seller or Buyer.
3. Except as specifically amended herein, all terms and conditions of
the Purchase Agreement shall remain in full force and effect.
4. This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original. The counterparts shall
together constitute but one agreement.
5. The effective date of this Amendment shall be the date upon which
this Amendment is last executed by Seller or Buyer.
SELLER: BUYER:
Monro Muffler Brake, Inc., Realty Income Corporation,
a New York corporation a Maryland corporation
By: By:
--------------------------------- ----------------------------
Date: Date:
------------------------------- ---------------------------
<PAGE> 5
LEASE AMENDMENT NO. 1
This Lease Agreement No. 1 (this "Amendment") is dated for reference purposes
only as of May 6, 1999, and is by and between Realty Income Corporation, a
Maryland corporation ("Landlord") and Monro Muffler Brake, Inc., a New York
corporation ("Tenant") with reference to the following recitals:
RECITALS
A. Landlord and Tenant entered into that certain Lease dated March
29, 1999 (the "Lease"), in connection with that certain real
property, the legal description of which is attached to the Lease
as Exhibit "A," commonly referred to as:
Monro Muffler Brake Shop #368
111 Franklin Street
Dansville, NY 14437
B. Tenant (as "Seller") and Landlord (as "Buyer") contemporaneously
with the execution of this Amendment, are entering into a certain
Amendment to Purchase Agreement and Escrow Instructions of even
date herewith (the "Purchase Agreement Amendment") pursuant to
which Seller shall pay to Buyer the sum of Eighty-two Thousand One
Hundred Seventy-seven Dollars ($82,177), reflecting a refund due
Buyer resulting from a correction in the Purchase Price, all as
more particularly set forth in the Purchase Agreement Amendment.
The parties hereto have agreed to amend the rent payable by Tenant
pursuant to the Lease to reflect said refund.
NOW THEREFORE, in consideration of the mutual covenants contained
herein and other good valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
AMENDMENT
1. "Monthly Rent: First Five (5) Lease Years" as set forth in
Section 4, Rent, shall be deleted and shall be replaced with the
following:
"During the first five (5) lease years (the "First Five Lease Years"),
Tenant shall pay Landlord monthly rent (the "Monthly Rent") as
follows:
MONTHS PER MONTH
1 through 60 $4,326.83"
2. Except as specifically amended herein, all terms and conditions
of the Lease shall remain in full force and effect.
<PAGE> 6
3. This Amendment may be executed in any number of counterparts, each
of which shall b deemed an original. The counterparts shall
together constitute but one agreement.
4. The effective date of this Amendment shall be the later of the
date upon which this Amendment or the Purchase Agreement Amendment
is last executed by Seller or Buyer.
LANDLORD: TENANT:
- --------- -------
Realty Income Corporation, Monro Muffler Brake, Inc.,
a Maryland corporation a New York corporation
By: By:
----------------------- ----------------------
Date: Date:
--------------------- ---------------------
<PAGE> 7
AMENDMENT TO PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
This Amendment to Purchase Agreement and Escrow Instructions (this
"Amendment") is dated for reference purposes only as of May 6, 1999, and is by
and between Monro Muffler Brake, Inc., a New York corporation ("Seller"), and
Realty Income Corporation, a Maryland corporation ("Buyer") with reference to
the following recitals:
RECITALS
A. Seller and Buyer entered into that certain Purchase Agreement and
Escrow Instructions dated March 24, 1999 (the "Purchase
Agreement"), in connection with that certain real property, the
legal description of which is attached to the Purchase Agreement
as Exhibit "A," commonly referred to as:
Monro Muffler Brake Shop #368
111 Franklin Street
Dansville, NY 14437
B. The Purchase Price (as such term is defined in Section 1 of the
Purchase Agreement) was incorrectly stated as Five Hundred
Seventy-eight Thousand Two Hundred Fifty-six Dollars ($578,256).
C. Notwithstanding that the closing (as defined in Section 8.1 of the
Purchase Agreement) preceded this Amendment, Seller and Buyer
desire to amend the purchase Agreement as more particularly set
forth herein.
NOW THEREFORE, in consideration of mutual covenants contained herein
and other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
AMENDMENT
1. Section 1, Purchase Price, shall be deleted in its entirety and
shall be replaced with the following:
"In consideration of the covenants contained in this Agreement, Seller
shall sell and Buyer shall purchase the Property for a total purchase
price of Four Hundred Ninety-six Thousand Seventy-nine Dollars
($496,079) (the "Purchase Price") which shall be delivered by Buyer to
Escrow Agent on or before the Closing in Cash (defined as (I) United
States currency, (ii) cashier's or certified check(s) currently dated,
payable to Escrow Agent, and honored upon presentation for payment,
(iii) an amount credited by wire transfer into Escrow Agent's bank
account, or (iv) if monies are deposited with Escrow Agent within
twenty (20) days prior to the Closing, funds in such form as Escrow
Agent in its sole discretion requires)."
<PAGE> 8
2. Seller and Buyer acknowledge Buyer paid the sum of Five Hundred
Ninety-six Thousand Two Hundred Fifty-six Dollars ($596,256) on
March 31, 1999 in accordance with the terms of the Purchase
Agreement. Notwithstanding anything contained in the Purchase
Agreement to the contrary, Seller shall pay to the Buyer the sum
of Eighty-two Thousand One Hundred Seventy-seven Dollars ($82,177)
as soon as reasonably possible following the date upon which this
Amendment is last executed by Seller or Buyer.
3. Except as specifically amended herein, all terms and conditions of
the Purchase Agreement shall remain in full force and effect.
4. This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original. The counterparts shall
together constitute but one agreement.
5. The effective date of this Amendment shall be the date upon which
this Amendment is last executed by Seller or Buyer.
SELLER: BUYER:
Monro Muffler Brake, Inc., Realty Income Corporation,
a New York corporation a Maryland corporation
By: By:
-------------------------- -----------------------------
Date: Date:
------------------------ ---------------------------
<PAGE> 1
MONRO MUFFLER BRAKE, INC. & SUBSIDIARY Exhibit 11.01
COMPUTATION OF PER SHARE EARNINGS
- --------------------------------------------------------------------------------
Net income per share was computed by dividing net income by the weighted average
number of common and common equivalent shares outstanding.
<TABLE>
<CAPTION>
Year ended March 31,
1999 1998 1997
---- ---- ----
(Dollars in thousands,
except per share data)
<S> <C> <C> <C>
DILUTED
EARNINGS
Net income available to
common shares $ 4,746 $ 9,854 $10,191
======= ======= =======
SHARES
Weighted average number of
common shares 8,317 8,256 8,187
Assuming conversion of Class
C Convertible Preferred
Stock 636 636 636
Dilutive effect of
outstanding options 44 124 186
------- ------- -------
Total common and common
equivalent shares 8,997 9,016 9,009
======= ======= =======
DILUTED EARNINGS PER SHARE $ .53 $ 1.09 $ 1.13
======= ======= =======
BASIC
EARNINGS
Net income available to
common shares $ 4,746 $ 9,854 $10,191
======= ======= =======
SHARES
Weighted average number of
common shares 8,317 8,256 8,187
======= ======= =======
BASIC EARNINGS PER SHARE $ .57 $ 1.19 $ 1.24
======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 21.01
SUBSIDIARIES OF THE COMPANY
---------------------------
Monro Service Corporation
Monro Leasing, LLC
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 33-56458) of Monro Muffler Brake, Inc. of our
report dated May 27, 1999, appearing in Item 8 of the Monro Muffler Brake, Inc.
Annual Report on Form 10-K for the year ended March 31, 1999.
PRICEWATERHOUSECOOPERS LLP
Rochester, New York
May 27, 1999
<PAGE> 1
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of
Monro Muffler Brake, Inc., a New York corporation (the "Corporation"),
constitutes and appoints ROBERT G. GROSS to be his true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities in connection with the filing of the Annual Report of Form 10-K of
the Corporation for the fiscal year ended March 31, 1999 (the "Form 10-K") with
the Securities and Exchange Commission, to sign the Form 10-K and any and all
amendments related thereto and to file the same, with any exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, or his substitutes,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this power of attorney has been signed by the following director on
June 22, 1999.
/s/ Jack M. Gallagher
--------------------------
Jack M. Gallagher
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of
Monro Muffler Brake, Inc., a New York corporation (the "Corporation"),
constitutes and appoints ROBERT G. GROSS to be his true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities in connection with the filing of the Annual Report of Form 10-K of
the Corporation for the fiscal year ended March 31, 1999 (the "Form 10-K") with
the Securities and Exchange Commission, to sign the Form 10-K and any and all
amendments related thereto and to file the same, with any exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, or his substitutes,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this power of attorney has been signed by the following director on
June 29, 1999.
/s/ Robert W. August
--------------------------
Robert W. August
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of
Monro Muffler Brake, Inc., a New York corporation (the "Corporation"),
constitutes and appoints ROBERT G. GROSS to be his true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities in connection with the filing of the Annual Report of Form 10-K of
the Corporation for the fiscal year ended March 31, 1999 (the "Form 10-K") with
the Securities and Exchange Commission, to sign the Form 10-K and any and all
amendments related thereto and to file the same, with any exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, or his substitutes,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this power of attorney has been signed by the following director on
June 22, 1999.
/s/ Frederick M. Danziger
--------------------------
Frederick M. Danziger
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of
Monro Muffler Brake, Inc., a New York corporation (the "Corporation"),
constitutes and appoints ROBERT G. GROSS to be his true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities in connection with the filing of the Annual Report of Form 10-K of
the Corporation for the fiscal year ended March 31, 1999 (the "Form 10-K") with
the Securities and Exchange Commission, to sign the Form 10-K and any and all
amendments related thereto and to file the same, with any exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, or his substitutes,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this power of attorney has been signed by the following director on
June 23, 1999.
/s/ Donald Glickman
--------------------------
Donald Glickman
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of
Monro Muffler Brake, Inc., a New York corporation (the "Corporation"),
constitutes and appoints ROBERT G. GROSS to be his true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities in connection with the filing of the Annual Report of Form 10-K of
the Corporation for the fiscal year ended March 31, 1999 (the "Form 10-K") with
the Securities and Exchange Commission, to sign the Form 10-K and any and all
amendments related thereto and to file the same, with any exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, or his substitutes,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this power of attorney has been signed by the following director on
June 23, 1999.
/s/ Lionel B. Spiro
--------------------------
Lionel B. Spiro
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of
Monro Muffler Brake, Inc., a New York corporation (the "Corporation"),
constitutes and appoints ROBERT G. GROSS to be his true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities in connection with the filing of the Annual Report of Form 10-K of
the Corporation for the fiscal year ended March 31, 1999 (the "Form 10-K") with
the Securities and Exchange Commission, to sign the Form 10-K and any and all
amendments related thereto and to file the same, with any exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, or his substitutes,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this power of attorney has been signed by the following director on
June 24, 1999.
/s/ Burton S. August
--------------------------
Burton S. August
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of
Monro Muffler Brake, Inc., a New York corporation (the "Corporation"),
constitutes and appoints ROBERT G. GROSS to be his true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities in connection with the filing of the Annual Report of Form 10-K of
the Corporation for the fiscal year ended March 31, 1999 (the "Form 10-K") with
the Securities and Exchange Commission, to sign the Form 10-K and any and all
amendments related thereto and to file the same, with any exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, or his substitutes,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this power of attorney has been signed by the following director on
June 24, 1999.
/s/ CHARLES J. AUGUST
--------------------------
Charles J. August
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of
Monro Muffler Brake, Inc., a New York corporation (the "Corporation"),
constitutes and appoints ROBERT G. GROSS to be his true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities in connection with the filing of the Annual Report of Form 10-K of
the Corporation for the fiscal year ended March 31, 1999 (the "Form 10-K") with
the Securities and Exchange Commission, to sign the Form 10-K and any and all
amendments related thereto and to file the same, with any exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, or his substitutes,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this power of attorney has been signed by the following director on
June 22, 1999.
/s/ W. Gary Wood
--------------------------
W. Gary Wood
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 5,599
<SECURITIES> 0
<RECEIVABLES> 1,291
<ALLOWANCES> 0
<INVENTORY> 38,656
<CURRENT-ASSETS> 53,347
<PP&E> 194,808
<DEPRECIATION> (59,021)
<TOTAL-ASSETS> 202,934
<CURRENT-LIABILITIES> 35,179
<BONDS> 0
0
138
<COMMON> 83
<OTHER-SE> 80,730
<TOTAL-LIABILITY-AND-EQUITY> 202,934
<SALES> 193,458
<TOTAL-REVENUES> 193,458
<CGS> 115,117
<TOTAL-COSTS> 115,117
<OTHER-EXPENSES> 64,062
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,600
<INCOME-PRETAX> 7,949
<INCOME-TAX> 3,203
<INCOME-CONTINUING> 4,746
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,746
<EPS-BASIC> .57
<EPS-DILUTED> .53
</TABLE>
