<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
MONRO MUFFLER BRAKE, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
MONRO MUFFLER BRAKE, INC.
200 HOLLEDER PARKWAY
ROCHESTER, NEW YORK 14615
---------------
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
AUGUST 2, 1999
---------------
To the Shareholders of
MONRO MUFFLER BRAKE, INC.
The Annual Meeting of Shareholders of Monro Muffler Brake, Inc. (the
"Company") will be held at The Hutchison House, 930 East Avenue, Rochester, New
York 14607, on Monday, August 2, 1999, commencing at 10 a.m., for the following
purposes:
1. electing five directors to Class 2 of the Board of Directors
to serve a two-year term, and until their successors are duly
elected and qualified at the 2001 annual meeting of
shareholders;
2. ratifying the adoption of the Monro Muffler Brake, Inc. 1998
Employees' Stock Option Plan;
3. ratifying the amendment to the Monro Muffler Brake, Inc.
Non-Employee Directors' Stock Option Plan to increase the
number of authorized shares;
4. ratifying the re-appointment of PricewaterhouseCoopers LLP as
the independent auditors of the Company for the fiscal year
ending March 31, 2000; and
5. considering such other business as may properly be brought
before the meeting or any adjournment or postponement
thereof.
Only shareholders of record at the close of business on Monday, June
14, 1999, will be entitled to vote at the meeting.
/s/ Robert W. August
-------------------------
Robert W. August
Secretary
Rochester, New York
July 1, 1999
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED,
SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE> 3
PROXY STATEMENT
MONRO MUFFLER BRAKE, INC.
200 HOLLEDER PARKWAY
ROCHESTER, NEW YORK 14615
---------------
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 2, 1999
---------------
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Monro
Muffler Brake, Inc., a New York corporation (the "Company" or "Monro"), for use
at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at The
Hutchison House, 930 East Avenue, Rochester, New York 14607, on Monday, August
2, 1999, commencing at 10 a.m., or at any adjournment or postponement thereof.
A shareholder who executes a proxy may revoke it at any time before it
is voted. Attendance at the meeting shall not have the effect of revoking a
proxy unless the shareholder so attending shall, in writing, so notify the
secretary of the meeting at any time prior to the voting of the proxy. A proxy
which is properly signed and not revoked will be voted for the nominees for
election as directors listed herein, for the ratification of the adoption of the
1998 Employees' Stock Option Plan, for the ratification of the amendment to the
Non-Employee Directors' Stock Option Plan, and for the ratification of the
re-appointment of independent auditors as proposed herein, unless contrary
instructions are given, and such proxy may be voted by the persons named in the
proxy in their discretion upon such other business as may be properly brought
before the meeting.
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, directors, officers and employees of the
Company may solicit proxies by telephone or otherwise. The Company will
reimburse brokers or other persons holding shares in their names or in the names
of their nominees for their charges and expenses in forwarding proxies and proxy
material to the beneficial owners of such shares. It is anticipated that the
mailing of this Proxy Statement will commence on or about July 2, 1999.
VOTING SECURITIES
Only shareholders of record at the close of business on Monday, June
14, 1999 will be entitled to vote. At such date, the Company had outstanding
8,321,701 shares of common stock, par value $.01 per share ("Common Stock").
Each share of Common Stock is entitled to one vote on each matter as may
properly be brought before the meeting.
1
<PAGE> 4
The voting rights of holders of Common Stock are subject to the voting
rights of the holders of 91,727 shares outstanding of the Company's Class C
Convertible Preferred Stock, par value $1.50 per share ("Class C Preferred
Stock"). The vote of the holders of at least 60% of the shares of Class C
Preferred Stock at the time outstanding, voting as a separate class, or,
alternatively, the written consent of the holders of all outstanding shares of
Class C Preferred Stock is needed to effect or validate any action approved by a
vote of the holders of shares of Common Stock. Therefore, such preferred
shareholders have an effective veto over all matters put to a vote of common
shareholders, and such veto power could be used, among other things, to block
the election of directors, the adoption of the 1998 Employees' Stock Option
Plan, the amendment of the Non-Employee Directors' Stock Option Plan, the
ratification of the appointment of auditors, or any other transaction that the
holders of Common Stock might otherwise approve at the Annual Meeting. It is
expected that the holders of Class C Preferred Stock will approve, by unanimous
written consent, all matters currently proposed to be put to a vote of common
shareholders at the Annual Meeting.
With regard to the election of directors, votes may be cast in favor of
or withheld from each nominee. Director nominees must receive a plurality of the
votes cast at the meeting to be elected. Votes that are withheld from any
nominee are counted as present for purposes of determining the existence of a
quorum but are not deemed cast at the meeting and, thus, have no effect on the
determination of a plurality. Abstentions may be specified on proposals other
than the election of directors, which proposals require a majority of the votes
cast at the meeting for approval. Abstentions will be counted as present for
purposes of determining the existence of a quorum but are not deemed cast at the
meeting and, thus, have no effect on the determination of a majority. With
respect to shares of Common Stock held in street name, where no vote is
indicated on a matter because the nominee or broker lacks authority to vote such
shares without specific instructions from the beneficial owner and the nominee
or broker has received no such instructions (a "broker non-vote"), such shares
are not counted as present for the purpose of determining the existence of a
quorum and are not counted as votes cast with respect to any such matter.
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into two classes
having terms which expire at the Annual Meeting (Class 2) and at the 2000 annual
meeting of shareholders (Class 1). The five Class 2 directors are proposed for
re-election at the Annual Meeting.
CURRENT NOMINEES
It is proposed to elect at the Annual Meeting five persons to Class 2
of the Board of Directors to serve (subject to the Company's by-laws) until the
election and qualification of their successors at the 2001 annual meeting of
shareholders. If any such person should be unwilling or unable to serve as a
director of the Company (which is not anticipated), the persons named in the
proxy will vote the proxy for substitute nominees selected by them unless the
number of directors has been reduced to the number of nominees willing and able
to serve.
The following summarizes biographical information for the Class 2 directors,
each of whom is nominated for re-election:
Charles J. August, 80, was elected to the Board of Directors in
February 1959. He founded the predecessor to the Company in 1957 and served as
the Company's Chairman, President and Chief Executive Officer until October
1987, when he retired.
Frederick M. Danziger, 59, was elected to the Board of Directors in
July 1984. He is President of Griffin Land & Nurseries, Inc. Mr. Danziger was
previously of counsel in the law firm of Latham & Watkins from 1995 to 1997, and
was a partner of the law firm of Mudge Rose Guthrie Alexander & Ferdon from 1974
to 1995. Mr. Danziger is a general partner of Ryan Instruments, L.P.
2
<PAGE> 5
Jack M. Gallagher, 62, was elected to the Board of Directors in
October 1987. He has been Director of Special Projects since January 1, 1999 and
from April 1, 1995 through February 17, 1998. Mr. Gallagher was interim
President and Chief Executive Officer from February 17, 1998 through December
31, 1998 and President and Chief Executive Officer from October 1987 through
March 31, 1995. Prior to joining the Company, Mr. Gallagher was President of
Auto Works, a 240-store chain of discount auto parts stores headquartered in
Pontiac, Michigan, from May 1985 to October 1987. Mr. Gallagher has held various
other positions in the auto parts and service industries, including 20 years
with Firestone Tire & Rubber Co., where he was Chief Executive of the Fidesta
Company, a 200-store nationwide chain of tire and service centers.
Robert G. Gross, 41, was elected to the Board of Directors in February
1999. He has been President and Chief Executive Officer since January 1, 1999.
Prior to joining the Company, Mr. Gross was Chairman and Chief Executive Officer
of Tops Appliance City, Inc., a consumer electronics and appliance store chain
based in Edison, New Jersey, from 1995 to 1998. Mr. Gross also held various
management positions with Eye Care Centers of America, Inc., a San Antonio,
Texas based optometry company owned by Sears, Roebuck & Co., including President
and Chief Operating Officer from 1992 through 1994; Executive Vice President and
Chief Operating Officer from 1991 through 1992 and Senior Vice President from
1990 through 1991. Mr. Gross is a director of Tops Appliance City, Inc.
Peter J. Solomon, Chairman of the Board, 60, was elected to the Board
of Directors in July 1984. He has been Chairman of the Board of Directors of
Peter J. Solomon Company Limited, an investment banking firm, since May 1989.
From 1985 to May 1989, he was a Vice Chairman and a member of the board of
directors of Shearson Lehman Hutton, Inc. Mr. Solomon is a director of General
Cigar Holdings, Inc., Office Depot, Inc. and Phillips-Van Heusen Corporation.
The following summarizes biographical information for each of the continuing
Class 1 directors:
Burton S. August, 84, was elected to the Board of Directors in May
1969. He was a Vice President of the Company until May 1980, when he retired.
Mr. August has been a director of Home Properties of New York since August 4,
1994.
Robert W. August, 47, was elected to the Board of Directors in July
1982. He has been Senior Vice President - Store Support since October 1996 and
Secretary since July 1984. Mr. August was Senior Vice President - Marketing from
May 1992 through October 1996, Vice President - Marketing from July 1989 to May
1992, Executive Vice President from 1984 through July 1989, and has worked for
Monro in various other capacities since 1968. Mr. August is a director of ACM
Medical Laboratory, Inc.
Donald Glickman, 66, was elected to the Board of Directors in July
1984. He is a private investor and has been a partner of J.F. Lehman & Company,
an investment banking firm, since January 1992. He was an executive employee of
Peter J. Solomon Company Limited, an investment banking firm, from July 1989 to
June 1992. From July 1988 to July 1989, he was a managing director of Lehman
Brothers (Shearson Lehman Hutton, Inc.) Prior to July 1988, Mr. Glickman was a
Senior Vice President of the First National Bank of Chicago. Mr. Glickman is a
director of Burke Industries, Inc., MacNeal Schwendler Corporation, General
Aluminum Corporation and SDI, Inc., and a trustee of MassMutual Corporate
Investors and MassMutual Participation Investors. He is Chairman of Elgar
Electronics.
Lionel B. Spiro, 60, was elected to the Board of Directors in August
1992. He was the Chairman and President of Charrette Corporation of Woburn,
Massachusetts, a distributor of design supplies and imaging services, until July
1997, when he retired. Mr. Spiro co-founded Charrette Corporation in 1964.
W. Gary Wood, 48, was elected to the Board of Directors in February
1993. Mr. Wood currently is an independent business owner with operations in
computer services and in specialty manufacturing. He was a principal with
Deloitte & Touche, an accounting, tax and consulting firm, from 1984 through
1993 in the management consulting practice, working from Deloitte & Touche's
Michigan office.
3
<PAGE> 6
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the number of shares of Common Stock and
Common Stock equivalents beneficially owned as of June 1, 1999 by (i) each
person or entity known to the Company to be the beneficial owners of more than
five percent of the Common Stock, (ii) each Class 2 director, each of whom is
nominated for re-election, (iii) each continuing Class 1 director, (iv) the
executive officers named in the Summary Compensation Table and (v) all directors
and executive officers as a group. Unless otherwise indicated, each of the named
individuals and each member of the group has sole voting power and sole
investment power with respect to the shares shown.
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
BENEFICIALLY OPTION SHARES CLASS
5 % SHAREHOLDERS, DIRECTORS AND OWNED EXERCISABLE INCLUDING
EXECUTIVE OFFICERS EXCLUDING OPTIONS WITHIN 60 DAYS OPTIONS
------------------ ----------------- -------------- -------
<S> <C> <C> <C>
Peter J. Solomon
767 Fifth Avenue
New York, NY 10153 1,440,676 (1) 15,195 (8) 16.6
Paradigm Capital Management, Inc.
9 Elk Street
Albany, NY 12207 711,154 (2) 8.5
FMR Corp.
82 Devonshire Street
Boston, MA 02109 605,095 (3) 7.3
Donald Glickman
450 Park Avenue
New York, NY 10022 589,349 (4) 15,195 (8) 7.3
Wellington Management Company, LLP
75 State Street
Boston, MA 02109 542,000 (5) 6.5
Robert W. August 358,871 (6) 2,625 4.3
Charles J. August 219,949 (6) 15,195 (8) 2.8
Jack M. Gallagher 127,671 (7) 95,971 2.7
Robert G. Gross 100,000 12,804 1.4
Burton S. August 85,349 (6) 15,195 (8) 1.2
G. Michael Cox 29,020 *
Frederick M. Danziger 13,226 15,195 (8) *
W. Gary Wood 4,432 15,195 (8) *
Lionel B. Spiro 4,149 15,195 (8) *
Catherine D'Amico 1,514 16,365 *
All directors and executive officers
as a group (14 persons) 2,862,987 273,962 34.7 (9)
</TABLE>
- ---------------
* Less than 1% of the shares deemed outstanding.
(1) Includes 65,000 shares of Class C Preferred Stock (including 45,000
shares held in trust for the benefit of Mr. Solomon's children for
which Mr. Solomon is trustee) presently convertible into 450,466 shares
of Common Stock. Also includes 878,845 shares of Common Stock held in
trusts for the benefit of Mr. Solomon's children for which Mr. Solomon
is the trustee. Mr. Solomon disclaims beneficial ownership of all such
shares held in trust. Peter J. Solomon is a principal shareholder and a
Class 2 director.
4
<PAGE> 7
(2) Beneficial ownership reported as of December 31, 1998, according to a
statement on Schedule 13G, dated February 9, 1999, of Paradigm Capital
Management, Inc., a registered investment adviser.
(3) Beneficial ownership reported as of December 31, 1998, according to a
statement on Schedule 13G, dated February 1, 1999, of FMR Corp., a
parent holding company of Fidelity Management & Research Company, a
registered investment adviser.
(4) Excludes shares of Common Stock owned by Mr. Glickman's children. Mr.
Glickman disclaims beneficial ownership of such shares. Donald Glickman
is a principal shareholder and a Class 1 director.
(5) Beneficial ownership reported as of December 31, 1998, according to a
statement on Schedule 13G, dated January 24, 1999, of Wellington
Management Company, LLP, a registered investment advisor.
(6) Includes 54,102 shares of Common Stock held in The Charles J. and
Burton S. August Family Foundation, a charitable trust for which Mr.
August is a trustee. Mr. August disclaims beneficial ownership of such
shares held in trust.
(7) Includes 57,750 shares held in trust for the benefit of Mr. Gallagher's
children for which Mr. Gallagher is trustee. Mr. Gallagher disclaims
beneficial ownership of such shares held in trust.
(8) Options granted pursuant to the Non-Employee Directors' Stock Option
Plan.
(9) Exclusive of shares as to which beneficial ownership has been
disclaimed, officers and directors of the Company as a group owned
beneficially approximately 20.3% of Common Stock deemed outstanding on
June 1, 1999.
OTHER INFORMATION CONCERNING DIRECTORS
Burton S. August and Charles J. August are brothers. Burton S. August
is the father of Robert W. August.
Jack M. Gallagher, Director of Special Projects of the Company, served
as President and Chief Executive Officer on an interim basis from February 17,
1998 through December 31, 1998 while the Company searched for a permanent
replacement for its former President and Chief Executive Officer, Lawrence C.
Day. Mr. Gallagher previously served as President and Chief Executive Officer
from October 1987 through March 1995.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into an employment agreement (the "Agreement")
with Robert G. Gross, its President and Chief Executive Officer. The Agreement,
which provides for a base salary of $420,000, plus a bonus, subject to the
discretion of the Compensation Committee, has a five-year term ending December
1, 2003. The Agreement includes a covenant against competition with the Company
for two years after termination. The Agreement provides the executive with a
minimum of one's years salary and certain additional rights in the event of a
termination without cause (as defined therein), or a termination in the event of
change in control (as defined therein).
5
<PAGE> 8
During fiscal 1999, the Company entered into an employment agreement
with G. Michael Cox, its Executive Vice President-Store Operations. The
agreement provides that, upon termination without cause by the Company, until
August 31, 2000, the Company shall pay him one year's base salary and shall
continue health insurance benefits for the earlier of one year or until Mr. Cox
accepts other employment.
Jack M. Gallagher entered into an employment agreement with the Company
through February 2003, pursuant to which he serves as Director-Special Projects
of the Company. In such capacity, Mr. Gallagher is responsible for, among other
things, finding, investigating and negotiating with acquisition candidates, and
advising and consulting with respect to investor and shareholder relations. As
compensation for such services, Mr. Gallagher is paid a salary of $24,000 per
year. During the term of the Agreement and for two years after termination, Mr.
Gallagher has agreed not to compete in any manner with the business of the
Company.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held seven meetings during fiscal 1999(1).
Non-employee directors of the Company receive directors' fees at the rate of
$2,000 per year plus $750 per meeting attended. All directors are reimbursed for
actual expenses incurred in connection with attendance at meetings of the Board
of Directors or committees thereof. In addition, each non-employee director
receives an annual grant of an option to purchase 3,039 shares of Common Stock.
The Board of Directors has created four standing committees: a
four-member Governance Committee, a three-member Audit Committee, a four-member
Compensation and Benefits Committee (the "Compensation Committee") and a
four-member Stock Option Committee.
The Governance Committee has and may exercise, between meetings of the
Board of Directors, all the power and authority of the full Board of Directors,
subject to certain exceptions. During fiscal 1999, the Governance Committee held
two meetings. Its members are Robert W. August, Donald Glickman, Robert G. Gross
(replacing Jack M. Gallagher effective February 17, 1999) and Peter J. Solomon.
The Audit Committee has the power and authority to select and engage
independent auditors for the Company, subject to the approval of shareholders,
and reviews with the auditors and with the Company's management all matters
relating to the annual audit of the Company. The Audit Committee held two
meetings in fiscal 1999. Its members are Frederick M. Danziger, Lionel B. Spiro
(replacing Donald Glickman effective February 17, 1999) and W. Gary Wood.
The Compensation Committee has the power and authority to review and
approve the remuneration arrangements for executive officers and employees of
the Company and to select participants, approve awards under, interpret and
administer the employee benefit plans of the Company (other than stock option
plans). The Compensation Committee held three meetings in fiscal 1999. Its
members are Donald Glickman, Robert G. Gross (replacing Jack M. Gallagher
effective February 17, 1999), Peter J. Solomon and Lionel B. Spiro.
6
<PAGE> 9
The Stock Option Committee has the power and authority to select
participants and approve awards under, and to interpret and administer or
otherwise act with respect to, the Company's stock option plans. During fiscal
1999, the Stock Option Committee met six times. Its members are Charles J.
August, Donald Glickman, Jack M. Gallagher (replacing Lionel B. Spiro effective
February 17, 1999) and Peter J. Solomon.
- -------------------
(1) References in this Proxy Statement 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).
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal
years, the annual and long-term compensation of those persons who were, at March
31, 1999, (i) the Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- -------------
FISCAL
NAME AND YEAR ALL OTHER
PRINCIPAL ENDED SALARY BONUS OPTIONS (3) COMPENSATION (1)
POSITION MARCH 31, ($) ($) (#) ($)
-------- --------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Robert G. Gross 1999 112,500 150,000 425,000
President and
Chief Executive Officer (2)
G. Michael Cox 1999 160,400 100,000 10,500
Executive Vice President - 1998 140,400 0 0 2,642
Store Operations 1997 126,650 42,778 19,294 2,843
Robert W. August 1999 150,400 0 10,500
Senior Vice President - 1998 146,900 0 0 2,642
Store Support, and Secretary 1997 142,360 46,385 0 3,227
Catherine D'Amico 1999 130,000 0 10,500
Senior Vice President - 1998 113,865 25,000 0 2,464
Finance, and Chief Financial Officer 1997 109,200 35,681 5,513 2,475
Jack M. Gallagher 1999 321,000 0 10,000
Director 1998 122,500 0 94,500 1,555
Special Projects (4) 1997 80,000 0 0 1,814
</TABLE>
- ------------
(1) For most officers, All Other Compensation represents the Company's
contributions to the Monro Muffler Brake, Inc. Profit Sharing Plan for
the accounts of the Named Officers. Information relating to fiscal 1999
profit sharing contributions is not yet available.
7
<PAGE> 10
(2) Mr. Gross joined the Company in December 1998.
(3) The number of options shown has been adjusted to reflect the impact of
the five percent stock dividends paid in June 1998, August 1997 and
August 1996.
(4) From February 17, 1998 through December 31, 1998, Mr. Gallagher served
as interim President and Chief Executive Officer. (See "Other
Information Concerning Directors").
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, for the Company's fiscal year ended
March 31, 1999, information concerning the granting of options to the Named
Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS EXERCISE VALUE ASSUMING RATES
OPTIONS GRANTED IN PRICE EXPIRATION OF STOCK PRICE
NAME (#) FISCAL YEAR (5) ($/SH) DATE APPRECIATION OF
---- --- --------------- ------ ---- ---------------
5% (1)($) 10% (1)($)
-------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Gross 425,000 (2) 77.57 7.81 (6) 1,536,677 3,754,221
G. Michael Cox 10,500 (3) 1.92 15.60 5/31/03 45,255 100,002
Robert W. August 10,500 (3) 1.92 15.60 5/31/03 45,255 100,002
Catherine D'Amico 10,500 (3) 1.92 15.60 5/31/03 45,255 100,002
Jack M. Gallagher 10,000 (4) 1.83 6.31 10/25/08 39,683 100,565
</TABLE>
- -----------------
(1) These values are calculated by comparing the exercise price of such
options to the market value of the shares of Common Stock subject to
such options, assuming that the market price of such shares increases
by 5% and 10%, respectively, during each year of the options' terms.
Actual gains, if any, on the stock option exercises are dependent on
the future performance of the Common Stock and overall stock
conditions, as well as the option holder's continued employment through
the vesting period. The value stated may not necessarily be achieved.
(2) 225,000 options were granted in fiscal 1999 under the Company's 1989
Employees' Incentive Stock Option Plan. 200,000 options were granted in
fiscal 1999 under the Company's 1998 Employee Stock Option Plan and are
subject to shareholder approval hereunder. 100,000 of these options
become exercisable when the closing price of the Common Stock has been
at least $13.00 per share for 20 consecutive trading days, and 100,000
of these shares become exercisable when the closing price of the Common
Stock has been at least $16.00 per share for 20 consecutive trading
days.
(3) Options granted in fiscal 1999 under the Company's 1989 Employees'
Incentive Stock Option Plan. Subject to certain conditions, 25% of such
options become exercisable each year beginning one year after the
date of grant.
(4) Options granted in fiscal 1999 under the Company's 1989 Employees'
Incentive Stock Option Plan. 5,000 of the options became exercisable on
March 31, 1999; 5,000 become exercisable on March 31, 2000.
8
<PAGE> 11
(5) Based on a total of 547,888 options granted to 101 employees of the
Company in fiscal 1999.
(6) The options expire as follows: 200,000 options expire 11/30/03 and
225,000 options expire 11/30/08.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, for the Company's fiscal year ended March
31, 1999, information concerning the exercise of options by the Named Officers
and the value of unexercised options of the Named Officers:
<TABLE>
<CAPTION>
NUMBER OF TOTAL VALUE OF
SHARES TOTAL NUMBER OF UNEXERCISED, IN-THE-MONEY
ACQUIRED ON VALUE UNEXERCISED OPTIONS HELD AT OPTIONS HELD AT
EXERCISE REALIZED MARCH 31, 1999 MARCH 31, 1999
NAME (#) ($) (#) ($)
---- --- --- --- ---
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Gross 0 0 12,804 412,196 0 0
G. Michael Cox 0 0 26,394 39,286 0 0
Robert W. August 0 0 0 10,500 0 0
Catherine D'Amico 0 0 13,740 18,790 0 0
Jack M. Gallagher 0 0 95,971 40,437 4,100 4,100
</TABLE>
- ---------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
setting the Chief Executive Officer's compensation and making annual
recommendations for the compensation of the other executive officers to the full
Board of Directors after considering recommendations made by the Chief Executive
Officer.
Executive compensation is a mix of salary, annual bonus awarded under the
executive bonus plan, Company contributions to the profit sharing plan and
pension plan, long-term compensation in the form of stock options and other
benefits generally available to all employees. The Company relies to a large
degree on bonus, stock options and stock ownership to attract and retain
executives of outstanding ability and to motivate them to work to their fullest
potential. Under the executive bonus plan, the Compensation Committee seeks to
enhance the profitability of the Company by aligning closely the financial
interest of the Company's executives with those of its shareholders through the
payment of bonuses based on attainment of profit targets. In setting base
salaries, the Company refers to the National Executive Compensation Survey
published by The Management Association of Illinois.
Robert G. Gross, who has served as President and Chief Executive Officer
since January 1, 1999, earned compensation during fiscal 1999 consisting of a
salary of $112,500, an initial signing bonus of $150,000 and other benefits
extended to all full-time employees. The Chief Executive Officer does not
participate in the Compensation Committee's determination of his compensation
which includes an annual bonus contingent upon the Company's achievement of its
performance targets set by the Board of Directors.
While serving as President and Chief Executive Officer from February 17,
1998 through December 31, 1998, Jack M. Gallagher's salary was $35,000 per
month. Mr. Gallagher's compensation package did not include a bonus. The Chief
Executive Officer does not participate in the Compensation Committee's
determination of his compensation.
9
<PAGE> 12
The salaries of other executive officers are set at amounts the Company
believes to be comparable to those paid to executives holding similar positions
at other automotive service companies of comparable size. Bonuses are paid based
on attainment of profit targets. Executive officers did not receive profit-based
bonuses for fiscal 1999 and fiscal 1998 because the Company did not attain the
minimum required percentage of targeted profit performance. However, Robert G.
Gross received a signing bonus upon joining the Company in fiscal 1999 and
Catherine D'Amico was awarded a bonus in fiscal 1998 in connection with her
performance in the negotiation of the acquisition of the Speedy Muffler stores
in the United States (the "Speedy Stores") from Speedy Muffler King, Inc. 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 G. Michael Cox. The bonus was paid in April 1999.
All employees, including executive officers, may receive stock options from
time to time under the Company's stock option plans. Stock option grants are
recommended by the Stock Option Committee of the Board of Directors, a committee
composed primarily of non-management directors. Under the stock option plans,
and subject to the approval of Shareholders of the 1998 Employee's Stock Option
Plan in August 1999, 549,806 shares are currently available for grants to
employees. During fiscal 1999, the Stock Option Committee granted options,
including 425,000 to Robert G. Gross, President and Chief Executive Officer in
conjunction with his employment agreement. Additionally, in recognition of
officers' new or expanded management responsibilities, the Stock Option
Committee granted options of 10,500 each to G. Michael Cox, Executive Vice
President - Store Operations; Robert W. August, Senior Vice President - Store
Support, and Secretary; and Catherine D'Amico, Senior Vice President - Finance,
and Chief Financial Officer; and 10,000 to Jack M. Gallagher, interim President
and Chief Executive Officer. Options exercisable for an aggregate of 21,273
shares were also granted to seven non-employee directors of the Company under
the terms of the Non-Employee Directors' Stock Option Plan approved by
shareholders in August 1995 and amended in 1998.
The executive officers participate in the Company's qualified,
non-contributory profit sharing and pension plans on the same basis as all other
employees. The Company offers health care, life insurance, disability insurance
and other benefits to the executive officers on substantially the same terms as
available to all employees of the Company. The amount of perquisites received by
any executive officer in fiscal 1999 did not exceed $50,000 or ten percent of
his or her cash compensation.
The federal income tax laws impose limitations on the deductibility of
compensation in excess of $1 million paid to executive officers in certain
circumstances. The Compensation Committee intends that all compensation paid to
executive officers in fiscal 1999 will be deductible by the Company under such
tax laws.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In December 1998, the Company loaned $523,000 to Robert G. Gross, its
President and Chief Executive Officer, to purchase 75,000 shares of the
Company's common stock at the then fair market value. This 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.
The members of the Compensation Committee are Donald Glickman, Robert G.
Gross (replacing Jack M. Gallagher effective February 17, 1999), Peter J.
Solomon and Lionel B. Spiro.
10
<PAGE> 13
In June 1991, the Company entered into a management agreement effective
July 1, 1991, with Peter J. Solomon Company Limited ("PJSC") pursuant to which
PJSC provides to the Company strategic and financial advice relating to
financing, capital structure, mergers and acquisitions and offensive/defensive
positioning for a fee of $160,000 per year (plus reimbursement of out-of-pocket
expenses). Pursuant to such agreement, the Company has agreed to indemnify PJSC
against certain liabilities. In addition, PJSC, from time to time, provides
additional investment banking services to the Company for customary fees. The
firm provided financial advisory services to the Company in connection with the
acquisition of and financing for the Speedy Stores for fees of approximately $1
million. Peter J. Solomon, Chairman of the Board and principal shareholder of
the Company, is Chairman of PJSC.
11
<PAGE> 14
PERFORMANCE GRAPH
Set forth below is a line-graph presentation comparing the cumulative
shareholder return on the Company's Common Stock, on an indexed basis, against
the cumulative total returns of the S&P 400 Index and the S&P Retail
Stores-Specialty Index for the sixty month period from March 31, 1994 to March
31, 1999 (March 31, 1994 = 100):
Research Data Group Peer Group Total Return Worksheet
Monro Muffler Brake Inc. (MNRO)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------------
3/94 3/95 3/96 3/97 3/98 3/99
<S> <C> <C> <C> <C> <C> <C>
MONRO MUFFLER BRAKE, INC. 100 118 107 117 122 55
S & P INDUSTRIALS 100 117 153 182 266 326
S & P RETAIL (SPECIALTY) 100 102 109 115 130 114
</TABLE>
12
<PAGE> 15
PENSION PLAN
The Company sponsors a qualified, noncontributory retirement plan (the
"Pension Plan"). Each employee who has attained age 21 becomes a participant on
the April 1 or October 1 following the date the employee completes one year of
service. The basic benefit under the Pension Plan is a straight life annuity.
Benefit payments generally begin upon retirement at age 65 or age 60 with 20
years of service. Subject to certain limits required by law, benefits are
payable monthly in an amount equal to (i) 45% of a participant's average monthly
earnings for the highest ten consecutive years prior to retirement, less (ii)
45% of the monthly primary Social Security benefit payable to a participant at
retirement. The amount of the benefit is reduced for short service participants
and also is reduced if a participant terminates his or her employment prior to
retirement.
Remuneration covered by the Pension Plan includes any kind of
compensation that is subject to tax for Social Security benefits without regard
to the dollar limitation on such compensation subject to FICA taxes. The Pension
Plan only recognizes such earnings up to $100,000 for plan years beginning after
March 31, 1986.
Benefits under the Pension Plan are 100% vested in each participant upon
completion of five years of service, attainment of age 65 or the termination of
the Pension Plan. Lump sum distributions are available at termination or
retirement only for accrued benefits of $3,500 or less.
The following table shows the estimated annual benefits payable upon
retirement at age 65 under the formula described above to participants under the
Pension Plan, excluding the offset for Social Security benefits:
<TABLE>
<CAPTION>
PENSION PLAN TABLE
AVERAGE COMPENSATION NUMBER OF YEARS OF SERVICE
-------------------- -------------------------------------------------------------------------
5 10 15 20 25
---------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $22,500 $45,000 $45,000 $45,000 $45,000
</TABLE>
The following are estimated years of credited service at age 65
(rounded to the nearest year) under the Pension Plan for each of the Named
Officers: Robert G. Gross -- 24 years; G. Michael Cox -- 22 years; Robert W.
August -- 43 years; Catherine D'Amico -- 28 years and Jack M. Gallagher -- 14
years.
During fiscal 1999, the Board approved a plan whereby the benefits of
the defined benefit plan would be frozen in fiscal 2000.
CERTAIN TRANSACTIONS
AFFILIATE LEASES
The Company leases 41 stores from Charles J. August, Burton S. August
and others or partnerships or trusts in which such persons or members of their
families, including Robert W. August, have interests. In fiscal 1999, the
Company paid or accrued $1,783,000 as rent for these stores. As of June 1, 1999,
most of these properties were subject to mortgages or notes under which such
persons or entities were obligated. Charles J. August, Burton S. August and
Robert W. August are directors of the Company.
13
<PAGE> 16
The Company has not entered into any affiliate leases, other than
renewals or modifications of existing leases, since May 1989, and as a matter of
policy, will not do so.
(See also "Compensation Committee Interlocks and Insider
Participation").
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who beneficially own more than ten percent of the Company's Common
Stock, to file with the Securities and Exchange Commission (the "SEC") initial
reports of ownership and reports of changes in ownership of Common Stock.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during fiscal 1999, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with.
PROPOSAL TO APPROVE THE EMPLOYEE STOCK OPTION PLAN
The following description of the Monro Muffler Brake, Inc. 1998 Stock
Option Plan (the "Plan") is a summary and is qualified in its entirety by
reference to the Plan as proposed to be adopted, which is hereto attached as
Exhibit A.
PURPOSE OF PLAN
On November 18, 1998, subject to approval by the shareholders of the
Company, the Board of Directors approved the adoption of the Plan. The purpose
of the Plan is to encourage and enable all eligible employees of the Company to
acquire a proprietary interest in the Company through the ownership of the
Company's Common Stock or to increase such proprietary interest. Ownership of
Common Stock will provide such employees with a more direct stake in the future
welfare of the Company and encourage them to remain with the Company. It is also
expected that the Plan will strengthen the Company's ability to attract and
retain, in its employ, additional persons of training, experience and ability.
SUMMARY OF PLAN
The Plan will be administered by the Stock Option Committee and will
provide for grants of "incentive stock options" or "non-qualified stock options"
as defined under the Code. Under the Plan, options may be granted to key
employees, including executive officers of Monro, as shall be determined by the
Stock Option Committee. Approximately 2,800 employees, including six executive
officers, will be eligible to participate. Options granted to employees under
the Plan will have a maximum term of ten years, except as described below, and
will not be transferable except by will or pursuant to the laws of descent and
distribution. The maximum aggregate number of shares of Common Stock available
for award under the Plan is 750,000.
14
<PAGE> 17
The number and exercise price of options granted is determined by the
Stock Option Committee, but the exercise price of an Incentive Stock Option
shall be the Market Price (as defined in the Plan) of the Common Stock on the
date the Incentive Stock Option is granted. The purchase price per share under
each Non-qualified Stock Option shall be specified by the Committee. In no case,
however, shall the exercise price per share of an option be less than the par
value of the Common Stock ($0.01). Notwithstanding the foregoing, to the extent
required by the Code, the exercise price per share under each Non-qualified
Stock Option granted to an employee who is treated as a "covered employee" (as
defined in Section 162(m)(3) of the Code) on the date such Non-qualified Stock
Option is exercised shall not be less than 100% of the Market Price of the
Common Stock on the date of grant. In the case of an Incentive Stock Option
granted to an employee owning (actually or constructively under Section 424(d)
of the Code), more than 10% of the total combined voting power of all classes of
stock of the Company or of a subsidiary (a "10% Stockholder"), the option price
shall not be less than 110% of the Market Price of the Common Stock on the date
of grant. Options may be exercised in whole or in part. Common Stock purchased
upon exercise of options shall be paid for in full at the time of purchase. Such
payment shall be made in cash or, in the discretion of the Committee, through
delivery of shares of Common Stock or a combination of cash and Common Stock, in
accordance with procedures to be established by the Committee. Any shares so
delivered shall be valued at their Market Price on the date of exercise.
The term of each option granted under the Plan shall be determined by
the Committee; PROVIDED, HOWEVER, that, notwithstanding any other provision of
the Plan, in no event shall an Incentive Stock Option be exercisable after ten
(10) years from the date it is granted, or in the case of an Incentive Stock
Option granted to a 10% Stockholder, five (5) years from the date it is granted.
Generally, an optionee may exercise his options during his lifetime
provided he is employed by the Company. In the event an optionee's employment is
terminated for reasons other than retirement, death or disability, an optionee
may exercise his options to the extent exercisable at such time for thirty days
from his date of termination.
If an optionee's employment is terminated as the result of Disability
(as defined in the Plan) or the optionee retires, the thirty day period after
cessation of employment during which options may be exercised (as described
above) is extended to one year.
If an optionee dies while employed by the Company, the optionee's
remaining options, whether or not otherwise exercisable on such date, may be
exercised by the optionee's estate, or the person to whom the optionee's rights
under the option pass under the optionee's will or the laws of descent and
distribution, within one year of the date of the optionee's death, at which time
such options shall terminate.
If an optionee dies following a termination of employment due to
retirement or disability, the optionee's remaining options, whether or not
otherwise exercisable on such date, may be exercised by the optionee's estate,
or the person to whom the optionee's rights under the option pass under the
optionee's will or the laws of descent and distribution, to the same extent such
options were exercisable by the recipient following such termination of
employment.
If there should be a Change in Control of the Company (as defined in
the Plan) (i) the Company shall give each recipient of options written notice of
such Change in Control as promptly as practicable prior to the effective date
thereof, and (ii) all of the options held by employees not currently exercisable
shall become exercisable immediately prior to the effective date of such Change
in Control; PROVIDED, HOWEVER, that all or a portion of such options shall not
be exercisable to the extent that the exercise would cause the employee to be
subject to taxes under Section 4999 of the Code.
The Plan provides that the aggregate number and kind of shares
available for options and the option price of each outstanding option shall be
adjusted to reflect any increase, decrease or change in the total outstanding
shares of the Company resulting from a stock dividend, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or similar transaction.
15
<PAGE> 18
The Plan provides that the Board of Directors of the Company may at any
time suspend, terminate or amend the Plan without seeking the approval of the
shareholders of the Company. However, shareholder approval will be required to
give effect to any amendment which would increase the maximum number of shares
for which options may be granted, increase the benefits accruing to employees
under the Plan or change the eligibility requirements for participation in the
Plan.
FISCAL 1999 GRANTS
The number of options granted in fiscal 1999 to the Named Officers is
set forth in the table entitled "Option Grants in Last Fiscal Year" on page 8.
The following table sets forth the number of options granted in fiscal 1999 to
the following persons:
<TABLE>
<S> <C>
Robert G. Gross, CEO 200,000
All current executive officers (six persons) 200,000
All other employees 0
</TABLE>
On June 14, 1999, the closing price per share of the Company's Common
Stock on the NASDAQ National Market System was $8.38.
FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS
The following summary describes the principal federal income tax
consequences of grants made under the Plan. The summary is based upon an
analysis of the Internal Revenue Code of 1986, as currently in effect, judicial
decisions, administrative rulings, regulations and proposed regulations, all of
which are subject to change. Any such change could have retroactive effect and
could affect the consequences described in the summary. The summary does not
purport to cover all federal income tax consequences that may apply to a
participant in the Plan (a "Participant") and does not contain any discussion of
foreign, state or local tax laws. Participants are urged to consult their own
tax advisors regarding the tax consequences to them of acquiring and exercising
options and upon the sale or other disposition of any Common Stock acquired
under the Plan. The Plan is not subject to the requirements of the Employee
Retirement Income Security Act of 1974, as amended, or qualified under Section
401(a) of the Code.
A Participant will not recognize income upon the grant of a
Non-qualified Stock Option ("NSO"). The Participant will recognize ordinary
income at the time of exercise of the NSO in an amount equal to the difference
between the fair market value of the Shares received upon exercise of the NSO
and the aggregate Option Price for the Shares purchased upon such exercise. The
Company will generally be entitled to a deduction for federal income tax
purposes at the same time and in the same amount as the Participant is required
to recognize ordinary income. The Participant's basis in any Shares acquired
upon exercise of an NSO will equal the fair market value of the Shares on the
exercise date. A Participant who later sells such Shares will generally
recognize capital gain or loss on the sale of the Shares equal to the difference
between the amount realized and the Participant's basis in the Shares.
16
<PAGE> 19
A Participant to whom an Incentive Stock Option ("ISO") is granted will not
recognize income at the time of the grant or exercise of the ISO, and the
Company will not be entitled to a deduction at either time. However, upon the
exercise of the ISO, a Participant will be required to include in alternative
minimum taxable income an amount equal to the fair market value of the Shares
purchased upon such exercise at the time of exercise over the aggregate Option
Price the Participant paid in connection with such exercise, for purposes of the
federal alternative minimum tax that may apply to individual Participants. If
the Shares acquired upon exercise of an ISO are not disposed of until more than
one year after the date of exercise of the ISO and more than two years after the
date of the grant of the ISO (the "Required Holding Period"), any gain
recognized on such disposition will be treated as a capital gain. If the Shares
purchased in the exercise of an ISO are disposed of prior to the expiration of
the Required Holding Period (a "Disqualifying Disposition"), then the
Participant will be required to recognize ordinary income in an amount equal to
the excess of (a) the lesser of (i) the fair market value of the Shares at the
time of such exercise and (ii) the amount realized on disposition, over (b) the
aggregate Option Price of the Shares purchased. In the event of a Disqualifying
Disposition, the Company will be entitled to a deduction in an amount equal to
the amount the Participant was required to treat as ordinary income. Each
Participant agrees to notify the Company in writing immediately after the
Participant sells or otherwise transfers Common Stock acquired under the Plan,
if such sale or other transfer occurs within two years from the date of grant or
one year from the date of exercise.
Each Participant is advised to consult a tax advisor with respect to
current and possible future U.S. tax consequences of acquiring, holding and
disposing of Common Stock as well as any tax consequences that may arise under
the laws of any state, local or foreign jurisdiction.
APPROVAL OF PLAN
The adoption of the Plan requires the approval of a majority of the
votes cast at the Annual Meeting (in person or by proxy) by the holders of
shares entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE THEIR SHARES
FOR APPROVAL OF THE PLAN AS DESCRIBED ABOVE.
PROPOSAL TO RATIFY THE AMENDMENT TO THE NON-EMPLOYEE DIRECTORS' STOCK
OPTION PLAN TO INCREASE THE NUMBER OF AUTHORIZED SHARES
The Company has a Non-Employee Directors' Stock Option Plan (the
"Plan") adopted in 1995, amended in 1998 and previously approved by
shareholders. The Plan initially provided that options for a maximum of 66,852
shares (as restated to give retroactive effect to the 5% stock dividends) of
Common Stock, in the aggregate, may be granted.
On May 14, 1997, the Board of Directors of the Company approved an
increase in the aggregate number of shares of Common Stock authorized for awards
of options under the Plan from 66,852 shares (as restated to give retroactive
effect to the 5% stock dividends) to 135,102 shares (as restated to give
retroactive effect to the 5% stock dividends), an increase of 68,250 shares (as
restated to give retroactive effect to the 5% stock dividends), or approximately
.9% of the number of shares of Common Stock then outstanding. The increase was
approved by shareholders in August 1997. As of March 31, 1999, options covering
106,357 shares of Common Stock, in the aggregate, were outstanding under the
Plan, leaving 28,745 shares of Common Stock available for grant of future
options.
17
<PAGE> 20
On May 18, 1999, subject to approval by shareholders of the Company,
the Board of Directors of the Company approved an increase in the aggregate
number of shares of Common Stock authorized for awards of options under the Plan
from 135,102 shares (as restated to give retroactive effect to the 5% stock
dividends) to 200,102 shares, an increase of 65,000 shares, or approximately .8%
of the number of shares of Common Stock currently outstanding. As required by
the terms of the Plan, shareholders of the Company are asked to approve an
amendment to the Plan reflecting such increase (as so amended, the "Amended
Plan"). Other than the increase in the number of shares authorized, the Amended
Plan will be identical to the Plan as currently in effect.
PURPOSE OF AMENDED PLAN
The purpose of the Amended Plan is to secure for the Company and its
shareholders the benefits of the incentive inherent in increased Common Stock
ownership by members of the Board who are not employees of the Company or any of
its subsidiaries ("Non-Employee Directors"). The Amended Plan is designed to
provide a means of giving existing and new Non-Employee Directors an increased
opportunity to acquire an investment in the Company, thereby maintaining and
strengthening their desire to remain with or join the Company's Board of
Directors and stimulating their efforts on the Company's behalf.
SUMMARY OF PLAN
The Amended Plan authorizes the Company to grant options ("Options") to
purchase Common Stock to Non-Employee Directors. Seven directors are currently
eligible to receive Options under the Amended Plan.
The Amended Plan is administered by the Stock Option Committee of the
Board (the "Committee"). The Committee is authorized to construe and interpret
the Amended Plan and Options granted thereunder, to establish and amend rules
for its administration and to correct any defect or omission or reconcile any
inconsistency in the Amended Plan or in any Option to the extent the Committee
deems desirable to carry the Amended Plan or any Option into effect.
Options granted under the Amended Plan are non-incentive stock options.
The exercise price per share of Common Stock under each Option (the "Exercise
Price") is the Fair Market Value of a share of Common Stock on the date of
grant. The Amended Plan provides for an annual grant of an Option to purchase
3,039 shares of Common Stock (as restated to give retroactive effect to the 5%
stock dividends) to each Non-Employee Director on the date of the Annual
Shareholders Meeting. The Fair Market Value is determined by reference to the
closing sale price of the Common Stock as reported on the NASDAQ National Market
System. The term of each Option is ten years.
Options granted under the Amended Plan are subject to such terms and
conditions and evidenced by agreements in such form as is determined from time
to time by the Committee and are in any event subject to the terms and
conditions set forth in the Amended Plan. Options granted under the Amended Plan
are not transferable, except by will and the laws of descent and distribution.
Under the Amended Plan, Options may be exercised immediately on the
date of grant, provided, however, that no shares of the Company's Common Stock
underlying any Option may be sold, assigned, pledged or otherwise transferred
for a period of six months after the date of the grant of such Option.
Each Option shall be exercisable only during the holder's term as a
director, except that an Option may be exercisable after the death, disability,
as defined under Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended (the "Code") ("Disability"), or retirement from the Board at the age of
65 or thereafter ("Retirement"), of a holder while a director of the Company
until the earlier of (i) the one year anniversary of the termination of the
director's term due to death, Disability or Retirement and (ii) the expiration
of the Option (ten years after the date of grant).
18
<PAGE> 21
Options may be exercised by written notice to the Company accompanied
by payment in full of the Exercise Price. Payment of the Exercise Price may be
made (i) in cash (including check, bank draft or money order), (ii) by delivery
of Common Stock (valued at the Fair Market Value thereof on the date of
exercise), or (iii) by delivery of a combination of cash and Common Stock.
The Company intends to file a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), to register the
Common Stock to be issued to Non-Employee Directors under the Amended Plan.
Persons who are "affiliates" of the Company (i.e., persons who are deemed to
control the Company directly or indirectly) may resell Common Stock acquired
under the Amended Plan only by complying with the requirements and limitations
of Rule 144 under the Securities Act.
The Amended Plan provides that the Board or the Committee may at any
time suspend or terminate the Amended Plan or make such additions or amendments
as they deem advisable; provided, that certain of such additions or amendments
are made with approval of the Company's shareholders. No Options may be granted
under the Amended Plan after August 1, 2004, although Options previously granted
under the Amended Plan and outstanding on August 1, 2004 remain outstanding,
unless terminated, in accordance with the terms of the Amended Plan and the
Option agreement under which they were granted.
The Amended Plan provides that in the event of a reorganization,
merger, consolidation, recapitalization, stock split-up, stock dividend,
combination of shares or other change in the Common Stock, appropriate changes
to prevent dilution or enlargement of Options will be made by the Committee in
the aggregate number of shares subject to Options to be granted, and in the
number of shares and price per share subject to outstanding Options.
The Amended Plan provides that in the event of a merger of the Company
with or into another corporation constituting a change of control, a sale of all
or substantially all of the Company's assets or a sale of a majority of the
Company's outstanding voting securities (a "Sale of the Company"), the Options
may be assumed by the successor corporation or substantially equivalent Options
substituted by the successor corporation, and if the successor corporation does
not assume the Options or substitute Options, then the Options shall terminate
if not exercised as of the date of the Sale of the Company or other prescribed
period of time. In the event of a liquidation or dissolution of the Company, the
Options shall terminate immediately prior to the liquidation or dissolution.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the principal federal income tax
consequences of grants made under the Amended Plan. The summary is based upon an
analysis of the Internal Revenue Code of 1986, as currently in effect, judicial
decisions, administrative rulings, regulations and proposed regulations, all of
which are subject to change. Any such change could have retroactive effect and
could affect the consequences described in the summary. The summary does not
purport to cover all federal income tax consequences that may apply to an
optionee and does not contain any discussion of foreign, state or local tax
laws. Optionees are urged to consult their own tax advisors regarding the tax
consequences to them of acquiring and exercising options and upon the sale or
other disposition of any Common Stock acquired under the Amended Plan, as well
as any tax consequences that may arise under the laws of any state, local or
foreign jurisdiction.
Options granted or to be granted under the Amended Plan will be
"non-qualified" stock options and are not intended to qualify as incentive stock
options under Section 422 of the Code. In general, no taxable income will be
recognized by the optionee and no deduction will be allowed to the Company upon
the grant of an Option. Upon exercise of an Option, except as described below,
an optionee will recognize an amount of ordinary income equal to the excess of
the fair market value on the exercise date of the shares of Common Stock issued
to an optionee over the Exercise Price. The Company will be entitled to a
corresponding tax deduction equal to the amount included in the optionee's
income.
19
<PAGE> 22
As the optionees will be directors of the Company, the stock received
upon the exercise of an Option may be subject to restrictions under Section
16(b) of the Exchange Act if the Option is exercised and the underlying stock is
sold within six months after the grant date (the "Restriction Period"). Options
exercised during the Restriction Period will not be deemed to be exercised for
purposes of the above income recognition rules until the date that the
Restriction Period ends, unless the optionee makes an election to be taxed
currently under Section 83(b) of the Code. If such an election is made within 30
days after the transfer of Common Stock pursuant to the exercise of the Option,
the optionee will recognize ordinary income on the date of the actual exercise
of Options (and the Company will be entitled to a corresponding tax deduction
equal to the amount included in the optionee's income).
If an optionee delivers previously-acquired Common Stock, however
acquired, in payment of all or part of the Exercise Price of a non-qualified
stock option, the optionee will not, as a result of such delivery, be required
to recognize as taxable income or loss any appreciation or depreciation in the
value of the previously-acquired Common Stock after its acquisition date. The
fair market value of the shares received in excess of the fair market value of
the shares surrendered and any cash paid constitutes compensation taxable to the
optionee as ordinary income. Such fair market value is determined on the date of
exercise. The Company is entitled to a tax deduction equal to the compensation
income included by the optionee in his income.
APPROVAL OF AMENDMENT
The amendment to the Plan requires the approval of a majority of the
votes cast at the Annual Meeting (in person or by proxy) by the holders of
shares entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE THEIR SHARES
FOR APPROVAL OF THE AMENDMENT TO THE PLAN AS DESCRIBED ABOVE.
20
<PAGE> 23
APPROVAL OF AUDITORS
Subject to ratification by shareholders at the Annual Meeting, the Board
of Directors, upon recommendation of the Audit Committee, has re-appointed
PricewaterhouseCoopers LLP as independent auditors to audit the books and
accounts of the Company for fiscal 2000. A representative of
PricewaterhouseCoopers LLP will be present at the Annual Meeting to respond to
questions and will have an opportunity to make a statement if he or she desires
to do so.
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the
annual meeting to be held in 2000 must be received by the Company by March 3,
2000 in order that they may be considered for inclusion in the proxy statement
and form of proxy relating to that meeting.
ADDITIONAL INFORMATION
THE COMPANY WILL FURNISH TO ANY SHAREHOLDER, UPON WRITTEN REQUEST, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH
31, 1999, AS FILED WITH THE SEC, WITHOUT CHARGE, EXCEPT THAT COPIES OF ANY
EXHIBIT TO SUCH REPORT WILL BE FURNISHED UPON PAYMENT BY SUCH SHAREHOLDER OF THE
COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBIT. WRITTEN REQUESTS MAY
BE DIRECTED TO THE COMPANY, 200 HOLLEDER PARKWAY, ROCHESTER, NEW YORK 14615,
ATTENTION: SECRETARY.
By order of the Board of Directors
/s/ Robert W. August
--------------------
Robert W. August
Secretary
Rochester, New York
July 1, 1999
21
<PAGE> 24
EXHIBIT A
MONRO MUFFLER BRAKE, INC.
1998 STOCK OPTION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment and Effective Date. Monro Muffler Brake, Inc., a New
York corporation (the "Company"), hereby establishes a stock option plan to be
known as the Monro Muffler Brake, Inc. 1998 Stock Option Plan (the "Plan"). The
Plan shall become effective as of November 18, 1998, subject to the approval of
the Company's stockholders.
1.2 Purpose. The purpose of the Plan is to encourage and enable all
eligible employees (subject to such requirements as may be prescribed by the
Stock Option Committee (the "Committee")) of the Company and its subsidiaries to
acquire a proprietary interest in the Company through the ownership of the
Company's common stock, par value $0.01 per share ("Common Stock"). Such
ownership will provide such employees with a more direct stake in the future
welfare of the Company and encourage them to remain with the Company and its
subsidiaries. It is also expected that the Plan will encourage qualified persons
to seek and accept employment with the Company and its subsidiaries.
ARTICLE 2
AWARDS
2.1 Form of Awards. Awards under the Plan may be granted in the form of
incentive stock options ("Incentive Stock Options") meeting the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
non-qualified stock options ("Non-qualified Stock Options) that are not intended
to qualify as incentive stock options under Section 422 of the Code
(collectively, "Options").
2.2 Maximum Shares Available. The maximum aggregate number of shares of
Common Stock available for award under the Plan is 750,000, subject to
adjustment pursuant to Article 8 hereof. Shares of Common Stock issued pursuant
to the Plan may be either authorized but unissued shares or issued shares
reacquired by the Company. In the event that prior to the end of the period
during which Options may be granted under the Plan, any Option expires
unexercised or is terminated, surrendered or canceled without being exercised in
whole for any reason, the shares of Common Stock covered by such Option shall be
available for subsequent awards of Options under the Plan upon such terms as the
Committee may determine. In addition, shares of Common Stock withheld in payment
of taxes relating to Options, and the number of shares of Common Stock equal to
the number of shares surrendered in payment of the exercise price of Options or
taxes relating to Options, shall be available for subsequent awards of Options
under the Plan upon such terms as the Committee may determine.
- 1 -
<PAGE> 25
2.3 Return of Prior Awards. As a condition to any subsequent award, the
Committee shall have the right, at its discretion, to require employees to
return to the Company Options previously granted under the Plan. Subject to the
provisions of the Plan, such new Option shall be upon such terms and conditions
as are specified by the Committee at the time the new award is granted.
ARTICLE 3
ADMINISTRATION
3.1 Committee. Awards shall be determined, and the Plan shall be
administered by, the Committee as appointed from time to time by the Board of
Directors of the Company (the "Board"), which Committee shall consist of not
less than two (2) members of the Board. Except as permitted by Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Act"), and by Section 162(m)
of the Code (or Regulations promulgated thereunder), no member of the Board may
serve on the Committee if such member: (i) is or has been granted or awarded
stock, stock options or any other equity security or derivative security of the
Company or any of its affiliates pursuant to the Plan or any other plan of the
Company or its affiliates either while serving on the Committee or during the
one year period prior to being appointed to the Committee; (ii) is an employee
or former employee of the Company; or (iii) receives remuneration from the
Company, either directly or indirectly, in any capacity other than as a
director.
3.2 Powers of Committee. Subject to the express provisions of the Plan,
the Committee shall have the power and authority (i) to grant Options and to
determine the purchase price of the Common Stock covered by each Option, the
term of each Option, the number of shares of Common Stock to be covered by each
Option and any performance objectives or vesting standards applicable to each
Option; (ii) to designate Options as Incentive Stock Options or Non-qualified
Stock Options; and (iii) to determine the employees to whom, and the time or
times at which, Options shall be granted.
3.3 Delegation. The Committee may delegate to one or more of its
members or to any other person or persons such ministerial duties as it may deem
advisable. The Committee may also delegate to the Chief Executive Officer of the
Company the authority, subject to such terms as the Committee shall determine,
to perform any and all functions as the Committee may determine. The Committee
may also employ attorneys, consultants, accountants or other professional
advisors and shall be entitled to rely upon the advice, opinions or valuations
of any such advisors.
3.4 Interpretations. The Committee shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Company, all employees who have received awards under the Plan and all
other interested persons.
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<PAGE> 26
3.5 Liability; Indemnification. No member of the Committee, nor the
Chief Executive Officer, or any person to whom ministerial duties have been
delegated, shall be personally liable for any action, interpretation or
determination made with respect to the Plan or Options granted thereunder, and
each member of the Committee, the Chief Executive Officer and each person to
whom ministerial duties have been delegated shall be fully indemnified and
protected by the Company with respect to any liability he or she may incur with
respect to any such action, interpretation or determination, to the extent
permitted by applicable law and to the extent provided in the Company's
Certificate of Incorporation and Bylaws, as amended from time to time, or under
any agreement between such member, the Chief Executive Officer and the Company.
ARTICLE 4
ELIGIBILITY
Options may be granted to all employees of the Company or any of its
subsidiaries (subject to such requirements as may be prescribed by the
Committee), including officers of the Company; provided, however, that no
employee may receive a grant of an Option to purchase more than 500,000 shares
of Common Stock in the aggregate in any fiscal year of the Company. Options may
be granted to a director of the Company, provided that the director is also an
employee. In determining the employees to whom Options shall be granted and the
number of shares to be covered by each Option, the Committee shall take into
account the nature of the services rendered by such employees, their present and
potential contributions to the success of the Company and its subsidiaries, and
such other factors as the Committee in its sole discretion shall deem relevant.
As used herein, the term "subsidiary" shall mean any present or future
corporation, partnership or joint venture in which the Company owns, directly or
indirectly, 40% or more of the economic interests. Notwithstanding the
foregoing, only employees of the Company and any present or future corporation
which is or may be a "subsidiary corporation" of the Company (as such term is
defined in Section 424(f) of the Code) shall be eligible to receive Incentive
Stock Options.
ARTICLE 5
STOCK OPTIONS
5.1 Grant of Options. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
5.2 Designation as Non-qualified Stock Option or Incentive Stock
Option. In connection with any grant of Options, the Committee shall designate
in the written agreement required pursuant to Article 10 hereof whether the
Options granted shall be Incentive Stock Options or Non-qualified Stock Options,
or in the case both are granted, the number of shares of each.
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<PAGE> 27
5.3 Option Price. The purchase price per share under each Incentive
Stock Option shall be the Market Price (as hereinafter defined) of the Common
Stock on the date the Incentive Stock Option is granted. The purchase price per
share under each Non-qualified Stock Option shall be specified by the Committee.
In no case, however, shall the purchase price per share of an Option be less
than the par value of the Common Stock ($0.01). Notwithstanding the foregoing,
to the extent required by the Code, the purchase price per share under each
Non-qualified Stock Option granted to an employee who is treated as a "covered
employee" (as defined in Section 162(m)(3) of the Code) on the date such
Non-qualified Stock Option is exercised shall not be less than 100% of the
Market Price of the Common Stock on the date of grant. In the case of an
Incentive Stock Option granted to an employee owning (actually or constructively
under Section 424(d) of the Code), more than 10% of the total combined voting
power of all classes of stock of the Company or of a subsidiary (a "10%
Stockholder"), the option price shall not be less than 110% of the Market Price
of the Common Stock on the date of grant.
The "Market Price" of the Common Stock on any day shall be determined
as follows: (i) if the Common Stock is listed on a national securities exchange
or quoted through the NASDAQ National Market System, the Market Price on any day
shall be the average of the high and low reported Consolidated Trading sales
prices, or if no such sale is made on such day, the average of the closing bid
and asked prices reported on the Consolidated Trading listing for such day; (ii)
if the Common Stock is quoted on the NASDAQ inter-dealer quotation system, the
Market Price on any day shall be the average of the representative bid and asked
prices at the close of business for such day; or (iii) if the Common Stock is
not listed on a national stock exchange or quoted on NASDAQ, the Market Price on
any day shall be the average of the high bid and low asked prices reported by
the National Quotation Bureau, Inc. for such day.
5.4 Limitation on Amount of Incentive Stock Options. In the case of
Incentive Stock Options, the aggregate Market Price (determined at the time the
Incentive Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Company and any subsidiary)
shall not exceed $100,000.
5.5 Limitation on Time of Grant. No grant of an Incentive Stock Option
shall be made under the Plan more than ten (10) years after the date the Plan is
approved by stockholders of the Company.
5.6 Exercise and Payment. Options may be exercised in whole or in part.
Common Stock purchased upon exercise of Options shall be paid for in full at the
time of purchase. Such payment shall be made in cash or, in the discretion of
the Committee, through delivery of shares of Common Stock or a combination of
cash and Common Stock, in accordance with procedures to be established by the
Committee. Any shares so delivered shall be valued at their Market Price on the
date of exercise.
5.7 Term. The term of each Option granted under the Plan shall be
determined by the Committee; provided, however, that, notwithstanding any other
provision of the Plan, in no event shall an Incentive Stock Option be
exercisable after ten (10) years from the date it is granted, or in the case of
an Incentive Stock Option granted to a 10% Stockholder, five (5) years from the
date it is granted.
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<PAGE> 28
5.8 Rights as a Stockholder. A recipient of Options shall have no
rights as a stockholder with respect to any shares issuable or transferable upon
exercise thereof until the date a stock certificate is issued to such recipient
representing such shares. Except as otherwise expressly provided in the Plan, no
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such stock certificate is issued.
5.9 General Restrictions. Each Option granted under the Plan shall be
subject to the requirement that, at any time the Board shall determine, in its
discretion, that the listing, registration or qualification of the shares
issuable or transferable upon exercise thereof upon any securities exchange or
under any state or Federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue, transfer, or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
The Board or the Committee may, in connection with the granting of any
Option, require the individual to whom the Option is to be granted to enter into
an agreement with the Company stating that as a condition precedent to each
exercise of the Option, in whole or in part, such individual shall if then
required by the Company represent to the Company in writing that such exercise
is for investment only and not with a view to distribution, and also setting
forth such other terms and conditions as the Board or the Committee may
prescribe.
ARTICLE 6
NONTRANSFERABILITY OF OPTIONS
No Option may be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by will or the
applicable laws of descent and distribution, and no Option shall be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option not specifically
permitted herein shall be null and void and without effect. An Option may be
exercised by the recipient only during his or her lifetime, or following his or
her death pursuant to Section 7.3 hereof.
Notwithstanding anything to the contrary in the preceding paragraph,
the Committee may, in its sole discretion, cause the written agreement relating
to any Options granted under the Plan to provide that the recipient of such
Options may transfer any such Options other than by will or the laws of descent
and distribution in any manner authorized under applicable law.
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<PAGE> 29
ARTICLE 7
EFFECT OF TERMINATION OF EMPLOYMENT, RELOCATION EVENT,
DISABILITY, RETIREMENT, DEATH OR SPECIAL EVENT
7.1 General Rule. Except as expressly determined by the Committee in
its sole discretion, no Option shall be exercisable after [thirty (30) days]
following the recipient's termination of employment with the Company or a
subsidiary, unless such termination of employment occurs by reason of: (i)
Retirement (as defined in Section 7.2), (ii) Disability (as defined in Section
7.2), or (iii) death.
Options shall not be affected by any change of employment so long as
the recipient continues to be employed by either the Company or a subsidiary.
The Committee may, in its sole discretion, cause any Option to be forfeited upon
an employee's termination of employment if the employee was terminated for one
(or more) of the following reasons: (i) the employee's conviction, or plea of
guilty or nolo contendere to the commission of a felony; (ii) the employee's
commission of any fraud, misappropriation or misconduct which causes
demonstrable injury to the Company or a subsidiary; (iii) an act of dishonesty
by the employee resulting or intended to result, directly or indirectly, in gain
or personal enrichment at the expense of the Company or a subsidiary; or (iv)
any breach of the employee's fiduciary duties to the Company as an employee. It
shall be within the sole discretion of the Committee to determine whether the
employee's termination was for one of the foregoing reasons, and the decision of
the Committee shall be final and conclusive.
7.2 Disability or Retirement. Except as expressly provided otherwise in
the written agreement relating to any Option granted under the Plan, in the
event of the Disability or Retirement of a recipient of Options, the Options
which are held by such recipient on the date of such Disability or Retirement,
whether or not otherwise exercisable on such date, shall be exercisable for one
(1) year following such Disability or Retirement.
"Disability" shall mean any termination of employment with the Company
or a subsidiary because of a "Disability" as such term is defined in Section
22(e) of the Code. "Retirement" shall mean a termination of employment with the
Company or a subsidiary either: (i) on a voluntary basis by a recipient who is
at least sixty-five (65) years of age and who has at least ten (10) years of
service with the Company or a subsidiary; or (ii) otherwise with the written
consent of the Committee in its sole discretion. The decision of the Committee
with respect to a determination regarding Disability or Retirement shall be
final and conclusive.
7.3 Death. In the event of the death of a recipient of Options while an
employee of the Company or any subsidiary, Options which are held by such
employee at the date of death, whether or not otherwise exercisable on the date
of death, shall be exercisable by the beneficiary designated by the employee for
such purpose (the "Designated Beneficiary") or if no Designated Beneficiary
shall be appointed or if the Designated Beneficiary shall predecease the
employee, by the employee's personal representatives, heirs or legatees, at any
time within [one (1) year] from the date of death, at which time such Options
shall terminate.
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<PAGE> 30
In the event of the death of a recipient of Options following a
termination of employment due to Retirement or Disability, if such death occurs
before the Options are exercised, the Options which are held by such recipient
on the date of termination of employment, whether or not otherwise exercisable
on such date, shall be exercisable by such recipient's Designated Beneficiary,
or if no Designated Beneficiary shall be appointed or if the Designated
Beneficiary shall predecease such recipient, by such recipient's personal
representatives, heirs or legatees, to the same extent such Options were
exercisable by the recipient following such termination of employment.
7.4 Leave of Absence. In the case of an employee on an approved leave
of absence, the Options of such employee shall not be affected unless such leave
is longer than [three (3) months]. The date of exercisability of any Options of
an employee which are unexercisable at the beginning of an approved leave of
absence lasting longer than [three (3) months] shall be postponed for a period
equal to the length of such leave of absence. Notwithstanding the foregoing, the
Committee may, in its sole discretion, waive in writing any such postponement of
the date of exercisability of any Options due to a leave of absence.
7.5 Change in Control. Notwithstanding any provisions of the Plan to
the contrary, if there should be a Change in Control of the Company (i) the
Company shall give each recipient of Options written notice of such Change in
Control as promptly as practicable prior to the effective date thereof, and (ii)
all of the Options held by employees not currently exercisable shall become
exercisable immediately prior to the effective date of such Change in Control;
provided, however, that all or a portion of such Options shall not be
exercisable to the extent that the exercise would cause the employee to be
subject to taxes under Section 4999 of the Code.
"Change in Control" shall mean any of the following: (i) any person who
is not an "affiliate" (as defined in Rule 12b-2 of the Act) of the Company as of
the effective date of the Plan becomes the beneficial owner, directly or
indirectly, of 50% or more of the combined voting power of the then outstanding
securities of the Company except pursuant to a public offering of securities of
the Company; (ii) the sale of the Company substantially as an entirety (whether
by sale of stock, sale of assets, merger, consolidation, or otherwise) to a
person who is not an affiliate of the Company as of the effective date of the
Plan; or (iii) there occurs a merger, consolidation or other reorganization of
the Company with a person who is not an affiliate of the Company as of the
effective date of the Plan, and in which the Company is not the surviving
entity.
ARTICLE 8
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Committee may: (i)
at any time, make or provide for such adjustments to the Plan or to the number
and class of shares available thereunder; or (ii) at the time of grant of any
Options, provide for such adjustments to such Options as the Committee shall
deem appropriate to prevent dilution or enlargement of rights, including,
without limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, spin-offs, reorganizations, liquidations and the like.
- 7 -
<PAGE> 31
ARTICLE 9
AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) materially increase the aggregate number of
shares which may be issued under the Plan, (ii) materially increase the benefits
accruing to employees under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan, shall be subject
to the approval of the Company's stockholders, except that any such increase or
modification that may result from adjustments authorized by Article 8 hereof
shall not require such stockholder approval. If the Plan is terminated, the
terms of the Plan shall, notwithstanding such termination, continue to apply to
awards granted prior to such termination. No suspension, termination,
modification or amendment of the Plan may, without the consent of the employee
to whom an award shall theretofore have been granted, adversely affect the
rights of such employee under such award.
ARTICLE 10
WRITTEN AGREEMENT
Each award of Options shall be evidenced by a written agreement
containing such restrictions, terms and conditions, if any, as the Committee may
require. In the event of any conflict between a written agreement and the Plan,
the terms of the Plan shall govern.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Tax Withholding. The Company shall have the right to require
employees or their Designated Beneficiaries, personal representatives, heirs or
legatees to remit to the Company an amount sufficient to satisfy Federal, state
and local withholding tax requirements, or to deduct from all payments under the
Plan amounts sufficient to satisfy all withholding tax requirements. The
Committee may, in its sole discretion, permit an employee to satisfy his or her
tax withholding obligation either by: (i) surrendering shares of Common Stock
owned by the employee; or (ii) having the Company withhold from shares of Common
Stock otherwise deliverable to the employee. Shares of Common Stock surrendered
or withheld shall be valued at their Market Price as of the date on which income
is required to be recognized for income tax purposes.
11.2 Successor. The obligations of the Company under the Plan shall be
binding upon any successor Company or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor
Company or organization succeeding to all or substantially all of the assets and
business of the Company. In the event of any of the foregoing, the Committee
may, at its discretion prior to the consummation of the transaction and subject
to Article 9 hereof, cancel, offer to purchase, exchange, adjust or modify any
outstanding awards, at such time and in such manner as the Committee deems
appropriate and in accordance with applicable law.
- 8 -
<PAGE> 32
11.3 General Creditor Status. Employees shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations under the Plan. Nothing contained in the Plan, and
no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company and
any employee or Designated Beneficiary, personal representative, heir or legatee
of such employee. To the extent that any person acquires a right to receive
payments from the Company under the Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company. All payments to be
made under the Plan shall be paid from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of such amounts except as expressly set forth in the
Plan.
11.4 No Right to Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 10 hereof, nor the grant of any
award, shall confer upon any employee any right to continue in the employ of the
Company or a subsidiary or to be entitled to any remuneration or benefits not
set forth in the Plan or such written agreement or interfere with or limit the
right of the Company or a subsidiary to modify the terms of or terminate such
employee's employment at any time.
11.5 Notices. Notices required or permitted to be made under the Plan
shall be sufficiently made if personally delivered to the employee or sent by
regular mail addressed: (i) to the employee at the employee's address as set
forth in the books and records of the Company or its subsidiaries; or (ii) to
the Company or the Committee at the principal office of the Company clearly
marked "Attention: Stock Option Committee."
11.6 Severability. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
11.7 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements thereunder, shall be construed in accordance with and
governed by the laws of the State of New York.
- 9 -
<PAGE> 33
MONRO MUFFLER BRAKE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS, AUGUST 2, 1999
The undersigned hereby appoints Robert G. Gross and Catherine D'Amico,
as proxies, each with the power to appoint his substitute and hereby authorizes
such person acting individually, to represent and to vote, as specified on the
reverse side hereof, all of the shares of common stock of Monro Muffler Brake,
Inc. which the undersigned may be entitled to vote at the Annual Meeting of
stockholders to be held at The Hutchison House, 930 East Avenue, Rochester, New
York, 14607, commencing at 10:00 a.m. on August 2, 1999 and at any postponement
or adjournment thereof; and in the discretion of the proxies, their substitutes
or delegates, to vote such shares and to represent the undersigned in respect of
other matters properly brought before the meeting.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED BY THE
SIGNING STOCKHOLDER ON THE REVERSE SIDE HEREOF. UNLESS THE AUTHORITY TO VOTE
FOR ELECTION OF ANY NOMINEE FOR DIRECTOR IS WITHHELD IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE REVERSE SIDE HEREOF, THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
[To Be Signed on Reverse Side.]
<PAGE> 34
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
MONRO MUFFLER BRAKE, INC.
AUGUST 2, 1999
* Please Detach and Mail in the Envelope Provided *
A [X] Please mark your
votes as in this
example.
WITHHOLD
FOR authority for
all nominees all nominees
1. To elect Class 2 [ ] [ ] NOMINEES: Charles J. August
directors to the Frederick M. Danziger
Board of Jack M. Gallagher
Directors. Robert G. Gross
Peter J. Solomon
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, write the person's name below.)
- ---------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of the adoption of the [ ] [ ] [ ]
Company's 1998 Employees' Incentive
Stock Option Plan.
3. Ratification of the amendment to the [ ] [ ] [ ]
Company's Non-Employee Directors'
Stock Option Plan to increase the
number of authorized shares.
4. Ratification of the re-appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as the
independent auditors of the Company.
Mark here for [ ]
change of address
and note at left.
I will not [ ] I will [ ]
attend attend
meeting meeting
Signature Date Date
----------------------------- ------------------------ ------
Signature, if shares held jointly
Instruction: Please sign exactly as your name appears hereon. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
