-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LYJlBLulFvSdueuv3/LvUKpoGsQsyuesCjfdUH2HDflJ+HCjRfmFlDFSpwe693Jv Qz+ufxsK8w6sNVidGv2BUw== 0000950152-05-006517.txt : 20050804 0000950152-05-006517.hdr.sgml : 20050804 20050804143706 ACCESSION NUMBER: 0000950152-05-006517 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20050625 FILED AS OF DATE: 20050804 DATE AS OF CHANGE: 20050804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONRO MUFFLER BRAKE INC CENTRAL INDEX KEY: 0000876427 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 160838627 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19357 FILM NUMBER: 05998958 BUSINESS ADDRESS: STREET 1: 200 HOLLEDER PKWY CITY: ROCHESTER STATE: NY ZIP: 14615-3808 BUSINESS PHONE: 7166476400 10-Q 1 l15010ae10vq.htm MONRO MUFFLER BRAKE, INC. 10-Q/QUARTER END 6-25-05 Monro Muffler Brake, Inc. 10-Q
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 25, 2005.
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                      to                     
Commission File No. 0-19357
MONRO MUFFLER BRAKE, INC.
 
(Exact name of registrant as specified in its charter)
     
New York   16-0838627
 
(State or other jurisdiction of
incorporation or organization) 		  (I.R.S. Employer
Identification #)
     
200 Holleder Parkway, Rochester, New York   14615
 
(Address of principal executive offices)   (Zip code)
     
Registrant’s telephone number, including area code   585-647-6400
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ           No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes þ           No o
As of July 23, 2005, 13,842,064 shares of the Registrant’s Common Stock, par value $ .01 per share, were outstanding.
 
 

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MONRO MUFFLER BRAKE, INC.
INDEX
         
    Page No.
Part I. Financial Information
        
 
        
       
 
        
    3  
 
        
    4  
 
        
    5  
 
        
    6  
 
        
    7  
 
        
    12  
 
        
    15  
 
        
       
 
        
    16  
 
        
    17  
 
        
    18  
 EX-10.1 Credit Agreement Among Monro Muffler Brake, Inc.
 EX-10.2 Security Agreement Among Monor Muffler Brake, Inc.
 EX-10.3 Guaranty Among Monro Service Corporation
 EX-10.4 Credit Agreement Among Monro Leasing, LLC
 EX-10.5 Negative Pdedge Agreement Among Monro Muffler
 EX-31.1 Section 302 Certification of Robert G. Gross
 EX-31.2 Sect. 302 Certification of Catherine D'Amico
 EX-32.1 Certification Pursuant to 18 USC Sect. 1350

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Item 1. Financial Statements
MONRO MUFFLER BRAKE, INC.
CONSOLIDATED BALANCE SHEET
                 
    (Unaudited)    
    June 25,   March 26,
    2005   2005
    (Dollars in thousands)
Assets
                
Current assets:
                
Cash and equivalents
   $ 3,557     $ 888  
Trade receivables
     2,502       2,162  
Inventories
     62,285       59,753  
Deferred income tax asset
     787       798  
Other current assets
     13,559       13,918  
 
                
Total current assets
     82,690       77,519  
 
                
 
                
Property, plant and equipment
     283,230       279,561  
Less — Accumulated depreciation and amortization
     (118,781 )     (115,252 )
 
                
Net property, plant and equipment
     164,449       164,309  
Goodwill
     37,218       37,218  
Intangible assets and other noncurrent assets
     5,784       5,939  
 
                
Total assets
   $ 290,141     $ 284,985  
 
                
 
                
Liabilities and Shareholders’ Equity
                
Current liabilities:
                
Current portion of long-term debt
   $ 1,928     $ 1,928  
Trade payables
     24,799       23,791  
Federal and state income taxes payable
     5,417       682  
Accrued payroll, payroll taxes and other payroll benefits
     8,480       8,736  
Accrued insurance
     4,238       4,622  
Other current liabilities
     10,832       10,602  
 
                
Total current liabilities
     55,694       50,361  
 
Long-term debt
     47,321       55,438  
Accrued rent expense
     7,829       7,829  
Other long-term liabilities
     3,165       3,332  
Deferred income tax liability
     374       536  
 
                
Total liabilities
     114,383       117,496  
 
                
 
                
Commitments
                
Shareholders’ equity:
                
Class C Convertible Preferred Stock, $1.50 par value, $.144 conversion value, 150,000 shares authorized; 65,000 shares issued and outstanding
     97       97  
Common Stock, $.01 par value, 20,000,000 shares authorized; 13,750,930 and 13,702,455 shares issued and outstanding at June 25, 2005 and March 26, 2005, respectively
     137       137  
Treasury Stock, 325,200 shares, at cost
     (1,831 )     (1,831 )
Additional paid-in capital
     52,998       52,484  
Accumulated other comprehensive income
     (9 )     (17 )
Retained earnings
     124,366       116,619  
 
                
Total shareholders’ equity
     175,758       167,489  
 
                
Total liabilities and shareholders’ equity
   $ 290,141     $ 284,985  
 
                
The accompanying notes are an integral part of these financial statements.

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MONRO MUFFLER BRAKE, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
                 
    Quarter Ended Fiscal June
    2005   2004
        Restated
    (Dollars in thousands,
    except per share data)
Sales
   $ 94,625     $ 87,347  
Cost of sales, including distribution and occupancy costs
     53,922       50,322  
 
                
 
                
Gross profit
     40,703       37,025  
Operating, selling, general and administrative expenses
     26,901       25,283  
 
                
 
                
Operating income
     13,802       11,742  
Interest expense, net of interest income for the quarter of $7 in 2005 and $11 in 2004
     882       585  
Other expense, net
     425       121  
 
                
 
                
Income before provision for income taxes
     12,495       11,036  
Provision for income taxes
     4,748       4,194  
 
                
 
                
Net income
   $ 7,747     $ 6,842  
 
                
 
                
Earnings per share:
                
Basic
   $ .58     $ .53  
 
                
Diluted
   $ .52     $ .47  
 
                
 
                
Weighted average number of common shares outstanding used in computing earnings per share
                
Basic
     13,395       13,007  
 
                
Diluted
     14,866       14,520  
 
                
The accompanying notes are an integral part of these financial statements.

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MONRO MUFFLER BRAKE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
(Dollars in thousands)
                                                         
                                    Accumulated        
                            Additional   Other        
    Preferred   Common   Treasury   Paid-in   Comprehensive   Retained    
    Stock   Stock   Stock   Capital   Income   Earnings   Total
Balance at March 26, 2005
   $ 97     $ 137     $ (1,831 )   $ 52,484     $ (17 )   $ 116,619     $ 167,489  
 
                                                        
Net income
                                             7,747       7,747  
Other comprehensive income:
                                                        
SFAS No. 133 adjustment for the three months ended June 25, 2005
                                     8               8  
 
                                                        
Total comprehensive income
                                                     7,755  
 
                                                        
Exercise of stock options
                             514                       514  
 
                                                        
 
                                                        
Balance at June 25, 2005
   $ 97     $ 137     $ (1,831 )   $ 52,998     $ (9 )   $ 124,366     $ 175,758  
 
                                                        
The accompanying notes are an integral part of these financial statements.

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MONRO MUFFLER BRAKE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
                 
    Quarter Ended Fiscal June
    2005   2004
        Restated
    (Dollars in thousands)
    Increase (Decrease) in Cash
Cash flows from operating activities:
                
Net income
   $ 7,747     $ 6,842  
 
                
Adjustments to reconcile net income to net cash provided by operating activities -
               
Depreciation and amortization
     4,353       3,953  
Net change in deferred income taxes
     (156 )     1,411  
Loss (gain) on disposal of property, plant and equipment
     237       (52 )
Increase in trade receivables
     (340 )     (491 )
Increase in inventories
     (2,532 )     (1,274 )
Decrease in other current assets
     407       949  
Increase in intangible assets and other noncurrent assets
     (45 )     (1,034 )
Increase in trade payables
     1,008       4,878  
Decrease in accrued expenses
     (447 )     (540 )
Increase in federal and state income taxes payable
     4,735       3,346  
(Decrease) increase in other long-term liabilities
     (150 )     374  
 
                
Total adjustments
     7,070       11,520  
 
                
Net cash provided by operating activities
     14,817       18,362  
 
                
 
                
Cash flows from investing activities:
                
Capital expenditures
     (3,561 )     (4,391 )
Proceeds from the disposal of property, plant and equipment
     77       113  
 
                
Net cash used for investing activities
     (3,484 )     (4,278 )
 
                
 
                
Cash flows from financing activities:
                
Proceeds from borrowings
     31,600       33,100  
Principal payments on long-term debt and capital lease obligations
     (40,778 )     (46,456 )
Exercise of stock options
     514       692  
 
                
Net cash used for financing activities
     (8,664 )     (12,664 )
 
                
 
                
Increase in cash
     2,669       1,420  
Cash at beginning of period
     888       1,533  
 
                
Cash at end of period
   $ 3,557     $ 2,953  
 
                
The accompanying notes are an integral part of these financial statements.

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MONRO MUFFLER BRAKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Condensed Consolidated Financial Statements
     The consolidated balance sheet as of June 25, 2005, the consolidated statements of income and cash flows for the thirteen week periods ended June 25, 2005 and June 26, 2004 and the consolidated statement of changes in shareholders’ equity for the thirteen week period ended June 25, 2005, include Monro Muffler Brake, Inc. and its wholly owned subsidiaries (the “Company”). These unaudited condensed consolidated financial statements have been prepared by the Company and are subject to year-end adjustments. In the opinion of management, all known adjustments (consisting of normal recurring accruals or adjustments) have been made to present fairly the financial position, results of operations and cash flows for the unaudited periods presented.
     Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 26, 2005. The results of operations for the interim periods being reported on herein are not necessarily indicative of the operating results for the full year.
     The Company reports its results on a 52/53 week fiscal year with the fiscal year ending on the last Saturday in March of each year. The following are the dates represented by each fiscal period reported in these condensed financial statements:
     “Quarter Ended Fiscal June 2005”:           March 27, 2005 – June 25, 2005 (13 weeks)
     “Quarter Ended Fiscal June 2004”:           March 28, 2004 – June 26, 2004 (13 weeks)
RESTATEMENT
     During the fourth quarter of fiscal 2005, the Company conducted a review of its lease accounting practices. As a result of the review, the Company revised its lease accounting policies to comply with generally accepted accounting principles.
     Historically, the Company followed a practice in which it computed straight-line rent expense for the current term of the lease only, while depreciating buildings and leasehold improvements over longer periods. The Company has revised its lease accounting policies to recognize rent expense including rent escalations, on a straight-line basis over the reasonably assured lease term, as defined in Statement of Financial Accounting Standards No. 98 (“SFAS 98”), “Accounting for Leases”. Additionally, the Company modified its accounting to depreciate buildings and leasehold improvements over the shorter of their estimated useful lives or the reasonably assured lease term.
     The effects of the restatement on previously reported Consolidated Financial Statements as of June 26, 2004 are summarized below.

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MONRO MUFFLER BRAKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 
    (Unaudited)
    As Previously   As
Financial statement caption   Reported   Restated
    (Dollars in thousands, except
    for per share amounts)
CONSOLIDATED STATEMENT OF INCOME
                
 
                
Cost of sales, including distribution and occupancy costs
   $ 50,083     $ 50,322  
Gross profit
     37,264       37,025  
Operating income
     11,981       11,742  
Other expense
     147       121  
Income before provision for income taxes
     11,249       11,036  
Provision for income taxes
     4,275       4,194  
Net income
     6,974       6,842  
 
Earnings per share — basic
   $ .54     $ .53  
Earnings per share — diluted
   $ .48     $ .47  
 
                
CONSOLIDATED STATEMENT OF CASH FLOWS
                
 
                
Net Income
     6,974       6,842  
Depreciation and amortization
     3,745       3,953  
Net change in deferred income taxes
     1,492       1,411  
Gain on disposal of property, plant and equipment
     (26 )     (52 )
Decrease in accrued expenses
     (571 )     (540 )
     The restatement resulted in a decrease to other expense as a result of changes in the gain or loss on disposal of assets for which depreciation expense was restated.
Note 2 — Acquisitions
     Effective October 17, 2004, the Company acquired five retail tire and automotive repair stores located in and around Frederick, Maryland from Donald B. Rice Tire Co., Inc. (the “Rice Tire Acquisition”). On March 6, 2005, the Company acquired 10 retail tire and automotive repair stores located in southern Maryland from Henderson Holdings, Inc. (the “Henderson Acquisition”). This group of 15 stores produce approximately $19 million in sales annually. The Company operates 14 of these retail locations under the Mr. Tire brand name and one under the Tread Quarters brand name. The Company purchased all of the operating assets of these stores, including fixed assets and certain inventory, and assumed certain liabilities, including obligations pursuant to the real property leases for certain of the retail store locations. The total purchase price of these stores was approximately $11.6 million, which was funded through $5.1 million in cash, the assumption of liabilities and the issuance of 240,206 shares of the Company’s common stock, which was valued at $6.5 million. In addition, the Company recorded buildings and capital lease obligations in the amount of approximately $7 million in connection with new leases with the seller of Henderson Holdings for nine of the properties acquired. The purchase price and the related accounting for these acquisitions is subject to adjustments to reflect final counts of inventory and fixed assets and the completion of the Company’s purchase accounting procedures, including finalizing the valuation of certain tangible and intangible assets by the fourth quarter of fiscal 2006. The results of operations of these stores is included in the Company’s income statement from their respective dates of acquisition .

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MONRO MUFFLER BRAKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 — Derivative Financial Instruments
     The Company reports derivatives and hedging activities in accordance with Statement of Financial Accounting Standards No. 133 (“SFAS 133”), “Accounting for Derivative Instruments and Hedging Activities”, as amended. This statement requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if it is, depending on the type of hedge transaction.
     The notional amount of derivative financial instruments, which consisted solely of an interest rate swap used to minimize the risk and/or costs associated with changes in interest rates, was approximately $1.5 million at June 25, 2005. This swap matures in October 2005. This swap contract requires the Company to pay a fixed-rate of interest of 7.15% and receive variable rates of interest based on the 30-day LIBOR rate.
     At June 25, 2005, the fair value of this contract, net of tax, is recorded as a component of accumulated other comprehensive income in the consolidated Statement of Changes in Shareholders’ Equity.
Note 4 — Earnings Per Share
     The following is a reconciliation of basic and diluted earnings per common share for the respective quarters:
                 
    Quarter Ended
    Fiscal June
    2005   2004
 
           Restated
Numerator for earnings per common share calculation:
                
Net Income
   $ 7,747     $ 6,842  
 
                
 
                
Denominator for earnings per common share calculation:
                
Weighted average common shares, basic
     13,395       13,007  
 
                
Effect of dilutive securities:
                
Preferred Stock
     675       675  
Stock options and warrants
     796       838  
 
                
 
                
Weighted average number of common shares, diluted
     14,866       14,520  
 
                
 
                
Basic Earnings per common share:
   $ .58     $ .53  
 
                
 
                
Diluted Earnings per common share:
   $ .52     $ .47  
 
                
     The computation of diluted earnings per common share for the thirteen week periods ended fiscal June 2005 and 2004 excludes the effect of the assumed exercise of approximately 1,000 and 9,000 stock options, respectively, as the exercise prices of these options were greater than the average market value of the Company’s common stock for those periods, resulting in an anti-dilutive effect on diluted earnings per common share.
Note 5 — Stock-Based Compensation
     The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations including FASB Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25”, issued in March 2000, to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the

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MONRO MUFFLER BRAKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
current market price of the underlying stock exceeds the exercise price. The Company’s policy generally is to grant stock options at fair market value at the date of grant.
     Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, (“SFAS 123”) established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS 123, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS 123. The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards in each period.
                 
    Quarter Ended Fiscal June
    2005   2004
            Restated
    (Dollars in thousands,
    except per share data)
Net income, as reported
   $ 7,747     $ 6,842  
Add: Total stock-based employee compensation expense recorded in accordance with APB 25, net of tax effect
     —       —  
Deduct: Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of related tax effects
    (940 )     (215 )
 
                
Pro forma net income
   $ 6,807     $ 6,627  
 
                
 
                
Earnings per share:
                
Basic-as reported
   $ .58     $ .53  
 
                
Basic-pro forma
   $ .51     $ .51  
 
                
 
                
Diluted-as reported
   $ .52     $ .47  
 
                
Diluted-pro forma
   $ .46     $ .46  
 
                
     The weighted average fair value of options granted during the thirteen week periods ended fiscal June 2005 and 2004 was $9.47 and $11.22, respectively. The fair values of the options granted were estimated on the date of their grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
                 
    Quarter Ended Fiscal June
    2005   2004
Risk free interest rate
     4.11 %     4.60 %
Expected life
   6 years   9 years
Expected volatility
     28.4 %     28.9 %
Expected dividend yield
     0 %     0 %
Forfeitures are recognized as they occur.
Note 6 – Supplemental Disclosure of Cash Flow Information
     The following transactions represent non-cash investing and financing activities during the periods indicated:
THREE MONTHS ENDED JUNE 25, 2005:
     In connection with the disposal of assets, the Company reduced both fixed assets and long-term liabilities by $4,000.

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MONRO MUFFLER BRAKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     In connection with the recording of capital leases, the Company increased both fixed assets and long-term debt by $1,061,000.
     In connection with recording the value of the Company’s swap contracts, other comprehensive income increased by $8,000, other long-term liabilities decreased by $13,000 and the deferred income tax liability was increased by $5,000.
THREE MONTHS ENDED JUNE 26, 2004:
     In connection with the disposal of assets, the Company reduced both fixed assets and long-term liabilities by $181,000.
     In connection with recording the value of the Company’s swap contracts, other comprehensive income increased by $25,000, other long-term liabilities decreased by $40,000 and the deferred income tax liability was increased by $15,000.
CASH PAID DURING THE PERIOD:
                 
    Quarter Ended Fiscal June
    2005   2004
Interest, net
   $ 736,000     $ 600,000  
Income taxes, net
   $ 170,000     $ 298,000  
Note 7 – Cash Dividend
     In May 2005, the Company’s Board of Directors declared a regular quarterly cash dividend of $.05 per share to be paid beginning with the first quarter of fiscal 2006. However, the declaration of and any determination as to the payment of future dividends will be at the discretion of the Board of Directors and will depend on the Company’s financial condition, results of operations, capital requirements, compliance with charter and contractual restrictions, and such other factors as the Board of Directors deems relevant.
Note 8 – Subsequent Events — Credit Facility Agreement
     In July 2005, the Company entered into a new five-year, $125 million Revolving Credit Facility agreement (the “Credit Facility”) with five banks in the lending syndicate that provided the Company’s prior financing arrangement. Interest only is payable monthly throughout the Credit Facility’s term. The Credit Facility increases the Company’s current borrowing capacity by $15 million and includes a provision allowing the Company to expand the amount of the overall facility to $160 million, subject to existing or new lender(s) commitments at that time. The terms of the Credit Facility immediately reduce the spread the Company pays on LIBOR-based borrowings by 50 basis points and permit the payment of cash dividends not to exceed 25% of the preceding year’s net income. Additionally, the new Credit Facility is not secured by the Company’s real property, although the Company has entered into an agreement not to encumber its real property, with certain permissible exceptions. Other terms of the Credit Facility are generally consistent with the Company’s prior financing agreement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
     The statements contained in this Form 10-Q that are not historical facts, including (without limitation) statements made in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, may contain statements of future expectations and other forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed. These factors include, but are not necessarily limited to, product demand, dependence on and competition within the primary markets in which the Company’s stores are located, the need for and costs associated with store renovations and other capital expenditures, the effect of economic conditions, the impact of competitive services and pricing, product development, parts supply restraints or difficulties, industry regulation, risks relating to leverage and debt service (including sensitivity to fluctuations in interest rates), continued availability of capital resources and financing, risks relating to integration of acquired businesses and other factors set forth or incorporated elsewhere herein and in the Company’s other Securities and Exchange Commission filings. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.
     During the fourth quarter of fiscal 2005, the Company conducted a review of its lease accounting practices. As a result of the review, the Company revised its lease accounting policies to comply with generally accepted accounting principles.
     Historically, the Company followed a practice in which it computed straight-line rent expense for the current term of the lease only, while depreciating buildings and leasehold improvements over longer periods. The Company has revised its lease accounting policies to recognize rent expense including rent escalations, on a straight-line basis over the reasonably assured lease term, as defined in Statement of Financial Accounting Standards No. 98 (“SFAS 98”), “Accounting for Leases”. Additionally, the Company modified its accounting to depreciate buildings and leasehold improvements over the shorter of their estimated useful lives or the reasonably assured lease term.
     The following table sets forth income statement data of Monro Muffler Brake, Inc. (“Monro” or the “Company”) expressed as a percentage of sales for the fiscal periods indicated:
                 
    Quarter Ended Fiscal June
    2005   2004
        Restated
Sales
     100.0 %     100.0 %
 
                
Cost of sales, including distribution and occupancy costs
     57.0       57.6  
 
                
 
                
Gross profit
     43.0       42.4  
Operating, selling, general and administrative expenses
     28.4       29.0  
 
                
Operating income
     14.6       13.4  
 
                
Interest expense — net
     .9       .7  
 
                
Other expense
     .5       .1  
 
                
Income before provision for income taxes
     13.2       12.6  
 
                
Provision for income taxes
     5.0       4.8  
 
                
 
                
Net income
     8.2 %     7.8 %
 
                

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First Quarter Ended June 25, 2005 Compared To First Quarter Ended June 26, 2004
     Sales were $94.6 million for the quarter ended June 25, 2005 as compared with $87.3 million in the quarter ended June 26, 2004. The sales increase of $7.3 million, or 8.3%, was due to an increase of $7.0 million related to new stores and a comparable store sales increase of 1.7%. There were 77 selling days in the quarter ended June 25, 2005 and in the quarter ended June 26, 2004.
     At June 25, 2005, the Company had 625 company-operated stores compared with 597 stores at June 26, 2004. During the quarter ended June 25, 2005, the Company added two stores and closed three.
     Gross profit for the quarter ended June 25, 2005 was $40.7 million or 43.0% of sales as compared with $37.0 million or 42.4% of sales for the quarter ended June 26, 2004. The increase in gross profit for the quarter ended June 25, 2005, as a percentage of sales, is primarily due to a reduction in material costs. A combination of selling price increases, which were implemented in March 2005, some lower product costs as a result of new vendor agreements and the recognition of vendor rebates against cost of goods in concert with inventory turns, all helped to lower material costs.
     Operating, selling, general and administrative (“SG&A”) expenses for the quarter ended June 25, 2005 increased by $1.6 million to $26.9 million from the quarter ended June 26, 2004, and were 28.4% of sales as compared to 29.0% in the prior year quarter. The decrease in SG&A expense as a percentage of sales is partially due to a reduction in advertising costs, through better leveraging, with more tire stores clustered in the Baltimore market. Additionally, management bonus costs and corporate insurance and depreciation costs decreased as a percent of sales as compared to the prior year.
     Operating income for the quarter ended June 25, 2005 of approximately $13.8 million increased 17.5% as compared to operating income for the quarter ended June 26, 2004, and increased as a percentage of sales from 13.4% to 14.6% for the same periods.
     Net interest expense for the quarter ended June 25, 2005 increased by approximately $.3 million as compared to the same period in the prior year, and increased from .7% to .9% as a percentage of sales for the same periods. There was an increase in the weighted average interest rate for the current year quarter of approximately 270 basis points as compared to the prior year due to increases in prime and LIBOR interest rates, as well as some new capital leases that carry higher rates than the Company’s bank facility. Partially offsetting this was a decrease in the weighted average debt outstanding for the quarter ended June 25, 2005 of approximately $7.1 million.
     The effective tax rate for the quarters ended June 25, 2005 and June 26, 2004 was 38% of pre-tax income.
     Net income for the quarter ended June 25, 2005 of $7.7 million increased 13.2% from net income for the quarter ended June 26, 2004. Earnings per share on a diluted basis for the quarter ended June 25, 2005 increased 10.6%.
     Interim Period Reporting
     The data included in this report are unaudited and are subject to year-end adjustments; however, in the opinion of management, all known adjustments (which consist only of normal recurring adjustments) have been made to present fairly the Company’s operating results and financial position for the unaudited periods. The results for interim periods are not necessarily indicative of results to be expected for the fiscal year.
Capital Resources and Liquidity
     Capital Resources
     The Company’s primary capital requirements in fiscal 2006 are the upgrading of facilities and systems in existing stores and the funding of its store expansion program, including potential acquistions of existing store chains. For the three months ended June 25, 2005, the Company spent $3.6 million principally for equipment. Funds were provided primarily by cash flow from operations. Management believes that the Company has sufficient resources available (including cash and equivalents, net cash flow from operations and bank financing) to expand its business as currently planned for the next several years.
     Liquidity
     In March 2003, the Company renewed its credit facility agreement. The amended financing arrangement consisted of an $83.4 million Revolving Credit facility (of which approximately $10.4 million was outstanding at June 25, 2005), and a non-

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amortizing credit loan (formerly synthetic lease financing) totaling $26.6 million (all of which was outstanding at June 25, 2005).
     The Revolving Credit portion of the prior facility had a three-year term expiring in September 2006. On June 27, 2003, the Company purchased the entity holding title to the properties and debt under the synthetic lease and, accordingly, consolidated both the assets and debt related to such lease on its balance sheet at that date. In accordance with the Company’s prior credit facility agreement, the synthetic lease was converted to a three-year, non-amortizing revolving credit loan, also expiring in September 2006.
     The loans bore interest at the prime rate or other LIBOR-based rate options tied to the Company’s financial performance. Interest only was payable monthly on the Revolving Credit facility and credit loan throughout the term. The Company also paid a facility fee on the unused portion of the commitment.
     The prior credit facility was secured by most of the Company’s assets, with certain permissible exceptions.
     In July 2005, the Company entered into a new five-year, $125 million Revolving Credit Facility agreement (the “Credit Facility”) with five banks in the lending syndicate that provided the Company’s prior financing arrangement. Interest only is payable monthly throughout the Credit Facility’s term. The Credit Facility increases the Company’s current borrowing capacity by $15 million to $125 million and includes a provision allowing the Company to expand the amount of the overall facility to $160 million, subject to existing or new lender(s) commitments at that time. The terms of the Credit Facility immediately reduce the spread the Company pays on LIBOR-based borrowings by 50 basis points and permit the payment of cash dividends not to exceed 25% of the preceding year’s net income. Additionally, the new Credit Facility is not secured by the Company’s real property, although the Company has entered into an agreement not to encumber its real property, with certain permissible exceptions. Other terms of the Credit Facility are generally consistent with the Company’s prior financing agreement.
     The Company has financed its office/warehouse facility via a 10 year mortgage with a current balance of $1.5 million, amortizable over 20 years, and a mortgage note payable of $.7 million due in a balloon payment in 2015. In addition, the Company has financed certain store properties and equipment with capital leases, which amount to $10.1 million and are due in installments through 2023.
     Certain of the Company’s long-term debt agreements require, among other things, the maintenance of specified interest and rent coverage ratios and amounts of tangible net worth. They also contain restrictions on cash dividend payments. At June 25, 2005, the Company is in compliance with the applicable debt covenants.
     The Company enters into interest rate hedge agreements, which involve the exchange of fixed and floating rate interest payments periodically over the life of the agreement without the exchange of the underlying principal amounts. The differential to be paid or received is accrued as interest rates change and is recognized over the life of the agreements as an offsetting adjustment to interest expense. At June 2005, the Company was party to an interest rate swap agreement with a notional value of $1.5 million, which expires in October 2005.
Recent Accounting Pronouncements
     In June 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS 154 requires retrospective application to prior period financial statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle should be recognized in the period of the accounting change. SFAS 154 further requires a change in depreciation, amortization or depletion method for long-lived, non-financial assets to be accounted for as a change in accounting estimate effected by a change in accounting principle. SFAS 154 is effective for fiscal years beginning after December 15, 2005. The Company does not believe the adoption of SFAS 154 will have a material impact on its financial statements.
     In June 2005, the FASB ratified Emerging Issues Task Force (EITF) consensus on Issue No. 05-6, “Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination” (“EITF 05-6”). EITF 05-6 provides guidance regarding the amortization period for leasehold improvements acquired in a business combination and the amortization period of leasehold improvements that are placed in service significantly after and not contemplated at the beginning of the lease term. EITF 05-6 will be effective beginning with the Company’s second quarter of fiscal 2006. The Company does not believe the adoption of EITF 05-6 will have a material impact on its financial statements.

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     In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”), which requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the financial statements based on the estimated fair value of the awards on the grant date (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award or the requisite service period (usually the vesting period). SFAS 123R is effective for public entities as of the beginning of the first annual reporting period that begins after June 15, 2005 (the Company’s fiscal year 2007). The Company discloses the pro forma impact of expensing stock options in accordance with SFAS 123, as originally issued, in Note 5 to the consolidated financial statements and is still assessing the impact that SFAS 123R will have on its financial statements.
     In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151 (“SFAS 151”), “Inventory Costs”, which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) by requiring these items to be recognized as current-period charges. SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005, with earlier application permitted. The Company does not believe the adoption of SFAS 151 will have a material impact on its financial statements.
     In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153 (“SFAS 153”), “Exchanges of Nonmonetary Assets”, an amendment of APB Opinion No. 29. This Statement addresses the measurement of exchanges of nonmonetary assets. It eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB 29 and replaces it with an exception for exchanges that do not have commercial substance. SFAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not believe the adoption of SFAS 153 will have a material impact on its financial statements.
Item 4. Controls and Procedures
     Disclosure controls and procedures
     The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports that the Company files or submits pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Security and Exchange Commission’s (SEC) rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
     In conjunction with the close of each fiscal quarter and under the supervision of the Chief Executive Officer and Chief Financial Officer, the Company conducts an update, a review and an evaluation of the effectiveness of the Company’s disclosure controls and procedures. It is the conclusion of the Company’s Chief Executive Officer and Chief Financial Officer, based upon an evaluation completed as of the end of the most recent fiscal quarter reported on herein, that the Company’s disclosure controls and procedures were effective in ensuring that any material information relating to the Company is recorded, processed, summarized and reported to its principal officers to allow timely decisions regarding required disclosures.
     Changes in internal controls
     There were no changes in the Company’s internal control over financial reporting during the quarter ended June 25, 2005 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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MONRO MUFFLER BRAKE, INC.
PART II — OTHER INFORMATION
Item 6. Exhibits
     a. Exhibits
10.1 –   Credit Agreement among Monro Muffler Brake, Inc., Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein
10.2 –   Security Agreement among Monro Muffler Brake, Inc., Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein
10.3 –   Guaranty among Monro Service Corporation, Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein
10.4 –   Credit Agreement among Monro Leasing, LLC, Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein
10.5 –   Negative Pledge Agreement among Monro Muffler Brake, Inc., Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein
31.1 –   Certification of Robert G. Gross pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
31.2 –   Certification of Catherine D’Amico pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
32.1 –   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
    MONRO MUFFLER BRAKE, INC.
 
        
DATE: August 4, 2005
  By   /s/ Robert G. Gross
 
       
 
        Robert G. Gross
  President and Chief Executive Officer
         
DATE: August 4, 2005
  By   /s/ Catherine D’Amico
 
       
 
        Catherine D’Amico
 
        Executive Vice President-Finance, Treasurer
 
            and Chief Financial Officer

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EXHIBIT INDEX
             
Exhibit No.   Description   Page No.
10.1
  Credit Agreement among Monro Muffler Brake, Inc., Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein     19  
 
            
10.2
  Security Agreement among Monro Muffler Brake, Inc., Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein     80  
 
            
10.3
  Guaranty among Monro Service Corporation, Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein     93  
 
            
10.4
  Credit Agreement among Monro Leasing, LLC, Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein     105  
 
            
10.5
  Negative Pledge Agreement among Monro Muffler Brake, Inc., Charter One Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and the Lenders Named therein     118  
 
            
31.1
  Certification of Robert G. Gross pursuant to Section 302 of the Sarbanes-Oxley Act of 2002     124  
 
            
31.2
  Certification of Catherine D’Amico pursuant to Section 302 of the Sarbanes-Oxley Act of 2002     125  
 
            
32.1
  Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     126  

18

EX-10.1 2 l15010aexv10w1.txt EX-10.1 CREDIT AGREEMENT AMONG MONRO MUFFLER BRAKE, INC. EXHIBIT 10.1 CREDIT AGREEMENT among MONRO MUFFLER BRAKE, INC., Borrower CHARTER ONE BANK, N.A., Administrative Agent JPMORGAN CHASE BANK, N.A., Syndication Agent BANK OF AMERICA, N.A., Documentation Agent and THE LENDERS NAMED HEREIN, Lenders SENIOR SECURED CREDIT FACILITY RBS SECURITIES CORPORATION, Sole Lead Arranger and Bookrunner JULY 13, 2005 19 TABLE OF CONTENTS
Page ---- SECTION 1 DEFINITIONS AND TERMS................................................ 25 1.1 Definitions................................................................... 25 1.2 Number and Gender of Words.................................................... 36 1.3 Accounting Principles......................................................... 36 SECTION 2 COMMITMENT........................................................... 37 2.1 The Facility.................................................................. 37 2.2 Borrowing Procedure........................................................... 37 2.3 LC Subfacility................................................................ 38 2.4 Swing Line Subfacility........................................................ 41 2.5 Termination................................................................... 42 2.6 Optional Increase in Facility Committed Sum................................... 42 SECTION 3 TERMS OF PAYMENT..................................................... 43 3.1 Notes and Payments............................................................ 43 3.2 Interest and Principal Payments............................................... 43 3.3 Interest Options.............................................................. 45 3.4 Quotation of Rates............................................................ 45 3.5 Default Rate.................................................................. 45 3.6 Interest Recapture............................................................ 45 3.7 Interest Calculations......................................................... 45 3.8 Maximum Rate.................................................................. 46 3.9 Interest Periods.............................................................. 46 3.10 Conversions................................................................... 46 3.11 Order of Application.......................................................... 47 3.12 Sharing of Payments, Etc...................................................... 47 3.13 Offset........................................................................ 47 3.14 Booking Borrowings............................................................ 47 3.15 Basis Unavailable or Inadequate for LIBOR..................................... 47 3.16 Additional Costs.............................................................. 48 3.17 Change in Laws................................................................ 49 3.18 Funding Loss.................................................................. 49 3.19 Foreign Lenders............................................................... 49 SECTION 4 FEES................................................................. 50 4.1 Treatment of Fees............................................................. 50 4.2 LC Fees....................................................................... 50 4.3 Facility Commitment Fee....................................................... 50 SECTION 5 SECURITY............................................................. 50 5.1 Collateral.................................................................... 50 5.2 Additional Security and Guaranties............................................ 50 5.3 Financing Statements.......................................................... 51
20 SECTION 6 CONDITIONS PRECEDENT................................................. 51 6.1 Initial Borrowing............................................................. 51 6.2 All Borrowings or LCs......................................................... 51 6.3 Materiality of Conditions..................................................... 51 6.4 Waiver........................................................................ 51 SECTION 7 REPRESENTATIONS AND WARRANTIES....................................... 51 7.1 Purpose of Credit Facility.................................................... 51 7.2 Corporate Existence, Good Standing, Authority, and Compliance................. 52 7.3 Subsidiaries.................................................................. 52 7.4 Authorization and Contravention............................................... 52 7.5 Binding Effect................................................................ 52 7.6 Financial Statements; Fiscal Year............................................. 52 7.7 Litigation.................................................................... 52 7.8 Taxes......................................................................... 53 7.9 Environmental Matters......................................................... 53 7.10 Employee Plans................................................................ 53 7.11 Properties; Liens............................................................. 53 7.12 Location; Real Estate Interests............................................... 53 7.13 Government Regulations........................................................ 54 7.14 Transactions with Affiliates.................................................. 54 7.15 Debt.......................................................................... 54 7.16 Material Agreements........................................................... 54 7.17 Insurance..................................................................... 54 7.18 Labor Matters................................................................. 54 7.19 Solvency...................................................................... 54 7.20 Trade Names................................................................... 54 7.21 Intellectual Property......................................................... 54 7.22 Full Disclosure............................................................... 55 SECTION 8 AFFIRMATIVE COVENANTS................................................ 55 8.1 Items to be Furnished......................................................... 55 8.2 Use of Proceeds............................................................... 56 8.3 Books and Records............................................................. 56 8.4 Inspections................................................................... 56 8.5 Taxes......................................................................... 56 8.6 Payment of Obligations........................................................ 56 8.7 Expenses...................................................................... 56 8.8 Maintenance of Existence, Assets, and Business................................ 57 8.9 Insurance..................................................................... 57 8.10 Preservation and Protection of Rights......................................... 57 8.11 Environmental Laws............................................................ 57 8.12 Subsidiaries.................................................................. 58 8.13 Indemnification............................................................... 58 8.14 Further Assurances............................................................ 59 8.15 Change of Control............................................................. 59
21 SECTION 9 NEGATIVE COVENANTS................................................... 59 9.1 Taxes......................................................................... 59 9.2 Payment of Obligations........................................................ 59 9.3 Employee Plans................................................................ 59 9.4 Debt and Debt Instruments..................................................... 59 9.5 Liens......................................................................... 59 9.6 Transactions with Affiliates.................................................. 59 9.7 Compliance with Laws and Documents............................................ 60 9.8 Loans, Advances and Investments............................................... 60 9.9 Dividends and Distributions................................................... 60 9.10 Sale of Assets................................................................ 60 9.11 Mergers and Dissolutions...................................................... 61 9.12 Assignment.................................................................... 61 9.13 Fiscal Year and Accounting Methods............................................ 61 9.14 New Businesses................................................................ 61 9.15 Government Regulations........................................................ 61 9.16 Leases; Sale-Leasebacks; Tax Leases........................................... 61 9.17 Subsidiaries.................................................................. 61 SECTION 10 FINANCIAL COVENANTS.................................................. 61 SECTION 11 DEFAULT.............................................................. 62 11.1 Payment of Obligation......................................................... 62 11.2 Covenants..................................................................... 62 11.3 Debtor Relief................................................................. 62 11.4 Judgments and Attachments..................................................... 62 11.5 Government Action............................................................. 63 11.6 Misrepresentation............................................................. 63 11.7 Material Adverse Event........................................................ 63 11.8 Default Under Other Agreements................................................ 63 11.9 LCs........................................................................... 63 11.10 Validity and Enforceability of Loan Papers.................................... 63 11.11 Employee Benefit Plans........................................................ 63 SECTION 12 RIGHTS AND REMEDIES.................................................. 64 12.1 Remedies Upon Default......................................................... 64 12.2 Company Waivers............................................................... 64 12.3 Performance by Administrative Agent........................................... 64 12.4 Not in Control................................................................ 64 12.5 Course of Dealing............................................................. 65 12.6 Cumulative Rights............................................................. 65 12.7 Application of Proceeds....................................................... 65 12.8 Diminution in Value of Collateral............................................. 65 12.9 Certain Proceedings........................................................... 65 12.10 Change of Control............................................................. 65
22 SECTION 13 AGREEMENT AMONG LENDERS.............................................. 66 13.1 Administrative Agent.......................................................... 66 13.2 Expenses...................................................................... 67 13.3 Proportionate Absorption of Losses............................................ 67 13.4 Delegation of Duties; Reliance................................................ 67 13.5 Limitation of Administrative Agent's Liability................................ 68 13.6 Delegation of Duties by Administrative Agent.................................. 69 13.7 Default; Collateral........................................................... 69 13.8 Limitation of Liability....................................................... 70 13.9 Relationship of Lenders....................................................... 70 13.10 Other Agents.................................................................. 70 13.11 Collateral Matters............................................................ 70 13.12 Benefits of Agreement......................................................... 71 SECTION 14 MISCELLANEOUS........................................................ 71 14.1 Headings...................................................................... 71 14.2 Nonbusiness Days; Time........................................................ 71 14.3 Communications................................................................ 71 14.4 Form and Number of Documents.................................................. 72 14.5 Exceptions to Covenants....................................................... 72 14.6 Survival...................................................................... 72 14.7 Governing Law................................................................. 72 14.8 Invalid Provisions............................................................ 72 14.9 Venue; Service of Process; Jury Trial......................................... 73 14.10 Amendments, Consents, Conflicts, and Waivers.................................. 73 14.11 Multiple Counterparts......................................................... 74 14.12 Successors and Assigns; Participations........................................ 74 14.13 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances... 76 14.14 Confidentiality............................................................... 76 14.15 Entirety...................................................................... 77 14.16 Patriot Act................................................................... 77
23
SCHEDULES AND EXHIBITS ---------------------- Schedule 1 Parties, Addresses, Committed Sums and Wiring Information Schedule 6 Conditions Precedent Schedule 7.2 Jurisdictions of Incorporation and Business Schedule 7.3 Corporate Structure Schedule 7.7 Litigation Schedule 7.9 Environmental Matters Schedule 7.11 Permitted Liens Schedule 7.12 Chief Executive Office, Location of Material Assets and Real Estate Interests Schedule 7.14 Transactions with Affiliates Schedule 7.15 Permitted Debt Schedule 7.16 Material Agreements Schedule 7.20 Trade Names Schedule 7.21 Intellectual Property Schedule 9.10 Existing Sale\Leaseback Properties Exhibit A Facility Note Exhibit B Swing Line Note Exhibit C LC Request Exhibit D Borrowing Request Exhibit E Conversion Request Exhibit F Compliance Certificate Annex I Financial Covenants Calculation Worksheet Exhibit G Assignment Agreement Exhibit H Form of Guaranty
24 CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of July 13, 2005, (the "EFFECTIVE DATE") among Monro Muffler Brake, Inc., a New York corporation ("BORROWER"), Lenders (defined below), Charter One Bank, N.A., as Administrative Agent for itself and the other Lenders, JPMorgan Chase Bank, N.A., as Syndication Agent, and Bank of America, N.A., as Documentation Agent. RECITALS WHEREAS, Borrower has requested Lenders to make loans to and otherwise extend credit for the account of Borrower pursuant to a five year senior secured revolving credit facility in the aggregate principal amount of $125,000,000 (the "FACILITY") and Lenders are willing to do so upon terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the undersigned parties agree as follows: SECTION 1 DEFINITIONS AND TERMS. 1.1 Definitions. As used in the Loan Papers: ABR means, for any day, the highest of (a) the Federal Funds Rate plus fifty (50) basis points or (b) the Prime Rate. ABR BORROWING means a Borrowing bearing interest at the sum of the ABR plus the Applicable Margin. ACCOUNTANTS mean Pricewaterhouse Coopers, LLP or other firm of independent public accountants of nationally recognized standing retained by Borrower or any other firm acceptable to the Lenders. ACQUISITION means the acquisition or purchase by Borrower (whether in one or more separate transactions contemplated as part of the same transaction) of assets, including without limitation, stock, partnership, securities, or other interest in any other Person; excluding however, assets purchased in the ordinary course of business which are budgeted as part of the Borrower's annual capital expenditure budget. ADJUSTED DEBT means Funded Debt, plus the product of eight (8) times Rental Payments. AFFILIATE means, as to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person or any Subsidiary of such Person. The term "control" (including the terms "controlled by" or "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether as general partner, through ownership of a Control Percentage of such Person or the general partner of such Person, by contract or otherwise. 25 ADMINISTRATIVE AGENT means Charter One Bank, N.A., and its successor or successors as administrative agent for Lenders under this Agreement. AGREEMENT means this Credit Agreement, as amended, restated, supplemented, or otherwise modified from time to time in accordance with SECTION 14.10. APPLICABLE MARGIN means at all times during the applicable periods set forth below: (a) with respect to all LIBOR Rate Borrowings, the applicable percentage set forth below in the column entitled "Applicable Margin for LIBOR Rate Borrowings"; (b) with respect to all ABR Borrowings, the applicable percentage set forth below in the column entitled "Applicable Margin for ABR Borrowings"; and (c) with respect to the Commitment Fee, the applicable percentage set forth below in the column entitled "Applicable Margin for Commitment Fee."
Applicable Margin for Applicable Applicable LIBOR Rate Margin for Margin for Period Borrowings ABR Borrowings Commitment Fee - ------------------------ ---------- -------------- -------------- When the AD < or = 2.75x 50 bp 0 bp 15 bp When the AD > 2.75x 75 bp 0 bp 17.5 bp When the AD > 3.25x 100 bp 0 bp 20 bp When the AD > 3.75x 125 bp 0 bp 25 bp When the AD > 4.25x 150 bp 0 bp 30 bp
Definition: "AD" is the abbreviation for Adjusted Debt/EBITDAR Ratio. Adjusted Debt and EBITDAR are calculated for the most recently-completed Four Quarter Period and the ratio of Adjusted Debt to EBITDAR is calculated as of the last day of such Four Quarter Period. The Applicable Margin, as adjusted to reflect such calculations, shall become effective on the date of receipt by the Administrative Agent of the Compliance Certificate applicable to such Four Quarter Period. If Borrower fails to timely furnish to Administrative Agent the Current Financials and any related Compliance Certificate or, if for some other reason, a new Applicable Margin for a current period cannot be calculated, then the Applicable Margin in effect on the last day of the last Four Quarter Period for which the ratio of Adjusted Debt to EBITDAR was calculated shall remain in effect until a new Applicable Margin can be calculated, which new Applicable Margin shall become effective as provided in the immediately preceding sentence. ARRANGER means RBS Securities Corporation, as sole lead arranger and bookrunner. BORROWER is defined in the preamble to this Agreement. BORROWING means (without duplication) any amount disbursed by (a) one or more Lenders to or on behalf of Borrower under the Loan Papers, whether such amount constitutes an original disbursement of funds, the continuation of an amount outstanding under the Facility or under the Swing Line Subfacility or the financing of a LC reimbursement obligation under the Facility or (b) any Lender in accordance with, and to satisfy the obligations of any Company under, any Loan Paper. 26 BORROWING DATE means for any Borrowing the date for which funds are requested by Borrower. BORROWING REQUEST means a request substantially in the form of the attached EXHIBIT D. BUSINESS DAY means (a) for all purposes, any day other than Saturday, Sunday, and any other day that commercial banks are authorized by Law to be closed in New York, New York and (b) for purposes of any LIBOR Rate Borrowing, a day that satisfies the requirements of clause (a) and is a day that commercial banks are open for domestic or international business in London. CAPEX means, for any Four Quarter Period, capital expenditures for fixed or capital assets that are required to be capitalized on a balance sheet prepared in accordance with GAAP minus any net proceeds of allowable sale/leasebacks permitted by SECTIONS 9.10 OR 9.16 minus (without duplication) any capital expenditures incurred for equipment purchased and then sold within one year of acquisition to any Lender pursuant to sale/leaseback facilities permitted pursuant to SECTION 9.10. CAPITALIZED LEASE means any lease the obligation for Rental Payments with respect to which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. CASH EQUIVALENTS means (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government of any agency thereof; (b) certificates of deposit, time deposits, corporate savings accounts overnight bank deposits, bankers acceptances and repurchase agreements of any commercial bank which has capital and surplus in excess of $100,000,000 having maturities of one year or less from the date of acquisition; (c) commercial paper of an issuer rated at least A-2 by Standard & Poor's Ratings Group or P-2 by Moody's Investors Service, Inc., or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments; (d) money market accounts or funds with or issued by "QUALIFIED ISSUERS"; (e) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (b) above; and (f) demand deposit accounts maintained in the ordinary course of business with any bank, not in excess of $100,000 in the aggregate on deposit with any such bank or any other financial institution. CHANGE OF CONTROL shall mean the occurrence of one or more of the following: (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group, other than the Ownership Group, of (i) shares representing more than thirty-five percent (35%) of the Common Stock, issued and outstanding at any time or (ii) more than sixty percent (60%) of the Preferred Stock, issued and outstanding at any time; or (b) the occupancy of a majority of the seats (other than vacant seats) on the board of directors of Borrower or any Subsidiary of Borrower by persons who were neither (i) nominated by the board of directors of Borrower nor (ii) appointed by directors so nominated. As used in this definition of "CHANGE OF CONTROL," terms defined in the Securities Exchange Act of 1934 or the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof shall have the respective meanings ascribed to them therein. CLOSING DATE means July 13, 2005. CODE means the Internal Revenue Code of 1986, as amended from time to time, and related rules and regulations promulgated thereunder by the Internal Revenue Service. 27 COLLATERAL is defined in SECTION 5.1. COMMITMENT FEE is defined in SECTION 4.3. COMMITMENT USAGE means, at any time, for each Lender, its Facility Commitment Usage. COMMITTED SUM means, with respect to each Lender, the several obligation of such Lender to lend to Borrower one or more Borrowings in the aggregate principal amounts (which amount is subject to increase as provided in SECTION 2.6 and to reduction and cancellation as provided in this Agreement, including, without limitation, the provisions of SECTION 2.5) stated beside such Lender's name for the Facility on SCHEDULE 1 as most recently amended under this Agreement. COMMON STOCK means the Borrower's common stock, $.01 par value per share. COMPANY OR COMPANIES means, at any time, Borrower and each of its Subsidiaries. COMPLIANCE CERTIFICATE means a certificate substantially in the form of the attached EXHIBIT F and signed by a Responsible Officer. CONTROL PERCENTAGE means, with respect to any Person (a) in the case of a corporation, the percentage of the outstanding capital stock of such Person having ordinary voting power which gives the direct or indirect holder of such stock the power to elect a majority of the Board of Directors of such Person and (b) in the case of a limited partnership, the percentage of the outstanding limited partnership interests of such Person which gives the direct or indirect holder of such limited partnership interests the power to remove the general partner or partners of such Person or to take actions reserved for the limited partners under the applicable limited partnership act. CONVERSION REQUEST means a request substantially in the form of the attached EXHIBIT E. CURRENT FINANCIALS means, at any time, the consolidated Financial Statements of Borrower and its Subsidiaries most recently delivered to Administrative Agent under SECTIONS 8.1(a) or 8.1(b), as the case may be. DEBT means (without duplication), for any Person, (a) indebtedness of such Person for borrowed money; (b) obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations of such Person to pay the deferred purchase price of property or services; (d) obligations of such Person as lessee under Capitalized Leases required to be capitalized under GAAP; (e) reimbursement obligations in respect of bonds or letters of credit; (f) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) of such Person to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness of others of the kinds referred to in clauses (a) through (e) above; and (g) indebtedness of others of the kinds referred to in clauses (a) through (f) secured by any Lien on or in respect of any property of such Person whether or not assumed by such Person; provided, however, that all trade accounts payable and accrued expenses incurred in the ordinary course of business of such Person and not overdue shall be excluded from the foregoing. 28 DEBTOR RELIEF LAWS means Title 11 of the United States Code and all other applicable state or federal liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments or similar Laws affecting creditors' Rights in effect from time to time. DEFAULT is defined in SECTION 11. DEFAULT RATE means an annual rate of interest equal from day to day to the lesser of (a) (i) for the principal of all Borrowings, the applicable interest rate for such Borrowing plus 2%, or (ii) the then-existing ABR plus 2% of all fees, interest and other amounts due hereunder and (b) the Maximum Rate. DISTRIBUTION means, with respect to any shares of any capital stock or other equity securities or other interests issued by a Person, (a) the retirement, redemption, purchase, or other acquisition for value of those securities by such Person; (b) the declaration or payment of any dividend on or with respect to those securities by such Person (except distributions in the form of such securities); (c) any loan or advance by that Person to, or other investment by that Person in, the holder of any of those securities; and (d) any other payment by that Person with respect to those securities. DOLLARS and $ means lawful money of the United States of America. EBITDAR means, as determined, on a rolling twelve month basis and in respect of any Person the sum of (i) the Net Income of such Person, plus (ii) the Interest Expense of such Person for such period as determined in accordance with GAAP and as such item is reported on such Person's financial statements, plus (iii) the income tax expense of such Person for such period, plus (iv) the amount reported as the depreciation of the assets of such Person for such period, computed in accordance with GAAP, and as such item is used in the computation of such Person's Net Income for such period, plus (v) the amount reported as the amortization of intangibles for such Person for such period, computed in accordance with GAAP, and as such item is used in the computation of such Person's Net Income for such period, plus (vi) Rental Payments plus (vii) expenses in respect of stock options of such Person for such period as determined in accordance with GAAP and as such item is used in the computation of such Person's Net Income for such period in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards Number 123 (revised). EFFECTIVE DATE is defined in the Preamble to this Agreement. EMPLOYEE PLAN means an employee pension benefit plan covered by Title IV of ERISA and established or maintained by any Company. ENVIRONMENTAL LAW means any Law that relates to the pollution or protection of the environment or to Hazardous Substances. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, and related rules and regulations. EXISTING LCS means, collectively, (i) the irrevocable letter of credit dated May 15, 2002 issued by JPMorgan Chase Bank (predecessor-in-interest to JPMorgan Chase Bank, N.A.) for the benefit of Liberty Mutual Insurance Company in the face amount of $950,000.00 and (ii) the irrevocable letter of credit dated July 24, 2002 issued by JPMorgan Chase Bank (predecessor-in-interest to JPMorgan Chase Bank, N.A.) for the benefit of The Travelers Indemnity Company in the face amount of $3,100,000.00. 29 FACILITY is defined in the recitals to this Agreement. FACILITY COMMITMENT USAGE means, at any time, the sum of (a) the Principal Debt, whether under the Swing Line Subfacility or otherwise, plus (b) the LC Exposure. FACILITY COMMITTED SUM means, at any time, the sum of all Committed Sums for all Lenders under the Facility (as increased, reduced or cancelled under this Agreement, including, without limitation, the provisions of SECTIONS 2.5 and 2.6) then in effect. FACILITY MATURITY DATE means the earlier of (a) July 13, 2010, and (b) the effective date that Lenders' commitments to lend under the Facility are otherwise cancelled or terminated in accordance with this Agreement. FACILITY NOTE means a promissory note substantially in the form of the attached EXHIBIT A. FEDERAL FUNDS RATE means, on any day, the weighted average (rounded upwards, if necessary, to the nearest 0.01%) equal to the rates on overnight federal funds transactions with member banks of the Federal Reserve System arranged by federal funds brokers as published by the Federal Reserve Bank of New York on the next successive Business Day; provided, however, that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be the rate for such transactions on the next preceding Business Day as published on the next successive Business Day or, (ii) if those rates are not published for any Business Day, the Federal Funds Rate shall be the average of the quotations at approximately 10:00 a.m. on such Business Day received by Administrative Agent from three federal funds brokers of recognized standing selected by Administrative Agent in its reasonable discretion. FINANCIAL HEDGE means a swap, collar, floor, cap, or other contract between any Company and any Lender or another Person reasonably acceptable to Majority Lenders, that is intended to reduce or eliminate the risk of fluctuations in interest rates and that is legal and enforceable under applicable Law. FINANCIAL STATEMENTS of a Person means balance sheets, profit and loss statements, reconciliations of capital and surplus, and statements of cash flow prepared (a) according to GAAP, (b) except as stated in SECTION 1.3, in comparative form to prior year-end figures or corresponding periods of the preceding fiscal year, as applicable, and (c) on a consolidated basis if that Person had any consolidated Subsidiaries during the applicable period. FOUR QUARTER PERIOD means a period of four full consecutive fiscal quarter-annual periods, taken together as one accounting period. FUNDED DEBT means, when determined, on a rolling twelve-month basis, calculated using the month-end balance for each month on a consolidated basis for the Companies in accordance with GAAP: (a) indebtedness of such Person for borrowed money; (b) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, and (c) obligations of such Person as lessee under Capitalized Leases; excluding notes generated in the ordinary course of business payable within one year not to exceed $1,000,000, trade payables and accrued expenses. FUNDING LOSS means, without duplication, (a) the administrative or reemployment costs customarily charged by any Lender (consistent with such Lender's policies with respect to its other customers) when (i) Borrower fails or refuses (for any reason other than Lender's failure to comply with this Agreement) to take any Borrowing that it has requested under this Agreement, or (ii) Borrower 30 prepays or pays any Borrowing or converts any Borrowing to a Borrowing of another Type, in each case, before the last day of the applicable Interest Period, plus (b) an amount equal to the excess, if any, of the amount of interest that would have accrued on the Borrowing at the elected interest rate during the remainder of the applicable Interest Period (but for such failure, refusal, payment, prepayment or conversion) over the amount of interest that would accrue on the same Type of Borrowing for an interest period of the same duration as the remainder of the applicable Interest Period. GAAP means generally accepted accounting principles of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board that are applicable from time to time, applied on a basis consistent with those used in preparation of the audited consolidated financial statements referred to in PARAGRAPH (f) of SCHEDULE 6 (except for changes to which Borrower's Accountants concur). GUARANTOR means collectively any and all Subsidiaries of the Borrower now or in the future, including, without limitation, Monro Leasing, LLC and Monro Service Corporation. GUARANTY means a guaranty substantially in the form of the attached EXHIBIT H. HAZARDOUS SUBSTANCE means any substance (a) the presence of which requires removal, remediation, or investigation under any Environmental Law, or (b) that is defined or classified as a hazardous waste, hazardous material, pollutant, contaminant, or toxic or hazardous substance under any Environmental Law. INTEREST COVERAGE RATIO means, in respect of a Person, as of the last day of each fiscal quarter, the ratio of (a)(i) EBITDAR of such Person for the Four Quarter Period ending on such day minus (ii) CAPEX made by such Person during such Four Quarter Period to (b) the sum of (i) Interest Expense of such Person for such Four Quarter Period plus (ii) Rental Payments made by such Person during such Four Quarter Period, in each case determined on a consolidated basis in accordance with GAAP. INTEREST EXPENSE means, in respect of a Person, for any Four Quarter Period, all interest paid or accrued and amortization of debt discount with respect to all Funded Debt of such Person for such period (after giving effect to the net cost associated with all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, or other financial arrangements designed to protect such Person against fluctuations in interest rates) and after giving credit for interest income and construction period interest income. INTEREST PERIOD is determined in accordance with SECTION 3.9. LAWS means all applicable statutes, laws, treaties, ordinances, rules, regulations, orders, writs, injunctions, decrees, judgments, opinions, and interpretations of any Tribunal, as in effect from time to time. LC means a standby letter of credit or a commercial letter of credit (in such form as shall be customary in respect of obligations of a similar nature) issued by Administrative Agent under this Agreement and under an LC Agreement. LC AGREEMENT means a letter of credit application and reimbursement agreement (in form and substance satisfactory to Administrative Agent) submitted by Borrower to Administrative Agent for a letter of credit for the account of any Company. 31 LC EXPOSURE means, at any time, (without duplication) the sum of (a) the aggregate undrawn and uncancelled portions of all outstanding LCs plus (b) the aggregate unpaid reimbursement obligations of Borrower under drawings or drafts under any LC, excluding Borrowings to fund such reimbursement obligations under SECTION 2.3(c). LC REQUEST means a request substantially in the form of the attached EXHIBIT C. LENDER LIENS means Liens in favor of Lenders, or Administrative Agent on behalf of Lenders, securing any of the Obligation. LENDERS means the financial institutions named on the attached SCHEDULE 1 or on the most recently amended SCHEDULE 1, if any, delivered by Administrative Agent under this Agreement, and, subject to this Agreement, their respective successors and assigns (but not any Participant who is not otherwise a party to this Agreement). LIBOR RATE BORROWING means a Borrowing bearing interest at the sum of the LIBOR Rate plus the Applicable Margin. LIBOR RATE means, for any LIBOR Rate Borrowing, for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; divided by one minus the Reserve Percentage (expressed as a decimal) applicable to the relevant Interest Period. If for any reason such rate is not available, the term "LIBOR Rate" shall mean, for any LIBOR Rate Borrowing for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. LIEN means any lien, mortgage, security interest, pledge, assignment, charge, title retention agreement or encumbrance of any kind and any other arrangement for a creditor's claim to be satisfied from assets or proceeds prior to the claims of other creditors or the owners. LITIGATION means any action by or before any Tribunal. LOAN PAPERS means (a) this Agreement, certificates and reports delivered under this Agreement, and exhibits and schedules to this Agreement; (b) the Notes and all agreements, documents, and instruments in favor of Administrative Agent or Lenders (or Administrative Agent on behalf of Lenders) ever delivered in connection with or under this Agreement or otherwise delivered in connection with all or any part of the Obligation; (c) all LCs and LC Agreements; (d) any Financial Hedge between any Company and any Lender; (e) any Guaranty; and (f) all renewals, extensions, and restatements of, and amendments and supplements to, any of the foregoing. MAJORITY LENDERS means any combination of Lenders holding at least (a) 66-2/3% of the Facility Committed Sum, if no Principal Debt or LC Exposure is outstanding, or (b) 66-2/3% of the Facility Commitment Usage if any Principal Debt or LC Exposure is outstanding. MATERIAL ADVERSE EVENT means any circumstance or event that, individually or collectively with 32 other circumstances or events, reasonably is expected to result in any (a) impairment of the ability of any Company to perform any of its payment or other material obligations under any Loan Paper; (b) impairment of the ability of Administrative Agent or any Lender to enforce (i) any of the material obligations of any Company under this Agreement or (ii) any of their respective Rights under the Loan Papers; or (c) material and adverse effect on the business, assets, property, or condition (financial or otherwise) of the Companies as a whole as represented to Lenders in the Current Financials. MATERIAL AGREEMENT means, for any Person, any agreement (excluding purchase orders and purchase agreements for materials, inventory or services in the ordinary course of business) to which that Person is a party, by which that Person is bound, or to which any assets of that Person may be subject, and that is not cancelable by that Person upon thirty (30) or fewer days' notice without liability for further payment other than nominal penalty, and that requires that Person to pay more than $2,000,000 during any 12-month period. MATURITY DATE means, as applicable, the Facility Maturity Date, or the Swing Line Maturity Date. MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for a Lender, the maximum non-usurious amount and the maximum non-usurious rate of interest that, under applicable Law, such Lender is permitted to contract for, charge, take, reserve, or receive on the Obligation. MINORITY INTERESTS means any shares of stock of any class of a Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Borrower and/or one or more of its Wholly-Owned Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in Preferred Stock. MULTIEMPLOYER PLAN means a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code to which any Company (or any Person that, for purposes of Title IV of ERISA, is a member of Borrower's controlled group or is under common control with Borrower within the meaning of Section 414 of the Code) is making, or has made, or is accruing, or has accrued, an obligation to make contributions. NET INCOME means, in respect of a Person, the net income of such Person computed in accordance with GAAP and as such item is reported from time to time on such Person's statement of income and retained earnings (or similar statement) (after deduction for payment of all taxes); provided however, certain costs that in the past were capitalized in the cost of an acquisition, but will be required to be expensed under Statement of Financial Accounting Standards 146, as well as other similar accounting requirements that are issued in the future and require expense treatment of costs that are currently capitalized in the cost of an acquisition, shall be included as if capitalized under prior accounting guidelines. NET WORTH means as of the date of any determination thereof, the sum of the capital stock of all classes, paid-in-capital and surplus accounts (net of treasury shares) plus (or minus in the case of a deficit) the retained earnings of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP, after elimination of (i) Minority Interests; and (ii) the effect, if any, of the Borrower's interest rate hedging agreements, as determined by the Accountants. 33 NON-U.S. LENDER is defined in SECTION 3.19. NOTES means all outstanding and unpaid Facility Notes, and the Swing Line Note. OBLIGATION means all present and future indebtedness and obligations, and all renewals, increases, and extensions thereof, or any part thereof, now or hereafter owed to Administrative Agent or any Lender by any Company under any Loan Paper, together with all interest accruing thereon, fees, costs, and expenses (including, without limitation, all attorneys' fees and expenses incurred in the enforcement or collection thereof) payable under the Loan Papers or in connection with the protection of Rights under the Loan Papers. OWNERSHIP GROUP means Peter J. Solomon and Donald Glickman, and their spouses or lineal descendants, or any estate of such parties or any trust of which any of the foregoing are the exclusive beneficiaries. PARTICIPANT is defined in SECTION 14.12(b). PBGC means the Pension Benefit Guaranty Corporation, or any successor thereof, established under ERISA. PERMITTED DEBT means Debt described on the attached SCHEDULE 7.15. PERMITTED LIENS means Liens described on the attached SCHEDULE 7.11. PERSON means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof, or any trustee, receiver, custodian, or similar official. POTENTIAL DEFAULT means the occurrence of any event or the existence of any circumstance that would, upon notice or lapse of time or both, become a Default. PREFERRED STOCK means the Borrower's Class C Convertible Preferred Stock, $1.50 par value per share. PRIME RATE means, for any day, the rate of interest announced publicly from time to time by Administrative Agent, after taking into account such factors as Administrative Agent shall in its sole discretion deem appropriate, as its prime rate in effect at its principal office in New York, New York automatically fluctuating upward and downward with and at the time specified in each such announcement without special notice to Borrower or any other Person. However, Administrative Agent's prime rate may (i) be one of several interest rates, (ii) serve as a basis upon which effective rates of interest are from time to time calculated for loans referring to the prime rate, and (iii) not be Administrative Agent's lowest lending interest rate. Administrative Agent may from time to time make various loans at rates of interest having no relationship to such prime rate. PRINCIPAL DEBT means, at any time, the unpaid principal balance of all Borrowings under the Facility. PRO RATA and PRO RATA PART means, when determined for any Lender, (a) if there is no Principal Debt or LC Exposure, the proportion (stated as a percentage) that such Lender's Committed Sum bears to 34 the Facility Committed Sum or (b) if there is any Principal Debt or LC Exposure, the proportion (stated as a percentage) that the sum of (i) the Principal Debt owed to such Lender and (ii) and (without duplication) the LC Exposure of such Lender, bears to the (x) aggregate Principal Debt owed to and (y) (without duplication) the LC Exposure of all Lenders. PURCHASER is defined in SECTION 14.12(c). QUALIFIED ISSUER means any commercial bank (a) which has capital and surplus in excess of $100,000,000 and (b) the outstanding long term debt securities of which are rated at least A-2 by Standard & Poors Ratings Group or at least P-2 by Moody's Investors Service, Inc., or carry an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments. REGULATION D means Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. REGULATION U means Regulation U of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. RENTAL PAYMENTS means, as determined, on a rolling twelve month basis ending on the last day of the accounting period covered by the consolidated financial statements of Borrower and its Subsidiaries, and delivered pursuant to this Agreement, the dollar amount of the fixed payments which Borrower or its Subsidiaries are required to make by the terms of any lease to its landlords during such period; (a) excluding, however (i) rentals under Capitalized Leases, (ii) maintenance, repairs, taxes and other similar charges included in such payments, (iii) amounts constituting step rent in accordance with GAAP, and (iv) (without duplication) rentals under equipment leases whether operating leases or Capitalized Leases, and (b) less (x) rental income and (y) amortization of deferred gains on sale-leasebacks, such amortization not to exceed $1,000,000 for purposes hereof. REPORTABLE EVENT means an event described in Section 4043 of ERISA excluding any such event for which the notice requirement is waived under applicable regulations of the PBGC. REPRESENTATIVES means representatives, officers, directors, employees, attorneys, and agents. RESERVE PERCENTAGE means, for all Lenders of a LIBOR Rate Borrowing for the relevant Interest Period, the weighted average of the Reserve Requirements, if any, incurred by each Lender on its Pro Rata Part of such Borrowing. RESERVE REQUIREMENT means, with respect to any LIBOR Rate Borrowing for the relevant Interest Period, the maximum aggregate reserve requirements (including all basic, supplemental, emergency, special, marginal and other reserves required by applicable Law) applicable to a member bank of the Federal Reserve System for eurocurrency fundings or liabilities. RESPONSIBLE OFFICER means the chairman, president, senior vice-president, executive vice-president, chief executive officer, treasurer, or chief financial officer of Borrower. RIGHTS means rights, remedies, powers, privileges, and benefits. SECURITY DOCUMENTS means, collectively, any security agreement, pledge agreement, negative 35 pledge agreement, mortgage, deed of trust, or other agreement or document, together with all related financing statements and stock powers, in form and substance satisfactory to Administrative Agent and its legal counsel, executed and delivered by any Person in connection with this Agreement to create a Lender Lien on any of its real or personal property, as amended, supplemented, or restated from time to time. SOLVENT means, as to a Person, that (a) the aggregate fair market value of its assets exceeds its liabilities; (b) it has sufficient cash flow to enable it to pay its Debts as they mature; and (c) it does not have unreasonably small capital to conduct its businesses. SUBSIDIARY of any Person means any entity of which at least 50% (in number of votes) of the stock (or equivalent interests) is owned of record or beneficially, directly or indirectly, by that Person. SWING LINE BORROWING means any Borrowing under the Swing Line Subfacility. SWING LINE MATURITY DATE means the earlier of (a) July 13, 2010 or (b) the date of the acceleration of maturity of the Swing Line Subfacility in accordance with SECTION 12. SWING LINE NOTE means a promissory note substantially in the form of the attached EXHIBIT B, as amended, supplemented, and restated. SWING LINE SUBFACILITY means the facility under the Facility described in SECTION 2.4. TAXES means, for any Person, taxes, assessments or other governmental charges or levies imposed upon it, its income, or any of its properties, franchises, or assets. TRIBUNAL means any (a) local, state, or federal judicial, executive, or legislative instrumentality; (b) private arbitration board or panel having binding authority with respect to any party to be bound thereby pursuant to a written agreement entered into by such party; or (c) central bank. TYPE means any type of Borrowing determined with respect to the applicable interest option. UCP means the Uniform Customs and Practices for Documentary Credit (1993 version), International Chamber of Commerce Publication No. 500 (as amended or modified from time to time). WHOLLY-OWNED SUBSIDIARY means a Subsidiary owned 100% by Borrower. 1.2 Number and Gender of Words. The singular includes the plural where appropriate and vice versa, and words of any gender include each other gender where appropriate. 1.3 Accounting Principles. Unless otherwise stated, (a) GAAP determines all accounting and financial terms and compliance with financial covenants; (b) all accounting principles applied in a current period must be consistent in all material respects with those applied during the preceding comparable period, unless the change is required by GAAP; provided however, if the Borrower wishes to change an accounting principle that is not consistent with that applied during the preceding comparable period, and is not required under GAAP, such change shall not be effective unless (i) the Borrower shall have objected in writing to determining such compliance on such basis within ten (10) days of delivery to the Administrative Agent of the financial statements relating to such period, or (ii) the Majority Lenders shall so object in writing within thirty (30) days after receipt of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest 36 financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under SECTION 8.1 hereof, shall mean the Current Financials); and (c) the Borrower shall deliver to the Administrative Agent at the same time as the delivery of any annual or quarterly financial statement under SECTION 8.1 hereof (i) a description in reasonable detail of any material variation between the application of accounting principles employed in the preparation of such statement and the application of accounting principles employed in the preparation of the next preceding annual or quarterly financial statements as to which no objection has been made in accordance with the proviso of SUBPARAGRAPH (b) above and (ii) reasonable estimates of the difference between such statements arising as a consequence thereof. Notwithstanding the foregoing to the contrary, for changes which are required under GAAP where GAAP does not require restatement or proforma disclosure of the impact of the change on prior periods, the impact of the change on prior periods will only be disclosed if reasonably practical to estimate. SECTION 2 COMMITMENT. 2.1 The Facility. Subject to the provisions in the Loan Papers, each Lender severally and not jointly agrees to lend to Borrower its Pro Rata Part of one or more Borrowings under the Facility which Borrower may borrow, repay, and reborrow under this Agreement: (i) Each Borrowing under the Facility must occur on a Business Day and no later than the Business Day immediately preceding the Facility Maturity Date; (ii) Each Borrowing must be in an amount not less than (i) $1,000,000 or a greater integral multiple of $100,000 (if an ABR Borrowing other than a Swing Line Borrowing or an ABR Borrowing the proceeds of which are used to repay a Swing Line Borrowing) or (ii) $2,000,000 or a greater integral multiple of $100,000 (if a LIBOR Rate Borrowing); and (iii) When determined, (i) the Facility Commitment Usage may not exceed the Facility Committed Sum and (ii) no Lender's Pro Rata Part of the Facility Commitment Usage may exceed such Lender's Facility Committed Sum. 2.2 Borrowing Procedure. The following procedures apply to Borrowings other than Swing Line Borrowings (see SECTION 2.4) and drawings under an LC (see SECTION 2.3): (i) Borrower may request a Borrowing by submitting to Administrative Agent a Borrowing Request. The Borrowing Request must be received by Administrative Agent no later than (i) 12:00 noon on the third Business Day preceding the Borrowing Date for any LIBOR Rate Borrowing or (ii) 11:00 a.m. on the Borrowing Date for any ABR Borrowing. Administrative Agent shall promptly notify each Lender of its receipt of any Borrowing Request and its contents. A Borrowing Request is irrevocable and binding on Borrower. (ii) By 2:00 p.m. on the applicable Borrowing Date, each Lender shall remit its Pro Rata Part of each requested Borrowing by wire transfer to Administrative Agent pursuant to Administrative Agent's wire transfer instructions on SCHEDULE 1 (or as otherwise directed by Administrative Agent) in funds that are available for immediate use by Administrative Agent. Subject to receipt of such funds, Administrative Agent shall make such funds available to Borrower as directed in the Borrowing Request (unless Administrative Agent has actual knowledge that any applicable condition precedent has not been satisfied by Borrower and has not been waived by Majority Lenders). 37 (iii) Absent contrary written notice from a Lender, Administrative Agent may assume that each Lender has made its Pro Rata Part of the requested Borrowing available to Administrative Agent on the applicable Borrowing Date, and Administrative Agent may, in reliance upon such assumption (but is not required to), make available to Borrower a corresponding amount. If a Lender fails to make its Pro Rata Part of any requested Borrowing available to Administrative Agent on the applicable Borrowing Date, Administrative Agent may recover the applicable amount on demand (i) from that Lender, together with interest at the Federal Funds Rate for the period commencing on the date the amount was made available to Borrower by Administrative Agent and ending on (but excluding) the date Administrative Agent recovers the amount from that Lender or (ii) if that Lender fails to pay its amount upon demand, then from Borrower, together with interest at an annual interest rate equal to the rate applicable to the requested Borrowing for the period commencing on the Borrowing Date and ending on (but excluding) the date Administrative Agent recovers the amount from Borrower. No Lender is responsible for the failure of any other Lender to make its Pro Rata Part of any Borrowing. 2.3 LC Subfacility. (i) Subject to the terms and conditions of this Agreement and applicable Law, Administrative Agent agrees to issue LCs under the Facility upon Borrower's delivery of an LC Request and a duly executed LC Agreement, each of which must be received by Administrative Agent no later than 12:00 noon on the third Business Day before the requested LC is to be issued; provided that the LC Exposure may not exceed $20,000,000 and the Facility Commitment Usage may not exceed the Facility Commitment Sum. Each LC must expire no later than the earlier (i) of five (5) days before the Facility Maturity Date and (ii) one (1) year after such LCs issuance (provided that, LCs may, if so requested by Borrower, be self-extending for up to one additional year with up to one hundred twenty (120) days cancellation notice, but in no event shall the expiration extend beyond the date contemplated by this SECTION 2.3(a)(i)). (ii) Immediately upon Administrative Agent's issuance of any LC, Administrative Agent shall be deemed to have sold and transferred to each other Lender, and each other Lender shall be deemed irrevocably and unconditionally to have purchased and received from Administrative Agent, without recourse or warranty, an undivided interest and participation (to the extent of such Lender's Pro Rata Part of the Facility Commitment Sum) in the LC and all applicable Rights of Administrative Agent in the LC (other than Rights to receive certain fees provided for in SECTION 4.2). Administrative Agent agrees to provide a copy of each LC to each other Lender promptly after issuance. However, Administrative Agent's failure to promptly send to Lenders a copy of an issued LC shall not affect the rights and obligations of Administrative Agent and Lenders under this Agreement. (iii) To induce Administrative Agent to issue and maintain LCs, and to induce Lenders to participate in issued LCs, Borrower agrees to pay or reimburse Administrative Agent (i) within one (1) Business Day after Borrower receives notice from Administrative Agent that any draft or draw request has been properly presented under any LC, or, if the draft of draw request is for payment at a future date, within one (1) Business Day before the payment date specified in the draw request, the amount paid or to be paid by Administrative Agent and (ii) promptly, upon demand, the amount of any additional fees Administrative Agent customarily charges for the application and issuance of an LC, for confirming, negotiating or amending LC Agreements, for honoring drafts and draw requests, and taking similar action in connection with letters of credit. If Borrower does not timely pay or reimburse Administrative Agent for any 38 drafts or draw requests paid or to be paid, Administrative Agent shall fund Borrower's reimbursement obligations as an ABR Borrowing, Pro Rata among the Lenders, under the Facility and the proceeds of the ABR Borrowing shall be advanced directly to Administrative Agent to pay Borrower's unpaid reimbursement obligations. If funds cannot be advanced under the Facility for the immediately preceding sentence to fund the reimbursement obligations as a Borrowing under the Facility, then Borrower's reimbursement obligation shall constitute a demand obligation. Borrower's reimbursement obligations shall accrue interest (x) at the ABR plus the Applicable Margin from the date Administrative Agent pays the applicable draft or draw request through the date Administrative Agent is paid or reimbursed by Borrower and, (y) if funds are not advanced under the Facility, at the Default Rate from the date Administrative Agent pays the applicable draft or draw request through the date Administrative Agent is paid or reimbursed by Borrower. Borrower's obligations under this SECTION 2.3(c) are absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that Borrower may have at any time against Administrative Agent or any other Person. Administrative Agent shall promptly distribute reimbursement payments received from Borrower to all Lenders according to their Pro Rata Part of the Facility Commitment Sum. (iv) Administrative Agent shall promptly notify Borrower of the date and amount of any draft or draw request presented for honor under any LC (but failure to give notice will not affect Borrower's obligations under this Agreement). Administrative Agent shall pay the requested amount upon presentment of a draft or draw request unless presentment on its face does not comply with the terms of the applicable LC. When making payment, Administrative Agent may disregard (i) any default or potential default that exists under any other agreement and (ii) obligations under any other agreement that have or have not been performed by the beneficiary or any other Person (and Administrative Agent is not liable for any of those obligations). Borrower's reimbursement obligations to Administrative Agent and Lenders, and each Lender's obligations to Administrative Agent, under this SECTION 2.3 are absolute and unconditional irrespective of, and Administrative Agent is not responsible for, (1) the validity, enforceability, sufficiency, accuracy, or genuineness of documents or endorsements (even if they are in any respect invalid, unenforceable, insufficient, inaccurate, fraudulent, or forged), (2) any dispute by any Company with or any Company's claims, setoffs, defenses, counterclaims, or other Rights against Administrative Agent, any Lender, or any other Person, or (iii) the occurrence of any Potential Default or Default. (v) If Borrower fails to reimburse Administrative Agent as provided in SECTION 2.3(c) and funds are not advanced under the Facility to satisfy the reimbursement obligations, Administrative Agent shall promptly notify each Lender of Borrower's failure, of the date and amount paid, and of each Lender's Pro Rata Part of the unreimbursed amount. Each Lender shall promptly and unconditionally make available to Administrative Agent in immediately available funds its Pro Rata Part of the unpaid reimbursement obligation. Such funds are due and payable to Administrative Agent before the close of business on (i) the Business Day Administrative Agent gives notice to each Lender of Borrower's reimbursement failure if the notice is received by a Lender before 2:00 p.m. in the time zone where such Lender's office listed on SCHEDULE 1 is located, or (ii) on the next succeeding Business Day after the Business Day Administrative Agent gives notice to each Lender of Borrower's reimbursement failure, if notice is received after 2:00 p.m. in the time zone where such Lender's office listed on SCHEDULE 1 is located. All amounts payable by any Lender accrue interest at the Federal Funds Rate from the day the applicable draft or draw is paid by Administrative Agent to (but not including) the date the amount is paid by the Lender to Administrative Agent. 39 (vi) Borrower acknowledges that each LC is deemed issued upon delivery to the beneficiary or Borrower. If Borrower requests that any LC be delivered to Borrower rather than the beneficiary, and Borrower subsequently cancels that LC, Borrower agrees to return it to Administrative Agent together with Borrower's written certification that it has never been delivered to the beneficiary. If any LC is delivered to the beneficiary under Borrower's instructions, Borrower's cancellation is ineffective without Administrative Agent's receipt of the LC and the beneficiary's written consent to the cancellation. (vii) Administrative Agent agrees with each Lender that it will examine all documents with reasonable care to ascertain that each appears on its face to be in accordance with the terms and conditions of the LC. Each Lender and Borrower agree that, in paying any draft or draw under any LC, Administrative Agent has no responsibility to obtain any document (other than any documents expressly required by the respective LC) or to ascertain or inquire as to any document's validity, enforceability, sufficiency, accuracy, or genuineness or the authority of any Person delivering it. Neither Administrative Agent nor its Representatives will be liable to any Lender or any Company for any LCs use or for any beneficiary's acts or omissions. Any action, inaction, error, delay, or omission taken or suffered by Administrative Agent or any of its Representatives in connection with any LC, applicable draws, drafts, or documents, or the transmission, dispatch, or delivery of any related message or advice, if in conformity with applicable Laws and in accordance with the standards of care specified in the UCP, is binding upon the Companies and Lenders. Administrative Agent is not liable to any Company or any Lender for any action taken or omitted by Administrative Agent or its Representative in connection with any LC in the absence of gross negligence or willful misconduct. (viii) On the Facility Maturity Date, upon a termination under SECTION 2.5, during the continuance of a Default under SECTION 11.3, or upon any demand by Administrative Agent during the continuance of any other Default, Borrower shall provide to Administrative Agent, for the benefit of Lenders, cash collateral in an amount equal to the then-existing LC Exposure. Any cash collateral provided by Borrower to Administrative Agent in accordance with this SECTION 2.3(h) shall be deposited by Administrative Agent in an interest bearing cash collateral account maintained with Administrative Agent at the office of Administrative Agent and invested in obligations issued or guaranteed by the United States and, upon the surrender of any LC, Administrative Agent shall deliver the appropriate funds on deposit in such collateral account to Borrower together with interest accrued on such funds. (ix) BORROWER SHALL PROTECT, INDEMNIFY, PAY, AND SAVE ADMINISTRATIVE AGENT, EACH LENDER AND THEIR RESPECTIVE REPRESENTATIVES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, DAMAGES, LOSSES, COSTS, CHARGES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) WHICH ANY OF THEM MAY INCUR OR BE SUBJECT TO AS A CONSEQUENCE OF THE ISSUANCE OF ANY LC, ANY DISPUTE ABOUT IT, ANY CANCELLATION OF ANY LC BY BORROWER, OR THE FAILURE OF ADMINISTRATIVE AGENT TO HONOR A DRAFT OR DRAW REQUEST UNDER ANY LC AS A RESULT OF ANY ACT OR OMISSION (WHETHER RIGHT OR WRONG) OF ANY PRESENT OR FUTURE TRIBUNAL. HOWEVER, NO PERSON IS ENTITLED TO INDEMNITY UNDER THE FOREGOING FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE PROVISIONS OF AND UNDERTAKINGS AND INDEMNIFICATION SET FORTH IN THIS PARAGRAPH 40 SHALL SURVIVE THE SATISFACTION AND PAYMENT OF THE OBLIGATION AND TERMINATION OF THIS AGREEMENT. (x) Although referenced in any LC, terms of any particular agreement or other obligation to the beneficiary are not incorporated into this Agreement in any manner. The fees and other amounts payable with respect to each LC are as provided in this Agreement, drafts and draws under each LC are part of the Obligation, and the terms of this Agreement control any conflict between the terms of this Agreement and any LC Agreement. (xi) Each of the parties hereto hereby acknowledges and agrees that the Existing LCs are and shall be deemed LCs hereunder and Lenders hereby assume and are jointly and severally obligated in all respects with respect to the Existing LCs in accordance with the terms of this SECTION 2.3. Notwithstanding anything to the contrary set forth herein or in any other Loan Paper, JPMorgan Chase Bank, N.A. shall be deemed to be an issuer of LCs with respect to the Existing LCs. 2.4 Swing Line Subfacility. (i) For the convenience of the parties, the Administrative Agent, solely for its own account, may make any requested Borrowing of not less than $500,000 (or a greater integral multiple of $100,000) directly to Borrower as a Swing Line Borrowing without requiring each other Lender to fund its Pro Rata Part thereof unless and until SECTION 2.4(c) is applicable. Swing Line Borrowings are subject to the following conditions: (i) Each Swing Line Borrowing must occur on a Business Day before the Swing Line Maturity Date; (ii) When determined, (x) the aggregate Swing Line Debt outstanding may not exceed $5,000,000 and (y) the Facility Commitment Usage may not exceed the Facility Committed Sum; (iii) On any date when Borrowings equal to or in excess of $5,000,000 are funded under the Facility, all or a portion of the proceeds of those Borrowings shall be used to repay in full all indebtedness then outstanding under the Swing Line Subfacility; (iv) Each Swing Line Borrowing is deemed an ABR Borrowing; and (v) Each Borrowing under the Swing Line Subfacility is available and may be prepaid on same-day telephonic notice from Borrower to Administrative Agent, if notice is received by Administrative Agent before 11:00 a.m. (ii) Each Swing Line Borrowing shall be repaid on the earlier of (i) the date that is five Business Days after the making of such Swing Line Borrowing and (ii) the Swing Line Maturity Date. (iii) If (i) any Swing Line Borrowing remains outstanding at 12:00 noon on the Business Day immediately prior to the Business Day on which Swing Line Borrowings are due and payable pursuant to SECTION 2.4(b) and by such time Administrative Agent shall not have received a Borrowing Request from Borrower pursuant to SECTION 2.2 requesting an ABR 41 Borrowing on the following Business Day in an amount at least equal to the aggregate principal amount of such Swing Line Borrowings or (ii) any Swing Line Borrowing remains outstanding during the existence of a Potential Default or a Default, Administrative Agent shall be deemed to have received a Borrowing Request from Borrower pursuant to SECTION 2.2 requesting an ABR Borrowing on such following Business Day in an amount equal to the aggregate amount of such Swing Line Borrowings; provided that such ABR Borrowing shall be made notwithstanding Borrower's failure to comply with SECTION 6.2. Notwithstanding the foregoing, if an ABR Borrowing becomes legally impractical, Administrative Agent shall promptly notify each Lender of Borrower's failure to pay such Swing Line Borrowings and the unpaid amount of such Swing Line Borrowings. No later than the close of business on the date Administrative Agent gives notice (if notice is given before 12:00 noon on any Business Day, or, if made at any other time, on the next Business Day following the date of notice), each Lender shall irrevocably and unconditionally purchase and receive from Administrative Agent a ratable participation in such Swing Line Borrowings and shall make available to Administrative Agent in immediately available funds its Pro Rata Part of such unpaid amount, together with interest from the date when its payment was due to, but not including, the date of payment, at the Federal Funds Rate. If a Lender does not promptly pay its amount upon Administrative Agent's demand, and until Lender makes the required payment, Administrative Agent is deemed to continue to have outstanding a Swing Line Borrowing in the amount of the Lender's unpaid obligation. Borrower shall make each payment of all or any part of any Swing Line Borrowing to Administrative Agent for the ratable benefit of Administrative Agent and those Lenders who have funded their participations in Swing Line Borrowings under this SECTION 2.4(c) (but all interest accruing on Swing Line Borrowings before the funding date of any participation is payable solely to Administrative Agent for its own account). 2.5 Termination. Without premium or penalty, and upon giving at least ten (10) Business Days prior written and irrevocable notice to Administrative Agent, Borrower may terminate all or part of the unused portion of the Facility Committed Sum. Each partial termination must be in an amount of not less than $5,000,000 or a greater integral multiple of $1,000,000, and shall be Pro Rata among all Lenders. Once terminated in full, the Facility Committed Sum may not be increased or reinstated. 2.6 Optional Increase in Facility Committed Sum. (i) At any time prior to the Facility Maturity Date, Borrower may increase the Facility Committed Sum, either by designating a financial institution not theretofore a Lender to become a Lender (such designation to be effective only with the prior written consent of Administrative Agent, which consent will not be unreasonably withheld or delayed), or by agreeing with one or more existing Lenders that such Lender's or Lenders' Committed Sum shall be increased. Upon execution and delivery by the Borrower and such Lender or other financial institution of an instrument in form reasonably satisfactory to Administrative Agent, such existing Lender shall have a Committed Sum as therein set forth or such other financial institution shall become a Lender with a Committed Sum as therein set forth and all the rights and obligations of a Lender with a Committed Sum hereunder; provided that: (i) no Event of Default shall have occurred and be continuing or result therefrom; (ii) Borrower shall provide prompt notice of such increase to Administrative Agent, who shall promptly notify the Lenders; 42 (iii) the Committed Sum of each such other financial institution shall be not less than $15,000,000; and (iv) immediately after such increase is made, the Facility Committed Sum shall not exceed $160,000,000. (ii) Upon any increase in the Facility Committed Sum pursuant to SECTION 2.6(a), within five Business Days, in the case of any ABR Borrowings then outstanding, and at the end of the then current Interest Period with respect thereto, in the case of any LIBOR Rate Borrowings then outstanding, Borrower shall prepay such Borrowings in their entirety and, to the extent Borrower elects to do so and subject to the conditions specified in SECTION 6.3, Borrower shall reborrow Borrowings from Lenders in proportion to their respective Pro Rata Part after giving effect to such increase, until such time as all outstanding Borrowings are held by Lenders in such proportion. Effective upon such increase, the amount of the participations held by each Lender in each LC then outstanding shall be adjusted such that, after giving effect to such adjustments, Lenders shall hold participations in each such LC in proportion to their respective Pro Rata Part after giving effect to such increase. SECTION 3 TERMS OF PAYMENT. 3.1 Notes and Payments. (i) (i) The Principal Debt shall be evidenced by the Facility Notes, one payable to each Lender in the stated principal amount of its Committed Sum for the Facility. (ii) Principal Debt under the Swing Line Subfacility shall be evidenced by a Swing Line Note payable to the Administrative Agent in the stated principal amount of $5,000,000. (ii) Borrower must make each payment and prepayment on the Obligation, without offset, counterclaim, or deduction, to Administrative Agent's principal office in New York, New York, in funds that will be available for immediate use by Administrative Agent by 12:00 noon on the day due. Payments received after such time shall be deemed received on the next Business Day. Administrative Agent shall pay to each Lender any payment to which that Lender is entitled on the same day Administrative Agent receives the funds from Borrower if Administrative Agent receives the payment or prepayment before 12:00 noon, and otherwise before 12:00 noon on the following Business Day. If and to the extent that Administrative Agent does not make payments to Lenders when due, unpaid amounts shall accrue interest at the Federal Funds Rate from the due date until (but not including) the payment date. 3.2 Interest and Principal Payments. (i) Interest Payments. Accrued interest on each Borrowing is due and payable on the last day of its respective Interest Period. If any Interest Period with respect to a LIBOR Rate Borrowing is a period greater than three (3) months, then accrued interest is also due and payable on the date three (3) months after the commencement of the Interest Period. Accrued interest on 43 each ABR Borrowing is due and payable on each March 31, June 30, September 30, and December 31 and on the Facility Maturity Date. (ii) Principal Payments. The Principal Debt is due and payable on the Facility Maturity Date. (iii) Mandatory Prepayments of Proceeds. The following amounts shall be applied to prepay the Principal Debt: (i) 100% of the net proceeds of any sale or issuance of equity of the Borrower, except (A) as provided in CLAUSE (iii) below or for Securities issued pursuant to employee stock options or similar plans and (B) for the issuance of equity securities as consideration for acquisitions permitted by SECTION 9.8; (ii) 100% of the net proceeds of any sale or other disposition by the Borrower or any of its subsidiaries of any assets (except for sales permitted under SECTION 9.10) in excess of $35,000,000 in the aggregate from the Closing Date to the date of such sale or other disposition; (iii) 100% of the first $25,000,000 of net proceeds resulting from the issuance by Borrower of convertible preferred securities or subordinated debt, and 75% of the net proceeds of any subordinated debt issued thereafter, shall be applied to the prepayment of Principal Debt, each in accordance with this SECTION 3.2(c). (iv) Mandatory Prepayment. If (i) the Facility Commitment Usage ever exceeds the Facility Committed Sum or (ii) Borrower's property becomes the subject of a casualty or condemnation, the proceeds of which exceed $500,000 in the aggregate, then Borrower shall prepay (1) the Principal Debt under the Facility in at least the amount of the excess described in (i) above, (2) the Principal Debt under the Facility by the amount of proceeds of sales described in SECTION 3.2(c)(ii) above, and (3) the Principal Debt under the Facility by the amount of proceeds of casualty or condemnation described in (ii) above, together with (x) all accrued and unpaid interest on the principal amount so prepaid and (y) any resulting Funding Loss; provided, however, that Borrower shall not be required to make any prepayment required by this SECTION 3.2(d) until the last day of the Interest Period with respect to such Principal Debt so long as an amount equal to such prepayment is deposited by Borrower in a cash collateral account with Administrative Agent to be held in such account on terms reasonably satisfactory to Administrative Agent. (v) Voluntary Prepayment. Borrower may voluntarily repay or prepay all or any part of the Principal Debt at any time without premium or penalty, subject to the following conditions: (i) Administrative Agent must receive Borrower's written payment notice by (A) 12:00 noon on the third Business Day preceding the date of payment of a LIBOR Rate Borrowing and (B) 11:00 a.m. on the date of payment of an ABR Borrowing which shall specify the payment date, the facility or the subfacility under this Agreement being paid and the Type and amount of the Borrowing(s) to be paid, and which shall constitute an irrevocable and binding obligation of Borrower to make a repayment or prepayment on the designated date; 44 (ii) each partial repayment or prepayment must be in a minimum amount of at least $2,000,000 or a greater integral multiple of $100,000 (if a LIBOR Rate Borrowing), or $1,000,000 or a greater integral multiple of $100,000 (if an ABR Borrowing other than under the Swing Line Subfacility) or $500,000 or a greater multiple (if a Borrowing under the Swing Line Subfacility); (iii) all accrued interest on the portion of the Obligation being prepaid must also be paid in full on the date of payment; and (iv) Borrower shall pay any related Funding Loss upon demand. 3.3 Interest Options. Except as specifically otherwise provided, Borrowings bear interest at an annual rate equal to the lesser of (a) the ABR plus the Applicable Margin or LIBOR plus the Applicable Margin (in each case as designated or deemed designated by Borrower and, in the case of LIBOR Rate Borrowings, for the Interest Period designated by Borrower), as the case may be, and (b) the Maximum Rate. Each change in the ABR and Maximum Rate is effective, without notice to Borrower or any other Person, upon the effective date of change. 3.4 Quotation of Rates. A Responsible Officer of Borrower may call Administrative Agent before delivering a Borrowing Request to receive an indication of the interest rates then in effect, but the indicated rates do not bind Administrative Agent or Lenders or affect the interest rate that is actually in effect when Borrower delivers its Borrowing Request or on the Borrowing Date. 3.5 Default Rate. If permitted by Law, all past-due Principal Debt, Borrower's past-due payment and reimbursement obligations in connection with LCs, and past-due interest accruing on any of the foregoing, bears interest from the date due (stated or by acceleration) at the Default Rate until paid, regardless whether payment is made before or after entry of a judgment. 3.6 Interest Recapture. If the designated interest rate applicable to any Borrowing exceeds the Maximum Rate, the interest rate on that Borrowing is limited to the Maximum Rate, but, to the extent permitted by applicable Laws, any subsequent reductions in the designated rate shall not reduce the interest rate thereon below the Maximum Rate until the total amount of accrued interest equals the amount of interest that would have accrued if that designated rate had always been in effect. If at maturity (stated or by acceleration), or at final payment of the Notes, the total interest paid or accrued is less than the interest that would have accrued if the designated rates had always been in effect, then, at that time and to the extent permitted by applicable Law, Borrower shall pay an amount equal to the difference between (a) the lesser of the amount of interest that would have accrued if the designated rates had always been in effect and the amount of interest that would have accrued if the Maximum Rate had always been in effect, and (b) the amount of interest actually paid or accrued on the Notes. 3.7 Interest Calculations. (i) Interest will be calculated on the basis of actual number of days elapsed (including the first day but excluding the last day) but computed as if each calendar year consisted of three hundred sixty (360) days for LIBOR Rate Borrowings (unless the calculation would result in an interest rate greater than the Maximum Rate, in which event interest will be calculated on the basis of a year of 365 or 366 days, as the case may be), and 365 or 366 days, as the case may be, for ABR Borrowings. All interest rate determinations and calculations by Administrative Agent are conclusive and binding absent manifest error. 45 (ii) The provisions of this Agreement relating to calculation of the ABR and LIBOR Rates are included only for the purpose of determining the rate of interest or other amounts to be paid under this Agreement that are based upon those rates. 3.8 Maximum Rate. Regardless of any provision contained in any Loan Paper or any document related thereto, it is the intent of the parties to this Agreement that neither Administrative Agent nor any Lender contract for, charge, take, reserve, receive, or apply as interest on all or any part of the Obligation any amount in excess of the Maximum Rate or the Maximum Amount or receive any unearned interest in violation of any applicable Law, and, if Lenders ever do so, then any excess shall be treated as a partial repayment or prepayment of principal and any remaining excess shall be refunded to Borrower. In determining if the interest paid or payable exceeds the Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted under applicable Law, (a) treat all Borrowings as but a single extension of credit (and Lenders and Borrower agree that is the case and that provision in this Agreement for multiple Borrowings is for convenience only); (b) characterize any nonprincipal payment as an expense, fee or premium rather than as interest; (c) exclude voluntary repayments or prepayments and their effects; and (d) amortize, prorate, allocate, and spread the total amount of interest throughout the entire contemplated term of the Obligation. However, if the Obligation is paid in full before the end of its full contemplated term, and if the interest received for its actual period of existence exceeds the Maximum Amount, Lenders shall refund any excess (and Lenders may not, to the extent permitted by Law, be subject to any penalties provided by any Laws for contracting for, charging, taking, reserving, or receiving interest in excess of the Maximum Amount). 3.9 Interest Periods. When Borrower requests any LIBOR Rate Borrowing, Borrower may elect the applicable interest period (each an "INTEREST PERIOD"), which may be, at Borrower's option, one (1), two (2), three (3), or six (6) months for LIBOR Rate Borrowings, subject to the following conditions: (a) the initial Interest Period for a LIBOR Rate Borrowing commences on the applicable Borrowing Date or conversion date, and each subsequent Interest Period applicable to any Borrowing commences on the day when the next preceding applicable Interest Period expires; (b) if any Interest Period for a LIBOR Rate Borrowing begins on a day for which there exists no numerically corresponding Business Day in the calendar month at the end of the Interest Period ("ENDING CALENDAR MONTH"), then the Interest Period ends on the next succeeding Business Day of the Ending Calendar Month, unless there is no succeeding Business Day in the Ending Calendar Month in which case the Interest Period ends on the next preceding Business Day of the Ending Calendar Month; (c) no Interest Period for any portion of Principal Debt may extend beyond the scheduled repayment date for that portion of Principal Debt; and (d) there may not be in effect at any one time more than six (6) Interest Periods under the Facility. 3.10 Conversions. Borrower may (a) on the last day of the applicable Interest Period convert all or part of a LIBOR Rate Borrowing to an ABR Borrowing; (b) at any time convert all or part of an ABR Borrowing to a LIBOR Rate Borrowing; and (c) elect a new Interest Period for a LIBOR Rate Borrowing. Any such conversion is subject to the dollar limits and denominations of SECTION 2.1 and may be accomplished by delivering a Conversion Request to Administrative Agent no later than (i) 12:00 noon on the third Business Day before the conversion date for conversion to a LIBOR Rate Borrowing and the last day of the Interest Period, for the election of a new Interest Period, and (ii) 11:00 a.m. on the last day of the Interest Period for conversion to an ABR Borrowing. Absent Borrower's notice of conversion or election of a new Interest Period, a LIBOR Rate Borrowing shall be converted to an ABR Borrowing when the applicable Interest Period expires. 46 3.11 Order of Application. (i) If no Default or Potential Default exists, any payment shall be applied to the Obligation in the order and manner as provided in this Agreement. (ii) If a Default or Potential Default exists, any payment (including proceeds from the exercise of any Rights) shall be applied in the following order: (i) to all fees and expenses for which Administrative Agent or Lenders have not been paid or reimbursed in accordance with the Loan Papers (and if such payment is less than all unpaid or unreimbursed fees and expenses, then the payment shall be paid against unpaid and unreimbursed fees and expenses in the order of incurrence or due date); (ii) to accrued interest on the Principal Debt; (iii) to the Principal of Debt outstanding under the Swing Line Subfacility; (iv) to any LC reimbursement obligations that are due and payable and that remain unfunded by any Borrowing under the Facility; (v) to the remaining Obligation in the order and manner Majority Lenders deem appropriate; and (vi) as a deposit with Administrative Agent, for the benefit of Lenders, as security for and payment of any subsequent LC reimbursement obligations. 3.12 Sharing of Payments, Etc. If any Lender obtains any amount (whether voluntary, involuntary or otherwise, including, without limitation, as a result of exercising its Rights under SECTION 3.13) that exceeds its combined Pro Rata Part of the Facility Commitment Usage, then that Lender shall purchase from the other Lenders participations that will cause the purchasing Lender to share the excess amount ratably with each other Lender. If all or any portion of any excess amount is subsequently recovered from the purchasing Lender, then the purchase shall be rescinded and the purchase price restored to the extent of the recovery. Borrower agrees that any Lender purchasing a participation from another Lender under this section may, to the fullest extent permitted by Law, exercise all of its Rights of payment (including the Right of offset) with respect to that participation as fully as if that Lender were the direct creditor of Borrower in the amount of that participation. 3.13 Offset. If a Default exists, each Lender is entitled, but is not obligated, to exercise (for the benefit of all Lenders in accordance with SECTION 3.12) the Rights of offset and banker's Lien against each and every account and other property, or any interest therein, that any Company may now or hereafter have with, or which is now or hereafter in the possession of, that Lender to the extent of the full amount of the Obligation owed to it. 3.14 Booking Borrowings. To the extent permitted by Law, any Lender may make, carry, or transfer its Borrowings at, to, or for the account of any of its branch offices or the office of any of its Affiliates. However, no Affiliate is entitled to receive any greater payment under SECTION 3.16 than the transferor Lender would have been entitled to receive with respect to those Borrowings. 3.15 Basis Unavailable or Inadequate for LIBOR. If, on or before any date when LIBOR Rate is to be determined for a Borrowing, Administrative Agent, or any Lender determines (and Majority Lenders agree with that determination) that the basis for determining the applicable rate is not available or that the resulting rate does not accurately reflect the cost to Lenders of making or converting Borrowings at that rate for the applicable Interest Period, then Administrative Agent shall promptly notify Borrower and Lenders of that determination (which is conclusive and binding on Borrower absent manifest error) and the applicable Borrowing shall bear interest at the sum of the ABR plus the Applicable Margin. Until Administrative Agent notifies Borrower that those circumstances no longer exist, Lenders' commitments under this Agreement to make, or to convert to, LIBOR Rate Borrowings (as the case may be) will be suspended. 47 3.16 Additional Costs. With respect to any Law, requirement, request, directive, or change affecting banking institutions generally: (i) With respect to any LIBOR Rate Borrowing or ABR Borrowing, if (i) any change in present Law or any future Law imposes, modifies, or deems applicable (or if compliance by any Lender with any such requirement of any Tribunal results in) any such requirement that any reserves (including, without limitation, any marginal, emergency, supplemental, or special reserves) be maintained, and (ii) those reserves reduce any sums receivable by that Lender under this Agreement or increase the costs incurred by that Lender in advancing or maintaining any portion of any LIBOR Rate Borrowing, or ABR Borrowing, then (unless the effect is already reflected in the rate of interest then applicable under this Agreement) that Lender (through Administrative Agent) shall deliver to Borrower a certificate setting forth in reasonable detail the basis and calculation of the amount necessary to compensate it for its reduction or increase (which certificate is conclusive and binding absent manifest error), and Borrower shall promptly pay that amount to that Lender upon demand. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Agreement. (ii) With respect to any Borrowing or LC, if any change in present Law or any future Law regarding capital adequacy or compliance by Administrative Agent (as issuer of LCs) or any Lender with any request, directive, or requirement now existing or hereafter imposed by any Tribunal regarding capital adequacy, or any change in its written policies or in the risk category of this transaction, reduces the rate of return on its capital as a consequence of its obligations under this Agreement to a level below that which it otherwise could have achieved (taking into consideration its policies with respect to capital adequacy) by an amount deemed by it to be material (and it may, in determining the amount, use reasonable assumptions and allocations of costs and expenses and use any reasonable averaging or attribution method), then (unless the effect is already reflected in the rate of interest then applicable under this Agreement) Administrative Agent or that Lender (through Administrative Agent) shall notify Borrower and deliver to Borrower a certificate setting forth in reasonable detail the calculation of the amount necessary to compensate it (which certificate is conclusive and binding absent manifest error), and Borrower shall promptly pay that amount to Administrative Agent or that Lender upon demand. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Agreement. (iii) Any Taxes payable by Administrative Agent or any Lender or ruled (by a Tribunal) payable by Administrative Agent or any Lender in respect of this Agreement or any other Loan Paper shall, if permitted by Law, be paid by Borrower, together with interest and penalties, if any (except for (i)(1) Taxes imposed on or measured by the net income of Administrative Agent or that Lender (2) franchise or similar taxes of the Administrative Agent or that Lender and (3) amounts requested to be withheld for Taxes pursuant to the last sentence of SECTION 3.19 and (ii) except for interest and penalties incurred as a result of the gross negligence or willful misconduct of Administrative Agent or any Lender). Administrative Agent or that Lender (through Administrative Agent) shall notify Borrower and deliver to Borrower a certificate setting forth in reasonable detail the basis and calculation of the amount of payable Taxes, which certificate is conclusive and binding (absent manifest error), and Borrower shall promptly pay that amount to Administrative Agent for its account or the account of that Lender, 48 as the case may be. If Administrative Agent or that Lender subsequently receives a refund of the Taxes paid to it by Borrower, then the recipient shall promptly pay the refund to Borrower. 3.17 Change in Laws. If any Law makes it unlawful for any Lender to make or maintain any Borrowing based on the LIBOR Rate Borrowings, then that Lender shall promptly notify Borrower and Administrative Agent, and (a) as to undisbursed funds, that requested Borrowing shall be made as an ABR Borrowing subject to the higher of the Prime Rate and the Federal Funds Rate plus 1%, and (b), as to any outstanding Borrowing, (i) if maintaining the Borrowing until the last day of the applicable Interest Period is unlawful, the Borrowing shall be converted to an ABR Borrowing as of the date of notice, and Borrower shall pay any related Funding Loss, or (ii) if not prohibited by Law, the Borrowing shall be converted to an ABR Borrowing as of the last day of the applicable Interest Period, or (iii) if any conversion will not resolve the unlawfulness, Borrower shall promptly prepay the Borrowing, without penalty, together with any related Funding Loss. 3.18 Funding Loss. BORROWER AGREES TO INDEMNIFY EACH LENDER AGAINST, AND PAY TO IT UPON DEMAND, ANY FUNDING LOSS OF THAT LENDER. When any Lender demands that Borrower pay any Funding Loss, that Lender shall deliver to Borrower and Administrative Agent a certificate setting forth in reasonable detail the basis for imposing Funding Loss and the calculation of the amount, which calculation is conclusive and binding absent manifest error. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Agreement. 3.19 Foreign Lenders. Each Lender that is organized under the Laws of any jurisdiction other than the United States of America or any State thereof (a "NON-U.S. LENDER") (a) represents to Administrative Agent and Borrower that (i) no Taxes are required to be withheld by Administrative Agent or Borrower with respect to any payments to be made to it in respect of the Obligation and (ii) it has furnished to Administrative Agent and Borrower two duly completed copies of U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8, or any other tax form acceptable to Administrative Agent and Borrower (wherein it claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments under the Loan Papers) or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", Form W-8 or successor applicable form (and, if such Non-U.S. Lender delivers copies of Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, is not a ten percent (10%) shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and is not a controlled foreign corporation related to the Borrower within the meaning of Section 864(d)(4) of the Code), and (b) covenants to (i) provide Administrative Agent and Borrower a new tax form upon the expiration or obsolescence of any previously delivered form according to Law, duly executed and completed by it, and (ii) comply from time to time with all Laws with regard to the withholding tax exemption. If any of the foregoing is not true or the applicable forms are not provided, then Borrower and Administrative Agent (without duplication) may deduct and withhold from interest payments under the Loan Papers United States federal income tax at the full rate applicable under the Code. The Borrower shall not be required to indemnify or pay any additional amounts to any Non-U.S. Lender in respect of U.S. federal income tax pursuant to this Agreement to the extent that the obligation to pay U.S. federal income tax would not have occurred but for the failure of such Non-U.S. Lender to deliver the forms or other certifications required pursuant to this SECTION 3.19. 49 SECTION 4 FEES. 4.1 Treatment of Fees. The fees described in this SECTION 4 are calculated on the basis of actual number of days (including the first day but excluding the last day) elapsed, but computed as if each calendar year consisted of three hundred sixty (360) days, unless computation would result in an interest rate in excess of the Maximum Rate in which event the computation is made on the basis of a year of 365 or 366 days, as the case may be. The fees described in this SECTION 4 are in all events subject to the provisions of SECTION 3.8 of this Agreement. 4.2 LC Fees. As a condition to the issuance or extension of a LC, Borrower shall pay to Administrative Agent (and such payment shall accompany each LC Request) a fee equal to (a) one-eighth of one percent (0.125%) multiplied by (b) the face amount of the LC, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, and on the Facility Maturity Date. Borrower shall also pay a commission on all outstanding LCs at a per annum rate equal to the Applicable Margin with respect to LIBOR Rate Borrowings on the face amount of each LC. Such commission shall be payable quarterly in arrears to Administrative Agent for ratable distribution among the Lenders participating in the Facility. Borrower also agrees to pay on demand and solely for the account of Administrative Agent, any and all additional customary LC fees including those relating to administering, issuing, confirming, negotiating or amending LCs. 4.3 Facility Commitment Fee. Borrower shall pay to Administrative Agent for the account of each Lender a commitment fee ("COMMITMENT FEE"), payable as it accrues on each March 31, June 30, September 30, and December 31, and on the Facility Maturity Date, equal to the Applicable Margin times the amount by which (a) such Lender's Facility Committed Sum exceeds (b) such Lender's average daily Facility Commitment Usage, in each case during the calendar quarter ending on such date. If there is any change in the Applicable Margin during any quarter, the average daily amount shall be computed and multiplied by the Applicable Margin separately for each period that such Applicable Margin was in effect during such quarter. SECTION 5 SECURITY. 5.1 Collateral. Full and complete payment of the Obligation is secured by all of the property (together with proceeds thereof and any additional collateral ever furnished under SECTION 5.2, the "COLLATERAL") described in the following Security Documents: a security agreement in respect of all accounts receivable, equipment (except as otherwise provided pursuant to the terms of such security agreement), fixtures, inventory, escrow accounts and other personal property of the Borrower, a pledge agreement executed by the Borrower of all owned capital stock of any Subsidiary, provided that the pledge as respects the capital stock of a foreign Subsidiary shall be limited to sixty-five percent (65%) of such Subsidiary's capital stock, and a negative pledge agreement of the Borrower not to encumber any tangible personal property or real property, whether owned or leased, with any Liens not agreed to by Administrative Agent and Permitted Liens. 5.2 Additional Security and Guaranties. Administrative Agent may, without notice or demand and without affecting any Person's obligations under the Loan Papers, from time to time (a) receive and hold additional collateral from any Person for the payment of all or any part of the Obligation and exchange, enforce or release all or any part of that collateral and (b) accept and hold any endorsement or guaranty of payment of all or any part of the Obligation and release any endorser or guarantor, or any Person who has given any other security for the payment of all or any part of the Obligation, or any other Person in any way obligated to pay all or any part of the Obligation. 50 5.3 Financing Statements. Borrower will file, or cause to be filed, financing statements and will execute, or cause to be executed, stock powers and other writings in the form and content reasonably required by Administrative Agent, and Borrower will pay all costs of filing any financing, continuation or termination statements, or other action taken by Administrative Agent relating to the Collateral, including, without limitation, costs and expenses of any Lien search reasonably required by Administrative Agent. SECTION 6 CONDITIONS PRECEDENT. 6.1 Initial Borrowing. Lenders will not be obligated to fund the initial Borrowing unless Administrative Agent has timely received (a) a Borrowing Request and (b) all of the items described on the attached SCHEDULE 6. 6.2 All Borrowings or LCs. In addition, Lenders will not be obligated to fund (as opposed to continue or convert) any Borrowing, and Administrative Agent will not be obligated to issue any LC, as the case may be, unless on the applicable Borrowing Date, issue date, or creation date (and after giving effect to the requested Borrowing or LC), as the case may be: (a) Administrative Agent shall have timely received a Borrowing Request or LC Request (together with the applicable duly executed LC Agreement), as the case may be; (b) Administrative Agent shall have received any applicable LC fee; (c) all of the representations and warranties of the Borrower in the Loan Papers are true and correct in all material respects (unless they speak to a specific date or are based on facts which have changed by transactions contemplated or permitted by this Agreement); (d) no Default or Potential Default exists; and (e) the funding of the Borrowing or issuance of the LC, as the case may be, is permitted by Law. Upon Administrative Agent's request, Borrower shall deliver to Administrative Agent evidence substantiating any of the matters in the Loan Papers that are necessary to enable Borrower to qualify for the Borrowing or LC, as the case may be. 6.3 Materiality of Conditions. Each condition precedent in this Agreement (including, without limitation, those on the attached SCHEDULE 6) is material to the transactions contemplated by this Agreement, and time is of the essence with respect to each condition precedent. 6.4 Waiver. Subject to the prior approval of Majority Lenders, Lenders may fund any Borrowing, and Administrative Agent may issue any LC, without all conditions being satisfied, but, to the extent permitted by Law, that funding and issuance shall not be deemed to be a waiver of the requirement that each condition precedent be satisfied as a prerequisite for any subsequent funding or issuance, unless Majority Lenders specifically waive each item in writing. SECTION 7 REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Administrative Agent and Lenders as follows: 7.1 Purpose of Credit Facility. Borrower will use proceeds of Facility Borrowings and LCs for working capital and general corporate purposes of the Companies, to refinance certain indebtedness of Borrower and to finance Acquisitions permitted hereunder. No Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended. No part of the proceeds of any LC draft or drawing, or Borrowing will be used, directly or indirectly, for a purpose that violates any Law, including without limitation, the provisions of Regulation U. 51 7.2 Corporate Existence, Good Standing, Authority, and Compliance. Each Company is duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is incorporated or organized as identified on the attached SCHEDULE 7.2 or on the most recently amended SCHEDULE 7.2. Except where failure is not a Material Adverse Event, each Company (a) is duly qualified to transact business and is in good standing as a foreign corporation or other entity in each jurisdiction where the nature and extent of its business and properties require due qualification and good standing (those jurisdictions being identified on the attached SCHEDULE 7.2 or on the most recently amended SCHEDULE 7.2; (b) possesses all requisite authority, permits, and power to conduct its business as is now being, or is contemplated by this Agreement to be, conducted; and (c) is in compliance with all applicable Laws, except in each case where the failure to so qualify, to possess such authority, permits, or power or to comply with such Law would not cause a Material Adverse Event. 7.3 Subsidiaries. As of the date of this Agreement, Borrower has no Subsidiaries except as disclosed on the attached SCHEDULE 7.3 or on the most recently amended SCHEDULE 7.3 reflecting changes to the schedule as a result of transactions permitted by this Agreement. All of the outstanding shares of capital stock (or similar voting interests) of those Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and are owned of record and beneficially as set forth thereon, free and clear of any Liens, restrictions, claims or Rights of another Person, other than Permitted Liens, and are not subject to any warrant, option or other acquisition Right of any Person or subject to any transfer restriction except for restrictions imposed by securities Laws and general corporate Laws. 7.4 Authorization and Contravention. The execution and delivery by each Company of each Loan Paper or related document to which it is a party and the performance by it of its obligations thereunder (a) are within its corporate power; (b) have been duly authorized by all necessary corporate action; (c) require no action by or filing with any Tribunal (other than any action or filing that has been taken or made on or before the date of this Agreement or which would not cause a Material Adverse Event); (d) do not violate any provision of its charter or bylaws; (e) do not violate any provision of Law or order of any Tribunal applicable to it, other than violations that individually or collectively are not a Material Adverse Event; (f) do not violate any Material Agreements to which it is a party, other than a violation which would not cause a Material Adverse Event; or (g) do not result in the creation or imposition of any Lien (other than the Lender Liens) on any asset of any Company. 7.5 Binding Effect. Upon execution and delivery by all parties thereto, each Loan Paper will constitute a legal and binding obligation of each Company party thereto, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable Debtor Relief Laws and general principles of equity. 7.6 Financial Statements; Fiscal Year. The Current Financials were prepared in accordance with GAAP and present fairly, in all material respects, the consolidated financial condition, results of operations, and cash flows of the Companies as of, and for the portion of the fiscal year ending, on the date or dates thereof (subject only to normal year-end adjustments). All material liabilities of the Companies as of the date or dates of the Current Financials are reflected therein or in the notes thereto. Except for transactions directly related to, or specifically contemplated by, the Loan Papers, no subsequent material adverse changes have occurred in the consolidated financial condition of the Companies from that shown in the Current Financials, nor has any Company incurred any subsequent material liability. The fiscal year of each Company ends on the last Saturday in March. 7.7 Litigation. Except as disclosed on the attached SCHEDULE 7.7 or the most recently amended SCHEDULE 7.7, no Company is subject to, or aware of the threat of, any Litigation that is 52 reasonably likely to be determined adversely to any Company and, if so adversely determined, is a Material Adverse Event. Except as permitted under SECTION 11.4, no outstanding and unpaid judgments against any Company exist. 7.8 Taxes. All Tax returns of each Company required to be filed have been filed (or extensions have been granted) before delinquency, except for returns for which the failure to file is not a Material Adverse Event, and all Taxes imposed upon each Company that are due and payable have been paid before delinquency, other than Taxes for which the criteria for Permitted Liens have been satisfied or for which nonpayment is not a Material Adverse Event. 7.9 Environmental Matters. Except as disclosed on SCHEDULE 7.9 or on the most recently amended SCHEDULE 7.9, (a) no Company knows of any environmental condition or circumstance materially adversely affecting any Company's properties taken as a whole or operations; (b) no Company has received any report of any Company's material violation of any Environmental Law;(c) no Company knows that any Company is under any obligation to remedy any material violation of any Environmental Law; or (d) no facility of any Company is used for, or to the knowledge of any Company has been used for, storage, treatment, or disposal of any Hazardous Substance, excluding the storage of Hazardous Substances in amounts commonly and lawfully used in automotive repair shops which have been handled in compliance with applicable Environmental Law. Except as disclosed in SCHEDULE 7.9, each Company has taken prudent steps to determine that its properties and operations do not violate any Environmental Law, other than violations that are not, individually or in the aggregate, a Material Adverse Event, except where such condition, circumstance, violation or non-compliance would not reasonably be expected to have a monetary impact or cost to the Borrower equal to or in excess of five percent (5%) of the Borrower's pre-tax income during the preceding Four Quarter Period, such amount not to exceed $1,000,000. 7.10 Employee Plans. Except where occurrence or existence is not a Material Adverse Event, (a) no Employee Plan has incurred an "accumulated funding deficiency" (as defined in section 302 of ERISA or section 412 of the Code); (b) no Company has incurred liability under ERISA to the PBGC in connection with any Employee Plan (other than required insurance premiums, all of which have been paid); (c) no Company has withdrawn in whole or in part from participation in a Multiemployer Plan; (d) no Company has engaged in any "prohibited transaction" (as defined in section 406 of ERISA or section 4975 of the Code); and (e) no Reportable Event has occurred, excluding events for which the notice requirement is waived under applicable PBGC regulations. 7.11 Properties; Liens. Each Company has good and marketable title to all its property reflected on the Current Financials (except for property that is obsolete or that has been disposed in the ordinary course of business or, after the date of this Agreement, as otherwise permitted by SECTION 9.10 or SECTION 9.11). Except for Permitted Liens, no Lien exists on any property of any Company, and the execution, delivery, performance, or observance of the Loan Papers will not require or result in the creation of any Lien (other than Lender Liens) on any Company's property. 7.12 Location; Real Estate Interests. Each Company's chief executive office is located at the address on the attached SCHEDULE 7.12 or on the most recently amended SCHEDULE 7.12. Each Company's books and records concerning accounts and accounts receivable are located at its chief executive office, and all of its inventory (other than inventory on consignment, in transit or in the possession of a subcontractor of any Company) is in its possession and, together with the Company's other material assets, are located, until sold in the ordinary course of business, at one or more of the locations on the attached SCHEDULE 7.12 or on the most recently amended SCHEDULE 7.12. Except as described on the 53 attached SCHEDULE 7.12, or on the most recently amended SCHEDULE 7.12, no Company has any ownership, leasehold, or other interest in real estate. 7.13 Government Regulations. No Company is subject to regulation under the Investment Company Act of 1940, as amended, or the Public Utility Holding Company Act of 1935, as amended. 7.14 Transactions with Affiliates. Except as disclosed on the attached SCHEDULE 7.14 other than the most recently amended SCHEDULE 7.14 (if the disclosures are approved by Majority Lenders), no Company is a party to a material transaction with any of its Affiliates (excluding other Companies), other than transactions in the ordinary course of business and upon fair and reasonable terms not materially less favorable than it could obtain or could become entitled to in an arm's-length transaction with a Person that was not its Affiliate. For purposes of this SECTION 7.14, a transaction is "material" if it requires any Company to pay more than $1,000,000 during the term of the governing agreement. 7.15 Debt. No Company is an obligor on any Funded Debt, other than Permitted Debt. 7.16 Material Agreements. No Company is a party to any Material Agreement, other than the Loan Papers and the Material Agreements described on the attached SCHEDULE 7.16. All described Material Agreements are in full force and effect, and no default or potential default exists on the part of any Company thereunder that is a Material Adverse Event. 7.17 Insurance. Each Company maintains with financially sound, responsible, and reputable insurance companies or associations (or, as to workers' compensation or similar insurance, with an insurance fund or by self-insurance authorized by the jurisdictions in which it operates) insurance concerning its properties and businesses against casualties and contingencies and of types and in amounts (and with co-insurance and deductibles) as is customary in the case of similar businesses. 7.18 Labor Matters. No actual or threatened strikes, labor disputes, slow downs, walkouts, or other concerted interruptions of operations by the employees of any Company that are a Material Adverse Event exist. Hours worked by and payment made to employees of the Companies have not been in violation of the Fair Labor Standards Act or any other applicable Law dealing with labor matters, other than any violations, individually or collectively, that are not a Material Adverse Event. All payments due from any Company for employee health and welfare insurance have been paid or accrued as a liability on its books, other than any nonpayments that are not, individually or collectively, a Material Adverse Event. 7.19 Solvency. On each Borrowing Date, each Company is, and after giving effect to the requested Borrowing will be, Solvent. 7.20 Trade Names. No Company has used or transacted business under any other corporate or trade name in the five-year period preceding the initial Borrowing Date, except as disclosed on the attached SCHEDULE 7.20. 7.21 Intellectual Property. Each Company owns or has the right to use all material licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, and trade names necessary to continue to conduct its businesses as presently conducted by it and proposed to be conducted by it immediately after the date of this Agreement. Each Company is conducting its business without infringement or claim of infringement of any license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of others, other than any infringements or claims that, if successfully asserted against or determined adversely to any Company, would not, 54 individually or collectively, constitute a Material Adverse Event. To the knowledge of any Company, no infringement or claim of infringement by others of any material license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property of any Company exists. Except as disclosed on the attached SCHEDULE 7.21, or on the most recently amended SCHEDULE 7.21, no Company has any ownership or other interest in any United States or foreign trademark applications or registrations thereof, patent applications or issued patents, or copyright applications or registrations thereof. 7.22 Full Disclosure. All information previously furnished, furnished on the date of this Agreement, and furnished in the future, by any Company to Administrative Agent in connection with the Loan Papers (a) was, is, and will be, true and accurate in all material respects or based on reasonable estimates on the date the information is stated or certified and (b) did not, does not, and will not, fail to state any fact the omission of which would otherwise make any such information materially misleading. SECTION 8 AFFIRMATIVE COVENANTS. So long as Lenders are committed to fund any Borrowings and Administrative Agent is committed to issue LCs under this Agreement, and thereafter until the Obligation is paid in full, Borrower covenants and agrees as follows: 8.1 Items to be Furnished. Borrower shall cause the following to be furnished to Administrative Agent and each Lender: (i) Promptly after preparation, and no later than one hundred (100) days after the last day of each fiscal year of Borrower, Financial Statements showing the consolidated financial condition and results of operations of the Companies as of, and for the year ended on, that last day, accompanied by: (i) the unqualified opinion of Borrower's Accountants, based on an audit using generally accepted auditing standards, that the Financial Statements were prepared in accordance with GAAP and present fairly, in all material respects, the consolidated financial condition and results of operations of the Companies, (ii) certificate from the accounting firm to Administrative Agent indicating that during its audit it obtained no knowledge of any Default or Potential Default or, if it obtained knowledge, the nature and period of existence thereof, and (iii) a Compliance Certificate with respect to the Financial Statements. (ii) Promptly after preparation, and no later than fifty (50) days after the last day of the first three fiscal quarters of Borrower, Financial Statements showing the consolidated financial condition and results of operations of the Companies for the fiscal quarter and for the period from the beginning of the current fiscal year to the last day of the fiscal quarter, subject to ordinary year-end adjustments, accompanied by a Compliance Certificate with respect to the Financial Statements. (iii) Within thirty (30) days after the end of each fiscal year of Borrower (commencing with the fiscal year ending on or about March 31, 2006), the financial budget for the next succeeding fiscal year, accompanied by a certificate executed by a Responsible Officer certifying that the budget was prepared by Borrower based on assumptions that, in light of the historical performance of the Companies and their prospects for the future, are reasonable as of the date prepared. 55 (iv) Promptly after receipt, a copy of each interim or special audit report and management letter issued by Borrower's Accountants with respect to any Company or its financial records. (v) Notice, promptly after Borrower knows or has reason to know, of (i) the existence and status of any Litigation that, if determined adversely to any Company, would be a Material Adverse Event; (ii) any change in any material fact or circumstance represented or warranted by any Company in any Loan Paper; (iii) the receipt by any Company of notice of any violation or alleged violation of ERISA or any Environmental Law (which individually or collectively with other violations or allegations could constitute a Material Adverse Event); or (iv) a Default or Potential Default, specifying the nature thereof and what action the Companies have taken, are taking, or propose to take. (vi) Promptly after filing, copies of all material reports or filings filed by or on behalf of any Company with any Tribunal. (vii) Promptly upon reasonable request by Administrative Agent or Majority Lenders (through Administrative Agent), information (not otherwise required to be furnished under the Loan Papers) respecting the business affairs, assets, and liabilities of the Companies and opinions, projections, certifications, and documents in addition to those mentioned in this Agreement. 8.2 Use of Proceeds. Borrower shall use the proceeds of Borrowings only for the purposes represented in this Agreement. 8.3 Books and Records. Borrower will, and will cause each other Company, to maintain books, records, and accounts necessary to prepare financial statements in accordance with GAAP. 8.4 Inspections. Upon reasonable request and reasonable prior notice, Borrower will, and will cause each other Company, to allow Administrative Agent or any Lender (or their Representatives) to inspect any of its properties, to review reports, files, and other records, and to make and take away copies, to conduct tests or investigations, and to discuss any of its affairs, conditions, and finances with its other creditors, directors, officers, employees, or representatives from time to time, during reasonable business hours. 8.5 Taxes. Borrower will, and will cause each other Company, to promptly pay when due any and all Taxes, other than Taxes which are being contested in good faith by lawful proceedings diligently conducted, against which reserve or other provision required by GAAP has been made, and in respect of which levy and execution of any Lien have been and continue to be stayed. 8.6 Payment of Obligations. Borrower will, and will cause each other Company, to promptly pay (or renew and extend) all of its material obligations as they become due (unless the obligations are being contested in good faith by appropriate proceedings). 8.7 Expenses. Borrower shall promptly pay, within five (5) days following the receipt of an invoice therefor setting forth the amount thereof (a) all costs, fees, and expenses paid or incurred by Administrative Agent and Arranger in connection with the arrangement, syndication, and negotiation of the Facility and the negotiation, preparation, delivery, and execution of the Loan Papers and any related amendment, waiver, or consent (including in each case, without limitation, the reasonable fees and expenses of Administrative Agent's and Arranger's counsel) and (b) all costs, fees, and expenses 56 of Lenders, Administrative Agent, and Arranger incurred by Administrative Agent, Arranger, or any Lender in connection with the enforcement of the obligations of any Company arising under the Loan Papers or the exercise of any Rights arising under the Loan Papers (including, but not limited to, reasonable attorneys' fees, expenses, and costs paid or incurred in connection with any workout or restructure and any action taken in connection with any Debtor Relief Laws), all of which shall be a part of the Obligation and shall bear interest, if not paid upon demand, at the Default Rate until repaid. 8.8 Maintenance of Existence, Assets, and Business. Except as otherwise permitted by SECTION 9.11, Borrower will, and will cause each other Company to (a) maintain its corporate existence and good standing in its state of incorporation and its authority to transact business in all other states where failure to maintain its authority to transact business is a Material Adverse Event; (b) maintain all licenses, permits, and franchises necessary for its business where failure to do so is a Material Adverse Event; (c) keep all of its assets that are useful in and necessary to its business in good working order and condition (ordinary wear and tear excepted) and make all necessary repairs and replacements. 8.9 Insurance. Borrower will, and will cause each other Company to, maintain with financially sound, responsible, and reputable insurance companies or associations (or, as to workers' compensation or similar insurance, with an insurance fund or by self-insurance authorized by the jurisdictions in which it operates) insurance concerning its properties and businesses against casualties and contingencies and of types and in amounts (and with co-insurance and deductibles) as is customary in the case of similar businesses similarly situated, which insurance may provide for reasonable deductibility from coverage thereof. Borrower shall, and shall cause each other Company to, deliver to Administrative Agent certificates of insurance for each policy of insurance and evidence of payment of all premiums which certificates of insurance shall name Administrative Agent as an additional insured, secured party, mortgagee and loss payee and which provide Administrative Agent with at least thirty (30) days notice of cancellation or reduction in coverage. If any insurance policy covered by an insurance certificate previously delivered to Administrative Agent is altered or canceled, then Borrower shall cause to be promptly delivered to Administrative Agent a replacement certificate (in form and substance satisfactory to Administrative Agent). 8.10 Preservation and Protection of Rights. Borrower will, and will cause each other Company to, perform the acts and duly authorize, execute, acknowledge, deliver, file, and record any additional writings as Administrative Agent or Majority Lenders may reasonably deem necessary or appropriate to perfect and maintain the Lender Liens and preserve and protect the Rights of Administrative Agent and Lenders under any Loan Paper. 8.11 Environmental Laws. Borrower will, and will cause each other Company to, (a) conduct its business so as to comply with all applicable Environmental Laws and shall promptly take corrective action to remedy any non-compliance with any Environmental Law, except where failure to comply or take action would not have a monetary impact or cost to the Borrower equal to or in excess of five percent (5%) of the Borrower's pre-tax income during the preceding Four Quarter Period, or would otherwise be a Material Adverse Event, such amount in no event to exceed $1,000,000 and (b) establish and maintain a management system designed to ensure compliance with applicable Environmental Laws and minimize financial and other risks to each Company arising under applicable Environmental Laws or as the result of environmentally related injuries to Persons or property. Borrower shall deliver reasonable evidence of compliance with the foregoing covenant to Administrative Agent within thirty (30) days after any request from Majority Lenders. 57 8.12 Subsidiaries. Borrower shall pledge to Administrative Agent for the benefit of Lenders all stock of each Person that becomes a Subsidiary of Borrower after the date of this Agreement (whether as a result of acquisition, creation, or otherwise) within ten (10) days after becoming a Subsidiary of Borrower and shall execute and deliver a stock power in form acceptable to Administrative Agent, as well as the original stock certificate. Borrower further agrees, within ten (10) days after any Person becomes a Subsidiary of Borrower, that Borrower will cause such Subsidiary to execute a Guaranty and shall promptly deliver such executed Guaranty to the Administrative Agent. 8.13 Indemnification. BORROWER WILL, AND WILL CAUSE EACH OTHER COMPANY TO, JOINTLY AND SEVERALLY, INDEMNIFY, PROTECT, AND HOLD ADMINISTRATIVE AGENT, ARRANGER, AND LENDERS AND THEIR RESPECTIVE PARENTS, SUBSIDIARIES, REPRESENTATIVES, SUCCESSORS, AND ASSIGNS (INCLUDING ALL OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS) (COLLECTIVELY, THE "INDEMNIFIED PARTIES") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, AND PROCEEDINGS AND ALL COSTS, EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL ATTORNEYS' FEES AND LEGAL EXPENSES WHETHER OR NOT SUIT IS BROUGHT), AND DISBURSEMENTS OF ANY KIND OR NATURE (THE "INDEMNIFIED LIABILITIES") THAT MAY AT ANY TIME BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE INDEMNIFIED PARTIES, IN ANY WAY RELATING TO OR ARISING OUT OF (A) THE DIRECT OR INDIRECT RESULT OF THE VIOLATION BY ANY COMPANY OF ANY ENVIRONMENTAL LAW; (B) ANY COMPANY'S GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE IN CONNECTION WITH ITS PROPERTIES OF A HAZARDOUS SUBSTANCE (INCLUDING, WITHOUT LIMITATION, (I) ALL DAMAGES OF ANY USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE OR (II) THE COSTS OF ANY ENVIRONMENTAL INVESTIGATION, MONITORING, REPAIR, CLEANUP, OR DETOXIFICATION AND THE PREPARATION AND IMPLEMENTATION OF ANY CLOSURE, REMEDIAL OR OTHER PLANS); OR (C) THE LOAN PAPERS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN; PROVIDED HOWEVER, IF THERE IS MORE THAN ONE INDEMNIFIED PARTY HAVING A RIGHT TO DEFEND SUCH CLAIM, ACTION, PROCEEDING OR SUIT AS AFORESAID, THE OBLIGATION OF BORROWER AND THE OTHER COMPANIES TO PAY THE FEES AND EXPENSES OF SUCH INDEMNIFIED PARTIES SHALL BE LIMITED TO ONE FIRM OF ATTORNEYS. ANY INDEMNIFIED PARTY SHALL ALSO HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL AND TO PARTICIPATE IN ITS DEFENSE, BUT THE FEES AND EXPENSES OF SUCH COUNSEL SHALL BE BORNE BY SUCH INDEMNIFIED PARTY. ANY DECISION BY AN INDEMNIFIED PARTY TO EMPLOY ITS OWN COUNSEL (WHETHER OR NOT AT BORROWER'S EXPENSE) SHALL IN NO WAY AFFECT ANY RIGHTS OF SUCH INDEMNIFIED PARTY OTHERWISE ARISING UNDER THIS SECTION 8.13. IN ADDITION, BORROWER AND THE OTHER COMPANIES WILL NOT BE LIABLE FOR ANY SETTLEMENT OF ANY CLAIM, ACTION, PROCEEDING OR SUIT UNLESS BORROWER HAS CONSENTED THERETO IN WRITING. HOWEVER, ALTHOUGH EACH INDEMNIFIED PARTY HAS THE RIGHT TO BE INDEMNIFIED UNDER THE LOAN PAPERS FOR ITS OWN ORDINARY NEGLIGENCE, NO INDEMNIFIED PARTY HAS THE RIGHT TO BE INDEMNIFIED UNDER THE LOAN PAPERS FOR ITS OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT. THE PROVISIONS OF AND UNDERTAKINGS AND INDEMNIFICATION SET FORTH IN THIS PARAGRAPH SHALL SURVIVE THE 58 SATISFACTION AND PAYMENT OF THE OBLIGATION AND TERMINATION OF THIS AGREEMENT. 8.14 Further Assurances. The Borrower shall, and shall cause each Guarantor to, do such further things and execute such additional documents (including, without limitation, the perfection of security interest, in after-acquired property) as are reasonably requested by Lenders or the Administrative Agent. 8.15 Change of Control. Borrower shall promptly, but in any event within five (5) Business Days, give written notice to Administrative Agent upon obtaining knowledge of the occurrence of a Change of Control. SECTION 9 NEGATIVE COVENANTS. So long as Lenders are committed to fund Borrowings and the Administrative Agent is committed to issue LCs under this Agreement, and thereafter until the Obligation is paid in full, Borrower covenants and agrees as follows: 9.1 Taxes. Borrower may not and may not permit any Company to use any portion of the proceeds of any Borrowing to pay the wages of employees, unless a timely payment to or deposit with the United States of America of all amounts of Tax required to be deducted and withheld with respect to such wages is also made. 9.2 Payment of Obligations. Borrower may not and may not permit any Company to voluntarily prepay principal of, or interest on, any Debt other than the Obligation, if a Default or Potential Default exists. 9.3 Employee Plans. Except where a Material Adverse Event would not result, Borrower may not and may not permit any Company to permit any of the events or circumstances described in SECTION 7.10 to exist or occur. 9.4 Debt and Debt Instruments. Borrower may not and may not permit any Company to create, incur, or suffer to exist any Funded Debt, other than Permitted Debt, nor materially modify any Debt that is subordinate to the Obligations or any document or instrument evidencing such Debt. 9.5 Liens. Borrower may not and may not permit any Company to (a) create, incur, or suffer or permit to be created or incurred or to exist any Lien upon any of its assets other than Permitted Liens or (b) enter into or permit to exist any arrangement or agreement that directly or indirectly prohibits any Company from creating or incurring any Lien on any of its assets, other than the Loan Papers and leases that place a Lien prohibition on only the leased property. 9.6 Transactions with Affiliates. Except as disclosed on the attached SCHEDULE 7.14, or on the most recently amended SCHEDULE 7.14, (if the disclosures are approved by Majority Lenders), Borrower may not and may not permit any Company to enter into any material transaction with any of its Affiliates (excluding other Companies), other than transactions in the ordinary course of business and upon fair and reasonable terms not materially less favorable than it could obtain or could become entitled to in an arm's-length transaction with a Person that was not its Affiliate. For purposes of this SECTION 9.6, a transaction is "material" if it requires any Company to pay more than $1,000,000 during the term of the agreement governing such transaction. 59 9.7 Compliance with Laws and Documents. Borrower may not and may not permit any Company to (a) violate the provisions of any Laws applicable to it or of any Material Agreement to which it is a party if that violation alone, or when aggregated with all other violations, would be a Material Adverse Event; (b) violate the provisions of its charter or bylaws; or (c) repeal, replace, or amend any provision of its charter or bylaws if that action would be a Material Adverse Event. 9.8 Loans, Advances and Investments. Except as permitted by SECTION 9.9 or SECTION 9.11, Borrower may not and may not permit any Company to make any loan, advance, extension of credit or capital contribution to, make any investment in, or purchase or commit to purchase any stock or other securities or evidences of Debt of, or interests in, any other Person; provided, however, that Borrower or a Company may make an advance to, investment in or purchase from another Person if (1) (a) such action results in the acquisition of such Person by Borrower or such Company, (b) such action results in the Borrower's direct or indirect ownership of new stores, (c) the Person being acquired is in a line of business which is substantially the same as or complimentary to the Borrower's principal line of business, (d) the Person being acquired is located in either the United States or Canada, (e) the Person being acquired will not exceed forty percent (40%) growth in the total number of service bays owned or leased by Borrower immediately prior to the date of the proposed acquisition, and (f) immediately after giving effect to such acquisition, the Companies shall be in compliance with all covenants under ARTICLE 10 and shall not be in Default or Potential Default under this Agreement, or (2) such action is used to provide financial assistance to third parties that may be purchasing or subleasing certain facilities owned or leased by Borrower and the cumulative principal amount of such financing is not greater than $5,000,000 (provided that such third party loans shall be assigned to Lenders and shall not exceed a term of five (5) years); provided, further, that if any acquisition is in excess of an aggregate cost to the Borrower or such Company of more than $20,000,000, Borrower shall deliver to Administrative Agent, prior to the consummation of such acquisition, a certificate of a Responsible Officer of Borrower demonstrating, on a pro forma basis after giving effect to such acquisition that the Companies shall be in compliance with all covenants in this Agreement, or (3) such action is for investments in Cash Equivalents, or (4) such action is for investments in marketable securities traded on a national securities exchange for which there can be obtained a publicly quoted fair market value and the aggregate fair market value of such marketable securities is not greater than $1,000,000 at any time. 9.9 Dividends and Distributions. Borrower may not and may not permit any Company to declare, make, or pay any Distribution other than Distributions declared, made, or paid by (a) Borrower wholly in the form of its capital stock; or (b) any other Company to Borrower or (c) Borrower paid in cash in an aggregate amount in any fiscal year not to exceed an amount equal to 25% of the Net Income of Borrower for the immediately preceding fiscal year, provided that, before and after giving effect to any such cash dividend, the Companies shall be in compliance with all covenants under ARTICLE 10 and shall not be in Default or Potential Default under this Agreement. Borrower may not and may not permit any Company to enter into or permit to exist any arrangement or agreement (other than the Loan Papers) that prohibits it from paying dividends or other distributions to its shareholders. 9.10 Sale of Assets. Borrower may not and may not permit any Company to sell, assign, lease, transfer, or otherwise dispose of any of its assets, other than (a) sales of inventory in the ordinary course of business; (b) the sale, discount, or transfer of delinquent accounts receivable in the ordinary course of business for purposes of collection; (c) occasional sales, leases, or other dispositions of immaterial assets for consideration not less than fair market value; (d) sales, leases, or other dispositions of assets that are obsolete or have negligible fair market value; (e) sales of equipment for a fair and adequate consideration (but if replacement equipment is necessary for the proper operation of the business of the seller, the seller must promptly replace the sold equipment); (f) sale and leasebacks of real property that do not in the 60 aggregate exceed forty percent (40%) of the Borrower's capital expenditures in the prior fiscal year; (g) sale, lease, or other disposition by a Company of its assets to the Borrower; (h) sale and leasebacks of equipment that are acquired and sold within twelve (12) months of acquisition of such equipment, (i) sales of assets or sale-leasebacks (as defined in SECTION 9.16) of assets the aggregate net proceeds in respect of which do not exceed $35,000,000 during the period from the Closing Date to the Facility Maturity Date and sold for a price which is within a fair market value for such assets, provided that if the net proceeds from any single transaction in respect of any sale-leaseback of assets is in excess of $7,000,000, Borrower shall deliver to Administrative Agent, prior to the consummation of such sale-leaseback, a certificate of a Responsible Officer of Borrower demonstrating, on a pro forma basis after giving effect to such sale-leaseback that the Companies shall be in compliance with all covenants in this Agreement; or (j) as disclosed on the attached SCHEDULE 9.10. 9.11 Mergers and Dissolutions. Borrower may not and may not permit any Company to merge or consolidate with any other Person or liquidate, wind up, or dissolve (or suffer any liquidation or dissolution); provided, however, if after giving effect thereto, no Default shall have occurred and be continuing (a) any Person may merge into the Borrower in a transaction in which the Borrower is the surviving corporation; (b) any Person other than the Borrower may merge into any Subsidiary of the Borrower in a transaction in which the surviving entity is such Subsidiary; and (c) any Subsidiary of the Borrower may liquidate or dissolve so long as the Borrower determines in good faith that such liquidation or dissolution is in the best interest of the Borrower. 9.12 Assignment. Borrower may not and may not permit any Company to assign or transfer any of its Rights, duties, or obligations under any of the Loan Papers. 9.13 Fiscal Year and Accounting Methods. Borrower may not and may not permit any Company to change its fiscal year or its method of accounting (other than immaterial changes in methods or as required or permitted by GAAP). 9.14 New Businesses. Borrower may not and may not permit any Company to engage in any business except the businesses in which they are presently engaged and any other reasonably related business. 9.15 Government Regulations. Borrower may not and may not permit any Company to conduct its business in a way that it becomes regulated under the Investment Company Act of 1940, as amended, or the Public Utility Holding Company Act of 1935, as amended. 9.16 Leases; Sale-Leasebacks; Tax Leases. Except as otherwise permitted by SECTION 9.10, the Borrower will not, and will not permit any Subsidiary to, enter into any arrangement whereby the Borrower or any such Subsidiary shall sell or transfer property owned by the Borrower or such Subsidiary and then or thereafter as Lessee rent or lease such property (any such arrangement being herein referred to as a "SALE-LEASEBACK"). 9.17 Subsidiaries. Permit any Person other than a Company to acquire, directly or indirectly, beneficially or of record, shares representing more than twenty percent (20%) of the aggregate ordinary voting power represented by the issued and outstanding capital stock of any Subsidiary of the Borrower. SECTION 10 FINANCIAL COVENANTS. So long as Lenders are committed to fund Borrowings and Administrative Agent is committed to issue LCs under this Agreement, and thereafter until the Obligation is paid and performed in full, Borrower covenants and agrees to comply with the following 61 financial covenants as calculated on the last day of each fiscal quarter period and certified by Borrower in the most recent Compliance Certificate delivered to Administrative Agent, on behalf of the Lenders, from time to time in accordance with the terms of this Agreement: (i) Interest Coverage Ratio. At all times, Borrower shall not permit the Interest Coverage Ratio to be less than 1.95 to 1.00. (ii) Adjusted Debt to EBITDAR. At no time shall Adjusted Debt to EBITDAR exceed 4.50 to 1.00. (iii) Minimum Net Worth. At all times, Borrower shall have a Net Worth of not less than $140,000,000. SECTION 11 DEFAULT. The term Default means the occurrence of any one or more of the following events: 11.1 Payment of Obligation. The failure of any Company to pay any part of the Obligation within five (5) Business Days after it becomes due and payable under the Loan Papers. 11.2 Covenants. The failure of Borrower (and, if applicable, any other Company) to punctually and properly perform, observe, and comply with: (i) Any covenant or agreement contained in SECTIONS 8.2, 9.2, 9.9, 9.10, 9.11, 9.12, or 9.16; (ii) Any covenant or agreement contained in SECTION 8.1(a) and (b), 8.3, 8.4, 8.8, 9.3, 9.4, 9.8, 9.13, 9.14, 9.15, or 9.17, and failure continues for ten (10) days after the first to occur of (i) Borrower knows of or (ii) Borrower receives notice from Administrative Agent of, such failure; or (iii) Any other covenant or agreement contained in any Loan Paper (other than the covenants to pay the Obligation and the covenants in CLAUSES (a) and (b) preceding), and failure continues for thirty (30) days after the first to occur of (i) Borrower knows of or (ii) Borrower receives notice from Administrative Agent of, such failure. 11.3 Debtor Relief. Any Company (a) is not Solvent; (b) fails to pay its Debts generally as they become due; (c) voluntarily seeks, consents to, or acquiesces in the benefit of any Debtor Relief Law; or (d) becomes a party to or is made the subject of any proceeding provided for by any Debtor Relief Law, other than as a creditor or claimant, that could suspend or otherwise adversely affect the Rights of Administrative Agent or any Lender granted in the Loan Papers (unless, if the proceeding is involuntary, the applicable petition is dismissed within sixty (60) days after its filing). 11.4 Judgments and Attachments. Any Company fails, within sixty (60) days after entry, to pay, bond or otherwise discharge any judgment or order for the payment of money in excess of $1,000,000 (individually or collectively) or any warrant of attachment, sequestration, or similar proceeding against any Company's assets having a value (individually or collectively) of $1,000,000, which is neither (a) stayed on appeal nor (b) diligently contested in good faith by appropriate proceedings and adequate reserves have been set aside on its books in accordance with GAAP. 62 11.5 Government Action. (a) A final non-appealable order is issued by any Tribunal (including, but not limited to, the United States Justice Department) seeking to cause any Company to divest a significant portion of its assets under any antitrust, restraint of trade, unfair competition, industry regulation or similar Laws or (b) any Tribunal condemns, seizes or otherwise appropriates or takes custody or control of all or any substantial portion of the assets of any Company. 11.6 Misrepresentation. Any material representation or warranty made by any Company contained in any Loan Paper at any time proves to have been materially incorrect when made. 11.7 Material Adverse Event. A Material Adverse Event occurs and is continuing. 11.8 Default Under Other Agreements. (a) Any Company fails to pay when due (after lapse of any applicable grace period) any Debt in excess (individually or collectively) of $1,000,000; (b) any default exists under any agreement to which a Company is a party, the effect of which is to cause, or to permit any Person (other than a Company) to cause, an amount in excess (individually or collectively) of $1,000,000 to become due and payable by any Company before its stated maturity; or (c) any Debt in excess (individually or collectively) of $1,000,000 is declared to be due and payable or required to be prepaid by any Company before its stated maturity. 11.9 LCs. Administrative Agent is served with, or becomes subject to, a court order, injunction, or other process or decree restraining or seeking to restrain it from paying any amount under any LC and either (a) a drawing has occurred under the LC and Borrower has refused to reimburse Administrative Agent for payment or (b) the expiration date of the LC has occurred but the right of any beneficiary thereunder to draw under the LC has been extended past the expiration date in connection with the pendency of the related court action or proceeding and Borrower has failed to deposit with Administrative Agent cash collateral in an amount equal to Administrative Agent's maximum exposure under the LC. 11.10 Validity and Enforceability of Loan Papers. Except in accordance with its terms or as otherwise expressly permitted by this Agreement, any Loan Paper at any time after its execution and delivery ceases to be in full force and effect in any material respect or is declared by a Tribunal to be null and void or its validity or enforceability is contested in writing by any Company party thereto or any Company denies in writing that it has any further liability or obligations under any Loan Paper to which it is a party. 11.11 Employee Benefit Plans. Any of the following exists with respect to any Employee Plan of any Company: (a) a Reportable Event; (b) disqualification or involuntary termination proceedings; (c) voluntary termination proceedings are initiated while a funding deficiency (as determined under section 412 of the Code) exists; (d) withdrawal liability exists with respect to a Multiemployer Plan; (e) a trustee is appointed by any federal district court or the PBGC to administer an Employee Plan; (f) termination proceedings are initiated by the PBGC; (g) failure by any Company to promptly notify Administrative Agent upon its receipt of notice of any proceeding or other actions that may result in termination of an Employee Plan if the proceeding or termination would constitute a Material Adverse Event. 63 SECTION 12 RIGHTS AND REMEDIES. 12.1 Remedies Upon Default. (i) If a Default (i) occurs under SECTION 11.3(c) or (ii) occurs and is continuing under SECTION 11.3(a), (b), or (d), the commitment to extend credit under this Agreement automatically terminates, the entire unpaid balance of the Obligation automatically becomes due and payable without any action of any kind whatsoever, and Borrower must provide cash collateral in an amount equal to the then-existing LC Exposure. (ii) If a Default occurs and is continuing, subject to the terms of SECTION 13.5(b), Administrative Agent may (with the consent of, and must, upon the request of, Majority Lenders), do any one or more of the following: (i) if the maturity of the Obligation has not already been accelerated under SECTION 12.1(a), declare the entire unpaid balance of all or any part of the Obligation immediately due and payable, whereupon it is due and payable; (ii) terminate the commitments of Lenders to extend credit under this Agreement; (iii) reduce any claim to judgment; (iv) to the extent permitted by Law, exercise (or request each Lender to, and each Lender is entitled to, exercise) the Rights of offset or banker's Lien against the interest of any Company in and to every account and other property of any Company that are in the possession of Administrative Agent or any Lender to the extent of the full amount of the Obligation (and to the extent permitted by Law, each Company is deemed directly obligated to each Lender in the full amount of the Obligation for this purpose); (v) demand Borrower to provide cash collateral in an amount equal to the LC Exposure then existing; and (vi) exercise any and all other legal or equitable Rights afforded by the Loan Papers, the Laws of the State of New York, or any other applicable jurisdiction. (iii) If, in reliance on SECTION 13.5(b), Administrative Agent refuses to take any action under SECTION 12.1(b) at the request of Majority Lenders, then Majority Lenders may take that action. 12.2 Company Waivers. To the extent permitted by Law, each Company waives presentment and demand for payment, protest, notice of intention to accelerate, notice of acceleration, and notice of protest and nonpayment and agrees that its liability with respect to all or any part of the Obligation is not affected by any renewal or extension in the time of payment of all or any part of the Obligation, by any indulgence, or by any release or change in any security for the payment of all or any part of the Obligation. 12.3 Performance by Administrative Agent. If any covenant, duty or agreement of any Company is not performed in accordance with the terms of the Loan Papers, Administrative Agent may, while a Default exists, at its option (but subject to the approval of Majority Lenders), perform or attempt to perform that covenant, duty or agreement on behalf of that Company (and any amount expended by Administrative Agent in its performance or attempted performance is payable by the Companies, jointly and severally, to Administrative Agent on demand, becomes part of the Obligation, and bears interest at the Default Rate from the date of Administrative Agent's expenditure until paid). However, neither Administrative Agent nor any Lender assumes or shall have, except by its express written consent, any liability or responsibility for the performance of any covenant, duty, or agreement of any Company. 12.4 Not in Control. None of the covenants or other provisions contained in any Loan Paper shall, or shall be deemed to, give Administrative Agent or Lenders the Right to exercise control over the 64 assets (including, without limitation, real property), affairs, or management of any Company; the power of Administrative Agent and Lenders is limited to the Right to exercise the remedies provided in this SECTION 12. 12.5 Course of Dealing. The acceptance by Administrative Agent or Lenders of any partial payment on the Obligation shall not be deemed to be a waiver of any Default then existing. No waiver by Administrative Agent, Majority Lenders, or Lenders of any Default shall be deemed to be a waiver of any other then-existing or subsequent Default. No delay or omission by Administrative Agent, Majority Lenders, or Lenders in exercising any Right under the Loan Papers will impair that Right or be construed as a waiver thereof or any acquiescence therein, nor will any single or partial exercise of any Right preclude other or further exercise thereof or the exercise of any other Right under the Loan Papers or otherwise. 12.6 Cumulative Rights. All Rights available to Administrative Agent, Majority Lenders, and Lenders under the Loan Papers are cumulative of and in addition to all other Rights granted to Administrative Agent, Majority Lenders, and Lenders at law or in equity, whether or not the Obligation is due and payable and whether or not Administrative Agent, Majority Lenders, or Lenders have instituted any suit for collection, foreclosure, or other action in connection with the Loan Papers. 12.7 Application of Proceeds. Any and all proceeds ever received by Administrative Agent or Lenders from the exercise of any Rights pertaining to the Obligation shall be applied to the Obligation according to SECTION 3.11. 12.8 Diminution in Value of Collateral. Neither Administrative Agent nor any Lender has any liability or responsibility whatsoever for any diminution in or loss of value of any collateral now or hereafter securing payment or performance of all or any part of the Obligation (other than diminution in or loss of value caused by its gross negligence or willful misconduct). 12.9 Certain Proceedings. Borrower will promptly execute and deliver, or cause the execution and delivery of, all applications, certificates, instruments, registration statements, and all other documents and papers Administrative Agent or Majority Lenders reasonably request in connection with the obtaining of any consent, approval, registration, qualification, permit, license, or authorization of any Tribunal or other Person necessary or appropriate for the effective exercise of any Rights under the Loan Papers. Because Borrower agrees that Administrative Agent's and Majority Lenders' remedies at Law for failure of Borrower to comply with the provisions of this paragraph would be inadequate and that failure would not be adequately compensable in damages, Borrower agrees that the covenants of this paragraph may be specifically enforced. 12.10 Change of Control. Notwithstanding anything to the contrary contained in this Agreement, the Majority Lenders may, upon the happening of a Change of Control, declare the Notes due and payable on a date not earlier than sixty (60) days after delivery of written notice to Borrower. The Notes then outstanding (including all Principal Debt plus accrued interest thereon and any other amounts owed by Borrower to Administrative Agent or Lenders pursuant to this Agreement or any other Loan Paper) shall thereupon become automatically due and payable on the date set forth in such notice without any further notice or demand of any kind. 65 SECTION 13 AGREEMENT AMONG LENDERS. 13.1 Administrative Agent. (i) Each Lender appoints Administrative Agent (and Administrative Agent accepts appointment) as its nominee and agent, in its name and on its behalf: (i) to act as its nominee and on its behalf in, under and in accordance with all Loan Papers; (ii) to arrange the means whereby its funds are to be made available to Borrower under the Loan Papers; (iii) to take any action that it properly requests under the Loan Papers (subject to the concurrence of other Lenders as may be required under the Loan Papers); (iv) to receive all documents and items to be furnished to it under the Loan Papers; (v) to be the secured party, mortgagee, beneficiary, recipient, and similar party in respect of any collateral for the benefit of Lenders; (vi) to promptly distribute to it all material information, requests, documents, and items received from Borrower under the Loan Papers; (vii) to promptly distribute to it its ratable part of each payment or prepayment (whether voluntary, as proceeds of collateral upon or after foreclosure, as proceeds of insurance thereon, or otherwise) in accordance with the terms of the Loan Papers (including without limitation, environmental notices, notices of default and all financial statements and Compliance Certificates); and (viii) to deliver to the appropriate Persons requests, demands, approvals, and consents received from it. However, Administrative Agent may not be required to take any action that exposes it to personal liability or that is contrary to any Loan Paper or applicable Law. (ii) If the initial or any successor Administrative Agent ever ceases to be a party to this Agreement or if the initial or any successor Administrative Agent ever resigns (whether voluntarily or at the request of Majority Lenders), then Majority Lenders shall appoint the successor Administrative Agent from among the Lenders with Commitment Sums of at least $10,000,000 (other than the resigning Administrative Agent). If Majority Lenders fail to appoint a successor Administrative Agent within thirty (30) days after the resigning Administrative Agent has given notice of resignation or Majority Lenders have removed the resigning Administrative Agent, then the resigning Administrative Agent may, on behalf of Lenders and with the consent of the Borrower, which shall not be unreasonably withheld or delayed, appoint a successor Administrative Agent, which must be a commercial bank having a combined capital and surplus of at least $1,000,000,000 (as shown on its most recently published statement of condition). Upon its acceptance of appointment as successor Administrative Agent, the successor Administrative Agent succeeds to and becomes vested with all of the Rights of the prior Administrative Agent, and the prior Administrative Agent is discharged from its duties and obligations of Administrative Agent under the Loan Papers (but, when used in connection with LCs issued and outstanding before the appointment of the successor Administrative Agent, "Administrative Agent" shall continue to refer solely to Charter One Bank, N.A.), and each Lender shall execute such documents as any Lender, the resigning or removed Administrative Agent, or the successor Administrative Agent reasonably request to reflect the change. After any Administrative Agent's resignation or removal as Administrative Agent under the Loan Papers, the provisions of this SECTION 13 inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under the Loan Papers. (iii) Administrative Agent, in its capacity as a Lender, has the same Rights under the Loan Papers as any other Lender and may exercise those Rights as if it were not acting as Administrative Agent; the term "Lender" shall, unless the context otherwise indicates, include Administrative Agent; and Administrative Agent's resignation or removal shall not impair or otherwise affect any Rights that it has or may have in its capacity as an individual Lender. Each 66 Lender and Borrower agree that Administrative Agent is not a fiduciary for Lenders or for Borrower but simply is acting in the capacity described in this Agreement to alleviate administrative burdens for Borrower and Lenders, that Administrative Agent has no duties or responsibilities to Lenders or Borrower except those expressly set forth in the Loan Papers, and that Administrative Agent in its capacity as a Lender has all Rights of any other Lender. (iv) Administrative Agent may now or hereafter be engaged in one or more loan, letter of credit, leasing or other financing transaction with Borrower, act as trustee or depositary for Borrower, or otherwise be engaged in other transactions with Borrower (the "OTHER ACTIVITIES") not the subject of the Loan Papers. Without limiting the Rights of Lenders specifically set forth in the Loan Papers, Administrative Agent is not responsible to account to Lenders for those other activities, and no Lender shall have any interest in any other activities, any present or future guaranties by or for the account of Borrower that are not contemplated or included in the Loan Papers, any present or future offset exercised by Administrative Agent in respect of those other activities, any present or future property taken as security for any of those other activities, or any property now or hereafter in Administrative Agent's possession or control that may be or become security for the obligations of Borrower arising under the Loan Papers by reason of the general description of indebtedness secured or of property contained in any other agreements, documents, or instruments related to any of those other activities (but, if any payments in respect of those guaranties or that property or the proceeds thereof is applied by Administrative Agent to reduce the Obligation, then each Lender is entitled to share ratably in the application as provided in the Loan Papers). 13.2 Expenses. Each Lender shall pay its Pro Rata Part of any reasonable expenses (including, without limitation, court costs, reasonable attorneys' fees, and other costs of collection) incurred by Administrative Agent (while acting in such capacity) in connection with any of the Loan Papers if Administrative Agent is not reimbursed from other sources within thirty (30) days after incurrence. Each Lender is entitled to receive its Pro Rata Part of any reimbursement that it makes to Administrative Agent if Administrative Agent is subsequently reimbursed from other sources. 13.3 Proportionate Absorption of Losses. Except as otherwise provided in the Loan Papers, nothing in the Loan Papers gives any Lender any advantage over any other Lender insofar as the Obligation is concerned or to relieve any Lender from ratably absorbing any losses sustained with respect to the Obligation (except to the extent unilateral actions or inactions by any Lender result in Borrower or any other obligor on the Obligation having any credit, allowance, setoff, defense, or counterclaim solely with respect to all or any part of that Lender's Pro Rata Part of the Obligation). 13.4 Delegation of Duties; Reliance. Lenders may perform any of their duties or exercise any of their Rights under the Loan Papers by or through Administrative Agent, and Lenders and Administrative Agent may perform any of their duties or exercise any of their Rights under the Loan Papers by or through their respective Representatives. Administrative Agent, Lenders and their respective Representatives (a) are entitled to rely upon (and shall be protected in relying upon) any written or oral statement believed by it or them to be genuine and correct and to have been signed or made by the proper Person and, with respect to legal matters, upon opinion of counsel selected by Administrative Agent or that Lender (but nothing in this CLAUSE (a) permits Administrative Agent to rely on (i) oral statements if a writing is required by this Agreement or (ii) any other writing if a specific writing is required by this Agreement), (b) are entitled to deem and treat each Lender as the owner and holder of its Pro Rata Part of the Principal Debt for all purposes until, subject to SECTION 14.12, written notice of the assignment or transfer is given to and received by Administrative Agent (and any request, authorization, consent or 67 approval of any Lender is conclusive and binding on each subsequent holder, assignee or transferee of or Participant in that Lender's Pro Rata Part of the Principal Debt until that notice is given and received), (c) are not deemed to have notice of the occurrence of a Default unless a responsible officer of Administrative Agent, who handles matters associated with the Loan Papers and transactions thereunder, has actual knowledge or Administrative Agent has been notified by a Lender or Borrower, and (d) are entitled to consult with legal counsel (including counsel for Borrower), independent accountants, and other experts selected by Administrative Agent and are not liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of counsel, accountants, or experts. 13.5 Limitation of Administrative Agent's Liability. (i) Neither Administrative Agent nor any of its Representatives will be liable for any action taken or omitted to be taken by it or them under the Loan Papers in good faith and believed by it or them to be within the discretion or power conferred upon it or them by the Loan Papers or be responsible for the consequences of any error of judgment (except for fraud, gross negligence or willful misconduct), and neither Administrative Agent nor any of its Representatives has a fiduciary relationship with any Lender by virtue of the Loan Papers (but nothing in this Agreement negates the obligation of Administrative Agent to account for funds received by it for the account of any Lender). (ii) Unless indemnified to its satisfaction, Administrative Agent may not be compelled to do any act under the Loan Papers or to take any action toward the execution or enforcement of the powers thereby created or to prosecute or defend any suit in respect of the Loan Papers. If Administrative Agent requests instructions from Lenders, or Majority Lenders, as the case may be, with respect to any act or action in connection with any Loan Paper, Administrative Agent is entitled to refrain (without incurring any liability to any Person by so refraining) from that act or action unless and until it has received instructions. In no event, however, may Administrative Agent or any of its Representatives be required to take any action that it or they determine could incur for it or them criminal or onerous civil liability. Without limiting the generality of the foregoing, no Lender has any right of action against Administrative Agent as a result of Administrative Agent's acting or refraining from acting under this Agreement in accordance with instructions of Majority Lenders, or, if unanimity is required, in accordance with instructions of all Lenders. (iii) Administrative Agent is not responsible to any Lender or any Participant for, and each Lender represents and warrants that it has not relied upon Administrative Agent in respect of, (i) the creditworthiness of any Company and the risks involved to that Lender, (ii) the effectiveness, enforceability, genuineness, validity or due execution of any Loan Paper (other than by Administrative Agent), (iii) any representation, warranty, document, certificate, report or statement made therein (other than by Administrative Agent) or furnished thereunder or in connection therewith, (iv) the adequacy of any collateral now or hereafter securing the Obligation or the existence, priority or perfection of any Lien now or hereafter granted or purported to be granted on the collateral under any Loan Paper, or (v) the observance of or compliance with any of the terms, covenants or conditions of any Loan Paper on the part of any Company. EACH LENDER AGREES TO INDEMNIFY ADMINISTRATIVE AGENT AND ITS REPRESENTATIVES AND HOLD THEM HARMLESS FROM AND AGAINST (BUT LIMITED TO SUCH LENDER'S PRO RATA PART OF) ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON, 68 ASSERTED AGAINST, OR INCURRED BY THEM IN ANY WAY RELATING TO OR ARISING OUT OF THE LOAN PAPERS OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE LOAN PAPERS IF ADMINISTRATIVE AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH AMOUNTS BY ANY COMPANY. ALTHOUGH ADMINISTRATIVE AGENT AND ITS REPRESENTATIVES HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN ORDINARY NEGLIGENCE, ADMINISTRATIVE AGENT AND ITS REPRESENTATIVES DO NOT HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT. 13.6 Delegation of Duties by Administrative Agent. Administrative Agent may perform any and all of its duties and exercise its rights and powers under this Agreement or under any other Loan Paper by or through any one or more sub-agents appointed by Administrative Agent and any sub-agent may perform any and all of its duties and exercise its rights and powers under this Agreement or under any other Loan Paper by or through any one or more sub-agents appointed by such sub-agent with the approval of Administrative Agent (such appointing sub-agent is referred to in this SECTION 13.6 as an "APPOINTING SUB-AGENT"). Administrative Agent and each such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates. The exculpatory, indemnification and other provisions of this SECTION 13 and of SECTION 8.13 shall apply to any the Affiliates of Administrative Agent and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. All of the rights, benefits, and privileges (including the exculpatory and indemnification provisions) of this SECTION 13 and of SECTION 8.13 shall apply to each such sub-agent and to the Affiliates of each such sub-agent, and shall apply to their respective activities as sub-agent as if such sub-agent and Affiliates were named herein. Notwithstanding anything herein to the contrary, with respect to each sub-agent appointed by the Administrative Agent and/or an Appointing Sub-Agent, (i) such sub-agent shall be a third party beneficiary under this Agreement with respect to all such rights, benefits and privileges (including exculpatory rights and rights to indemnification) and shall have all of the rights and benefits of a third party beneficiary, including an independent right of action to enforce such rights, benefits and privileges (including exculpatory rights and rights to indemnification) directly, without the consent or joinder of any other Person, against any or all of the Companies and Lenders, (ii) such rights, benefits and privileges (including exculpatory rights and rights to indemnification) shall not be modified or amended without the consent of such sub-agent, and (iii) such sub-agent shall only have obligations to Administrative Agent and, if applicable, an Appointing Sub-Agent and not to any Company, Lender or any other Person and no Company, Lender or any other Person shall have any rights, directly or indirectly, as a third party beneficiary or otherwise, against such sub-agent; provided, that, notwithstanding anything herein to the contrary, (i) Administrative Agent shall remain solely responsible for the performance of its obligations under the Loan Papers and for any actions and/or omissions by any agent and/or sub-agent of Administrative Agent and (ii) Administrative Agent's Rights and obligations under the Loan Papers shall remain unchanged. 13.7 Default; Collateral. If Administrative Agent receives notice of a Default from Borrower or any Lender, Administrative Agent shall notify Lenders of such Default and Lenders agree to promptly confer in order that Majority Lenders or Lenders, as the case may be, may agree upon a course of action for the enforcement of the Rights of Lenders. Unless and until Administrative Agent receives directions from Majority Lenders, Administrative Agent shall refrain from taking any action (without incurring any liability to any Person for so refraining), provided that, unless and until the Administrative Agent has received such directions, the Administrative Agent may, at its option, take such actions as it deems appropriate without the direction of the Majority Lenders in circumstances where the ability of Lenders to 69 recover the Obligation may otherwise be materially impaired. In actions with respect to any property of Borrower, Administrative Agent is acting for the ratable benefit of each Lender. Administrative Agent shall hold, for the ratable benefit of all Lenders, any security it receives for the Obligation or any guaranty of the Obligation it receives upon or in lieu of foreclosure. 13.8 Limitation of Liability. No Lender or any Participant will incur any liability to any other Lender or Participant except for acts or omissions in bad faith, and neither Administrative Agent nor any Lender or Participant will incur any liability to any other Person for any act or omission of any other Lender or any Participant. 13.9 Relationship of Lenders. The Loan Papers, and the documents delivered in connection therewith, do not create a partnership or joint venture among Administrative Agent and Lenders or among Lenders. 13.10 Other Agents. None of the Lenders identified on the cover page or signature pages of this Agreement or otherwise herein as being the "Syndication Agent" or a "Documentation Agent" (collectively, the "OTHER AGENTS") shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders. Each Lender acknowledges that it has not relied, and will not rely, on any of the Other Agents in deciding to enter into this Agreement or in taking or refraining from taking any action hereunder or pursuant hereto. 13.11 Collateral Matters. (i) Each Lender authorizes and directs Administrative Agent to enter into the Security Documents for the ratable benefit of Lenders. Each Lender agrees that any action taken by Administrative Agent concerning any Collateral with the consent of, or at the request of, Majority Lenders in accordance with the provisions of this Agreement, the Security Documents or the other Loan Papers, and the exercise by Administrative Agent (with the consent of, or at the request of, Majority Lenders) of powers concerning the Collateral set forth in any Loan Paper, together with other reasonably incidental powers, shall be authorized and binding upon all Lenders. (ii) Administrative Agent is authorized on behalf of all Lenders, without the necessity of any notice to or further consent from any Lender, from time to time before a Default or Potential Default, to take any action with respect to any Collateral or Security Documents that may be necessary to perfect and maintain perfected the Lender Liens upon the Collateral granted by the Security Documents. (iii) Administrative Agent has no obligation whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned by any Company or is cared for or protected. (iv) Administrative Agent shall exercise the same care and prudent judgment with respect to the Collateral and the Security Documents as it normally and customarily exercises in respect of similar collateral and security documents. (v) Lenders irrevocably authorize Administrative Agent, at its option and in its discretion, to release any Lender Lien upon any Collateral (i) upon full payment of the Obligation; (ii) constituting property being sold or disposed of as permitted under SECTION 9.10, if 70 Administrative Agent determines that the property being sold or disposed is being sold or disposed in accordance with the requirements and limitations of SECTION 9.10 and Administrative Agent concurrently receives all mandatory prepayments with respect thereto, if any, in accordance with SECTION 9.10; (iii) constituting property in which no Company owned any interest at the time the Lender Lien was granted or at any time thereafter; (iv) constituting property leased to any Company under a lease that has expired or been terminated in a transaction permitted under this Agreement or is about to expire and that has not been, and is not intended by that Company to be, renewed; (v) consisting of an instrument evidencing Debt pledged to Administrative Agent (for the benefit of Lenders), if the Debt evidenced thereby has been paid in full; or (vi) if approved, authorized or ratified in writing by Majority Lenders subject to SECTION 14.10(b)(vi). Upon request by Administrative Agent at any time, Lenders will confirm in writing Administrative Agent's authority to release particular types or items of Collateral under this SECTION 13.11(e). 13.12 Benefits of Agreement. None of the provisions of this SECTION 13 inure to the benefit of any Company or any other Person other than Administrative Agent and Lenders; consequently, no Company or any other Person is entitled to rely upon, or to raise as a defense, in any manner whatsoever, the failure of Administrative Agent or any Lender to comply with these provisions. SECTION 14 MISCELLANEOUS. 14.1 Headings. The headings, captions and arrangements used in any of the Loan Papers are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify, or modify the terms of the Loan Papers, nor affect the meaning thereof. 14.2 Nonbusiness Days; Time. Any payment or action that is due under any Loan Paper on a non-Business Day may be delayed until the next-succeeding Business Day (but interest shall continue to accrue on any applicable payment until payment is in fact made) unless the payment concerns a LIBOR Rate Borrowing, in which case if the next-succeeding Business Day is in the next calendar month, then such payment shall be made on the next-preceding Business Day. Unless otherwise indicated, all time references (e.g., 10:00 a.m.) are to New York, New York time. 14.3 Communications. (i) Unless otherwise specifically provided, whenever any Loan Paper requires or permits any consent, approval, notice, request, demand or other communication from one party to another, communication must be in writing (which may be by telex or telecopy) to be effective and shall be deemed to have been given (i) if by telex, when transmitted to the appropriate telex number and the appropriate answerback is received; (ii) if by telecopy, when transmitted to the appropriate telecopy number (and all communications sent by telecopy must be confirmed promptly thereafter by telephone; but any requirement in this parenthetical shall not affect the date when the telecopy shall be deemed to have been delivered); (iii) if by mail, on the third Business Day after it is enclosed in an envelope and properly addressed, stamped, sealed, certified mail, return receipt requested, and deposited in the appropriate official postal service; or (iv) if by any other means, when actually delivered. Until changed by notice pursuant to this Agreement, the address (and telecopy number) for each party to a Loan Paper is set forth on the attached SCHEDULE 1. 71 (ii) Notices and other communications to Lenders and Administrative Agent hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Section 2 if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Section by electronic communication. Administrative Agent or Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested" function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor. 14.4 Form and Number of Documents. The form, substance, and number of counterparts of each writing to be furnished under this Agreement must be satisfactory to Administrative Agent and its counsel. 14.5 Exceptions to Covenants. Borrower may not and may not permit any Company to take or fail to take any action that is permitted as an exception to any of the covenants contained in any Loan Paper if that action or omission would result in the breach of any other covenant contained in any Loan Paper. 14.6 Survival. All covenants, agreements, undertakings, representations, and warranties made in any of the Loan Papers survive all closings under the Loan Papers and, except as otherwise indicated, are not affected by any investigation made by any party. 14.7 Governing Law. Except as expressly provided in a Loan Paper, the Laws (other than conflict-of-laws provisions) of the State of New York and of the United States of America govern the Rights and duties of the parties to the Loan Papers and the validity, construction, enforcement, and interpretation of the Loan Papers. 14.8 Invalid Provisions. Any provision in any Loan Paper held to be illegal, invalid, or unenforceable is fully severable; the appropriate Loan Paper shall be construed and enforced as if that provision had never been included; and the remaining provisions shall remain in full force and effect and shall not be affected by the severed provision. Administrative Agent, Lenders, and each Company party to the affected Loan Paper agree to negotiate, in good faith, the terms of a replacement provision as similar to the severed provision as may be possible and be legal, valid, and enforceable. However, if the provision held to be illegal, invalid, or unenforceable is a material part of this Agreement, such invalid, illegal, or unenforceable provision shall be, to the extent permitted by Law, replaced by a clause or provision judicially construed and interpreted to be as similar in substance and content to the original terms of such illegal, invalid, or unenforceable clause or provision as the context thereof would reasonably allow, so that such clause or provision would thereafter be legal, valid and enforceable. 72 14.9 Venue; Service of Process; Jury Trial. EACH PARTY TO ANY LOAN PAPER, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS (AND IN THE CASE OF BORROWER, FOR EACH OTHER COMPANY), (a) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK; (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN PAPERS AND THE OBLIGATION BROUGHT IN DISTRICT COURTS OF NEW YORK, NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; (c) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THE AFOREMENTIONED COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM; (d) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THOSE COURTS IN ANY LITIGATION BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR BY DELIVERY BY A NATIONALLY RECOGNIZED COURIER SERVICE, AND SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY OF THE LEGAL PROCESS AT ITS ADDRESS SET FORTH IN THIS AGREEMENT; (e) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY TO ANY LOAN PAPER ARISING OUT OF OR IN CONNECTION WITH THE LOAN PAPERS OR THE OBLIGATION MAY BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS; AND (f) IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY LOAN PAPER. The scope of each of the foregoing waivers is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Borrower (for itself and on behalf of each other Company) acknowledges that these waivers are a material inducement to Administrative Agent's and each Lender's agreement to enter into a business relationship, that Administrative Agent and each Lender have already relied on these waivers in entering into this Agreement, and that Administrative Agent and each Lender will continue to rely on each of these waivers in related future dealings. Borrower (for itself and on behalf of each other Company) further warrants and represents that it has reviewed these waivers with its legal counsel and that it knowingly and voluntarily agrees to each waiver following consultation with legal counsel. THE WAIVERS IN THIS SECTION 14.9 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS, OR REPLACEMENTS TO OR OF THIS OR ANY OTHER LOAN PAPER. In the event of Litigation, this Agreement may be filed as a written consent to a trial by the court. 14.10 Amendments, Consents, Conflicts, and Waivers. (i) Unless otherwise specifically provided, (i) this Agreement may be amended only by an instrument in writing executed by Borrower, Administrative Agent and Majority Lenders and supplemented only by documents delivered or to be delivered in accordance with the express terms of this Agreement and (ii) the other Loan Papers may only be the subject of an amendment, modification, or waiver that has been approved by Majority Lenders and Borrower. (ii) Any amendment, consent or waiver under this Agreement or any Loan Paper that purports to accomplish any of the following must be in writing and executed by Borrower and Administrative Agent and executed (or approved, as the case may be) by each Lender: (i) extend the due date or decrease the amount of any scheduled payment of the Obligation beyond the date 73 specified in the Loan Papers; (ii) decrease any rate or amount of interest, fees, or other sums payable to Administrative Agent or Lenders under this Agreement (except such reductions as are contemplated by this Agreement); (iii) change the definition of "APPLICABLE MARGIN," COMMITMENT USAGE," "COMMITTED SUM," "FACILITY COMMITTED SUM," "MAJORITY LENDERS," "MATURITY DATE" or "FACILITY MATURITY DATE"; (iv) increase or decrease any one or more Lenders' Committed Sums except as provided in this Agreement; (v) except as permitted by SECTION 9.10, consent to the release of all or a material portion of the Collateral under the Security Documents; (vi) change the provisions of SECTION 13 to the detriment of any Lender; (vii) change any provision requiring ratable distributions to Lenders; (viii) subject any Lender to a greater obligation than expressly provided in this Agreement; or (ix) change this CLAUSE (b) or any other matter specifically requiring the consent of all Lenders under this Agreement. (iii) Any conflict or ambiguity between the terms and provisions of this Agreement and terms and provisions in any other Loan Paper is controlled by the terms and provisions of this Agreement. (iv) No course of dealing or any failure or delay by Administrative Agent, any Lender, or any of their respective Representatives with respect to exercising any Right of Administrative Agent or any Lender under this Agreement operates as a waiver thereof. A waiver must be in writing and signed by Administrative Agent and Lenders (or Majority Lenders, if permitted under this Agreement) to be effective, and a waiver will be effective only in the specific instance and for the specific purpose for which it is given. 14.11 Multiple Counterparts. Any Loan Paper may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement; but, in making proof of thereof, it shall not be necessary to produce or account for more than one counterpart. Each Lender need not execute the same counterpart of this Agreement so long as identical counterparts are executed by Borrower, each Lender, and Administrative Agent. This Agreement shall become effective when counterparts of this Agreement have been executed and delivered to Administrative Agent by each Lender, Administrative Agent and Borrower, or, in the case only of Lenders, when Administrative Agent has received telecopied, telexed or other evidence satisfactory to it that each Lender has executed and is delivering to Administrative Agent a counterpart of this Agreement. 14.12 Successors and Assigns; Participations. (i) Each Loan Paper binds and inures to the benefit of the parties thereto, any intended beneficiary thereof, and each of their respective successors and permitted assigns. No Lender may transfer, pledge, assign, sell any participation in, or otherwise encumber its portion of the Obligation except as permitted by this SECTION 14.12. (ii) Subject to the provisions of this section and in accordance with applicable Law, any Lender may, in the ordinary course of its commercial banking business, at any time sell to one or more Persons (each a "PARTICIPANT") participating interests in its portion of the Obligation. The selling Lender shall remain a "Lender" under this Agreement (and the Participant shall not constitute a "Lender" under this Agreement) and its obligations under this Agreement shall remain unchanged. The selling Lender shall remain solely responsible for the performance of its obligations under the Loan Papers and shall remain the holder of its share of the Principal Debt for all purposes under this Agreement. Borrower and Administrative Agent shall continue to deal 74 solely and directly with the selling Lender in connection with that Lender's Rights and obligations under the Loan Papers. Participants have no Rights under the Loan Papers, other than certain voting Rights as provided below. Subject to the following, each Lender may obtain (on behalf of its Participants) the benefits of SECTION 3 with respect to all participations in its part of the Obligation outstanding from time to time so long as Borrower is not obligated to pay any amount in excess of the amount that would be due to that Lender under SECTION 3 calculated as though no participations have been made. No Lender may sell any participating interest under which the Participant has any Rights to approve any amendment, modification or waiver of any Loan Paper, except to the extent the amendment, modification or waiver extends the due date for payment of any principal, interest or fees due under the Loan Papers, reduces the interest rate or the amount of principal or fees applicable to the Obligation (except reductions contemplated by this Agreement), or releases a material portion of the Collateral, if any, for the Obligation (other than releases of collateral permitted by SECTION 13.11(e)). However, if a Participant is entitled to the benefits of SECTION 3 or a Lender grants Rights to its Participants to approve amendments to or waivers of the Loan Papers respecting the matters described in the previous sentence, then that Lender must include a voting mechanism in the relevant participation agreement whereby a majority of its portion of the Obligation (whether held by it or participated) shall control the vote for all of that Lender's portion of the Obligation. Except in the case of the sale of a participating interest to another Lender, the relevant participation agreement shall prohibit the Participant from transferring, pledging, assigning, selling participations in, or otherwise encumbering its portion of the Obligation. (iii) Subject to the provisions of this section, any Lender may at any time, in the ordinary course of its commercial banking business, (i) without the consent of Borrower or Administrative Agent, assign all or any part of its Rights and obligations under the Loan Papers to any of its Affiliates or any other Lender (each a "PURCHASER") and (ii) upon the prior written consent of Borrower and Administrative Agent (which will not be unreasonably withheld), assign to any other Person that is not a business competitor of any Company (each of which is also a "PURCHASER") a proportionate part (not less than the greater of (x) $5,000,000 or (y) its remaining balance, and an integral multiple of $1,000,000) of all or any part of its Rights and obligations under the Loan Papers; provided, however, that such assigning Lender must retain an obligation hereunder to fund at least $5,000,000 of the Facility, unless otherwise agreed by the Borrower and Administrative Agent (such consent not to be unreasonably withheld). In each case, the Purchaser shall assume those Rights and obligations under an assignment agreement substantially in the form of the attached EXHIBIT G. Each assignment under this SECTION 14.12 (c) shall include a ratable interest in the assigning Lender's Rights and obligations under the Facility. Upon (i) delivery to Borrower and Administrative Agent (A) of an assignment agreement electronically executed and delivered via an electronic settlement system acceptable to the Administrative Agent or (B) an assignment agreement manually executed and (ii) payment of a fee of $3,500 from the transferee to Administrative Agent, from and after the assignment's effective date (which shall be after the date of delivery), the Purchaser shall for all purposes be a Lender party to this Agreement and shall have all the Rights and obligations of a Lender under this Agreement to the same extent as if it were an original party to this Agreement with commitments as set forth in the assignment agreement, and the transferor Lender shall be released from its obligations under this Agreement to a corresponding extent, and, except as provided in the following sentence, no further consent or action by Borrower, Lenders or Administrative Agent shall be required. Upon the consummation of any transfer to a Purchaser under this CLAUSE (c), the then-existing SCHEDULE 1 shall automatically be deemed to reflect the name, address, and Committed Sum of such Purchaser, Borrower shall execute and deliver to each of the transferor Lender and 75 the Purchaser a Facility Note in the face amount of its respective Committed Sum under the Facility following transfer, and, upon receipt of its new Facility Note, the transferor Lender shall return to Borrower the Facility Note previously delivered to it under this Agreement. A Purchaser is subject to all the provisions in this section as if it were a Lender signatory to this Agreement as of the date of this Agreement. (iv) Any Lender may at any time, without the consent of Borrower or Administrative Agent, assign all or any part of its Rights under the Loan Papers to a Federal Reserve Bank without releasing the transferor Lender from its obligations thereunder. (v) The words "execution," "signed," "signature," and words of like import in any assignment agreement shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act. 14.13 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances. Each Company's obligations under the Loan Papers remain in full force and effect until the Facility Committed Sum is terminated and the Obligation is paid in full (except for provisions under the Loan Papers which by their terms expressly survive payment of the Obligation and termination of the Loan Papers). If at any time any payment of the principal of or interest on any Note or any other amount payable by Borrower or any other obligor on the Obligation under any Loan Paper is rescinded or must be restored or returned upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, the obligations of each Company under the Loan Papers with respect to that payment shall be reinstated as though the payment had been due but not made at that time. 14.14 Confidentiality. Borrower, Administrative Agent, Arranger and Lenders agree to keep all information concerning the structure and documentation of this Agreement confidential, including without limitation all information of a confidential nature received by them from Borrower pursuant to this Agreement; provided, however, that such information may be disclosed: (a) to directors, officers, employees, agents, representatives, or outside counsel of Borrower or of the Administrative Agent or any Lender or any Affiliate of any Lender; (b) to any auditor, government official, or examiner; (c) pursuant to any subpoena or other order of any court or administrative agency or otherwise as may be required by applicable law, rule, or regulation; (d) to any other Person if reasonably incidental to the administration of the credit facility provided herein; (e) in connection with any litigation to which such Lender or any of its Affiliates may be a party; (f) to the extent necessary in connection with the exercise of any remedy under this Agreement or any other Loan Paper; (g) subject to provisions substantially similar to those contained in this SECTION 14.14 to any actual or proposed participant or assignee; or (h) to any assignee of or participant in, or prospective assignee of or participant in, any Lender's Borrowings or its Committed Sum or any part thereof under any credit agreement who, in each case set forth in CLAUSES (a) through (h), agrees in writing to be bound by the terms of this Section; and provided further, that no confidentiality obligation shall attach to any information which (1) is or becomes publicly known, through no wrongful act on the part of any Person who shall have received such information, (2) is rightfully received by such Person from a third party, (3) is independently developed by such Person, or (4) is explicitly approved for release by Borrower. 76 14.15 Entirety. THIS AGREEMENT AND THE OTHER WRITTEN LOAN PAPERS (EACH AS AMENDED IN WRITING FROM TIME TO TIME) EXECUTED BY ANY COMPANY, ANY LENDER, OR ADMINISTRATIVE AGENT REPRESENT THE FINAL AGREEMENT AMONG THE COMPANIES, LENDERS, AND ADMINISTRATIVE AGENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 14.16 Patriot Act. Each of Administrative Agent and each Lender hereby notifies Borrower that, pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "PATRIOT ACT"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of Borrower and other information that will allow Administrative Agent and such Lender to identify Borrower in accordance with the Patriot Act. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 77 EXECUTED as of the day and year first written above. MONRO MUFFLER BRAKE, INC., a New York corporation, as Borrower By:_________________________________ Name:_______________________________ Title:______________________________ CHARTER ONE BANK, N.A., as Administrative Agent and a Lender By:_________________________________ Name:_______________________________ Title:______________________________ JPMORGAN CHASE BANK, N.A., as Syndication Agent and a Lender By:_________________________________ Name:_______________________________ Title:______________________________ BANK OF AMERICA, N.A., as Documentation Agent and a Lender By:_________________________________ Name:_______________________________ Title:______________________________ 78 MANUFACTURERS & TRADERS TRUST COMPANY, as a Lender By:___________________________________ Name:_________________________________ Title:________________________________ HSBC BANK USA, NATIONAL ASSOCIATION, as a Lender By:___________________________________ Name:_________________________________ Title:________________________________ 79 EX-10.2 3 l15010aexv10w2.txt EX-10.2 SECURITY AGREEMENT AMONG MONOR MUFFLER BRAKE, INC. Exhibit 10.2 SECURITY AGREEMENT THIS SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this "AGREEMENT") is executed as of July 13, 2005, by MONRO MUFFLER BRAKE, INC., a New York corporation ("BORROWER"), MONRO SERVICE CORPORATION, a Delaware corporation ("MONRO SERVICE"), and MONRO LEASING, LLC, a Delaware limited liability company ("MONRO LEASING", and together with Borrower and Monro Service, the "DEBTORS"), for the benefit of Charter One Bank, N.A., as Administrative Agent (in such capacity, "SECURED PARTY") for the Lenders ("LENDERS") party to the Credit Agreement (as defined below). RECITALS A. Borrower, Secured Party, and Lenders have executed a Credit Agreement dated as of even date with this Agreement (as amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), together with certain other Loan Papers. B. The execution and delivery of this Agreement is a condition to the execution of the Credit Agreement and the other Loan Papers by Secured Party and Lenders and is an integral part of the transactions contemplated by the Loan Papers and a condition precedent to the obligations of Secured Party and Lenders to extend credit under the Credit Agreement. C. Monro Leasing and Monro Service are wholly-owned subsidiaries of Borrower and shall benefit, directly and indirectly, from Lenders' extension of credit to Borrower under the Credit Agreement. THEREFORE, Debtors covenant and agree with Secured Party as follows: 1. Certain Definitions. Unless otherwise defined in this Agreement, each capitalized term used but not defined in this Agreement will have the meaning given that term in the Credit Agreement or in the UCC. If the definition given a term in the Credit Agreement conflicts with the definition given that term in the UCC, the Credit Agreement definition shall control to the extent allowed by Law. If the definition given a term in Article 9 of the UCC conflicts with the definition given that term in any other chapter of the UCC, the Article 9 definition shall control. As used in this Agreement, the following terms have the meanings indicated: ACCOUNTS means all accounts, instruments, receivables, accounts receivable, contract rights, chattel paper, documents, general intangibles, book debts, any and all amounts due to Debtors from a factor, amounts resulting from the sale of any assets, arising from a Debtor sale of goods or rendition of services in the ordinary course of a Debtor business and all returned, reclaimed, refused or repossessed goods and the books and records pertaining to the foregoing, and the cash or non-cash proceeds resulting therefrom and all security and guaranties therefor. AGREEMENT means this Agreement together with all schedules and exhibits attached to this agreement, and all amendments and modifications to this Agreement, the schedules or the exhibits. 80 COLLATERAL has the meaning given in SECTION 5 of this Agreement. CREDIT AGREEMENT has the meaning given in the Recitals. DEBTORS mean the Debtors and their successors and assigns. EQUIPMENT means any and all of each Debtor's equipment, wherever located, whether now owned or hereafter acquired, including, without limitation, any and all manufacturing, distribution, selling, data processing and office equipment, and all machinery, forklifts, furniture, furnishings, appliances, and trade fixtures. INTELLECTUAL PROPERTY means any and all of Debtors' patents, trademarks, tradenames, copyrights, techniques, processes, formulas, any licenses for any of the foregoing and such other intangible rights, privileges, concessions and other property of Debtors used or existing in connection with Debtors' business that is commonly considered to constitute intellectual property under applicable law or in accordance with common usage. INVENTORY means any and all of each Debtor's inventory, wherever located, whether now owned or hereafter acquired, including without limitation, any and all goods held for sale or lease or being processed for sale or lease in Debtor's business as now or hereafter conducted, including without limitation, all parts, furnishings, machinery, furniture, fixtures and equipment, manufacturing, distribution, selling, data processing and office equipment, appliances (excluding equipment in which such Debtor's interest is a leasehold interest), all materials, goods and work-in-process, finished goods, and other tangible property held for sale or lease or furnished or to be furnished under contracts of service or used or consumed in such Debtor's business, together with all increases, parts, fittings, accessories, equipment, and special tools now or hereafter affixed to any part thereof and thereto, together with all substitutes and replacements thereof, all accessions and attachments thereto, and all tools, parts and equipment now or hereafter added to or used in connection with the foregoing, along with all documents (including documents of title) covering inventory, all cash and non-cash proceeds from the sale of inventory, including proceeds from insurance, and including such property the sale or other disposition of which has given rise to accounts and which has not been returned to or repossessed or stopped in transit by such Debtor. LEASE means any lease, sublease, license, or concession of Inventory or other personal property of each Debtor. OBLIGATION means the Obligations defined in the Credit Agreement. OBLIGOR means any Person obligated with respect to any of the Collateral, whether as a party to a contract, an account debtor or otherwise. SECURITY INTEREST means the security interests granted and the pledges and collateral assignments made under SECTION 3 of this Agreement. SECURED PARTY means Secured Party and its successors and assigns. UCC means the Uniform Commercial Code, as in effect from time to time in New York. 2. Credit Agreement. This Agreement is being executed and delivered pursuant to the terms and conditions of the Credit Agreement. Each Security Interest is a "Lien" referred to in the Credit Agreement. 81 3. Security Interest. Subject to the terms and conditions of this Agreement, and to secure the prompt, unconditional and complete payment and performance of the Obligations when due, each Debtor grants to Secured Party a security interest in all of such Debtor's right, title, and interest in the Collateral and each Debtor pledges and assigns as security to Secured Party all of such Debtor's right, title and interest in the Collateral, provided, that, if the pledge or assignment of any specific item of the Collateral is expressly prohibited, the Security Interest shall, subject to Section 5 hereof, be effective to the extent allowed by UCC Section 9-404, 9-405, 9-406 or other applicable Law. 4. No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligations when due, and is given as security only. Secured Party does not assume and shall not be liable for any of Debtors' liabilities, duties, or Obligations under or in connection with the Collateral. Secured Party's acceptance of this Agreement, or its taking any action in carrying out this Agreement, does not constitute Secured Party's approval of the Collateral or Secured Party's assumption of any obligations under or in connection with the Collateral. This Agreement does not affect or modify Debtors' obligations with respect to the Collateral. 5. Collateral. As used in this Agreement, and subject to the immediately succeeding sentence, the term "COLLATERAL" means the following items and types of property, wherever located, whether now owned or hereafter acquired by either Debtor: a) Accounts; b) Inventory; c) Leases; d) Intellectual Property; and e) Equipment. The description of Collateral contained in this SECTION 5 includes after acquired Collateral and proceeds of the Collateral. Notwithstanding any provision of this Agreement or any other Loan Paper: (a) Debtors are pledging and collaterally assigning their right, title, and interest in the Leases to Secured Party only to the extent, if any, that such pledge and assignment is permitted by the terms of any Lease or by the secured party thereunder and Debtors make no representation or warranty with respect to the assignability of any Lease as contemplated by the Loan Papers or as to any interest of Secured Party therein; and (b) nothing herein or in any Loan Paper shall prohibit or give rise to any right or remedy by reason of any modification or termination of any Lease at any time without Secured Party's consent, including, but not limited to any such modification or termination of any Lease on account of, arising out of or related to, any breach or alleged breach thereof; and (c) upon sale of any Equipment in compliance with Section 9.10 of the Credit Agreement, the Security Interest in such Equipment shall be immediately and automatically released and Debtors shall be authorized, without further consent of Secured Party, to file any UCC statements as may be requested by the purchaser of such Equipment to evidence the release of the Security Interest. Debtors agree to use commercially reasonable efforts to obtain the consent of a lessee to the pledge and collateral assignment hereunder to Secured Party of any Lease if necessary and it requested by Secured Party. 82 6. Fraudulent Conveyance. Notwithstanding anything contained in this Agreement to the contrary, Debtors agree that if, but for the application of this SECTION 6, the Obligations or any Security Interest would constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section 547 (or any successor section of that Code) or a fraudulent conveyance or transfer under any state fraudulent conveyance or fraudulent transfer law or similar Law in effect from time to time (each a "FRAUDULENT CONVEYANCE") then the Obligations and each affected Security Interest will be enforceable to the maximum extent possible without causing the Obligations or any Security Interest to be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this SECTION 6. 7. Representation and Warranties. Debtors represent and warrant to Secured Party that: a) Place of Business Location of Records. SCHEDULE 1 to this Agreement sets forth each Debtor's place of business and chief executive office, the present location of its books and records concerning any of the Collateral that is accounts or general intangibles, and its place of formation. Except as noted on SCHEDULE 1, all such books, records, and Collateral are in its possession. The failure of such description of Collateral on SCHEDULE 1 to be accurate or complete will not impair the Security Interests in such Collateral. b) No Prior Lien. Except for Permitted Liens, Debtors have not executed any prior transfer, assignment, pledge, security interest, or hypothecation covering the Collateral or any interest in the Collateral. c) Authority. Each Debtor has full power and authority to execute this Agreement without breaching any material agreement to which such Debtor is party. The delivery at any time by Debtors to Secured Party of Collateral or of additional specific descriptions of certain Collateral shall constitute a representation and warranty by Debtors to Secured Party under this Agreement that the representations and warranties of this SECTION 7 are true and correct with respect to each item of such Collateral. 8. Covenants. Debtors further covenant and agree with Secured Party that so long as the Credit Agreement is in force and effect, each Debtor will: a) Relocation of Office or Books and Records, Change of Name or Address. Give Secured Party 30 days prior written notice of any proposed relocation of its principal place of business, its place of formation, chief executive office, the place where its books and records relating to accounts and general intangibles are kept or changing its name and the address to which it is entitled to notice under the Credit Agreement; provided that if such Debtor gives less than 30 days' prior notice, such notice shall be sufficient for purposes of this subparagraph (a) if, in the reasonable judgment of Secured Party, the rights of Secured Party in the Collateral are not adversely affected. The notice must include the street address, zip code, telephone number, city, county or parish, and state. b) Relocation of Collateral. Not relocate any of the Collateral to any commonwealth, nation, territory, possession, or country outside the United States of America. 83 c) Material Change. Promptly notify Secured Party of any change in any material fact or circumstance represented or warranted by Debtors with respect to the Collateral. d) Record of Collateral. Maintain, at the place where it is entitled to receive notices under the Credit Agreement, a current record of where all Collateral is located, upon reasonable notice permit Secured Party's representatives to inspect and make abstracts from such records at any reasonable time during normal business hours. e) Adverse Claim. Promptly notify Secured Party of any claim, action, or proceeding challenging the Security Interest or affecting title to all or any material portion of the Collateral and, at Secured Party's request, appear in and defend any such action or proceeding at Debtors' expense. f) Hold Collateral In Trust. Upon the occurrence and during the continuation of a Default, hold in trust (and not commingle with its other assets) for Secured Party all Collateral that is chattel paper, instruments, or documents of title at any time received by it and promptly deliver same to Secured Party upon the request of Secured Party. Upon the occurrence and during the continuation of a Default, at Secured Party's request, each chattel paper, instrument, or document of title retained by Debtor shall be marked to state that it is assigned to Secured Party and each instrument shall be endorsed to the order of Secured Party (but failure to so mark or endorse shall not impair the Security Interest). g) No Assignment. Not sell, assign, or otherwise dispose of, or permit the sale, assignment, or disposition of, any Collateral except as permitted by the Loan Papers and except for the sale of Inventory in the ordinary course of business. h) Permitted Liens. Not create or permit the creation of, or allow the existence of, any Lien upon or against any of the Collateral except for Permitted Liens. i) Further Assurance. From time to time promptly execute and deliver to Secured Party all other assignments, certificates, supplemental documents, and financing statements, and do all other acts or things as Secured Party may reasonably request in order to create, evidence, perfect, continue, or maintain the existence and priority of the Security Interest including amendments to SCHEDULE 1. j) Perform Obligations. Perform all of its Obligations under or in connection with the Collateral in accordance with customary business practices. k) Amendment. Not amend, alter, or modify, or permit the amendment, alteration or modification of, any material portion (individually or collectively) of the Collateral without Secured Party's prior written consent as to the form and content of the amendment, alteration or modification, such consent not to be unreasonably withheld or delayed. l) Impairment of Collateral. Not do or permit any act which would impair any material portion of the Collateral. m) Default Under Collateral. Promptly notify Secured Party of any default or event of default by such Debtor or any other party under or in connection with any material 84 portion (individually or collectively) of the Collateral and immediately use reasonable efforts to remedy the same or immediately demand that the same be remedied. n) No Lien or Assignment. Except for Permitted Liens, not execute in favor of any other person or entity, any assignment, pledge or hypothecation of, or security interest in, all or any portion of the Collateral. 9. Default, Remedies. Upon the occurrence and during the continuance of a Default, subject to the terms and conditions of the Credit Agreement, Secured Party has the following cumulative rights and remedies under this Agreement. a) Debtor's Agent. Secured Party shall be deemed to be irrevocably appointed as each Debtor's agent and attorney-in-fact with all right and power to enforce all of such Debtor's rights and remedies under or in connection with the Collateral. All reasonable costs, expenses and liabilities incurred and all payments made by Secured Party as a Debtor's agent and attorney-in-fact, including, without limitation, reasonable attorney's fees and expenses, shall be considered a loan by Secured Party to such Debtor which shall be repayable on demand and shall accrue interest at the Default Rate and shall be part of the Obligations. b) Account Debtors and Obligor. Secured Party may notify or require each account debtor or other Obligor to make payment directly to Secured Party and Secured Party may take control of the proceeds paid to Secured Party. Until Secured Party elects to exercise these rights, Debtors are authorized to collect and enforce the Collateral and to retain and expend all payments made on Collateral. After Secured Party elects to exercise these rights, Secured Party shall have the Right in its own name or in the name of Debtors to (i) compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Secured Party may reasonably determine, (ii) demand, collect, receive, receipt for, sue for, compound, and give acquittance for any and all amounts due or to become due with respect to Collateral, (iii) take control of cash and other proceeds of any Collateral, (iv) endorse any Debtor's name on any notes, acceptances, checks, drafts, money orders, or other evidences of payment on Collateral that may come into Secured Party's possession, (v) sign any Debtor's name on any invoice or bill of lading relating to any Collateral, on any drafts against Obligor or other Persons making payment with respect to Collateral, on assignments and verifications of accounts or other Collateral and on notices to Obligor making payment with respect to Collateral, (vi) send requests for verification of Obligations to any Obligor, and (vii) do all other acts and things reasonably necessary to carry out the intent of this Agreement. If any Obligor fails to make payment on any Collateral when due, after giving effect to any applicable grace period, Secured Party is authorized, in its sole discretion, either in its own name or in any Debtor's name, to take such action as Secured Party reasonably shall deem appropriate for the collection of any amounts owed with respect to Collateral or upon which a delinquency exists. Regardless of any other provision of this Agreement, however, Secured Party shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral except for its own fraud, gross negligence, willful misconduct or violation of any Law, nor shall it be under any duty whatever to anyone except Debtors to account for funds that it shall actually receive under this Agreement. A receipt given by Secured Party to any Obligor shall be a full and complete release, discharge, and acquittance 85 to such Obligor, to the extent of any amount so paid to Secured Party. Secured Party may apply or set off the deposits against any liability of Debtors to Secured Party. c) UCC Rights. Secured Party may exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Papers, at law, in equity, or otherwise, including, without limitation, (i) requiring Debtors to assemble all or part of the Collateral and make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to Debtors and Secured Party, (ii) applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral, (iii) applying to the Obligations any cash held by Secured Party under this Agreement, (iv) reducing any claim to judgment, (v) exercising the rights of offset or banker's Lien against the interest of Debtors in and to every account and other property of Debtors in Secured Party's possession to the extent of the full amount of the Obligations, (vi) foreclosing the Security Interest and any other liens Secured Party may have or otherwise realize upon any and all of the rights Secured Party may have in and to the Collateral, or any part thereof, and (vii) bringing suit or other proceedings before any Tribunal either for specific performance of any covenant or condition contained in any of the Loan Papers or in aid of the exercise of any right granted to Secured Party in any of the Loan Papers. d) Notice. Reasonable prior notification of the time and place of any public sale of the Collateral, or reasonable prior notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Debtors and to any other Person entitled to notice under the UCC; provided that, to the extent permitted by applicable Law, if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Secured Party may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind if giving such prior notification is not possible without causing undue expenses or delays; provided that notice shall be given as soon as possible thereafter. It is agreed that notice sent or given not less than five Business Days prior to the taking of the action to which the notice relates is reasonable notification and notice for the purposes of this subparagraph. It shall not be necessary that the Collateral be at the location of the sale. e) Application of Proceeds. Secured Party shall apply the proceeds of any sale or other disposition of the Collateral under this SECTION 9 in the following order: First, to the payment of all its reasonable expenses incurred in retaking, holding, and preparing any of the Collateral for sale(s) or other disposition, in arranging for such sale(s) or other disposition, and in actually selling or disposing of the same (all of which are part of the Obligations); second, toward repayment of amounts reasonably expended by Secured Party under SECTION 10; third, toward payment of the balance of the Obligations in the order and manner specified in the Credit Agreement. Any surplus remaining shall be delivered to Debtors or as a court of competent jurisdiction may direct. f) Sale. Secured Party's sale of less than all the Collateral shall not exhaust Secured Party's rights under this Agreement and Secured Party is specifically empowered to make successive sales until all the Collateral is sold. If the proceeds of a sale of less than all the Collateral shall be less than the Obligations, this Agreement and the Security Interest shall remain in full force and effect as to the unsold portion of the Collateral just as though no sale had 86 been made. In the event any sale under this Agreement is not completed or is, in Secured Party's opinion, defective, such sale shall not exhaust Secured Party's rights under this Agreement and Secured Party shall have the right to cause a subsequent sale or sales to be made. Any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale under this Agreement as to nonpayment of the Obligations, or as to the occurrence of any Default, or as to Secured Party's having declared all of such Obligations to be due and payable, or as to notice of time, place and terms of sale and the properties to be sold having been duly given, to, as to any other act or thing having been duly done by Secured Party, shall be taken as prima facie evidence of the truth of the facts so stated and recited. Secured Party may appoint or delegate any one or more Persons as agent to perform any act or acts necessary or incident to any sale held by Secured Party, including the sending of notices and the conduct of sale, but such acts must be done in the name and on behalf of Secured Party. g) Existence of Default. Regarding the existence of any Default for purposes of this Agreement, Debtors agree that the Obligor on any Collateral may rely upon written certification from Secured Party that such a Default exists. Subject to the terms of the Credit Agreement, Debtors expressly agree that Secured Party shall not be liable to Debtors for any claims, damages, costs, expenses or causes of action of any nature whatsoever in connection with, arising out of, or related to Secured Party's exercise of any rights, powers or remedies under any Loan Paper except for its own fraud, gross negligence, willful misconduct or violation of any Law. 10. Other Rights of Secured Party. a) Performance. In the event a Debtor fails to preserve the priority of the Security Interest in any of the Collateral, or, upon the occurrence and during the continuance of a Default, otherwise fails to perform any of its Obligations under the Loan Papers with respect to the Collateral, then Secured Party may (but is not required to) prosecute or defend any suits in relation to the Collateral or take any other action which such Debtor is required to take under the Loan Papers, but has failed to take. Any sum which may be reasonably expended or paid by Secured Party under this subparagraph (including, without limitation, court costs and reasonable attorneys' fees and expenses) shall bear interest from the date of notice to Debtors of such expenditure or payment at the Default Rate until paid and, together with such interest, shall be payable by such Debtor to Secured Party upon demand and shall be part of the Obligations. b) Collateral in Secured Party's Possession. If, upon the occurrence and during the continuance of a Default, any Collateral comes into Secured Party's possession, Secured Party may use such Collateral for the purpose of preserving it or its value pursuant to the order of a court of appropriate jurisdiction or in accordance with any other rights held by Secured Party in respect of such Collateral. Debtors covenant to promptly reimburse and pay to Secured Party, at Secured Party's request, the amount of all reasonable expenses incurred by Secured Party in connection with its custody and preservation of such Collateral, and all such expenses, costs, Taxes, and other charges shall bear interest at the Default Rate from the date of notice to Debtors of such expenses and costs until repaid and, together with such interest, shall be payable by Debtors to Secured Party upon demand and shall be part of the Obligations. However, the risk of accidental loss or damage to, or diminution in value of, Collateral is on Debtors, except for Secured Party's own fraud, gross negligence, willful misconduct or violation of any Law. 87 Provided that Secured Party acts in accordance with all applicable Laws, Secured Party shall have no liability for failure to obtain or maintain insurance, nor to determine whether any insurance ever in force is adequate as to amount or as to the risks insured. With respect to Collateral that is in the possession of Secured Party, except for its own fraud, gross negligence, willful misconduct or violation of any Law, Secured Party shall have no duty to fix or preserve rights against prior parties to such Collateral and shall never be liable for any failure to use diligence to collect any amount payable in respect of such Collateral, but shall be liable only to account to Debtors for what it may actually collect or receive thereon. c) Subrogation. If any of the Obligations is given in renewal or extension or applied toward the payment of indebtedness secured by any Lien, Secured Party shall be, and is hereby, subrogated to all of the rights, titles, interests, and Liens securing the indebtedness so renewed, extended, or paid. 11. Miscellaneous. a) Reference to Miscellaneous Provisions. This Agreement is one of the "Loan Papers" referred to in the Credit Agreement, and, therefore, this Agreement is subject to the applicable provisions of Article 14 of the Credit Agreement, all of which are incorporated in this Agreement by reference the same as if set forth in this Agreement verbatim. b) Term. Upon full and final payment of the Obligations and final termination of the Lenders' commitment to make advances and under the Credit Agreement without Secured Party having exercised its rights under this Agreement, this Agreement and all the Liens of the Administrative Agent and the Lenders on the Collateral shall automatically terminate; provided that no Obligor on any of the Collateral shall be obligated to require as to the termination of this Agreement, but shall be fully protected in making payment directly to Secured Party, which payment shall be promptly paid over to Debtors after termination of this Agreement. c) Actions Not Releases. The Security Interest and Debtors' Obligations and Secured Party's rights under this Agreement shall not be released, diminished, impaired, or adversely affected by the occurrence of any one or more of the following events: (i) the taking or accepting of any other security or assurance for any or all of the Obligations; (ii) any release, surrender, exchange, subordination, or loss of any security or assurance at any time existing in connection with any or all of the Obligations; (iii) the modification of, amendment to, or waiver of compliance with any terms of any of the other Loan Papers without the consent of Debtors, except as required therein; (iv) the insolvency, bankruptcy, or lack of corporate or trust power of any party at any time liable for the payment of any or all of the Obligations, whether now existing or hereafter occurring; (v) any renewal, extension, or rearrangement of the payment of any or all of the Obligations, either with or without notice to or consent of Debtors, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Secured Party to Debtors, in each case, except as required by the Loan Papers; (vi) any neglect, delay, omission, failure, or refusal of Secured Party to take or prosecute any action in connection with any other agreement, document, guaranty, or instrument evidencing, securing, or assuring the payment of all or any of the Obligations; (vii) any failure of Secured Party to notify Debtors of any renewal, extension, or assignment of the Obligations or any part thereof, or the release of 88 any security under any other document or instrument, or of any other action taken or refrained from being taken by Secured Party against Debtors or any new agreement between Secured Party and Debtors, it being understood that, except as expressly required by the Credit Agreement, Secured Party shall not be required to give Debtors any notice of any kind under any circumstances whatsoever with respect to or in connection with the Obligations, including, without limitation, notice of acceptance of this Agreement or any Collateral ever delivered to or for the account of Secured Party under this Agreement; (viii) the illegality, invalidity, or unenforceability of all or any part of the Obligations against any third party obligated with respect thereto by reason of the fact that the Obligations, or the interest paid or payable with respect thereto, exceeds the amount permitted by Law, the act of creating the Obligations, or any part thereof, is ultra vires, or the officers, partners, or trustees creating same acted in excess of their authority, or for any other reason; or (ix) if any payment by any party obligated with respect thereto is held to constitute a preference under applicable Laws or for any other reason Secured Party is required to refund such payment or pay the amount thereof to someone else. d) Waivers. Except to the extent expressly otherwise provided in this Agreement or in other Loan Papers, Debtors waive (i) any Right to require Secured Party to proceed against any other Person, to exhaust its rights in Collateral, or to pursue any other Right which Secured Party may have; (ii) with respect to the Obligations, presentment and demand for payment, protest, notice of protest and nonpayment, notice of acceleration, and notice of the intention to accelerate; and (iii) all rights of marshaling in respect of any and all of the Collateral. e) Financing Statement. Secured Party shall be entitled at any time to file this Agreement or a carbon, photographic, or other reproduction of this Agreement, as a financing statement, but the failure of Secured Party to do so shall not impair the validity or enforceability of this Agreement. f) Amendments. This Agreement may only be amended by a writing executed by Debtors and Secured Party. g) Multiple Counterparts. This Agreement may be executed in any number of identical counterparts. Each counterpart shall be deemed an original for all purposes and all counterparts, collectively, shall constitute one Agreement. In making proof of this Agreement, it shall not be necessary to produce or account for more than one set of counterpart signatures. h) Parties Bound. This Agreement shall be binding on Debtors and their successors and assigns and shall inure to the benefit of Secured Party and its successors and assigns. The Obligations and agreements of Debtors under this Agreement shall be binding upon their successors and assigns, and, except for Secured Party's fraud, gross negligence, willful misconduct, and violation of any applicable Law, delivery or other accounting of Collateral to Debtors shall discharge Secured Party of all liability therefor. i) Assignment. Debtors may not, without Secured Party's prior written consent, assign any rights, duties, or Obligations under this Agreement. j) Notice. Any notice or communication required or permitted under this Agreement must be given as prescribed in the Credit Agreement. 89 k) Governing Law. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES OF AMERICA. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] 90 EXECUTED as of the date set forth in the preamble. MONRO MUFFLER BRAKE, INC., a New York corporation By: _________________________________________ Catherine D'Amico, Executive Vice President of Finance, Chief Financial Officer, and Treasurer MONRO LEASING, LLC, a Delaware limited liability company By: MONRO MUFFLER BRAKE, INC., its Sole Member By: ____________________________________ Catherine D'Amico, Executive Vice President of Finance, Chief Financial Officer, and Treasurer MONRO SERVICE CORPORATION, a Delaware corporation By: _________________________________________ Catherine D'Amico, Treasurer CHARTER ONE BANK, N.A., as Administrative Agent By: _________________________________________ Name: _______________________________________ Title: ______________________________________ 91 SCHEDULE 1 LOCATION OF (1) BOOKS AND RECORDS AS TO ACCOUNTS, (2) CHIEF EXECUTIVE OFFICE, AND (3) PLACE OF FORMATION: Monro Muffler Brake, Inc. a New York corporation 200 Holleder Parkway Rochester, New York 14615 Monro Leasing, LLC a Delaware limited liability company 200 Holleder Parkway Rochester, New York 14615 Monro Service Corporation a Delaware corporation 200 Holleder Parkway Rochester, New York 14615 92 EX-10.3 4 l15010aexv10w3.txt EX-10.3 GUARANTY AMONG MONRO SERVICE CORPORATION Exhibit 10.3 GUARANTY (this "GUARANTY") As of July 13 2005 Charter One Bank, N.A., as Administrative Agent for the Lenders described below 71 South Wacker Drive Suite 2900 Chicago, Illinois 60603 Re: Credit Agreement dated as of July 13, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT") by and among Monro Muffler Brake, Inc. as the Borrower (the "BORROWER"), the several banks party thereto from time to time (the "LENDERS"), and Charter One Bank, N.A., as Administrative Agent (the "ADMINISTRATIVE Agent"). Ladies and Gentlemen: 1. Guaranty. For value received, and in consideration of Borrower entering into the Credit Agreement, the undersigned corporation (the "GUARANTOR"), does hereby irrevocably, absolutely, and unconditionally guarantee (a) payment, when due, of any and all indebtedness and other amounts of every kind, howsoever created, arising, or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or owing to the Lenders or the Administrative Agent, by Borrower under the Notes as defined in the Credit Agreement, (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the United States Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post-petition interest if Borrower voluntarily or involuntarily files for bankruptcy protection) (all such obligations being hereinafter collectively referred to as the "LIABILITIES") and (b) the performance by Borrower of its obligations under the Loan Papers pursuant to the terms thereof (the "OBLIGATIONS"). The Guarantor has a substantial, direct or indirect, financial interest in the benefits and advantages which will result from the Credit Agreement. The Guarantor hereby agrees that, upon any Default, the Guarantor will forthwith pay the Liabilities as limited by this paragraph immediately upon written demand or perform the Obligations. 2. Guaranty Continuing, Absolute, Unlimited. This Guaranty is a continuing, absolute, and unlimited Guaranty of payment and the Guarantor is a primary obligor and not a surety. The Liabilities and Obligations shall be conclusively presumed to have been created in reliance on this Guaranty. The Administrative Agent shall not be required to proceed first against Borrower or any other person, firm or corporation or against any property securing any 93 of the Liabilities or Obligations before resorting to the Guarantor for payment or performance. To the extent permitted by applicable law, this Guaranty shall be construed as a guarantee of payment without regard to the enforceability of any of the Liabilities or Obligations or the rejection of the Credit Agreement in bankruptcy, and notwithstanding any claim, defense (other than payment or performance by Borrower or the Guarantor) or right of setoff which Borrower or the Guarantor may have against any Lender or the Administrative Agent, including any such claim, defense, or right of setoff based on any present or future law or order of any government (de jure or de facto), or of any agency thereof or court of law purporting to reduce, amend, or otherwise affect any of the Liabilities or Obligations of Borrower or any other obligor, or to vary any terms of payment thereof, and without regard to any other circumstances which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. The Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment to the Lenders or the Administrative Agent of the Liabilities or any part thereof is rescinded or must otherwise be returned by any Lender or the Administrative Agent upon the insolvency, bankruptcy, or reorganization of Borrower, or otherwise, as though such payment to such Lender or the Administrative Agent had not been made. To the extent permitted by applicable law, the Guarantor's obligation to fully pay or perform the Liabilities and any remedy for the enforcement thereof shall not be impaired, modified, released, or limited in any way by any impairment, modification, release, or limitation of the liability of Borrower or its bankruptcy estate, resulting from the operation of any present or future provision of any Debtor Relief Law or from the decision of any court interpreting the same. 3. Guaranty Not Affected by Change in Security or Other Actions. The Administrative Agent and the Lenders may, from time to time, without the consent of or notice to the Guarantor, take any or all of the following actions without impairing or affecting (except insofar as the Liabilities are reduced or modified thereby), the Guarantor's obligations under this Guaranty or releasing or exonerating the Guarantor from any of its liabilities hereunder: a. retain or obtain a security interest in any property to secure any of the Liabilities or any obligation hereunder; b. retain or obtain the primary or secondary liability of any party or parties, in addition to the Guarantor, with respect to any of the Liabilities; c. extend the time or change the manner, place or terms of payment of, or renew or amend any note or other instrument evidencing the Liabilities or any part thereof, or amend in any manner any agreement relating thereto, in each case in accordance with the terms of each such agreement; d. release or compromise, in whole or in part, or accept full or partial payment for, any of the Liabilities hereby guaranteed, or any liability of any nature of any other party or parties with respect to the Liabilities or any security therefore; 94 e. enforce the Administrative Agent's or the Lenders' security interest, if any, in all or any properties securing any of the Liabilities or any obligations hereunder in order to obtain full or partial payment of the Liabilities then outstanding; or f. release or fail to perfect, protect, or enforce the Administrative Agent's or the Lenders' security interest, if any, in all or any properties securing any of the Liabilities or any obligation hereunder, or permit any substitution or exchange for any such property. 4. Waivers. The Guarantor hereby expressly waives to the extent permitted by law: a. notice of acceptance of this Guaranty; b. notice of the existence or incurrence of any or all of the Liabilities in accordance with the Loan Papers; c. presentment, demand, notice of dishonor, protest, and all other notices whatsoever (except the written demand referred to in SECTION 1 hereinabove); d. any requirement that proceedings first be instituted by the Administrative Agent or any Lender against the Borrower; e. all diligence in collection or protection of or realization upon the Liabilities or any part thereof, or any obligation hereunder, or any collateral for any of the foregoing; f. any rights or defenses based on the Administrative Agent's or a Lender's election of remedies, including any defense to the Administrative Agent's or Lender's action to recover any deficiency after a non-judicial sale; and g. the occurrence of every other condition precedent to which the Guarantor might otherwise be entitled. 5. Definitions. As used in this Guaranty, capitalized terms not otherwise defined herein will have the meanings given them in the Credit Agreement. 6. Representations, Warranties and Agreements of Guarantor. The Guarantor represents and warrants to the Administrative Agent and the Lenders that: a. Corporate Existence, Good Standing, Authority and Compliance. The Guarantor is duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated. Except where failure is not a Material Adverse Event, the Guarantor (a) is duly qualified to transact business and is in good standing as a foreign corporation or other entity in each jurisdiction where the nature and extent of its business and properties require due qualification and good standing, (b) possesses all requisite authority, permits and power to conduct 95 its business as is now being, or is contemplated to be, conducted, and (c) is in compliance with all applicable Laws, except in each case where the failure to so qualify, to possess such authority, permits or power or to comply with such Law would not cause a Material Adverse Event. b. Authorization and Contravention. The execution and delivery by the Guarantor of this Guaranty or related document to which it is a party and the performance by it of its obligations thereunder (a) are within its corporate power, (b) have been duly authorized by all necessary corporate action, (c) require no action by or filing with any Tribunal (other than any action or filing that has been taken or made on or before the date of this Guaranty or which would not cause a Material Adverse Event), (d) do not violate any provision of its charter or bylaws, (e) do not violate any provision of Law or order of any Tribunal applicable to it, other than violations that individually or collectively are not a Material Adverse Event, (f) do not violate any Material Agreements to which it is a party, other than a violation which would not cause a Material Adverse Event, (g) do not result in the creation or imposition of any Lien (other than the Lender Liens) on any asset of the Guarantor, (h) are in furtherance of the corporate purposes of the Guarantor and (i) do not require the consent or approval of the shareholders of the Guarantor. c. Binding Effect. Upon execution and delivery by all parties thereto, this Guaranty will constitute a legal and binding obligation of the Guarantor, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable Debtor Relief Laws and general principles of equity. d. Consideration. Guarantor represents and warrants that the value of the consideration received and to be received by it is reasonably worth at least as much as its liability under this Guaranty, and such liability may reasonably be expected to benefit Guarantor directly or indirectly. NOTWITHSTANDING ANY CONTRARY PROVISION IN THIS GUARANTY, GUARANTOR'S MAXIMUM LIABILITY HEREUNDER IS LIMITED, TO THE EXTENT, IF ANY, REQUIRED SO THAT ITS LIABILITY IS NOT SUBJECT TO AVOIDANCE UNDER ANY DEBTOR RELIEF LAW. e. Solvency. As of the date of this Guaranty, the Guarantor is, and after giving effect to this Guaranty, will be, Solvent. 7. Events of Default. a. Loan Papers. The failure of Borrower to pay any part of the Liabilities within five (5) Business Days after it becomes due and payable under the Loan Papers or the occurrence and continuation of a Default under any Loan Paper. 96 b. Debtor Relief. Guarantor (a) is not Solvent, (b) fails to pay its Debts generally as they become due, (c) voluntarily seeks, consents to, or acquiesces in the benefit of any Debtor Relief Law, or (d) becomes a party to or is made the subject of any proceeding provided for by any Debtor Relief Law, other than as a creditor or claimant, that could suspend or otherwise adversely affect the Rights of Administrative Agent or Lenders granted in the Loan Papers (unless, if the proceeding is involuntary, the applicable petition is dismissed within sixty (60) days after its filing). c. Government Action. (a) A final non-appealable order is issued by any Tribunal (including, but not limited to, the United States Justice Department) seeking to cause Guarantor to divest a significant portion of its assets under any antitrust, restraint of trade, unfair competition, industry regulation or similar Laws, or (b) any Tribunal condemns, seizes or otherwise appropriates, or takes custody or control of all or any substantial portion of the assets of Guarantor. d. Misrepresentation. Any material representation or warranty made by Guarantor contained herein or in any Loan Paper at any time proves to have been materially incorrect when made. 8. Remedies Upon Default. Without limiting any other rights or remedies of the Administrative Agent or the Lenders provided for elsewhere in this Guaranty or the Loan Papers, or by any requirement of Law, or in equity, or otherwise: a. Upon the occurrence of any Default, the Lenders may without any notice to (except as expressly provided herein or in and during the continuance of any Loan Paper) or demand upon Guarantor, which are expressly waived by Guarantor (except as to notices expressly provided for herein or in any Loan Paper), proceed to protect, exercise and enforce the rights and remedies of the Lenders against Guarantor hereunder or under the Loan Papers and such other rights and remedies as are provided by requirement of Law or equity. b. The rights provided for in this Guaranty and the Loan Papers are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. c. The order and manner in which the Lenders' rights and remedies upon the occurrence and during the continuance of a Default are to be exercised shall be determined by the Administrative Agent or the Lenders, as the case may be, in its sole discretion, and all payments received by the Administrative Agent shall be applied first to the costs and expenses (including reasonable attorney's fees incurred by the Administrative Agent and Lenders) of the Administrative Agent and Lenders, then to the payment of all accrued and unpaid amounts due under any Loan Papers to and including the date of such application. To the extent 97 permitted by applicable law, no application of payments will cure any Default, or prevent acceleration, or continued acceleration, of amounts payable under the Loan Papers, or prevent the exercise, or continued exercise, of rights or remedies of the Administrative Agent and Lenders hereunder or thereunder or under any requirement of Law or in equity. 9. Payments. Each payment by the Guarantor to the Administrative Agent under this Guaranty shall be made by transferring the amount thereof in immediately available funds without set-off or counterclaim. 10. Costs, Expenses and Taxes. The Guarantor agrees to pay on demand: (i) all reasonable out of pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Guaranty and any other documents to be delivered hereunder, including the reasonable fees and out of pocket expenses of counsel for the Administrative Agent with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities under this Guaranty, and any modification, supplement or waiver of any of the terms of this Guaranty, (ii) all reasonable costs and expenses of the Administrative Agent hereunder, including reasonable legal fees and expenses of counsel to the Agent, in connection with a default or the enforcement of this Guaranty and (iii) reasonable costs and expenses incurred in connection with third party professional services reasonably required by the Administrative Agent pursuant to the Loan Papers such as appraisers, environmental consultants, accountants or similar Persons; provided that except during the continuance of any Default hereunder, the Administrative Agent will first obtain the consent of the Guarantor to such expense, which consent shall not be unreasonably withheld. Without prejudice to the survival of any other obligations of the Guarantor hereunder, the obligations of the Guarantor under this Section shall survive the termination of this Guaranty. 11. Subrogation. The Guarantor shall not be subrogated to, in whole or in part, and agrees not to exercise any rights of subrogation with respect to, the rights of the Administrative Agent or any Lender or those of any subsequent assignee or transferee of any of the Liabilities until all the Liabilities to the Administrative Agent and the Lenders and every such subsequent assignee or transferee shall have been paid in full. The provisions of this SECTION 11 shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order, or law. 12. No Waiver; Remedies. No failure on the part of the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, or any abandonment or discontinuance of any steps to enforce such right, preclude any other or further exercise thereof or the exercise of any other right. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in similar or other circumstances. The remedies herein are cumulative and not exclusive of any other remedies provided by law, at equity or in any other agreement. 98 13. Survival of Representations and Warranties. All representations, warranties and covenants contained herein or made in writing by the Guarantor in connection herewith shall survive the execution and delivery of this Guaranty, and the termination of the Loan Papers and will bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed or not. 14. Confidentiality. The Administrative Agent and each Lender agree to keep any information delivered or made available by the Guarantor to it which is clearly indicated to be confidential information, confidential from anyone other than Persons employed or retained by the Administrative Agent who are or are expected to become engaged in evaluating, approving, structuring or administering the Loan Papers; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing such information (a) to any Lender, (b) pursuant to subpoena or upon the order of any court or administrative agency, (c) upon the request or demand of any regulatory agency or authority having jurisdiction over Administrative Agent or any Lender, (d) which has been publicly disclosed, (e) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Lender, the Borrower, the Guarantor or their respective Affiliates may be a party, (f) to the extent reasonably required in connection with the exercise of any remedy hereunder, (g) to any Lender's legal counsel and independent auditors. The Administrative Agent will promptly notify the Guarantor of any information that it is required or requested to deliver pursuant to clause (b) or (c) of this SECTION 14 and, if the Guarantor is a party to any such litigation, CLAUSE (e) of this SECTION 14. 15. Separability. Should any clause, sentence, paragraph or Section of this Guaranty be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Guaranty, and the parties hereto agree that the part or parts of this Guaranty so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom and the remainder will have the same force and effectiveness as if such part or parts had never been included herein. 16. Execution in Counterparts. This Guaranty may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 17. Interpretation. c. In this Guaranty, unless a clear contrary intention appears: i. the singular number includes the plural number and vice versa; ii. reference to any gender includes each other gender; iii. the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Guaranty as a whole and not to any particular Article, Section or other subdivision; 99 iv. reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Guaranty, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; provided that nothing in this clause is intended to authorize any assignment not otherwise permitted by this Guaranty; v. except as expressly provided to the contrary herein, reference to any agreement, document or instrument (including this Guaranty) means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof; vi. unless the context indicates otherwise, reference to any Article, Section, Schedule or Exhibit means such Article or Section hereof or such Schedule or Exhibit hereto; vii. the word "including" (and with correlative meaning "include") means including, without limiting the generality of any description preceding such term; viii. with respect to the determination of any period of time, except as expressly provided to the contrary, the word "from" means "from and including" and the word "to" means "to but excluding"; and ix. reference to any law, rule or regulation means such as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time. b. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. c. No provision of this Guaranty shall be interpreted or construed against any Person solely because that Person or its legal representative drafted such provision. 18. Submission to Jurisdiction. The Guarantor, to the extent permitted by applicable law, hereby agrees as follows: a. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE STATE COURTS OF NEW YORK, LOCATED IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID 100 COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 21, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GUARANTOR IN ANY OTHER JURISDICTION. b. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 19. Waiver of Jury Trial. THE GUARANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 20. Parties. This Guaranty shall inure to the benefit of the Administrative Agent and the Lenders and their respective successors, assigns or transferees, and shall be binding upon the Guarantor and its successors and assigns. The Guarantor may not assign any of its duties under this Guaranty without the prior written consent of the Administrative Agent. The Administrative Agent and the Lenders may assign their respective Rights and benefits under this Guaranty to any Participant or Purchaser in accordance with the provisions of Section 14.12 of the Credit Agreement. 21. Notices. All notices, consents, requests, approvals, demands and other communications provided for herein shall be in writing (including telecopy communications) and mailed, telecopied, sent by overnight courier or delivered: 101 a. If to the Guarantor: Monro Service Corporation 200 Holleder Parkway Rochester, New York 14615 Attention: Catherine D'Amico, Senior Vice President and Chief Financial officer telephone: (585) 647-6400 telecopy: (585) 627-0941 b. If to the Administrative Agent: Charter One Bank, N.A. 71 South Wacker Drive Suite 2900 Chicago, Illinois 60606 Attention: Stephanie Epkins Vice President, Corporate Banking telecopy: (312) 777-3494 telephone: (312) 777-3411 with a copy to Emmet, Marvin & Martin, LLP 120 Broadway New York, New York 10271 Attention: Richard S. Talesnick telecopy: (212) 238-3100 telephone: (212) 238-3046 c. or, in the case of any party hereto, such other address or telecopy number as such party may hereafter specify for such purpose by notice to the other parties given in accordance with the provisions of this SECTION 21. Other than the service of process set forth in SECTION 18(a) above, all communications shall be effective three (3) Business Days after the date when mailed by certified mail, return receipt requested postage prepaid to any party at its address specified above, or upon receipt if telecopied to any party to the telecopy number set forth above, or upon receipt if delivered personally to any party at its address specified above. 22. Term. This Guaranty is not limited to any particular period of time, but shall continue in full force and effect until all of the Liabilities have been fully and finally paid or have been otherwise discharged by the Administrative Agent and the Lenders, and the Guarantor shall not be released from any obligation or liability hereunder until such full payment or discharge shall have occurred. 23. Governing Law. This Guaranty and all other documents executed in connection herewith shall be deemed to be contracts and agreements executed by the Guarantor and 102 Administrative Agent under the laws of the State of New York and of the United States of America and for all purposes shall be construed in accordance with, and governed by, the laws of said state and of the United States of America. 24. Indemnity. a. The Guarantor shall indemnify the Administrative Agent, each Lender and each Affiliate thereof and their respective directors, officers, employees and agents (each, an "INDEMNIFIED PERSON") from, and hold each of them harmless against, any and all losses, liabilities, claims or damages (including reasonable legal fees and expenses) to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Borrower of the proceeds of any extension of credit or any investigation, litigation or other proceeding (including any threatened investigation or proceeding) relating to the foregoing or any of the Loan Papers, and the Guarantor shall assume the defense thereof, including the employment of counsel at Guarantor's expense; provided that Guarantor shall not have such right, to the extent that such Indemnified Person shall deliver to Guarantor a written notice waiving the benefits of the indemnification of such Indemnified Person provided by this SECTION 24(a) in connection with such claim, action, proceeding or suit. Notwithstanding the foregoing, if independent counsel to such Indemnified Person shall conclude that there may be defenses available to such Indemnified Person which may conflict with those available to Guarantor, Guarantor shall not have the right to assume the defense of any such claim, action, proceeding or suit on behalf of such Indemnified Person if such Indemnified Person chooses to defend such claim, action, proceeding or suit (with counsel reasonably acceptable to Guarantor), and all reasonable costs, expenses and attorneys' fees incurred by the Indemnified Person in defending such claim, action, proceeding or suit shall be borne by Guarantor; provided however, if there is more than one (1) Indemnified Person having a right to defend such claim, action, proceeding or suit as aforesaid, the obligation of Guarantor to pay the fees and expenses of such Indemnified Person shall be limited to one (1) firm of attorneys. Any Indemnified Person shall also have the right to employ separate counsel and to participate in its defense, but the fees and expenses of such counsel shall be borne by such Indemnified Person. Any decision by an Indemnified Person to employ its own counsel (whether or not at Guarantor's expense) shall in no way affect any rights of such Indemnified Person otherwise arising under this SECTION 24(a). In addition, Guarantor will not be liable for any settlement of any claim, action, proceeding or suit unless Guarantor has consented thereto in writing. The foregoing indemnity and agreement to hold harmless shall not in any event apply to any losses, liabilities, claims, damages or expenses incurred by reason of (i) the gross negligence or willful misconduct of the Person to be indemnified, or (ii) any material default by the Administrative Agent or any Lender that is not cured within any applicable cure period, if any, under any of the Loan Papers. b. Without limiting any provision of this Guaranty, it is the express intention of the parties hereto that each Person to be indemnified hereunder or thereunder shall be indemnified and held harmless against any and all losses, liabilities, claims or damages: (i) arising out of or resulting from the ordinary sole or contributory negligence of such Person 103 or (ii) imposed upon said party under any theory or strict liability. Without prejudice to the survival of any other obligations of the Guarantor hereunder and under the Loan Papers, the obligations of the Guarantor under this Section shall survive the termination of this Guaranty and the Loan Papers and the payment of the Liabilities. 25. New Guaranty. In the event that (i) any Loan Paper is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding involving the Borrower or (ii) any Loan Paper or this Guaranty is terminated as a result of any bankruptcy or insolvency proceeding involving the Borrower and, if within sixty (60) days after such rejection or termination, the Administrative Agent or its designee shall so request and shall certify in writing to the Guarantor that it intends to perform the obligations of the Borrower as and to the extent required under such Loan Paper or this Guaranty, as applicable, the Guarantor will, unless prohibited by bankruptcy or other applicable law, execute and deliver to the Administrative Agent or such designee, a new Guaranty that shall contain the same conditions, agreements, terms, provisions and limitations as such original Guaranty (except for any requirements which have been fulfilled by the Borrower and the Guarantor prior to such rejection or termination). Sincerely yours, MONRO SERVICE CORPORATION, a Delaware corporation By: _________________________________________ Name:________________________________________ Title:_______________________________________ ACCEPTED AND AGREED as of the date first above written: CHARTER ONE BANK, N.A., as Administrative Agent By:__________________________________________ Name:________________________________________ Title:_______________________________________ 104 EX-10.4 5 l15010aexv10w4.txt EX-10.4 CREDIT AGREEMENT AMONG MONRO LEASING, LLC Exhibit 10.4 GUARANTY (this "GUARANTY") As of July 13, 2005 Charter One Bank, N.A., as Administrative Agent for the Lenders described below 71 South Wacker Drive Suite 2900 Chicago, Illinois 60603 Re: Credit Agreement dated as of July 13, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT") by and among Monro Muffler Brake, Inc. as the Borrower (the "BORROWER"), the several banks party thereto from time to time (the "LENDERS"), and Charter One Bank, N.A., as Administrative Agent (the "ADMINISTRATIVE AGENT"). Ladies and Gentlemen: 1. Guaranty. For value received, and in consideration of Borrower entering into the Credit Agreement, the undersigned corporation (the "Guarantor"), does hereby irrevocably, absolutely, and unconditionally guarantee (a) payment, when due, of any and all indebtedness and other amounts of every kind, howsoever created, arising, or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or owing to the Lenders or the Administrative Agent, by Borrower under the Notes as defined in the Credit Agreement, (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the United States Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post-petition interest if Borrower voluntarily or involuntarily files for bankruptcy protection) (all such obligations being hereinafter collectively referred to as the "Liabilities") and (b) the performance by Borrower of its obligations under the Loan Papers pursuant to the terms thereof (the "Obligations"). The Guarantor has a substantial, direct or indirect, financial interest in the benefits and advantages which will result from the Credit Agreement. The Guarantor hereby agrees that, upon any Default, the Guarantor will forthwith pay the Liabilities as limited by this paragraph immediately upon written demand or perform the Obligations. 2. Guaranty Continuing, Absolute, Unlimited. This Guaranty is a continuing, absolute, and unlimited Guaranty of payment and the Guarantor is a primary obligor and not a surety. The Liabilities and Obligations shall be conclusively presumed to have been created in reliance on this Guaranty. The Administrative Agent shall not be required to proceed first against Borrower or any other person, firm or corporation or against any property securing any of the Liabilities or 105 Obligations before resorting to the Guarantor for payment or performance. To the extent permitted by applicable law, this Guaranty shall be construed as a guarantee of payment without regard to the enforceability of any of the Liabilities or Obligations or the rejection of the Credit Agreement in bankruptcy, and notwithstanding any claim, defense (other than payment or performance by Borrower or the Guarantor) or right of setoff which Borrower or the Guarantor may have against any Lender or the Administrative Agent, including any such claim, defense, or right of setoff based on any present or future law or order of any government (de jure or de facto), or of any agency thereof or court of law purporting to reduce, amend, or otherwise affect any of the Liabilities or Obligations of Borrower or any other obligor, or to vary any terms of payment thereof, and without regard to any other circumstances which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. The Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment to the Lenders or the Administrative Agent of the Liabilities or any part thereof is rescinded or must otherwise be returned by any Lender or the Administrative Agent upon the insolvency, bankruptcy, or reorganization of Borrower, or otherwise, as though such payment to such Lender or the Administrative Agent had not been made. To the extent permitted by applicable law, the Guarantor's obligation to fully pay or perform the Liabilities and any remedy for the enforcement thereof shall not be impaired, modified, released, or limited in any way by any impairment, modification, release, or limitation of the liability of Borrower or its bankruptcy estate, resulting from the operation of any present or future provision of any Debtor Relief Law or from the decision of any court interpreting the same. 3. Guaranty Not Affected by Change in Security or Other Actions. The Administrative Agent and the Lenders may, from time to time, without the consent of or notice to the Guarantor, take any or all of the following actions without impairing or affecting (except insofar as the Liabilities are reduced or modified thereby), the Guarantor's obligations under this Guaranty or releasing or exonerating the Guarantor from any of its liabilities hereunder: a. retain or obtain a security interest in any property to secure any of the Liabilities or any obligation hereunder; b. retain or obtain the primary or secondary liability of any party or parties, in addition to the Guarantor, with respect to any of the Liabilities; c. extend the time or change the manner, place or terms of payment of, or renew or amend any note or other instrument evidencing the Liabilities or any part thereof, or amend in any manner any agreement relating thereto, in each case in accordance with the terms of each such agreement; d. release or compromise, in whole or in part, or accept full or partial payment for, any of the Liabilities hereby guaranteed, or any liability of any nature of any other party or parties with respect to the Liabilities or any security therefore; 106 e. enforce the Administrative Agent's or the Lenders' security interest, if any, in all or any properties securing any of the Liabilities or any obligations hereunder in order to obtain full or partial payment of the Liabilities then outstanding; or f. release or fail to perfect, protect, or enforce the Administrative Agent's or the Lenders' security interest, if any, in all or any properties securing any of the Liabilities or any obligation hereunder, or permit any substitution or exchange for any such property. 4. Waivers. The Guarantor hereby expressly waives to the extent permitted by law: a. notice of acceptance of this Guaranty; b. notice of the existence or incurrence of any or all of the Liabilities in accordance with the Loan Papers; c. presentment, demand, notice of dishonor, protest, and all other notices whatsoever (except the written demand referred to in SECTION 1 hereinabove); d. any requirement that proceedings first be instituted by the Administrative Agent or any Lender against the Borrower; e. all diligence in collection or protection of or realization upon the Liabilities or any part thereof, or any obligation hereunder, or any collateral for any of the foregoing; f. any rights or defenses based on the Administrative Agent's or a Lender's election of remedies, including any defense to the Administrative Agent's or Lender's action to recover any deficiency after a non-judicial sale; and g. the occurrence of every other condition precedent to which the Guarantor might otherwise be entitled. 5. Definitions. As used in this Guaranty, capitalized terms not otherwise defined herein will have the meanings given them in the Credit Agreement. 6. Representations, Warranties and Agreements of Guarantor. The Guarantor represents and warrants to the Administrative Agent and the Lenders that: a. Corporate Existence, Good Standing, Authority and Compliance. The Guarantor is duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated. Except where failure is not a Material Adverse Event, the Guarantor (a) is duly qualified to transact business and is in good standing as a foreign 107 corporation or other entity in each jurisdiction where the nature and extent of its business and properties require due qualification and good standing, (b) possesses all requisite authority, permits and power to conduct its business as is now being, or is contemplated to be, conducted, and (c) is in compliance with all applicable Laws, except in each case where the failure to so qualify, to possess such authority, permits or power or to comply with such Law would not cause a Material Adverse Event. b. Authorization and Contravention. The execution and delivery by the Guarantor of this Guaranty or related document to which it is a party and the performance by it of its obligations thereunder (a) are within its corporate power, (b) have been duly authorized by all necessary corporate action, (c) require no action by or filing with any Tribunal (other than any action or filing that has been taken or made on or before the date of this Guaranty or which would not cause a Material Adverse Event), (d) do not violate any provision of its charter or bylaws, (e) do not violate any provision of Law or order of any Tribunal applicable to it, other than violations that individually or collectively are not a Material Adverse Event, (f) do not violate any Material Agreements to which it is a party, other than a violation which would not cause a Material Adverse Event, (g) do not result in the creation or imposition of any Lien (other than the Lender Liens) on any asset of the Guarantor, (h) are in furtherance of the corporate purposes of the Guarantor and (i) do not require the consent or approval of the shareholders of the Guarantor. c. Binding Effect. Upon execution and delivery by all parties thereto, this Guaranty will constitute a legal and binding obligation of the Guarantor, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable Debtor Relief Laws and general principles of equity. d. Consideration. Guarantor represents and warrants that the value of the consideration received and to be received by it is reasonably worth at least as much as its liability under this Guaranty, and such liability may reasonably be expected to benefit Guarantor directly or indirectly. NOTWITHSTANDING ANY CONTRARY PROVISION IN THIS GUARANTY, GUARANTOR'S MAXIMUM LIABILITY HEREUNDER IS LIMITED, TO THE EXTENT, IF ANY, REQUIRED SO THAT ITS LIABILITY IS NOT SUBJECT TO AVOIDANCE UNDER ANY DEBTOR RELIEF LAW. e. Solvency. As of the date of this Guaranty, the Guarantor is, and after giving effect to this Guaranty, will be, Solvent. 108 7. Events of Default. a. Loan Papers. The failure of Borrower to pay any part of the Liabilities within five (5) Business Days after it becomes due and payable under the Loan Papers or the occurrence and continuation of a Default under any Loan Paper. b. Debtor Relief. Guarantor (a) is not Solvent, (b) fails to pay its Debts generally as they become due, (c) voluntarily seeks, consents to, or acquiesces in the benefit of any Debtor Relief Law, or (d) becomes a party to or is made the subject of any proceeding provided for by any Debtor Relief Law, other than as a creditor or claimant, that could suspend or otherwise adversely affect the Rights of Administrative Agent or Lenders granted in the Loan Papers (unless, if the proceeding is involuntary, the applicable petition is dismissed within sixty (60) days after its filing). c. Government Action. (a) A final non-appealable order is issued by any Tribunal (including, but not limited to, the United States Justice Department) seeking to cause Guarantor to divest a significant portion of its assets under any antitrust, restraint of trade, unfair competition, industry regulation or similar Laws, or (b) any Tribunal condemns, seizes or otherwise appropriates, or takes custody or control of all or any substantial portion of the assets of Guarantor. d. Misrepresentation. Any material representation or warranty made by Guarantor contained herein or in any Loan Paper at any time proves to have been materially incorrect when made. 8. Remedies Upon Default. Without limiting any other rights or remedies of the Administrative Agent or the Lenders provided for elsewhere in this Guaranty or the Loan Papers, or by any requirement of Law, or in equity, or otherwise: a. Upon the occurrence of any Default, the Lenders may without any notice to (except as expressly provided herein or in and during the continuance of any Loan Paper) or demand upon Guarantor, which are expressly waived by Guarantor (except as to notices expressly provided for herein or in any Loan Paper), proceed to protect, exercise and enforce the rights and remedies of the Lenders against Guarantor hereunder or under the Loan Papers and such other rights and remedies as are provided by requirement of Law or equity. b. The rights provided for in this Guaranty and the Loan Papers are cumulative and are not exclusive of any other rights, powers, privileges 109 or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. c. The order and manner in which the Lenders' rights and remedies upon the occurrence and during the continuance of a Default are to be exercised shall be determined by the Administrative Agent or the Lenders, as the case may be, in its sole discretion, and all payments received by the Administrative Agent shall be applied first to the costs and expenses (including reasonable attorney's fees incurred by the Administrative Agent and Lenders) of the Administrative Agent and Lenders, then to the payment of all accrued and unpaid amounts due under any Loan Papers to and including the date of such application. To the extent permitted by applicable law, no application of payments will cure any Default, or prevent acceleration, or continued acceleration, of amounts payable under the Loan Papers, or prevent the exercise, or continued exercise, of rights or remedies of the Administrative Agent and Lenders hereunder or thereunder or under any requirement of Law or in equity. 9. Payments. Each payment by the Guarantor to the Administrative Agent under this Guaranty shall be made by transferring the amount thereof in immediately available funds without set-off or counterclaim. 10. Costs, Expenses and Taxes. The Guarantor agrees to pay on demand: (i) all reasonable out of pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Guaranty and any other documents to be delivered hereunder, including the reasonable fees and out of pocket expenses of counsel for the Administrative Agent with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities under this Guaranty, and any modification, supplement or waiver of any of the terms of this Guaranty, (ii) all reasonable costs and expenses of the Administrative Agent hereunder, including reasonable legal fees and expenses of counsel to the Agent, in connection with a default or the enforcement of this Guaranty and (iii) reasonable costs and expenses incurred in connection with third party professional services reasonably required by the Administrative Agent pursuant to the Loan Papers such as appraisers, environmental consultants, accountants or similar Persons; provided that except during the continuance of any Default hereunder, the Administrative Agent will first obtain the consent of the Guarantor to such expense, which consent shall not be unreasonably withheld. Without prejudice to the survival of any other obligations of the Guarantor hereunder, the obligations of the Guarantor under this Section shall survive the termination of this Guaranty. 11. Subrogation. The Guarantor shall not be subrogated to, in whole or in part, and agrees not to exercise any rights of subrogation with respect to, the rights of the Administrative Agent or any Lender or those of any subsequent assignee or transferee of any of the Liabilities until all the Liabilities to the Administrative Agent and the Lenders and every such subsequent assignee or transferee shall have been paid in full. The provisions of this SECTION 11 shall 110 survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order, or law. 12. No Waiver; Remedies. No failure on the part of the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, or any abandonment or discontinuance of any steps to enforce such right, preclude any other or further exercise thereof or the exercise of any other right. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in similar or other circumstances. The remedies herein are cumulative and not exclusive of any other remedies provided by law, at equity or in any other agreement. 13. Survival of Representations and Warranties. All representations, warranties and covenants contained herein or made in writing by the Guarantor in connection herewith shall survive the execution and delivery of this Guaranty, and the termination of the Loan Papers and will bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed or not. 14. Confidentiality. The Administrative Agent and each Lender agree to keep any information delivered or made available by the Guarantor to it which is clearly indicated to be confidential information, confidential from anyone other than Persons employed or retained by the Administrative Agent who are or are expected to become engaged in evaluating, approving, structuring or administering the Loan Papers; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing such information (a) to any Lender, (b) pursuant to subpoena or upon the order of any court or administrative agency, (c) upon the request or demand of any regulatory agency or authority having jurisdiction over Administrative Agent or any Lender, (d) which has been publicly disclosed, (e) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Lender, the Borrower, the Guarantor or their respective Affiliates may be a party, (f) to the extent reasonably required in connection with the exercise of any remedy hereunder, (g) to any Lender's legal counsel and independent auditors. The Administrative Agent will promptly notify the Guarantor of any information that it is required or requested to deliver pursuant to clause (b) or (c) of this SECTION 14 and, if the Guarantor is a party to any such litigation, CLAUSE (e) of this SECTION 14. 15. Separability. Should any clause, sentence, paragraph or Section of this Guaranty be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Guaranty, and the parties hereto agree that the part or parts of this Guaranty so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom and the remainder will have the same force and effectiveness as if such part or parts had never been included herein. 16. Execution in Counterparts. This Guaranty may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 111 17. Interpretation. a. In this Guaranty, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any gender includes each other gender; (iii) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Guaranty as a whole and not to any particular Article, Section or other subdivision; (iv) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Guaranty, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; provided that nothing in this clause is intended to authorize any assignment not otherwise permitted by this Guaranty; (v) except as expressly provided to the contrary herein, reference to any agreement, document or instrument (including this Guaranty) means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof; (vi) unless the context indicates otherwise, reference to any Article, Section, Schedule or Exhibit means such Article or Section hereof or such Schedule or Exhibit hereto; (vii) the word "including" (and with correlative meaning "include") means including, without limiting the generality of any description preceding such term; (viii) with respect to the determination of any period of time, except as expressly provided to the contrary, the word "from" means "from and including" and the word "to" means "to but excluding"; and (ix) reference to any law, rule or regulation means such as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time. b. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. c. No provision of this Guaranty shall be interpreted or construed against any Person solely because that Person or its legal representative drafted such provision. 112 18. Submission to Jurisdiction. The Guarantor, to the extent permitted by applicable law, hereby agrees as follows: a. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE STATE COURTS OF NEW YORK, LOCATED IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 21, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GUARANTOR IN ANY OTHER JURISDICTION. b. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 19. Waiver of Jury Trial. THE GUARANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 20. Parties. This Guaranty shall inure to the benefit of the Administrative Agent and the Lenders and their respective successors, assigns or transferees, and shall be binding upon the Guarantor and its successors and assigns. The Guarantor may not assign any of its duties under 113 this Guaranty without the prior written consent of the Administrative Agent. The Administrative Agent and the Lenders may assign their respective Rights and benefits under this Guaranty to any Participant or Purchaser in accordance with the provisions of Section 14.12 of the Credit Agreement. 21. Notices. All notices, consents, requests, approvals, demands and other communications provided for herein shall be in writing (including telecopy communications) and mailed, telecopied, sent by overnight courier or delivered: a. If to the Guarantor: Monro Leasing, LLC 200 Holleder Parkway Rochester, New York 14615 Attention: Catherine D'Amico, Senior Vice President and Chief Financial officer telephone: (585) 647-6400 telecopy: (585) 627-0941 b. If to the Administrative Agent: Charter One Bank, N.A. 71 South Wacker Drive Suite 2900 Chicago, Illinois 60606 Attention: Stephanie Epkins Vice President, Corporate Banking telecopy: (312) 777-3494 telephone: (312) 777-3411 with a copy to Emmet, Marvin & Martin, LLP 120 Broadway New York, New York 10271 Attention: Richard S. Talesnick telecopy: (212) 238-3100 telephone: (212) 238-3046 c. or, in the case of any party hereto, such other address or telecopy number as such party may hereafter specify for such purpose by notice to the other parties given in accordance with the provisions of this SECTION 21. Other than the service of process set forth in SECTION 18(a) above, all communications shall be effective three (3) Business Days after the date when mailed by certified mail, return receipt requested postage prepaid to any party at its address specified above, or upon receipt if telecopied to any party to the telecopy number set forth above, or upon receipt if delivered personally to any party at its address specified above. 114 22. Term. This Guaranty is not limited to any particular period of time, but shall continue in full force and effect until all of the Liabilities have been fully and finally paid or have been otherwise discharged by the Administrative Agent and the Lenders, and the Guarantor shall not be released from any obligation or liability hereunder until such full payment or discharge shall have occurred. 23. Governing Law. This Guaranty and all other documents executed in connection herewith shall be deemed to be contracts and agreements executed by the Guarantor and Administrative Agent under the laws of the State of New York and of the United States of America and for all purposes shall be construed in accordance with, and governed by, the laws of said state and of the United States of America. 24. Indemnity. a. The Guarantor shall indemnify the Administrative Agent, each Lender and each Affiliate thereof and their respective directors, officers, employees and agents (each, an "INDEMNIFIED PERSON") from, and hold each of them harmless against, any and all losses, liabilities, claims or damages (including reasonable legal fees and expenses) to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Borrower of the proceeds of any extension of credit or any investigation, litigation or other proceeding (including any threatened investigation or proceeding) relating to the foregoing or any of the Loan Papers, and the Guarantor shall assume the defense thereof, including the employment of counsel at Guarantor's expense; provided that Guarantor shall not have such right, to the extent that such Indemnified Person shall deliver to Guarantor a written notice waiving the benefits of the indemnification of such Indemnified Person provided by this SECTION 24(a) in connection with such claim, action, proceeding or suit. Notwithstanding the foregoing, if independent counsel to such Indemnified Person shall conclude that there may be defenses available to such Indemnified Person which may conflict with those available to Guarantor, Guarantor shall not have the right to assume the defense of any such claim, action, proceeding or suit on behalf of such Indemnified Person if such Indemnified Person chooses to defend such claim, action, proceeding or suit (with counsel reasonably acceptable to Guarantor), and all reasonable costs, expenses and attorneys' fees incurred by the Indemnified Person in defending such claim, action, proceeding or suit shall be borne by Guarantor; provided however, if there is more than one (1) Indemnified Person having a right to defend such claim, action, proceeding or suit as aforesaid, the obligation of Guarantor to pay the fees and expenses of such Indemnified Person shall be limited to one (1) firm of attorneys. Any Indemnified Person shall also have the right to employ separate counsel and to participate in its defense, but the fees and expenses of such counsel shall be borne by such Indemnified Person. Any decision by an Indemnified Person to employ its own counsel (whether 115 or not at Guarantor's expense) shall in no way affect any rights of such Indemnified Person otherwise arising under this SECTION 24(a). In addition, Guarantor will not be liable for any settlement of any claim, action, proceeding or suit unless Guarantor has consented thereto in writing. The foregoing indemnity and agreement to hold harmless shall not in any event apply to any losses, liabilities, claims, damages or expenses incurred by reason of (i) the gross negligence or willful misconduct of the Person to be indemnified, or (ii) any material default by the Administrative Agent or any Lender that is not cured within any applicable cure period, if any, under any of the Loan Papers. b. Without limiting any provision of this Guaranty, it is the express intention of the parties hereto that each Person to be indemnified hereunder or thereunder shall be indemnified and held harmless against any and all losses, liabilities, claims or damages: (i) arising out of or resulting from the ordinary sole or contributory negligence of such Person or (ii) imposed upon said party under any theory or strict liability. Without prejudice to the survival of any other obligations of the Guarantor hereunder and under the Loan Papers, the obligations of the Guarantor under this Section shall survive the termination of this Guaranty and the Loan Papers and the payment of the Liabilities. 25. New Guaranty. In the event that (i) any Loan Paper is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding involving the Borrower or (ii) any Loan Paper or this Guaranty is terminated as a result of any bankruptcy or insolvency proceeding involving the Borrower and, if within sixty (60) days after such rejection or termination, the Administrative Agent or its designee shall so request and shall certify in writing to the Guarantor that it intends to perform the obligations of the Borrower as and to the extent required under such Loan Paper or this Guaranty, as applicable, the Guarantor will, unless prohibited by bankruptcy or other applicable law, execute and deliver to the Administrative Agent or such designee, a new Guaranty that shall contain the same conditions, agreements, terms, provisions and limitations as such original Guaranty (except for any requirements which have been fulfilled by the Borrower and the Guarantor prior to such rejection or termination). Sincerely yours, MONRO LEASING, LLC, a Delaware limited liability company By: ______________________________________ Name: ____________________________________ Title: ___________________________________ 116 ACCEPTED AND AGREED as of the date first above written: CHARTER ONE BANK, N.A., as Administrative Agent By: _________________________________ Name: _______________________________ Title: ______________________________ 117 EX-10.5 6 l15010aexv10w5.txt EX-10.5 NEGATIVE PDEDGE AGREEMENT AMONG MONRO MUFFLER Exhibit 10.5 NEGATIVE PLEDGE AGREEMENT This NEGATIVE PLEDGE AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this "AGREEMENT") is executed as of July 13, 2005 by MONRO MUFFLER BRAKE, INC., a New York corporation ("BORROWER"), MONRO SERVICE CORPORATION, a Delaware corporation ("MONRO SERVICE"), and MONRO LEASING, LLC, a Delaware limited liability company ("MONRO LEASING", and together with Borrower, and Monro Service, collectively, the "COMPANIES") to and for the benefit of CHARTER ONE BANK, N.A., as administrative agent (in such capacity, "ADMINISTRATIVE AGENT") for the Lenders ("LENDERS") party to the Credit Agreement (defined below). A. Borrower, Administrative Agent and the Lenders have executed a Credit Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), together with certain other Loan Papers. B. The execution and delivery of this Agreement is a condition to the execution of the Credit Agreement and the other Loan Papers by Administrative Agent and the Lenders and is an integral part of the transactions contemplated by the Loan Papers and a condition precedent to the obligations of Administrative Agent and the Lenders to extend credit under the Credit Agreement. NOW THEREFORE in consideration of the premises and other valuable consideration, the receipt and adequacy of which are acknowledged, each of the Companies covenants and agrees with Administrative Agent as follows: 1. Certain Definitions. Unless otherwise defined in this Agreement, each capitalized term used but not defined in this Agreement will have the meaning given that term in the Credit Agreement. As used in this Agreement, the following terms have the meanings indicated: CREDIT AGREEMENT has the meaning given in the Recitals. DEFAULT means a Default as defined in the Credit Agreement. OBLIGATION means (a) the Obligation as defined in the Credit Agreement, (b) all indebtedness, liabilities and obligations of the Companies arising under this Agreement, (c) interest accruing on, and attorneys' fees, court costs, and other costs of collection reasonably incurred in the collection or enforcement of, any of the indebtedness, liabilities, or obligations described in CLAUSES (a) and (b) of this definition, and (d) any and all renewals and extensions of, or amendments to, any of the indebtedness, liabilities, and obligations described in CLAUSES (a) through (c) of this definition. 2. Property. Except as permitted under the Credit Agreement, each of the Companies hereby agrees that, for so long as any part of the Obligations remains outstanding, it will not, without first obtaining the prior written consent of Administrative Agent, which at the sole discretion of Administrative Agent may be recorded in the jurisdiction in which the affected property is situated, (i) create or permit any lien, encumbrance, charge, or security interest of any kind to exist on any of the real properties owned now or in the future by such Company, including, without limitation, those 118 properties described on EXHIBIT A attached hereto (the "PROPERTIES") or (ii) transfer, sell, assign or in any manner dispose of all or any part of any of the Properties or any interest therein. 3. Recording. Administrative Agent is hereby authorized and permitted to cause this Agreement to be recorded at such time and at such places as Administrative Agent, at its option, may elect. 4. Representations and Warranties of the Companies. Each Company represents and warrants to Administrative Agent and the Lenders as follows: (i) Such Company owns the Properties as described on EXHIBIT A hereto and there are no existing liens or encumbrances upon or affecting the Properties other than Permitted Liens. (ii) That this Agreement constitutes the legal, valid and binding obligation of such Company enforceable in accordance with its terms. The execution and delivery of this Agreement and the compliance with the provisions hereof will not conflict with or constitute a breach of, or default under, any of the provisions of any other agreement to which such Company is a party. 5. Default. Any failure by any Company to comply with the terms of this Agreement shall constitute a Default and the Companies agree that in such event Administrative Agent and Lenders shall have the right in addition to such other remedies as may be available to it, to file any deeds of trust, mortgages, financial statements or security agreements securing the Obligations as against any Property, and to obtain injunctive relief enjoining such breach of this Agreement and the Companies agree that they shall not urge that such remedy is not appropriate under the circumstances, it being expressly acknowledged by the Companies that such action shall cause Administrative Agent and Lenders irreparable damage for which legal remedies are inadequate to protect Administrative Agent and Lenders. 6. Termination. This Agreement shall remain in full force and effect until the obligation shall have been paid in full. 7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND AS APPLICABLE, THE LAWS OF THE UNITED STATES OF AMERICA. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] 119 Executed as of the date set forth in the preamble. MONRO MUFFLER BRAKE, INC., a New York corporation By: ____________________________________ Catherine D'Amico, Executive Vice President of Finance, Chief Financial Officer, and Treasurer MONRO SERVICE CORPORATION, a Delaware corporation By: ____________________________________ Catherine D'Amico, Treasurer MONRO LEASING, LLC, a Delaware limited liability company By: MONRO MUFFLER BRAKE, INC., its Sole Member By: ________________________________ Catherine D'Amico, Executive Vice President of Finance, Chief Financial Officer, and Treasurer CHARTER ONE BANK, N.A., as Administrative Agent By: ____________________________________ Name: __________________________________ Title: _________________________________ 120 STATE OF NEW YORK) ) ss. COUNTY OF _______) On the ____ day of July in the year 2005 before me, the undersigned, personally appeared ________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. ______________________ Notary Public STATE OF NEW YORK) ) ss. COUNTY OF _______) On the ____ day of July in the year 2005 before me, the undersigned, personally appeared ________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. ______________________ Notary Public STATE OF NEW YORK) ) ss. COUNTY OF _______) On the ____ day of July in the year 2005 before me, the undersigned, personally appeared ________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. ______________________ Notary Public 121 THE STATE OF NEW YORK) ) ss. COUNTY OF _________ ) On the ____ day of July in the year 2005 before me, the undersigned, personally appeared ________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. ______________________ Notary Public 122 EXHIBIT A PROPERTIES [SEE ATTACHED] 123 EX-31.1 7 l15010aexv31w1.txt EX-31.1 SECTION 302 CERTIFICATION OF ROBERT G. GROSS Exhibit 31.1 CERTIFICATION I, Robert G. Gross, President and Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Monro Muffler Brake, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) and 15(d)-15(f) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 4, 2005 /s/ Robert G. Gross ---------------------------------------- Robert G. Gross President and Chief Executive Officer 124 EX-31.2 8 l15010aexv31w2.txt EX-31.2 SECT. 302 CERTIFICATION OF CATHERINE D'AMICO Exhibit 31.2 CERTIFICATION I, Catherine D'Amico, Executive Vice President - Finance and Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Monro Muffler Brake, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) and 15(d)-15(f) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 4, 2005 /s/ Catherine D'Amico ---------------------------------------- Catherine D'Amico Executive Vice President - Finance and Chief Financial Officer 125 EX-32.1 9 l15010aexv32w1.txt EX-32.1 CERTIFICATION PURSUANT TO 18 USC SECT. 1350 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 (SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) Pursuant to, and solely for purposes of, 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), each of the undersigned hereby certifies in the capacity and on the date indicated below that: 1. The Quarterly Report of Monro Muffler Brake, Inc. ("Monro") on Form 10-Q for the period ended June 25, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Monro. /s/ Robert G. Gross Dated: August 4, 2005 - --------------------------------- Robert G. Gross Chief Executive Officer /s/ Catherine D'Amico Dated: August 4, 2005 - --------------------------------- Catherine D'Amico Chief Financial Officer 126 -----END PRIVACY-ENHANCED MESSAGE-----