<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 0-9812
GREASE MONKEY HOLDING CORPORATION
Utah 87-0321320
216 16th Street Mall, Suite 1100
Denver, Colorado 80202
Registrant's Telephone Number Is (303) 534-1660
Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Outstanding at
Class August 1, 1995
----------------------------- --------------
Common Stock, $0.03 par value 4,363,650 shares
Transitional Small Business Disclosure Format Yes No X
----- ----
<PAGE>
GREASE MONKEY HOLDING CORPORATION
COMMISSION FILE NUMBER: 0-9812
QUARTER ENDED JUNE 30, 1995
FORM 10-QSB
PART I FINANCIAL INFORMATION
Consolidated Statements of Operations . . . . . . . . . . Page 1
Consolidated Balance Sheets . . . . . . . . . . . . . . . Page 2
Consolidated Statements of Stockholders'
Equity. . . . . . . . . . . . . . . . . . . . . . . . . Page 4
Consolidated Statements of Cash Flows . . . . . . . . . . Page 5
Notes to Consolidated Financial Statements. . . . . . . . Page 8
Management's Discussion and Analysis or Plan of Operation. Page 10
PART II OTHER INFORMATION
Legal Proceedings . . . . . . . . . . . . . . . . . . . . Page 15
Submission of Matters to a Vote of Security Holders . . . Page 16
Exhibits and Reports on Form 8-K. . . . . . . . . . . . . Page 16
Signatures. . . . . . . . . . . . . . . . . . . . . . . . Page 17
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
-------
Royalty fees . . . . . . . . . . . . . . . . . . . . . . $ 794,031 744,137 1,582,436 1,420,722
Franchise sales - center openings. . . . . . . . . . . . 161,800 137,000 318,800 170,844
Franchise sales - unopened licenses canceled, net. . . . - 50,851 4,000 60,094
Product and equipment revenue. . . . . . . . . . . . . . 276,120 393,940 639,056 681,188
Sales by Company-owned centers . . . . . . . . . . . . . 3,129,075 3,101,028 5,975,756 6,081,913
Rent and interest income related to
operating and capital leases . . . . . . . . . . . . . 347,737 455,399 696,510 906,727
Interest income. . . . . . . . . . . . . . . . . . . . . 10,069 16,542 19,711 31,518
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 20,462 18,731 87,818 37,943
----------- ----------- ----------- ----------
4,739,294 4,917,628 9,324,087 9,390,949
EXPENSES:
--------
General and administrative expenses. . . . . . . . . . . 938,199 989,065 1,860,512 1,936,330
Franchise costs recognized - center openings . . . . . . 17,425 20,628 53,709 27,265
Product and equipment costs. . . . . . . . . . . . . . . 163,719 264,108 406,076 439,215
Company-owned centers. . . . . . . . . . . . . . . . . . 3,154,705 3,119,242 6,146,171 6,119,233
Rent and interest expenses related to
operating and capital leases . . . . . . . . . . . . . 357,442 436,279 708,502 858,386
Provision for credit losses. . . . . . . . . . . . . . . 42,500 36,337 65,000 57,834
Litigation award and related interest. . . . . . . . . . 5,832 5,386 11,453 10,590
Interest expense . . . . . . . . . . . . . . . . . . . . 9,952 15,417 12,683 38,095
----------- ----------- ----------- ----------
4,689,774 4,886,462 9,264,106 9,486,948
----------- ----------- ----------- ----------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . . $ 49,520 31,166 59,981 (95,999)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
EARNINGS (LOSS) PER COMMON SHARE . . . . . . . . . . . . . $ * * * (0.03)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
AVERAGE SHARES OUTSTANDING . . . . . . . . . . . . . . . . 4,361,256 4,300,318 4,347,790 4,280,185
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
<FN>
* Less than $.01 per share
</TABLE>
(UNAUDITED)
1
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
------------- -----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 382,285 256,631
Restricted cash including certificates of
deposit. . . . . . . . . . . . . . . . . . . . . . . . . 355,176 465,783
Accounts receivable, net of allowance for
doubtful accounts of $379,026 at June
30, 1995, and $309,394 at December 31, 1994. . . . . . . 977,210 867,062
Current portion of notes receivable,
net of allowance for uncollectible
amounts. . . . . . . . . . . . . . . . . . . . . . . . . 124,141 134,181
Current portion of net investment
in direct financing leases . . . . . . . . . . . . . . . 212,059 195,302
Inventories. . . . . . . . . . . . . . . . . . . . . . . . 688,093 733,736
Prepaid expenses and supplies. . . . . . . . . . . . . . . 224,265 125,027
------------- -----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . 2,963,229 2,777,722
------------- -----------
PROPERTY AND EQUIPMENT,
AT COST, PLEDGED:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,079 152,079
Buildings (including buildings under capital
leases). . . . . . . . . . . . . . . . . . . . . . . . . 5,345,018 5,268,460
Furniture and fixtures . . . . . . . . . . . . . . . . . . 489,764 511,806
Leasehold improvements . . . . . . . . . . . . . . . . . . 634,071 617,484
Machinery and equipment. . . . . . . . . . . . . . . . . . 1,452,839 1,414,961
------------- -----------
8,073,771 7,964,790
Less accumulated depreciation and
amortization . . . . . . . . . . . . . . . . . . . . . . (2,879,206) (2,680,599)
------------- -----------
NET PROPERTY AND EQUIPMENT . . . . . . . . . . . . . . . 5,194,565 5,284,191
------------- -----------
OTHER ASSETS:
Net investment in direct financing leases. . . . . . . . . 3,436,508 3,543,750
Notes receivable, net of allowance for uncollectible
amounts. . . . . . . . . . . . . . . . . . . . . . . . . 150,030 116,168
Deferred franchising costs . . . . . . . . . . . . . . . . 197,280 198,854
Goodwill and covenants not to compete, net
of accumulated amortization of $669,548
at June 30, 1995, and $621,855 at
December 31, 1994. . . . . . . . . . . . . . . . . . . . 1,665,592 1,110,152
Real estate held for sale. . . . . . . . . . . . . . . . . 173,500 173,500
Other assets, net of accumulated
amortization of $103,125 at June 30, 1995,
and $108,147 at December 31, 1994. . . . . . . . . . . . 162,830 141,805
------------- -----------
TOTAL OTHER ASSETS . . . . . . . . . . . . . . . . . . . 5,785,740 5,284,229
------------- -----------
$ 13,943,534 13,346,142
------------- -----------
------------- -----------
</TABLE>
(UNAUDITED)
(continued on next page)
2
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ---------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . $ 797,249 958,023
Accrued salaries and wages . . . . . . . . . . . . . . . . . . 195,773 176,065
Other accrued liabilities. . . . . . . . . . . . . . . . . . . 276,557 319,351
Current portion of long-term debt. . . . . . . . . . . . . . . 408,132 320,315
Current portion of obligations
under capital leases. . . . . . . . . . . . . . . . . . . . . 335,705 307,669
Reserve for litigation award . . . . . . . . . . . . . . . . . 309,544 298,091
---------------- ----------------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . . . 2,322,960 2,379,514
---------------- ----------------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 2,481,581 1,465,938
OBLIGATIONS UNDER CAPITAL
LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,575,220 6,746,748
DEFERRED FRANCHISE SALES
REVENUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 761,863 1,009,663
STOCKHOLDERS' EQUITY:
Series C Preferred stock, issued and outstanding
20,958 shares and 22,205 shares at June 30, 1995,
and December 31, 1994, respectively, stated
value of $100.00 . . . . . . . . . . . . . . . . . . . . . . 2,095,838 2,220,500
Common stock, par value $.03, 10,000,000
shares authorized, 4,362,080, and 4,305,359,
shares issued and outstanding at June 30,
1995, and December 31, 1994, respectively. . . . . . . . . . 130,863 129,161
Capital in excess of par value . . . . . . . . . . . . . . . . 5,827,992 5,707,382
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . (6,252,783) (6,312,764)
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . 1,801,910 1,744,279
Commitments and Contingencies. . . . . . . . . . . . . . . . .
---------------- ----------------
$ 13,943,534 13,346,142
---------------- ----------------
---------------- ----------------
</TABLE>
(UNAUDITED)
3
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
-------------------------------------- -----------------------------------
Capital in
Number of Subscriptions Number of Excess of
Shares Amount Receivable Shares Amount Par Value
--------- --------- ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 . . . . . . . . 9,360 $ 936,000 789,000 4,253,691 $ 127,611 5,765,475
Issuance of common stock pursuant to
employee benefit plan. . . . . . . . . . . - - - 12,981 389 29,131
Issuance of Series C Preferred stock,
net of offering costs. . . . . . . . . . . 13,000 1,300,000 (789,000) - - (162,100)
Conversion of Series C Preferred stock to
common stock, including payment of
accumulated dividends. . . . . . . . . . . (155) (15,500) - 6,199 186 14,412
Issuance of common stock, pursuant to
the cancellation of undeveloped
franchise licenses . . . . . . . . . . . . - - - 11,200 336 19,264
Issuance of common stock upon
exercise of employee stock options . . . . - - - 30,000 900 60,540
Common stock reacquired and
canceled . . . . . . . . . . . . . . . . . - - - (8,712) (261) (19,340)
Net income . . . . . . . . . . . . . . . . . - - - - - -
--------- --------- --------- --------- --------- ---------
Balance at December 31, 1994 . . . . . . . . 22,205 2,220,500 - 4,305,359 129,161 5,707,382
Issuance of common stock pursuant to
employee benefit plan. . . . . . . . . . . - - - 6,858 206 14,886
Conversion of Series C Preferred stock
to common stock, including payment
of accumulated dividends . . . . . . . . . (1,247) (124,662) - 49,863 1,496 113,224
Offering costs of Series C Preferred
stock. . . . . . . . . . . . . . . . . . . - - - - - (7,500)
Net income . . . . . . . . . . . . . . . . . - - - - - -
--------- --------- --------- --------- --------- ---------
Balance at June 30, 1995 . . . . . . . . . . 20,958 $2,095,838 - 4,362,080 $130,863 5,827,992
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
Accumulated
Deficit Total
--------- --------
Balance at December 31, 1993 . . . . . . . . (6,452,330) 1,165,756
Issuance of common stock pursuant to
employee benefit plan. . . . . . . . . . . - 29,520
Issuance of Series C Preferred stock,
net of offering costs. . . . . . . . . . . - 348,900
Conversion of Series C Preferred stock to
common stock, including payment of
accumulated dividends . . . . . . . . . . . - (902)
Issuance of common stock, pursuant to
the cancellation of undeveloped
franchise licenses . . . . . . . . . . . . - 19,600
Issuance of common stock upon
exercise of employee stock options . . . . - 61,440
Common stock reacquired and
canceled . . . . . . . . . . . . . . . . . - (19,601)
Net income . . . . . . . . . . . . . . . . . 139,566 139,566
--------- ---------
Balance at December 31, 1994 . . . . . . . . (6,312,764) 1,744,279
Issuance of common stock pursuant to
employee benefit plan. . . . . . . . . . . - 15,092
Conversion of Series C Preferred stock
to common stock, including payment
of accumulated dividends . . . . . . . . . - (9,942)
Offering costs of Series C Preferred
stock. . . . . . . . . . . . . . . . . . . - (7,500)
Net income . . . . . . . . . . . . . . . . . 59,981 59,981
--------- ---------
Balance at June 30, 1995 . . . . . . . . . . (6,252,783) 1,801,910
--------- ---------
--------- ---------
</TABLE>
(UNAUDITED)
4
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------------------------
1995 1994
--------------------- ---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . . .$ 59,981 (95,999)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Increase in deferred franchise sales revenue. . . . . . . 47,000 309,000
Franchise sales revenue recognized-center openings. . . . (318,800) (170,844)
Franchise sales revenue recognized-
unopened licenses canceled, net. . . . . . . . . . . . . (4,000) (60,094)
Increase in deferred franchising costs. . . . . . . . . . (52,134) (36,541)
Reduction in deferred franchising costs . . . . . . . . . 53,709 27,265
Provision for credit losses . . . . . . . . . . . . . . . 65,000 57,834
Net loss realized on retirement of property and
equipment. . . . . . . . . . . . . . . . . . . . . . . . 13,636 -
Depreciation and amortization . . . . . . . . . . . . . . 402,219 409,185
Provision for litigation award. . . . . . . . . . . . . . 11,453 10,590
Payments on settlement agreement. . . . . . . . . . . . . - (398,310)
Loss on settlement agreement. . . . . . . . . . . . . . . - 11,951
Loss on sale of centers . . . . . . . . . . . . . . . . . 62,541 -
Other, net. . . . . . . . . . . . . . . . . . . . . . . . - (14,112)
--------------------- ---------------------
340,605 49,925
Change in assets and liabilities:
Increase in accounts receivable. . . . . . . . . . . . . (206,103) (218,534)
Decrease in notes receivable . . . . . . . . . . . . . . 12,635 1,579
Decrease in inventories. . . . . . . . . . . . . . . . . 25,158 30,491
(Increase) decrease in prepaid expenses
and supplies . . . . . . . . . . . . . . . . . . . . . (99,238) 75,753
(Decrease) increase in accounts payable. . . . . . . . . (160,773) 39,544
(Decrease) increase in accrued salaries and wages
and other liabilities. . . . . . . . . . . . . . . . . (4,171) 28,973
--------------------- ---------------------
Total Adjustments. . . . . . . . . . . . . . . . . . (432,492) (42,194)
--------------------- ---------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES. . . . . . . . . . . . . . . . . . . . .
$ (91,887) 7,731
--------------------- ---------------------
</TABLE>
(UNAUDITED)
(continued on next page)
5
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------------------
1995 1994
--------------------- ---------------------
<S> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES:
Principal receipts on direct financing leases. . . . . . . . $ 92,286 104,496
Capital expenditures . . . . . . . . . . . . . . . . . . . . (135,689) (94,700)
Acquisition of centers . . . . . . . . . . . . . . . . . . . (870,388) -
Sale of centers. . . . . . . . . . . . . . . . . . . . . . . 123,233 -
Increase in other assets . . . . . . . . . . . . . . . . . . (36,290) (15,317)
--------------------- ---------------------
NET CASH (USED IN)
INVESTING ACTIVITIES . . . . . . . . . . . . . . . . (826,848) (5,521)
--------------------- ---------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on notes payable to a
related party. . . . . . . . . . . . . . . . . . . . . . . - (378,000)
Proceeds from long-term debt . . . . . . . . . . . . . . . . 1,241,880 -
Principal payments on long-term debt . . . . . . . . . . . . (145,364) (237,131)
Principal payments on capital lease
obligations. . . . . . . . . . . . . . . . . . . . . . . . (147,093) (175,315)
Issuance of preferred stock, net
of offering costs. . . . . . . . . . . . . . . . . . . . . (7,500) 1,148,813
Payment of accumulated dividends
upon conversion of preferred stock to common stock . . . . (9,942) -
Decrease (increase) in restricted cash . . . . . . . . . . . 110,608 (2,614)
Increase (decrease) in lease deposit obligations . . . . . . 1,800 (12,935)
--------------------- ---------------------
NET CASH FLOWS PROVIDED
BY FINANCING ACTIVITIES. . . . . . . . . . . . . . . 1,044,389 342,818
--------------------- ---------------------
NET INCREASE IN CASH . . . . . . . . . . . . . . . . . . . . . 125,654 345,028
CASH, BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . . . 256,631 13,096
--------------------- ---------------------
CASH, END OF PERIOD. . . . . . . . . . . . . . . . . . . . . . $ 382,285 358,124
--------------------- ---------------------
--------------------- ---------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the
period for interest. . . . . . . . . . . . . . . . . . . $ 469,567 536,450
--------------------- ---------------------
--------------------- ---------------------
</TABLE>
(UNAUDITED)
(continued on next page)
6
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the six months ended June 30, 1995, and June 30, 1994, there were
the following non-cash transactions: the Company issued 6,858 shares and 7,153
shares of stock at an average value of $2.20 per share and $2.25 per share,
respectively, in accordance with its matching requirement under the Company's
401(k) plan, and a $5,500 note receivable was issued upon the refranchising of a
center.
(UNAUDITED)
7
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three-month and six-month periods ended June 30, 1995,
and June 30, 1994, (b) the financial position at June 30, 1995, (c) the
statements of cash flows for the six-month periods ended June 30, 1995 and
1994, and (d) the changes in stockholders' equity at June 30, 1995, have
been made.
2. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for financial statements. For further information, refer to the
audited consolidated financial statements and notes thereto for the year
ended December 31, 1994, included in the Company's Form 10-KSB filed with
the Securities and Exchange Commission on March 24, 1995.
3. The results for the three-month and six-month periods ended June 30, 1995,
are not necessarily indicative of the results for the entire fiscal year of
1995.
4. STOCKHOLDERS' EQUITY
On February 28, 1994, and March 15, 1994, the Company issued a total of
13,000 shares of Series C Preferred stock for $1,300,000, of which $789,000
was subscribed to as of December 31, 1993.
The Series C, 6% cumulative, preferred stock is redeemable at the option of
the Company upon 60 days prior written notice after December 31, 1996. At
the option of the holder, at any time prior to the close of business on the
redemption date, each share of Series C Preferred stock, plus any
accumulated unpaid dividends, may be converted into shares of common stock
at a conversion price of $2.50 per share of common stock. On June 30,
1995, accumulated unpaid dividends totaled $193,139.
The Company has an employee deferred compensation 401(k) plan and matches
employee contributions to this plan in an amount equal to 50% of the
employees' contribution, up to a maximum of 6% of the employees'
compensation. The Company's contribution is paid with its $0.03 par value
common stock valued at market on the date of the contribution. During the
first six months of 1995 and 1994, the Company contributed 6,858 and 7,153
shares to this plan at an average of $2.20 and $2.25 per share,
respectively.
(continued)
8
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is determined based on the number of
common and common equivalent shares outstanding and is adjusted for the
assumed conversion of shares issuable upon exercise of options and
warrants, after the assumed repurchase of common shares with the related
proceeds. Earnings (loss) per share for all periods was computed after
reduction for preferred stock dividends ($31,367 and $33,074 for the second
quarter of 1995 and 1994, respectively, and $63,240 and $53,629 for the
first six months of 1995 and 1994, respectively). The assumed conversion
of preferred stock was anti-dilutive.
6. COMMITMENTS AND CONTINGENCIES
The Company leases Grease Monkey Center sites under capital lease
agreements. These sites are either subleased to franchisees or operated as
Company-owned Centers. The typical lease period is 15 to 20 years and some
leases contain renewal options. These leases are accounted for as capital
leases and are capitalized using interest rates appropriate at the
inception of each lease.
On February 28, 1991, a Verified Complaint in Replevin and for Restitution
or Damages was filed in the District Court of Denver, State of Colorado,
entitled NICK MONTOYA AND AVER MONTOYA V. GREASE MONKEY HOLDING
CORPORATION, GREASE MONKEY INTERNATIONAL, INC., GM PROPERTIES, INC.,
PHOENIX EQUITY CORPORATION, ARTHUR P. SENSENIG, EDITH SENSENIG, AND JOHN R.
HOLZMAN, Civil Action No. 91 CV 1778. Plaintiffs are elderly persons who
allegedly loaned to Arthur P. Sensenig, the former President and Director
of the Company and GMI, the approximate sum of $450,000. Plaintiffs
asserted claims against the Company, GMI and GM Properties for unjust
enrichment, fraud, statutory theft against the elderly, fraudulent
conveyance, conspiracy and vicarious liability for the acts of Mr.
Sensenig. On June 3, 1992, the Court entered a judgment against the
Company in the amount of $241,679, plus statutory interest to accrue from
June 4, 1992. As of June 30, 1995, interest in the amount of $67,865 has
accrued. The Company filed an appeal in this matter which was heard by the
Colorado Court of Appeals ("Appeals Court") on December 21, 1993. The
Appeals Court upheld the District Court decision in an opinion dated
January 13, 1994. The Company filed a Petition for Certiorari to the
Colorado Supreme Court which was granted on November 7, 1994. Counsel for
the plaintiffs filed a motion for an Order for Expedited Determination
which was issued by the court on April 13, 1995. Oral arguments were heard
on May 22, 1995. The Company has recorded a reserve for the full judgment
amount and continues to reserve for the related interest.
The Company is a party to other legal proceedings including claims by
franchisees against the Company that arise in the ordinary course of
business. In the opinion of management, the outcome of these matters will
not have a material effect on the financial condition or results of
operations of the Company.
9
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported income of $59,981 for the first half of 1995, as
compared to a loss of ($95,999) for the first half of 1994. For the second
quarter of 1995, the Company recognized income of $49,520 compared to income of
$31,166 for the same quarter in 1994.
Total revenue decreased by $66,862 (1%) for the first half of 1995,
compared to the first half of 1994. Revenue during the second quarter of 1995
decreased $178,334 over the same quarter last year, a decrease of 4%. The
decreases are due primarily to reductions in: revenue from termination of
undeveloped franchise licenses; revenue from product and equipment sales,
including marketing allowances; revenue from Company-owned centers; and revenue
from operating and capital leases. The decreases in both periods were offset by
increases in royalty fees and increased revenue recognized on center openings.
Royalty fees are a percentage of gross sales paid monthly by all franchised
Grease Monkey Centers. Royalty fee revenue for the first half of 1995 increased
11% over the first half of 1994 to $1,582,436. Royalty fee revenue for the
second quarter of 1995 increased 7% over the second quarter of 1994 to $794,031.
This increase is due to continued growth in sales at existing Centers and a net
increase of fourteen franchised Centers since June 30, 1994. Based upon many
factors, including the age of amounts owed the Company, the extent of
collateralization, and historical performance, the Company may place certain
financially troubled franchisees on a non-accrual status. For the first half of
1995, estimated royalties of $80,450 were not accrued under this policy,
compared to $66,050 for the first half of 1994. During the second quarter of
1995, estimated royalties of $47,425 were not accrued compared to $33,300 for
the second quarter of 1994. The Company has a royalty rebate program for
franchisees under which eligible franchisees can receive a rebate of royalties
paid. For the first half of 1995, the rebate accrued under this program was
$116,864, compared to $118,489 for the first half of 1994. The rebate accrued
for the second quarter of 1995, was $64,295, compared to a rebate of $61,383 for
the second quarter of 1994. The rebate is recorded as a reduction in royalty
revenue.
Franchise sales revenue was $318,800 (representing thirteen centers) for
the first half of 1995, as compared to $170,844 (representing eight centers) for
the first half of last year. For the second quarter of 1995, franchise sales
revenue was $161,800 (representing seven centers), as compared to $137,000
(representing six centers) for the same quarter last year. Franchise sales
revenue represents initial one-time payments received by the Company from buyers
of its franchises. The fee is recognized as revenue when the related franchise
opens for business.
In the first half of 1995, the Company recognized $4,000 in franchise sales
revenue resulting from license cancellations as compared to $60,094 in the first
half of 1994. There were no license cancellations in the second quarter of
1995, however, franchise sales revenue resulting from license cancellations for
the second quarter of 1994 was $50,851.
(continued)
10
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
In the first half of 1995 the Company lost ($170,415) on revenue of
$5,975,756 at Company-owned Centers, as compared to a loss of ($37,320) on
revenue of $6,081,913 for the same period last year. Second quarter losses on
Company-owned Centers were ($25,630) and ($18,214) for 1995 and 1994,
respectively. At June 30, 1995 and 1994, the Company owned 29 Centers.
Company-owned center revenue decreased 2% in the first six months of 1995
versus 1994. The loss of revenue can be primarily attributed to the elimination
of emissions testings in Colorado due to a state adopted emissions testing
program, which commenced January 2, 1995, and limited emissions testing to a
single contractor selected by the state. Company-owned center revenue increased
1% in the second quarter of 1995 versus 1994. The increase in revenue can be
attributed to the acquistion of a center on May 1, 1995, which helped to reduce
the effect on revenue of the lost emissions testing. Emissions revenue has
associated with it a lower cost of sales than the cost of sales percentage on
other services provided by the company-owned centers. This factor accounts for
the higher percentage increase recognized on expenses than recognized for
revenue over the same periods noted above.
In the first half of 1995 the Company realized marketing allowances and
gross margins on product and equipment sales of $232,980, as compared to
$241,973 in the first half of 1994. In the second quarter of 1995, marketing
allowances and gross margins on product and equipment sales were $112,401 as
compared to $129,832 in the second quarter of 1994. Product and equipment
revenue represents the sale of fluid dispensing equipment and other supplies to
franchisees, and marketing allowances related to the sale of oil filters, air
filters, oil additives, and certain other products.
General and administrative expenses for the first half and second quarter
of 1995 decreased by 4% and 5% respectively, as compared to the same periods of
1994. The decrease is due to: a decrease in litigation fees and related costs
of approximately $66,000 for the six months of 1995 compared to 1994 and $33,000
for the three months ended June 30, 1995 compared to the three months ended June
30, 1994; a decrease in travel and entertainment expenses of approximately
$44,000 and $22,000 for the same respective periods; a decrease in corporate
office operating expenses of approximately $34,000 and $12,000 respectively and
offset by losses incurred on the disposition of obsolete assets and the
refranchising of a closed center and a company-owned center totaling
approximately $83,000 and $48,000 respectively.
(continued)
11
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
The following schedule summarizes the total number of Grease Monkey Centers
open, vehicles serviced, franchise licenses issued, franchise licenses and
applications outstanding, and franchise/application fees received during the
first six months of 1995 compared to the first six months of 1994:
<TABLE>
<CAPTION>
SIX MONTHS ENDED:
JUNE 30, 1995 JUNE 30, 1994
-------------------------------------------------------------------------------------
COMPANY FRANCHISEE COMPANY FRANCHISEE
OWNED OWNED TOTAL OWNED OWNED TOTAL
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Centers open, beginning 29 176 205 32 162 194
Centers opened(A) - 12 12 1 8 9
Centers purchased or
sold (B)(C) - 1 1 (1) 1 -
Centers terminated
or closed (B) - (5) (5) (3) (1) (4)
Centers reacquired - - - - - -
--- --- --- --- --- ---
Centers open, ending 29 184 213 29 170 199
-- --- --- -- --- ---
-- --- --- -- --- ---
Vehicles serviced (000's) 1,441 1,417
----- -----
----- -----
Franchises licenses issued (D) 4 9
---- ----
---- ----
Undeveloped franchise licenses (E) 48 65
---- ----
---- ----
Franchise applications outstanding (E) 20 26
---- ----
---- ----
Franchise license/application
fees received (F) $47,000 $309,000
------- --------
------- --------
<FN>
(A) Includes one refranchised center which was previously closed
(B) Includes one center which was deidentified by the franchisee in January
1995; subsequently, the Company acquired the center on May 1, 1995.
(C) Includes one Company-owned center refranchised in June 1995.
(D) Represents the number of licenses issued during the period.
(E) Represents the number of licenses/applications outstanding at June 30.
(F) Represents amounts received for franchise licenses/applications during the
period.
</TABLE>
(continued)
12
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES
In March of 1991 a controlling interest in the Company was sold to First of
September Corporation ("FOSC") for $1.25 million. As part of the transaction,
FOSC provided a $750,000 two-year line of credit effective August of 1991. The
line of credit with FOSC for $750,000 which bore interest at prime plus 2% was
extended through March 31, 1994. On March 23, 1994, the outstanding balance of
$378,000 was paid off and the line of credit was canceled.
A motor oil supplier has provided financing for Company-owned Centers where
the Company agrees to feature its products. The financing ranges from $30,000
to $45,000 per Center depending on the expected usage at the center. The
advances are amortized based on the Company's purchases of its products.
Similar oil company financing is expected to be available for any new Company-
owned Centers acquired and existing Company-owned Centers where the Company does
not have a supply agreement or where the existing supply agreement may be
canceled.
During April 1995, the Company entered into two agreements with another
motor oil supplier, a Loan Agreement and a Fast Lube Supply Agreement. Under
the Loan Agreement a $2,400,000 line of credit was established. All loans drawn
under this line accrue interest at 9% per annum and are repaid in quarterly
installments over a ten year period from date of disbursement. The line is
secured with the leases and assets of certain Company-owned Centers. As of June
30, 1995 the Company had borrowed $1,655,661 under the line for refinancing of
debt with the motor oil supplier, working capital and acquisitions. The balance
of the funds available under the line are restricted to the acquisition or
construction of new fast lube centers. Under the Fast Lube Supply Agreement,
the Company is required to purchase at least 85% of the petroleum products for
such Centers from the supplier, the Company is required to meet certain minimum
annual purchase requirements and the Company is required to feature its products
in such Centers.
Between February 28, 1994, and March 15, 1994, the Company issued a total
of 13,000 shares of Series C Preferred stock for $1,300,000. Offering costs
were approximately $151,000. The Series C Preferred stock has a stated value of
$100 per share; bears a 6% cumulative dividend; is convertible, together with
any accumulated unpaid dividends, into common stock at the option of the holder
at a conversion price of $2.50 per share; and is callable by the company at any
time after December 31, 1996, at a price of $115 per share. The net proceeds of
this offering were designated for working capital, including reduction of notes
payable, and to fund a settlement agreement with a landlord.
The growth of the Grease Monkey system is dependent on the ability of the
Company and its franchisees to obtain real estate development capital. The
majority of Grease Monkey Centers are built under so-called "build-to-suit"
arrangements where the land is purchased and the building constructed to Grease
Monkey specifications by an unrelated party, and then leased to the franchisee
(continued)
13
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
or the Company. The Company does not currently have a national source of build-
to-suit developers. Instead, the Company and its franchisees solicit such
developers on a location-by-location basis.
LIQUIDITY
Cash used in operations during the first half of 1995 was ($91,887) as
compared to cash provided by operations of $7,731 in the first half of 1994.
Cash used in investing activities was ($826,848) in the first half of 1995,
as compared to cash used of ($5,521) in the first half of 1994. Cash provided
consisted primarily of receipts on direct financing leases and cash received for
the refranchising of a company-owned center. Cash used was for the acquisition
of centers and for capital expenditures, primarily computer systems and Company
Center equipment.
Cash provided by financing activities was $1,044,389 in the first half of
1995 and $342,818 in the first half of 1994. Cash provided by financing
activities in the first half of 1995 included proceeds from long-term debt
(related to the facility described previously) of $1,241,880. Cash provided by
financing activities in the first half of 1994 included $1,148,813 (net of
offering costs of $151,187) from the issuance of Series C Preferred stock.
Cash used to reduce long-term debt, notes payable, and capital lease
obligations was $292,457 in the first half of 1995 and $790,446 in the first
half of 1994.
The Company does not have any material commitments for capital
expenditures. The Company believes it has the capital resources and liquidity
necessary to meet all of the obligations, debt maturities, and commitments of
the Company during 1995.
14
<PAGE>
GREASE MONKEY HOLDING CORPORATION
COMMISSION FILE NUMBER: 0-9812
QUARTER ENDED JUNE 30, 1995
FORM 10-QSB
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On February 28, 1991, a Verified Complaint in Replevin and for Restitution
or Damages was filed in the District Court of Denver, State of Colorado,
entitled NICK MONTOYA AND AVER MONTOYA V. GREASE MONKEY HOLDING CORPORATION,
GREASE MONKEY INTERNATIONAL, INC., GM PROPERTIES, INC., PHOENIX EQUITY
CORPORATION, ARTHUR P. SENSENIG, EDITH SENSENIG, AND JOHN R. HOLZMAN,
Civil Action No. 91 CV 1778. Plaintiffs are elderly persons who allegedly
loaned to Arthur P. Sensenig, the former President and Director of the Company
and GMI, the approximate sum of $450,000. Plaintiffs asserted claims against
the Company, GMI and GM Properties for unjust enrichment, fraud, statutory theft
against the elderly, fraudulent conveyance, conspiracy and vicarious liability
for the acts of Mr. Sensenig. In January of 1992 the Plaintiffs reached a
settlement with Mr. Sensenig wherein he confessed judgment for approximately
$350,000. At or about the same time, Edith Sensenig was dismissed from the
case, with prejudice. Trial for the remaining defendants was held on May 18,
1992 and on June 3, 1992, the Court entered a judgment against the Company in
the amount of $241,679, plus statutory interest to accrue from June 4, 1992. As
of June 30, 1995, interest in the amount of $67,865 has accrued. The basis of
the Court's decision was one founded in vicarious liability of a principal for
the actions of its agent. The Court found that the Company was responsible for
the tortious acts of its former President, in spite of the fact that the Company
adequately supervised the former President, had no knowledge of any wrongdoing,
and received none of the funds which were taken from the Plaintiffs. The Court
based its decision on Section 261 of the RESTATEMENT OF AGENCY 2D., which
Section has not yet been adopted as the law in the State of Colorado. The
Company filed an appeal in this matter which was heard by the Colorado Court of
Appeals ("Appeals Court") on December 21, 1993. The Appeals Court upheld the
District Court decision in an opinion dated January 13, 1994. The Company filed
a Petition for Certiorari to the Colorado Supreme Court which was granted on
November 7, 1994. Counsel for the plaintiffs filed a motion for an Order for
Expedited Determination which was issued by the court on April 13, 1995. Oral
arguments were held on May 22, 1995. The Company has recorded a reserve for the
full judgment amount and continues to reserve for the related interest.
On February 11, 1993, the Company filed a complaint against a franchisee,
entitled GREASE MONKEY INTERNATIONAL, INC. V. PEARCO, INC. V. JOHN L. GALLIVAN,
Civil Action No. MJG 93-385, in the U.S. District Court in Maryland, for failure
to report sales and pay royalties and advertising fees, servicemark
infringement, unfair competition, unfair/deceptive trade practices,
misappropriation of trade secrets, breach of covenant not to compete, and breach
of agreement. On
(continued)
15
<PAGE>
ITEM 1. LEGAL PROCEEDINGS (continued)
April 2, 1993, the Defendant answered and counterclaimed, adding John L.
Gallivan, former Executive Vice President, as a counter-defendant. Their
counterclaims were as follows: fraud, negligent misrepresentation, breach of
contract, unlawful restraint of trade, violation of Maryland Anti-Trust Act,
civil conspiracy, violation of Federal RICO statute, violation of Maryland
Franchise Act, and violation of Federal Rule of Civil Procedure No. 11. The
counterclaim asked for $611,000 in damages, rescission, and attorney's fees and
costs. On August 2, 1993, the Court granted an Order staying and
administratively closing the case, pending the completion of a settlement
agreement between the parties. The settlement is contingent upon the Company
successfully negotiating for the purchase, by the Company or a third party, of
the Grease Monkey building occupied by Defendant. GMI did not acquire title to
Pearco's building by December 31, 1993, and does not anticipate that it will
acquire title to the building in the future. To date, neither party has
requested the reopening of the litigation and GMI has not paid anything to
purchase the assets of Pearco's franchise because the preconditions set forth in
the settlement agreement have not been fulfilled. Management believes that the
resolution of this matter will not have a material adverse effect on the
financial condition or results of operations of the Company.
The Company is a party to other legal proceedings including claims by
franchisees against the Company that arise in the ordinary course of business.
In the opinion of management, the outcome of these matters will not have a
material effect on the financial condition or results of operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 26, 1995, the Company held its annual meeting of shareholders. The
Company's shareholders elected the following nine persons as directors, each to
serve until the next annual meeting of shareholders or until his successor is
elected and qualified: Jerry D. Armstrong, Jim D. Baldwin, Cortlandt S. Dietler,
Kirk E. Douglas, Wayne H. Patterson, Charles E. Steinbrueck, Rex L. Utsler,
James B. Wallace, George F. Wood.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits (numbered in accordance with Item 601 of regulation S-K)
10. Material Contracts
(a) Loan Documents for $2,400,000 line of credit.
11. Statement Re: Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the period covered by this report.
16
<PAGE>
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
COMMISSION FILE NUMBER: 0-9812
QUARTER ENDED JUNE 30, 1995
FORM 10-QSB
SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the
following person(s) on behalf of the Registrant and in the capacities and on the
dates indicated.
GREASE MONKEY HOLDING CORPORATION
By:/s/ T. Timothy Kershisnik
-----------------------------------------------
T. Timothy Kershisnik
Controller, Treasurer and
Corporate Secretary
(Principal Financial and
Accounting Officer)
Denver, Colorado
August 9, 1995
17
<PAGE>
LOAN AGREEMENT BETWEEN QUAKER STATE CORPORATION
AND
GREASE MONKEY INTERNATIONAL, INC.
THIS LOAN AGREEMENT (hereinafter referred to as the (the "Agreement") is
made as of April 19, 1995 between Quaker State Corporation, a Delaware
--
Corporation, having its principal office in Oil City, Pennsylvania (hereinafter
referred to as "Quaker State") and Grease Monkey International, Inc., a Colorado
Corporation, having its principal office in Denver, Colorado (hereinafter called
"Grease Monkey").
Grease Monkey has applied to Quaker State for a loan of Two Million Four
Hundred Thousand Dollars ($2,400,000) for the purpose of satisfying its previous
loan with Quaker State improving its existing quick lubrication locations,
improving its working capital position, and for the purpose of acquiring
additional locations. Quaker State desires to lend this amount to Grease Monkey,
on the terms and subject to the conditions of this Agreement. In consideration
of the mutual covenants, agreements, representations, and warranties contained
in this Agreement, the Parties agree as follows:
1. LOANS. Subject to the terms and conditions of this Agreement and relying
upon Borrower's representations and warranties herein, Quaker State agrees
to make loans to Borrower from time to time until the expiration date of
this Agreement, in an aggregate principal amount not exceeding Two Million
Four Hundred Thousand Dollars ($2,400,000) during the term of this
Agreement, to be used and disbursed as follows:
(a) Immediately upon the execution of all required documents the sum
necessary to pay off and discharge an existing loan from Quaker State to
Grease Monkey.
Page 1 of 15
<PAGE>
(b) Immediately upon the execution of all necessary documents the sum
of Three Hundred Fifty Thousand Dollars ($350,000) for Borrower's current
working capital needs.
(c) Balance of the funds to be available upon Borrower's request and
in accordance with the procedures and terms set forth in this Agreement for
the acquisition or construction of new fast lube centers ("Acquired
Centers") by Borrower with the amount loaned per location not to exceed
100% of the value of the property to be constructed or acquired. An
Acquired Center shall be valued at the lesser of its acquired price or 4.5
times its operating cash flow.
Loans under this Section (c) shall be available to Borrower in
accordance with the payment or purchase terms of the acquisition document
executed by Borrower or in the case of construction by Borrower on an "as
needed" basis with one-third within 30 days prior to construction,
one-third upon completion of the excavation and footing, and one-third upon
the completion of the construction.
All loans shall accrue interest at a nine percent annualized rate and
shall be repaid in quarterly installments of principal and interest over a
ten year period from date of disbursement, and shall be evidenced by
Borrower's promissory notes in form satisfactory to Quaker State. Each loan
for an Acquired Center shall be secured by a first priority, purchase money
mortgage or deed of trust (as appropriate under applicable law) or, in the
case of leased properties, by first priority leasehold mortgage or
conditional lease assignment. The initial loan disbursements under Section
l(a) and l(b) of this Agreement shall be secured by conditional lease
assignments covering the lubrication center properties set forth in
paragraph 5 of this Agreement.
Page 2 of 15
<PAGE>
Borrower acknowledges that loans made under this Agreement shall be ln
lieu of Quaker State's other development and equipment loan programs.
2. LOAN REQUEST PROCEDURES. In order to request a loan Borrower shall
submit a written loan request to Quaker State containing the proposed date
and amount of the loan accompanied by the following documents:
(a) Address of location or locations to be acquired or constructed for
which the loan is requested; and
(b) A title search of the property demonstrating that Borrower holds
or will hold good and marketable title to the property free and clear of
all liens, mortgages, judgments and other encumbrances. In the case of
leased property, Borrower shall provide an executed copy of the lease for
the premises, and proof satisfactory to Quaker State that Borrower holds
good and sufficient leasehold interest in the property, free and clear of
prior liens, mortgages, judgments, or other encumbrances created by
Borrower or its landlord that would have priority over Quaker State's
interest or of title problems or defects with respect to the landlord's
title on such property (Quaker State waives the requirement for landlord
estoppel certificates for those locations set forth in paragraph 5 of this
Agreement which Grease Monkey was unable to provide Quaker State as part of
the previous loan between the parties hereto.); and
(c) Copies of applicable: Occupancy permits, zoning permits, and other
licenses and permits required for occupancy of and operation of the center.
3. INTEREST RATE. The unpaid balance of the loan shall bear interest at a
rate of nine percent (9%) per annum.
4. OPTIONAL PREPAYMENT. Grease Monkey may at its option prepay all loans
made under the terms of this Agreement in whole at any time or in such part
from time to time without penalty or premium. Any such prepayment shall be
Page 3 of 15
<PAGE>
applied to the latest maturity of principal then remaining unpaid. In the
event of the prepayment in part, interest shall accrue only on the unpaid
balance. Upon payment of all loans and all accrued interest thereon Grease
Monkey's purchase obligations under the Fast Lube Supply Contracts shall be
satisfied and the Fast Lube Supply Contracts shall become null and void.
5. SECURITY. In addition to the collateral required by paragraph 1 of this
Agreement the loan shall be secured by conditional assignments of Grease
Monkey's leases covering those properties as identified below and shall be
further secured by a Security Agreement executed by Grease Monkey as debtor
to Quaker State as secured party, granting Quaker State a security interest
in all of the collateral described therein. The Security Agreement shall be
delivered to Quaker State upon execution of this Agreement by Grease Monkey
along with executed UCC 1 forms.
Leasehold interest:
8885 N. Washington 8801 W. Colfax Ave.
Thornton, CO 80229 Lakewood, CO 80215
515 S. Federal Blvd. 50 W. Belleview
Denver, CO 80219 Englewood, CO 80110
1527 Peoria St. 6000 Parkway Drive
Aurora, CO 80010 Commerce City, CO 80037
2495 S. University 6549 S. Broadway
Denver, CO 80210 Littleton, CO 80120
1098 S. Wadsworth 3693 W. Bowles Ave.
Lakewood, CO 80226 Littleton, CO 80123
2890 N. Colorado 1295 S. Colorado
Denver, CO Denver, CO 80222
7005 E. Colfax Ave. 7225 E. Hampden
Denver, CO 80220 Denver, CO 80224
1790 S. Buckley 8450 N. Federal
Aurora, CO 80017 West Minister, CO 80030
7181 N. Pecos
Denver, CO 80220
Page 4 of 15
<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF GREASE MONKEY.
(a) Grease Monkey is a corporation, duly organized, validly existing,
and in good standing under the laws of the State of Colorado, has all
necessary corporate powers to own and lease its properties, carry on its
business as now being operated, and is duly qualified to do business, and
is in good standing with the State of Colorado.
(b) Grease Monkey has supplied to Quaker State consolidated audited
balance sheets of Grease Monkey Holding Corporation as of December 31, 1994
and 1993 and related consolidated statements of income and stockholders'
equity for the years ending on those dates. The financial statements
described herein are referred to as the "Financial Statements". The
Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently followed by Grease Monkey
throughout the periods indicated, and fairly present the financial position
of Grease Monkey as of the respective dates of the balance sheets included
in the Financial Statements, and the results of its operations for the
respective period. Except as reflected in the Financial Statements, there
exist no liabilities of Grease Monkey of a type customarily reflected on a
balance sheet in accordance with the generally accepted accounting
principles, contingent or absolute, matured or unmatured.
(c) Except as set forth in Exhibit "A" since the date of the last
audited Financial Statements referred to in the above paragraph there has
not been any change in the financial condition or operation of Grease
Monkey, except changes in the ordinary course of business, which changes
have not in the aggregate been materially adverse.
(d) Grease Monkey has good and valid leases for all of the leases to
be used as collateral for this Agreement, except as may be disclosed to
Quaker State in the Exhibit C provided to Quaker State and as accepted by
Page 5 of 15
<PAGE>
Quaker State prior to the execution of this Agreement. None of the leases
are subject to any prior assignments, conditional or otherwise, or
encumbrances. All leases are free and clear of restrictions or conditions
prohibiting the assignment of the leases as security for this loan. Grease
Monkey has not taken any action or failed to take any action or done
anything that would constitute a default in any of the leases. Grease
Monkey has not received any written or oral notice that it is in default
beyond any period provided for cure under any of the leases and has no
knowledge of any action or proceeding by any of its landlords that could
result in the loss of any of Grease Monkey's leasehold interests that are
to be used as collateral for the loan.
(e) Grease Monkey has maintained, now maintains and shall continue to
maintain insurance on all of its leasehold interests that are to be used as
collateral herein covering property, damage, and loss of income by fire or
other casualty and adequate insurance protection covering all liabilities,
claims, and risks against which it is customary to insure and for amounts
not less than required by the leases. Grease Monkey shall secure from each
of its landlords of Acquired Centers an acknowledgement and estoppel
certificate substantially in a form provided by Quaker State and shall
deliver to Quaker State certificates and estoppels on or before the date of
the closing of this loan.
(f) Except as set forth in Exhibit "B", there is no default or
event that with notice or lapse of time or both that would constitute a
default by Grease Monkey to any lease or agreement relating to the
property of Grease Monkey constituting the collateral hereunder to which
Grease Monkey is a party or by which any of the property of Grease
Monkey constituting the collateral hereunder is bound, and there exists
no contract, a default under which would have a material adverse effect
on the business, property
Page 6 of 15
<PAGE>
or financial condition of Grease Monkey, or which Grease Monkey has or
reasonably should have knowledge. Grease Monkey has not received notice
that any party to any of these agreements intends to cancel or terminate
any of these agreements or to exercise or not to exercise any options under
any of these agreements.
(g) Except as set forth in Exhibit "F" and in the financial
statements, there is no suit, action, arbitration, or legal,
administrative, or other proceeding, order, judgment or decree, or
governmental investigation pending to the best knowledge of Grease Monkey,
against, or affecting Grease Monkey, or any of its businesses, assets or
financial condition that may foreseeably result in a material adverse
impact to such business, assets or financial condition.
(h) The execution and delivery of this Agreement and consummation of
the transactions contemplated by this Agreement will not result or
constitute a default or an event with notice or lapse of time or both,
which would be a default, breech, or violation of the Articles of
Incorporation or Bylaws of Grease Monkey or any lease, license, promissory
note, conditional sales contract, commitment, indenture, mortgage, deed of
trust, or other agreement, instrument, or arrangement to which Grease
Monkey is a party or by which Grease Monkey or the property of Grease
Monkey is bound.
(i) Grease Monkey has the right, power, legal capacity, and authority
to enter into and perform its obligations under this Agreement and the
documents, instruments, and agreements to be executed and delivered
pursuant to this Agreement. All approvals or consents of any landlord,
lender person or entity required for Grease Monkey to enter into and
perform its obligation under the Agreement and documents which shall be
executed and delivered pursuant to this Agreement will be obtained and
Page 7 of 15
<PAGE>
provided to Quaker State. The execution and delivery of this Agreement and
such other documents, instruments, and agreements by Grease Monkey has been
duly authorized by its Board of Directors. The officers of Grease Monkey
executing this Agreement and any note, instrument or agreement required
under this Agreement are duly and properly in office and fully authorized
to execute them.
(j) No event has occurred or would result from the making of the loan
which constitutes an Event of Default as defined in this Agreement or
which, under lapse of time or notice or both, would become such an Event of
Default.
7. Grease Monkey shall deliver to Quaker State in form and detail
reasonably satisfactory to Quaker State as Quaker State may request as soon
as available but no later than one hundred twenty (120) days after the
close of Grease Monkey's fiscal year: copies of Grease Monkey Holding
Corporation's consolidated balance sheet, income statement, and statement
of cash flow certified by an independent public accountant selected by
Grease Monkey and such other documents or statements that Grease Monkey
prepares in the normal course of its business for public distribution or is
required to file by relevant securities laws or regulations.
8. Grease Monkey shall perform such acts as may be necessary or advisable
in the reasonable judgment of Quaker State, to perfect the lien, pledge,
assignment, or security interest provided for in this Agreement or
otherwise to carry out the intent of this Agreement.
9. CONDITIONS TO CLOSING OF LOANS. The following shall constitute
conditions precedent to Quaker State's obligations to make all or any
part of the loans to Borrower:
(a) Delivery of all information required by this Agreement shall have
occurred; and
Page 8 of 15
<PAGE>
(b) No event of default as defined in this Agreement shall have
occurred and be existing; and
(c) Borrower shall have executed and delivered to Quaker State a
promissory note in a form acceptable to Quaker State, a mortgage or
conditional lease assignment in a form satisfactory to Quaker State,
landlord consents, attornment and non-disturbance agreements or estoppel
certificates for all Acquired Centers as deemed necessary or advisable by
Quaker State, an executed supply agreement on Quaker State's standard form
of agreement committing the locations for which the loans are made to
purchase at least 85% of its (or their) requirements of motor oils from
Quaker State for a period of ten years from the date of the loan subject to
earlier termination in the event Borrower pays in full all principal and
accrued interest on all loans made by Quaker State to Borrower; and
(d) All other closing documents shall be in form satisfactory to
Quaker State and its counsel; and
(e) A policy of title insurance insuring Quaker State's interest in
the property as lender shall have been issued by a title insurance company
acceptable to Quaker State which property shall not be subject to any
exceptions or conditions reasonably unacceptable to Quaker State; and
(f) A certified resolution of Borrower's Board of Directors
authorizing the loan and execution of all documents relating thereto shall
be delivered to Quaker State; and
(g) A certificate of Borrower's President certifying that all
representations and warranties as set forth in this Agreement are true and
correct as of the date of the loan; and
(h) A current certificate of Borrower's good standing in the state of
Colorado and of Borrower's authority to conduct business in the state of
Colorado; and
Page 9 of 15
<PAGE>
(i) Quaker State shall be satisfied, in its sole discretion, with
Borrower's credit worthiness at the time of the loan.
10. EVENTS OF DEFAULT. The occurrence of any of the events set forth below
("Events of Default") shall give Quaker State the option to accelerate all
principal and interest remaining on any of the loans which shall become
immediately due and payable, with thirty (30) days written notice of
default, or as otherwise specified in this Agreement. If Quaker State
executes its right to accelerate hereunder, the entire unpaid principal,
together with accrued but unpaid interest, shall, after such exercise, bear
interest at the rate of twelve percent (12%) per annum. The existence of an
Event of Default shall permit, but shall not require, Quaker State to
foreclose upon or otherwise exercise all or any of its rights respecting
any security provided pursuant to this Agreement.
The following shall constitute an Event of Default under this
Agreement:
(a) NON-PAYMENT. Grease Monkey shall fail to pay, within thirty (30)
days after written notice of default of a past due amount, whether by
acceleration or otherwise, any installment of interest or principal or any
other sum payable in accordance with the terms of this Agreement or any
loan document between Grease Monkey and Quaker State, or any amount due and
owing on any product account between Grease Monkey and Quaker State.
(b) FALSE REPRESENTATION OR WARRANTY. Any representation or warranty
by Grease Monkey in this Agreement, in any Financial Statement, in any
Exhibit to this Agreement, or in any loan document, or certificate executed
for this Agreement, or in connection with any transaction contemplated by
this Agreement shall prove to have been false or misleading in any material
respect when made;
Page 10 of 15
<PAGE>
(c) INVOLUNTARY LIEN. An involuntary lien or liens recorded against
any of the leases or other property used as collateral for this loan
including a judgment entered against Grease Monkey and affecting the
leasehold interest and other items used as collateral for the loan in the
aggregate amount exceeding Fifty Thousand Dollars ($50,000) on a claim or
claims not covered by insurance. Grease Monkey shall have ninety (90) days
to remove any such liens and those items set forth on Exhibit C shall be
excluded from this provision.
(d) OTHER DEFAULT. Grease Monkey shall materially breach or default
under any term, condition, representation, or warranty in this Agreement or
any other agreement made at a later date between Grease Monkey and Quaker
State;
(e) DEFAULT IN SUPPLY AGREEMENT OBLIGATIONS. Notwithstanding anything
to the contrary contained herein, if Grease Monkey fails in any one year
contract period to purchase the minimum quantity of Quaker State motor oils
and greases required by a Quaker State Fast Lube Supply Contract, the loan
shall become due and payable at Quaker State's option;
(f) ACTS OF BANKRUPTCY. Grease Monkey shall become insolvent as the
term is defined in the Federal Bankruptcy Code, or shall commit any act of
bankruptcy including the filing of any voluntary petition or action for
relief under any bankruptcy, arrangement, reorganization, insolvency, or
moratorium law or an other law or laws for the relief of or relating to
debtors, or shall with respect to any involuntary petition or action for
relief under such law or laws, file an answer consenting to the relief
requested in the petition.
(g) DEFAULT IN LEASE. Grease Monkey defaults under any of the
provisions of the Leasehold interest to be used as collateral by Quaker
Page 11 0f 15
<PAGE>
State for the Loan and said default is not cured within the time allowed by
the terms of the relevant Lease Agreement.
(h) SALE OR MERGER. Any sale of a majority of Grease Monkey's assets
or a change in control of Grease Monkey or any merger of Grease Monkey into
another corporate entity that is a competitor of Quaker State.
11. EXPIRATION. Provided that Grease Monkey is in full compliance with all
the terms and conditions of this Agreement, Grease Monkey may, in
accordance with the terms of this Agreement, request from Quaker State a
disbursement of loan proceeds any time within the 24 consecutive months
effective from the execution of this Agreement. All other terms, conditions
and provisions of this Agreement shall remain in full force and effect
until the full amount of all principal and accrued interest of all loans
made under this Agreement are repaid by Grease Monkey to Quaker State or
its assignee.
12. EFFECTIVE HEADINGS. Subject headings of the articles, sections, and
sub-sections of this Agreement are included for purposes of convenience,
and shall not affect the construction or interpretation of any of the
provisions.
13. ENTIRE AGREEMENT MODIFICATION. This Agreement, together with its
attachments and exhibits, constitutes the entire agreement between the
parties pertaining to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations, and understanding of
the parties. Except as otherwise provided in this Agreement, no supplement,
modification, or amendment of this Agreement shall be binding unless
executed in writing by both parties: Provided that all promissory notes
hereunder need only be executed by Grease Monkey.
Page 12 of 15
<PAGE>
14. COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one in the same instrument.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants, and agreements herein or in any certificate, or
document provided by Grease Monkey pursuant to this Agreement shall be
deemed material and relied upon by Quaker State, notwithstanding any
investigation made by Quaker State or on Quaker State's behalf, and shall
survive the execution and delivery of this Agreement and all disbursements
made pursuant to this Agreement.
16. ASSIGNMENTS. This Agreement shall be binding on, and shall inure to the
benefit of, the parties to it and their respective successors and assigns;
provided, however, Grease Monkey may not assign any of its rights, duties,
or obligations under the Agreement without prior written consent of Quaker
State.
17. LITIGATION COSTS. If a legal action or arbitration or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any the
provisions of this Agreement or any Loan documents or if Quaker State
incurs any legal expense in protecting its rights under this Agreement or
Document in any legal proceeding, then the prevailing party in such action
shall be entitled to recover reasonable attorneys fees and all other costs
incurred under that action or proceeding, in addition to any other relief
that it may be entitled; or if any promissory note or other evidence of
indebtedness issued hereunder is collected by an attorney after the
occurrence of an Event of Default, with or without suit, Grease Monkey
shall pay reasonable attorneys fees together with all costs and expenses.
Page 13 of 15
<PAGE>
18. NOTICES. All notices, requests, demands, and other communication under
this Agreement shall be in writing and shall be deemed effective and duly
given on the date of service and served personally on the party to which
notice is to be given, or on the third day after mailing if mailed to the
party to whom notice is to be given by registered or certified, postage
Quaker State Corporation
255 Elm Street, P. O. Box 989
Oil City, Pennsylvania 16301
Attention R. Scott Keefer, Vice President/Finance
& Chief Financial Officer
Grease Monkey International, Inc.
216 16th Street Mall Suite 1100
Denver, Colorado 80202
Attention: Tim Kershisnik, Controller and Treasurer
19. DELAYS AND WAIVERS. No delay or omission to exercise any right, power,
or remedy accruing to Quaker State on any breach or default of Grease
Monkey under this Agreement shall impair any such right or remedy of Quaker
State, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence in such breach or default occurring later; nor
shall any waiver of any single breach or default be considered a waiver of
any other prior or subsequent breach or default. No course of dealing
between Grease Monkey and Quaker State shall operate as a waiver of any of
Quaker State's rights hereunder; nor shall the disbursement of funds or the
extension of any time or payment during the existence of an Event of
Default constitute a waiver thereof. All remedies, either under this
Agreement or by law or otherwise afforded to Quaker State, shall be
cumulative and not alternative.
Page 14 of 15
<PAGE>
20. FEES AND EXPENSES. Borrower shall be responsible for all reasonable
fees and expenses incurred by Quaker State in making loans pursuant to this
Agreement, including but not limited to appraisal fees, attorney fees,
consultant fees, environmental assessment fees, recording cost, title
insurance premiums, and excise, documentary, mortgage, or stamp fees.
21. CONFIDENTIALITY. Quaker State and Borrower agree not to make any
disclosure of the terms of this Agreement to any party other than those of
their employees who need to know such information in the course of
performance of this Agreement and except as may be required by law unless
such disclosure is approved in writing by the non-disclosing party.
22. GOVERNING LAW. This Agreement shall be construed in accordance with and
be governed by the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed on the
day first above written.
Date: 4-19-95 QUAKER STATE CORPORATION
--------------------
ATTEST:
/s/ Joyce A. McFadden By /s/ Conrad A. Conrad
------------------------------------ -------------------------------
Assistant Corporate Secretary Vice Chairman and
Chief Administrative Officer
Its President, Satellite Companies
-------------------------------
Date: 4-19-95 GREASE MONKEY INTERNATIONAL, INC.
--------------------
ATTEST:
/s/ T. Timothy Kershisnik /s/ Rex L.Utsler
------------------------------------ By -------------------------------
PRESIDENT
Its -------------------------------
Page 15 of 15
<PAGE>
EXHIBIT "A"
REPRESENTATION 6(c) CHANGES IN FINANCIAL CONDITION
<PAGE>
EXHIBIT "B"
REFERENCE SECTION 6(f) EVENTS OF LEASE DEFAULT
<PAGE>
EXHIBIT "C"
SECTION 6(d) DEFECTS IN LEASEHOLD TITLE
<PAGE>
EXHIBIT "D"
NOTHING REQUIRED
<PAGE>
EXHIBIT "F"
SECTION 6(g) LAWSUITS, ACTIONS OR OTHER PROCEEDINGS - MATERIAL ADVERSE IMPACT
<PAGE>
F. L. No. _______
QUAKER STATE CORPORATION
FAST LUBE SUPPLY AGREEMENT
This Agreement, dated the 19TH day of April, 1995, by and between Quaker
State Corporation, Oil City, Pennsylvania, hereinafter called "Quaker State" and
Grease Monkey International, Inc., hereinafter called "Buyer".
Whereas, Buyer conducts a business which provides quick automotive oil
changes to consumers, and Buyer desires to obtain an assured source of supply
for a portion of its needs of motor oil and greases for the said business; and
Whereas, Quaker State is willing to provide a source of supply for Buyer on
the terms and conditions hereinafter set forth.
Now, Therefore, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, Buyer and Quaker State agree as
follows:
1. QUANTITY. During each one-year period while this Agreement is in
effect, commencing the date of this Agreement, Buyer agrees to purchase from
Quaker State, and Quaker State agrees to sell to Buyer, not less than 85% of
Buyer's total requirements of motor oils and grease and Buyer agrees to
feature only Quaker State motor oil as the bulk for resale at its fast lube
facilities at:
8885 N. Washington 8801 W. Colfax Ave.
Thornton, CO 80229 Lakewood, CO 80215
515 S. Federal Blvd. 50 W. Belleview
Denver, CO 80219 Englewood, CO 80110
1527 Peoria St. 6000 Parkway Drive
Aurora, Co 80010 Commerce City, CO 80037
2495 S. University 6549 S. Broadway
Denver, CO 80210 Littleton, CO 80120
1098 S. Wadsworth 3693 W. Bowles Ave.
Lakewood, CO 80226 Littleton, CO 80123
2890 N. Colorado 1295 S. Colorado
Denver, CO Denver, CO 80222
7005 E. Colfax Ave. 7225 E. Hampden
Denver, CO 80220 Denver, CO 80224
1790 S. Buckley 8450 N. Federal
Aurora, CO 80017 West Minister, CO 80030
Page 1 of 4
<PAGE>
7181 N. Pecos
Denver, CO 80220
Buyer shall maintain complete and accurate records of its sales at the
above facilities, and Quaker State shall have the right, on an annual basis, to
inspect such records at Buyer's facilities to review compliance with this
covenant.
2. ORDER. The Buyer shall purchase the minimum gallonage by placing its
firm order for the products with a Quaker State Distributor, with a Quaker
State direct sales branch, or directly with Quaker State at Quaker State's
central order number. Such order shall specify the type, quantity and
delivered cost of said products and shall contain such other information as
necessary to ensure proper delivery. Unless otherwise indicated thereon, all
such orders shall be deemed to be for the earliest possible shipment.
3. TERMS OF PAYMENT. Buyer agrees to pay for said oils and greases at
the price reflected on the order form, which shall be the delivered price
agreed upon with the local Quaker State distributor or the suggested
delivered price on the applicable Quaker State price list. Said price lists
shall be subject to change with thirty (30) days written notice. The Buyer
covenants and agrees to pay all invoices for said oil and other products sold
and delivered under this Agreement in cash within thirty (30) days from the
date of invoice, all such invoices for purchases from Quaker State being
subject to a discount of one percent (1%) if paid within ten (10) days from
date of same.
4. SHIPPING TERMS. Deliveries hereunder shall be made from the place of
business of a Quaker State contract distributor or from a Quaker State
refinery or packaging plant. All deliveries are subject to the minimum
quantity provisions contained in the appropriate price list.
5. FORCE MAJEURE. It is agreed that Quaker State and its distributors
shall not be liable for delays or inability to deliver said products on
account of any cause whatsoever beyond its control, including but not limited
to fire, riots, flood, acts of God, accident, strike or work stoppages for
any reason, embargo, government regulation, shortage of crude petroleum or
other products or of transportation facilities, and other causes whether or
not of the same class or kind as specifically named. Should shortages occur
for any reason, Quaker State and its distributors will comply with the
government regulations pertaining to the allocation of said oils and other
products, or in the absence of government regulations, Quaker State and its
distributors may allocate their supply among their customers in such manner
and amount as shall in their judgment fairly allocate the supply among them.
In the event Quaker State or its distributor cannot deliver the minimum
amounts of oils and greases required hereunder, Buyer shall be released from
its obligation to purchase such minimum quantities and shall only be required
to purchase that amount which Quaker State or its distributor can actually
deliver.
6. CONDITION PRECEDENT. It is a severable condition precedent and this
Agreement of Sale is dependent on and subject to the continued performance
thereof, that Buyer will pay according to the terms stated on the appropriate
price list in effect at the time of purchase of all products purchased
hereunder, and that the credit of Buyer will be kept unimpaired and
satisfactory
Page 2 of 4
<PAGE>
to Quaker State. In the event that Buyer defaults on any payment due hereunder
or on any payment due Quaker State under any agreement beyond any period
provided for cure or files for bankruptcy, Quaker State may require and the
Buyer shall promptly provide payment in advance of shipment or satisfactory
security to assure payments, and until Buyer so provides, Quaker State or any of
its distributors may defer making shipment of said oil or other products. It is
likewise a severable condition precedent that Buyer not be in default under any
other agreement with Quaker State as default is defined under that Agreement. In
the event Buyer shall fail to keep or comply with the covenants and conditions
herein set forth, Quaker State may deem any of such defaults to be material
nonperformance on the part of the Buyer defeating the purposes of this
Agreement, and at its option may rescind the Agreement by giving notice to the
Buyer and may thereupon terminate all obligations of Quaker State or
distributors for delivery of all products then unshipped. All sums due Quaker
State or its distributors from Buyer shall then become immediately due and
payable. A waiver by Quaker State or its distributor of the performance of any
said condition shall not constitute or be deemed a waiver of strict performance
thereafter. Quaker State agrees to provide Grease Monkey written notice of its
intention to require advance payment for oil and grease shipments or terminate
this Agreement setting forth the reasons for such action by Quaker State and
allowing Grease Monkey thirty (30) days to cure said default in a manner
satisfactory to Quaker State.
7. TRADEMARKS. All Quaker State trademarks, colors, designs and symbols
shall be used only in connection with the sale and identification of Quaker
State branded products. Any other use, including, but not limited to signs,
letterheads, and fast lube promotional materials, requires the prior written
approval of Quaker State. Use of the Quaker State name or marks in an
improper manner or without prior written approval, shall constitute a
material breach of this agreement. This shall be in addition to any other
remedies or damages to which Quaker State may be entitled by virtue of
Buyer's use of the mark.
8. NOTICES. All notices or requests given pursuant to this Agreement
shall be in writing and shall be given by United States mail, postage prepaid
to Quaker State Corporation, P. O. Box 989, Oil City, Pennsylvania 16301,
marked to the attention of the National Account Sales Department, with a copy
thereof mailed to the affected distributor, if any, and notices to the Buyer
shall be mailed in writing to the Buyer at the name and the address as set
forth in the Loan Agreement.
9. RENEWAL AND TERMINATION. This agreement shall become effective upon
execution hereof and shall continue for so long as any amount remains due and
owing to Quaker State under a Loan Agreement dated even date herewith.
During the initial or any extended term of this Agreement, this
Agreement may be terminated only by mutual consent of the parties in writing
or by either party upon material default in the performance of any covenant
herein or in any other agreement between Quaker State and Buyer when such
default remains uncured thirty (30) days following written notice by the
non-breaching party specifying that a default has occurred. In the event
Quaker State should terminate this Agreement by reason of the default or
non-performance by Buyer, Quaker State shall be entitled to recover on demand
all damages incurred by Quaker State as a result of Buyer's default or
non-performance.
Page 3 of 4
<PAGE>
11. ASSIGNMENT. This Agreement is personal to the parties hereto and
neither it nor any rights arising out of it may or can be assigned by either
party, either voluntarily or by operation of law, without the written consent
of the other party, but it shall be binding upon and inure to the successors
of either party.
12. FEES AND COSTS. Buyer and Quaker State agree that, in the event
either party brings any action or proceeding to enforce any of the terms of
this Agreement, the non-prevailing party shall pay the prevailing party on
demand all costs, attorney's fees, and other expenses incurred in such
proceeding, including appeals and post-judgment collection efforts.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of Colorado.
Attest: QUAKER STATE CORPORATION
/s/ Joyce A. McFadden By: /s/
------------------------------- ---------------------------------------
Assistant Corporate Secretary Its: Treasuser
WITNESS: GREASE MONKEY INTERNATIONAL, INC.
/s/ T. Timothy Kershisnik By: /s/ Rex L. Utsler
------------------------------ ---------------------------------------
Title: PRESIDENT
--------------------------------------
Page 4 of 4
<PAGE>
EXHIBIT 11
GREASE MONKEY HOLDING CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(unaudited)
<TABLE>
<CAPTION>
Quarters Ended June 30, Six Months Ended June 30,
---------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income (loss). . . . . . . . . . . . . . . . . . $ 49,520 31,166 59,981 (95,999)
Dividends on preferred stock . . . . . . . . . . . . (31,367) (33,074) (63,240) (53,629)
------------ ------------ ------------ ------------
Net income (loss) applicable to common stock . . . . $ 18,153 (1,908) (3,259) (149,628)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Common shares outstanding. . . . . . . . . . . . . . 4,362,080 4,302,044 4,362,080 4,302,044
Effect of using weighted average common
and common equivalent shares . . . . . . . . . . . (824) (1,726) (14,290) (21,859)
Effect of shares issuable under common stock
warrants using the treasury stock
method . . . . . . . . . . . . . . . . . . . . . . 115,385 * * *
Effect of shares issuable under stock options
using the treasury stock method. . . . . . . . . . 14,495 * * *
------------ ------------ ------------ ------------
Shares used in computing primary earnings per share. 4,491,136 4,300,318 4,347,790 4,280,185
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Primary earnings per common share. . . . . . . . . . $ ** ** ** (0.03)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
FULLY DILUTED EARNINGS PER SHARE
Net income (loss). . . . . . . . . . . . . . . . . . $ 49,520 31,166 59,981 (95,999)
Dividends on preferred stock . . . . . . . . . . . . (31,367) (33,074) (63,240) (53,629)
------------ ------------ ------------ ------------
Net income (loss) as adjusted. . . . . . . . . . . . $ 18,153 (1,908) (3,259) (149,628)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares used in computing primary earnings
per share. . . . . . . . . . . . . . . . . . . . . 4,491,136 4,300,318 4,347,790 4,280,185
Effect of shares issuable upon conversion of
preferred stock. . . . . . . . . . . . . . . . . . * * * *
------------ ------------ ------------ ------------
Shares used in computing fully diluted
earnings per share . . . . . . . . . . . . . . . . 4,491,136 4,300,318 4,347,790 4,280,185
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Fully diluted earnings per common
share. . . . . . . . . . . . . . . . . . . . . . . $ ** ** ** (0.03)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
<FN>
* Antidilutive
** Less than $.01 per share
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 1-3 OF THE COMPANY'S FORM 10-QSB FOR THE YEAR-TO-DATE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 382,285
<SECURITIES> 0
<RECEIVABLES> 1,630,407
<ALLOWANCES> (379,026)
<INVENTORY> 688,093
<CURRENT-ASSETS> 2,963,229
<PP&E> 8,073,771
<DEPRECIATION> (2,879,206)
<TOTAL-ASSETS> 13,943,534
<CURRENT-LIABILITIES> 2,322,960
<BONDS> 2,889,713
<COMMON> 130,863
0
2,095,838
<OTHER-SE> (424,791)
<TOTAL-LIABILITY-AND-EQUITY> 13,943,534
<SALES> 0
<TOTAL-REVENUES> 9,324,087
<CGS> 0
<TOTAL-COSTS> 9,264,106
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 65,000
<INTEREST-EXPENSE> 12,683
<INCOME-PRETAX> 59,981
<INCOME-TAX> 0
<INCOME-CONTINUING> 59,981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,981
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>Less than $.01 per share
</FN>
</TABLE>
